The global economic downturn coupled with the urgent need to tackle climate change present unprecedented challenges for the EU into which public resources will have to be channelled, argues a report by the Centre for European Policy Studies (CEPS), presented at the European Parliament.
It recommended fundamental reform of the EU's budget to bring it in line with changed priorities.
Climate change was not a priority issue when the EU last decided on its long-term budget planning (2007-2013), but it has since climbed up the agenda, said Anders Wijkman, a former MEP who chaired the CEPS task force. The EU's Common Agricultural Policy (CAP), on the other hand, was established fifty years ago when food security was an issue, which he said is no longer the case in Europe.
"Food security may be an issue again, but in the short and medium-term perspective, I would submit that the best thing that could happen would be to transfer some of the funds that are now blocked for agricultural support and move them to this area," he said.
Jorge Núñez Ferrer, the lead author of the CEPS report, argued that financing an entire policy like the CAP from the EU's small budget represents inefficient use of common funds. But the money – which amounts to only 1% of the bloc's combined GDP – can play an important role in leveraging funding from national projects and the European Investment Bank, he said.
"It's not just 1%, it's 1% and everything else it manages to combine with it," he said. "If we co-finance the CAP through the budget, we will [be doing] a great favour to the budget."
Núñez Ferrer pointed out that energy and climate are horizontal issues that require behavioural changes, so it is not enough to simply add isolated measures to address them.
"We need to integrate climate objectives into the policy," he said. "This means that there should be coherence with climate objectives across the EU budget."
He was echoed by Chris Littlecott of the Green Alliance, a UK-based think-tank, who said the role of the budget in catalysing funding from member states and the private sector is going to be crucial to making the necessary investments in low-carbon technology and energy infrastructure.
"The ETS [EU emissions trading scheme] alone is not going to be sufficient to drive this investment – particularly for cross-border projects, for those which are public-good interventions. They will require public funding," he said.
Littlecott warned that there is currently a lack of confidence in the low-carbon agenda both among some economic sectors and social groups, but also in the member states themselves, with governments unsure about how they can cover the transition costs.
"They may accept in the long-term that they have to make this investment, but they are deeply concerned about the upfront costs," he said.
Moreover, Littlecott added that redefining the common budget to leverage the transition will be particularly important with a view to giving life to the upcoming EU 2020 strategy, which pledges to make green growth one of the pillars of its competitiveness (EurActiv 25/02/10).
Reform recommendations
The authors of the CEPS report recommended increasing support for R&D on energy and climate issues, in particular to support the breakthrough technologies outlined in the EU's Strategic Energy Technology (SET) Plan.
Other guidelines included the development of low-carbon zones in the EU and introducing energy-efficiency conditions in European procurement rules.
The report suggested finding the money by reducing the CAP's share of the EU budget and introducing national co-financing. Furthermore, climate objectives should also be integrated into CAP funding, it said.
As an example of good agricultural policy, the paper promoted the use of biochar to capture carbon in the soil, which would then function as a fertiliser. The practice could be integrated into the EU ETS, giving farmers an incentive to participate as they would make money from selling offset credits.
To leverage more funds from the budget, the think-tank proposed increasing the EIB's loan guarantee funds. This would facilitate the release of loans to companies for risky venture capital investments, it said.
