By Libby George, Karin Strohecker and Simon Jessop
LONDON (Reuters) - International lenders including the European Bank for Reconstruction and Development and the World Bank are backing a 3 billion euro ($3.26 billion) plan to wean North Macedonia off coal-fired power, the head of the EBRD told Reuters.
The deal, which is expected to be announced at the COP28 climate talks in Dubai beginning on Nov. 30, will lay out a plan to close the country's two coal power plants and replace them with 1.7 gigawatts of renewable energy.
"Coal in North Macedonia represents 40% of the energy source, so it's very big, it's very important," EBRD President Odile Renaud-Basso told Reuters.
"This is one example of what we would like to showcase in COP, to present this approach and what it can deliver, and the commitment of the country."
Dubbed the 'Just Energy Transition Investment Program' (JET-P), the plan follows similar efforts to retire coal plants more quickly in South Africa, Indonesia, Vietnam and Senegal, with the support of governments, public lenders and private investors.
Its price tag - the equivalent of 1,500 euros for each of the Balkan nation's 2 million people - underscores the difficulty many small or low-income countries face in financing a transition to cleaner energy.
A coalition of countries announced a $20 billion JET-P deal during COP27 last year to help Indonesia close coal-fired power plants, following an $8.5 billion pledge in 2021 to help South Africa transition away from coal. But experts say the money is only a fraction of what's needed.
The United Nations in 2018 named North Macedonia's capital, Skopje, the most polluted in Europe, and the country has worked for years to quit coal. But in 2021, it reopened the dormant coal-fired REK Oslomej power plant to cut electricity imports. Both of its coal-fired plants are ageing, outdated and run on lignite, the most polluting type of coal.
A spokesperson for multilateral investor the Climate Investment Funds (CIF) confirmed that North Macedonia was in the running for up to $85 million in concessional finance from it, and said the investment plan, including the specific amount of money, would go to the CIF governing body for approval early next year.
Renaud-Basso said that alongside around 300 million-400 million euros of concessional financing, funding would come from multilateral lenders like the International Finance Corporation (IFC) and the private sector.
An IFC spokesperson said the green transition, including in North Macedonia, was one of its key priorities, but that it was not in a position to confirm any plan details. The World Bank was not immediately available to comment. The North Macedonian government did not respond to a request for comment.
Leo Roberts, a programme lead for E3G, said the deal is an goodexample of EBRD using a framework such as JET-P to create much-needed financing for small nations that cannot access the significant capital they need for cleaner energy via other channels.
But he added that developed countries, and larger multilateral banks, will need to step up to arrange bigger-ticket projects in places such as Pakistan or Colombia.
"The world's richest countries need to work with the multilateral development banks to find effective, structural ways to channel significantly scaled up energy transition finance," he said.
North Macedonia joined the Powering Past Coal Alliance, a group of countries committed to phasing out coal-fired power, in 2021. After originally targeting completion by 2027, it pushed the date back to 2030 in January last year.
The delay, and plans to open two new coal mines amid energy security concerns triggered by the war in Ukraine, mirrored actions by other European Union states, but drew criticism from environmental campaigners.
($1 = 0.9205 euros)