Novi Pazar Biomass Plant, Photo: Nataša Kovačević
To:
Minister of Finance Lars Klingbeil
Bundesministerium für Wirtschaft und Klimaschutz
11016 Berlin
Katharina Reiche
Bundesministerin für Wirtschaft und Energie
10100 Berlin
CC:
Stefan Wintels, Managing Director, KfW and Christiane Laibach, Director, KfW
5th June 2025
Re: Serious ongoing concerns about KfW finance for wood biomass energy in Serbia
Dear Mr Klingbeil and Ms Reiche,
On 29th July 2024, we shared with you an open letter signed by 41 environmental organisations. In that open letter, we called on KfW to suspend the Programme for Renewable Energy in South East Europe – Development of a Biomass Market in Serbia and to redirect support towards energy efficiency and savings measures as well as wind, solar and geothermal energy in Serbia.
On 9th August 2024, Mr Jürgen Kern and Mr Klaus Müller responded to the open letter on behalf of KfW, however, the response failed to address our key concerns. Now, from 18th to 20th February 2025, representatives of CEE Bankwatch and Earth Thrive visited KfW funded biomass plants in Serbia – 8 MW CHP plant in Novi Pazar. The plant in Novi Pazar was built under the first tranche of the KfW project and the other in Gronji Milanovac, 3 MW plant, which is not funded by KfW but serves as an example how biomass operations in Serbia are poor managed and failing to implement environmental standards. Both plants burn woodchips and have their own wood chipping mills and logistics centres storing roundwood.
The Novi Pazar biomass plant, as documented in the attached photos, funded by KfW, faces significant environmental challenges. It sources roundwood, taken directly from forests, rather than relying on sawmill residues or post-consumption waste wood, although burning large quantities of the latter two wood sources is also problematic given that they can commonly be used to make wood products, which must have precedence in a circular economy.
Furthermore, a high moisture content can cause increased air pollution if biomass is incompletely combusted due to lower furnace temperatures. The plant has a large visible plume, indicative of a high moisture content which, as stated above, can in turn cause greater air pollution.There are no measures to control wood dust, and the fire prevention measures are inadequate. Visible dust dispersion, discolored or warped metal surfaces on silos, excessive steam or smoke emissions, and accumulated dust layers on exterior structures indicate potential failures in dust control and fire prevention systems at a biomass plant. Despite its significant environmental impact, an additional 4.5 MW capacity expansion is planned.
We find it difficult to accept that this €6.5 million project should be funded by KfW, and that, during their visit, the KfW delegation enthusiastically stated that “everything has been executed to the highest possible standard and that they will certainly recommend the continuation of the project,” leading to an additional loan.
To provide a clearer picture of how biomass operations pose risks to both the environment and public health, we present an additional example from a neighboring town. While not funded by KfW, this case demonstrates how biomass plants override operational standards. The Gornji Milanovac plant also relies on roundwood from beech trees, as documented in the attached photos. The wood chips have a high moisture content and become muddy due to outdoor storage, leading to deteriorated air quality. The facility lacks dust control measures to protect residents and workers, who operate without protective equipment, exposing themselves to hazardous conditions.
In addition to our serious concerns about the KfW funded biomass plant visited by members of CEE Bankwatch and Earth Thrive, we would like to express our concerns that the response we received from KfW in August 2024 does not address several different issues raised in the open letter, and that it appears to misreport some facts:
- In the response letter, KfW referred to biomass boilers with gas and oil back-up boilers. This seems unlikely to be true for the four plants financed during the first phase of the project, i.e. the plants in Priboj, Mali Zvornik, Novi Pazar and Majdanpek . These have a combined fossil gas and oil capacity of 33.9 MW and a biomass capacity of 19.5 MW. Each individual plant has a greater fossil fuel than biomass capacity, which the figures presented in KfW’s reply confirm. It therefore makes no sense for the fossil fuel boilers to merely be backup boilers and suggests that this might not be the case.
- KfW’s claims about reductions in CO2 emissions not only ignore the stack emissions but fail to address the question whether the use of forest wood may have led to a reduction in forest carbon stocks and in carbon sequestration by forests. KfW ignores, for example, the fact that the IPCC Guidance for National Greenhouse Gas Inventories states that, while stack emissions of CO2 are not accounted for as energy sector emissions in those national inventories, they nonetheless ought to be in that sector. Default greenhouse gas emissions values contained in the same IPCC Guidance show that upfront CO2 emissions from burning wood are greater than those from coal, fossil gas and oil. KfW has also failed to engage with warnings by hundreds of scientists and by the European Academies Science Advisory Council (ESAAC) that cutting down trees for biomass energy accelerates climate change, regardless of how sustainable forest management practices are, because there is simply no more time left to wait decades for trees to regrow.
- KfW’s response omits any references to the concerns about toxic air emissions – especially emissions of fine particulates, PM2.5 – expressed in the open letter.
- KfW’s response fails to address the evidence of high levels of illegal logging as well as widespread harm to living forest communities done by intensive and destructive logging in Serbia. It states that the municipalities receiving KfW funding for biomass plants have to source wood certified by the FSC or another international (i.e. voluntary) certification scheme. FSC, even though it is commonly regarded as superior to other forest certification schemes, has been shown repeatedly to have certified wood from illegal logging. Indeed, a UK court ruled in 2018 that FSC-certified wood had been imported in breach of the EU Timber Regulation because it had been placed illegally on the market. No reforms have been implemented to prevent FSC certification of illegal logging in future.
- In the response letter, KfW states that during the second phase, “a focus shall be on the use of residues from industry and agriculture”. However, nothing is said about how the use of primary forest biomass is to be avoided. In fact, KfW then goes on to say that “within the framework of the KfW-funded programme there’s a strong obligation to comply with sustainable forestry standards”. Sustainability of forestry would be irrelevant if only industrial and agricultural residues were used.
- KfW’s states in the response letter that biomass-fired district heating is more efficient than domestic wood stoves. However, no evidence has been offered to show that the KfW-financed plants do or will replace domestic wood stoves. In addition, this does not take into account that lower-impact alternatives exist. So far, existing fossil fuel boilers for district heating have been replaced with fossil fuel and biomass ones, while district heat pumps and other alternatives for the heat sector appear to not have been considered.
We hope that you will respond in detail to the concerns raised and the concerns reiterated in this letter. We kindly request a detailed response to the concerns raised in this letter, particularly regarding KfW’s compliance with its own policies and operational standards. If we do not receive an adequate response, we may consider escalating this matter through KfW’s internal complaints mechanism.
As well as requesting a detailed response, we once again highlight our ask that the KfW must suspend the “Programme for Renewable Energy in South East Europe – Development of a Biomass Market in Serbia” and redirect support towards energy efficiency and conservation measures as well as wind, solar and geothermal energy in Serbia.
We appreciate your attention to these important issues and look forward to your reply.
Yours sincerely,
Nataša Kovačević, Campaigner for decarbonisation of the district heating sector for the Western Balkans
Zoe Lujic, Rights of Nature campaigner,
Earth Thrive & Balkan Centre for the Rights of Nature
Almuth Ernsting,
Co-director, Biofuelwatch
Jana Ballenthien
Forest Campaigner, ROBIN WOOD, Germany