The Need for Action 

At the present time it is difficult to ignore the worldwide concern for the natural world and planet Earth, with countless individuals and organisations acknowledging a feeling of anxiety and unease about issues such as climate change, greenhouse gas emissions, species extinction, plastic pollution and deforestation.

On an increasingly regular basis, news media features the speeches of Greta Thunberg, scenes of civil disobedience carried out by Extinction Rebellion groups across the world, David Attenborough’s hard-hitting remarks about the state of the environment and alarming images of the Australian bushfires.

Science backs the existence of a global climate emergency and it seems that the European Commission is taking note. In 2018, the EU announced its long-term 2021-2027 budget, the Multiannual Financial Framework. Funding for climate change action will increase by €1.950 billion and the Commission intends to allocate €5.450 billion overall to projects supporting the environment and climate action.

Furthermore, the new Commission President, Ursula von der Leyen, has recently announced details of the European Green Deal. The link between sustainability and economic growth was made clear by von der Leyen, as she stated that ‘the European Green Deal is our new growth strategy - for a growth that gives back more than it takes away’.

The Green Deal

At Davos 2020, the annual meeting of the World Economic Forum (WEF), Greta Thunberg stated: ‘With today’s emissions levels, the remaining [carbon] budget is gone in less than eight years. These aren’t anyone’s views, this is the science.’

Under the European Green Deal, economic growth is decoupled from resource use and a just and inclusive transition to climate neutrality and a sustainable future is achieved. The Green Deal increases the EU’s climate ambitions by setting out a roadmap of policies and measures needed to put Europe on the path to becoming the first carbon-neutral continent by 2050.

Covering all sectors of the economy, the Green Deal includes key policies to enable this green transformation. Action plans (eg New Circular Economy Action Plan and Zero-Pollution Action Plan for air, water and soil) and the adoption of numerous Strategies (eg Biodiversity Strategy, Industrial Strategy, ‘Farm to Fork’ Strategy and EU Forest Strategy) will make the changes possible. 

The success of the EGDIP will depend on the engagement of all relevant stakeholders in its implementation. It is the Commission’s intention to hold a summit each year to chart progress across the Plan’s different work streams.  

The Sustainable Europe Investment Plan (also known as the European Green Deal Investment Plan - EGDIP), is the investment pillar of the Green Deal. The ten-year plan is a comprehensive framework, which will finance the long-term transition to a climate-neutral, climate-resilient and environmentally sustainable economy. It includes three objectives:

  1. Increase funding for the transition and mobilise at least €1 trillion to support sustainable investments over the next decade through the EU budget and associated instruments, in particular InvestEU.
  2. Create an enabling framework for private investors and the public sector to facilitate sustainable investments.
  3. Provide support to public administrations and project promoters in identifying, structuring and executing sustainable projects. 

To qualify for financial support, Member States will be required to put forward plans to restructure their economy to reflect the EU’s new climate ambitions. These will need to be signed off by the Commission.

The success of the EGDIP will depend on the engagement of all relevant stakeholders in its implementation. It is the Commission’s intention to hold a summit each year to chart progress across the Plan’s different work streams.  

Financing the Green Deal

The proposed long-term EU budget for 2021-27 will allocate €503 billion to the EGDIP. This will also trigger additional national co-financing of around €114 billion for climate and environment projects over the same period.

As negotiations on the EU budget for 2021-27 are already advanced, the long-term budget proposal will not be reopened. The Commission expects that its proposals will instead be accommodated in the final agreement on the next budget, recognising that the EGDIP warrants an additional financial allocation. As such, the Commission has proposed the establishment of a Just Transition Mechanism.

The Just Transition Mechanism will comprise three pillars:

A €7.5 billion Just Transition Fund. 

Member States will match each euro from the Just Transition Fund with a minimum of €1.5 and a maximum of €3 from the European Regional Development Fund and the European Social Fund Plus. The fund will primarily provide grants to regions where many people work in coal, lignite, oil shale and peat production or to regions that host greenhouse gas-intensive industries. It will also support investments in clean energy transition.

A dedicated Just Transition Scheme under InvestEU to mobilise up to €45 billion of investments.  

It is intended to attract private investments that benefit affected regions and help their economies find new sources of growth. This could include projects for decarbonisation, economic diversification of the regions, energy, transport and social infrastructure. The target of generating up to €45 billion of investments corresponds to around €1.8 billion from the EU budget for InvestEU.

A public sector loan facility with the European Investment Bank (EIB) backed by the EU budget to mobilise between €25 and €30 billion of investments.

It will provide concessional loans to the public sector for investments in projects such as energy and transport infrastructure, district heating networks, and renovation or insulation of buildings. The loan facility will receive a contribution of €1.5 billion from the EU budget in addition to an EIB lending of €10 billion at its own risk.

Initial Reactions

Ursula von der Leyen has made the Green Deal the centrepiece of her mandate, calling it a ‘green investment wave’. Positive reaction to the plans came from Lidia Borrell-Damián, Secretary General of the representative body of Europe’s leading public research organisations, Science Europe, who stated that the EGDIP underlines von der Leyen’s ‘leadership and commitment’ to reducing Europe’s carbon footprint. 

While the EGDIP’s ambitions have generally been lauded, debate has broken out about the amount of money committed and how much of it is ‘new’. Italian MEP Gianantonio Da Re stated that it is ‘not quite clear where the resources [for the Plan] are going to come from’, adding that the ‘criteria for beneficiaries and how the funds are going to be distributed also have to be resolved’. WWF went further, claiming that the EGDIP ‘only brings together funds which already exist’ and describing the announcement as ‘pretty packaging of an empty box’.

Commission Vice President Frans Timmermans acknowledged the ‘daunting’ task facing fossil fuel-dependent countries but stated that the EU ‘stands with’ them in the transition.

The €7.5 billion Just Transition Fund has received particular attention. It is being seen as a significant effort to convince lower income and Eastern European countries - especially Poland, which has been critical of green funding in the past - that efforts to reduce carbon emissions are worthwhile. Besides Poland, countries with particularly high number of employees in the coal sector include Bulgaria, Czech Republic, Germany, Greece and Romania.

Commission Vice President Frans Timmermans acknowledged the ‘daunting’ task facing fossil fuel-dependent countries but stated that the EU ‘stands with’ them in the transition. However, concerns have been raised that the Just Transition Fund is insufficient to deliver a successful energy transition, with Just Transition - a dedicated platform advocating a move away from coal-based energy generation - describing the sums as ‘a drop in the ocean’.

A further area of contention is that the Transition Funds cannot be used to finance the construction of nuclear power plants, although it presently allows for the financing of gas infrastructure. Yves Desbazeille, Director General of the European nuclear trade body Foratam, called this exclusion ‘hard to justify’. It seems likely that this will form a particularly contentious point in future debates, with countries such as France, Czech Republic and Hungary being staunch advocates for low-carbon nuclear power, while nations such as Austria and Luxembourg question the green credentials of nuclear energy.

On 15 January 2020 the European Parliament took an indicative non-binding vote on the Green Deal proposals. The resolution was adopted with 482 votes (136 against and 95 abstentions), with MEPs calling for higher ambitions for the upcoming ‘European Climate Law’. Von der Leyen says she wants the Climate Law, which enshrines the 2050 climate neutrality objective in legislation, to be in place by March 2020.

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