Energy budget cuts will hit EU’s low-carbon ambitions: Official


Cuts to the energy infrastructure package in the EU's new budget will increase costs and delays to the European Commission’s plans for a low carbon economy by 2050, Philip Lowe, the EU’s top energy civil servant said on Friday (8 February).

EU commissioners publicly welcomed the budget agreement's green energy credentials after protracted and often fractious negotiations.

The climate commissioner Connie Hedegaard professed delight at an "incredibly important day for Europe" after an EU pledge to ring-fence 20% of the budget’s €960 billion for climate measures was left standing when the budget hawks had finished their work.

But the response from the EU's energy directorate was more guarded.

"This is at least a door opener for interconnecting European energy infrastructure in the coming years," said Günther Oettinger, the energy commissioner. "We need to make the most out of it by using innovative financial instruments."

Nonetheless, he warned that "if we have to make choices, that means for example, we cannot co-finance all grids necessary to connect off or onshore wind parks to the big cities."

In the hours leading up to the final deal, Philip Lowe, the director of the EU's energy directorate was equally cautious. Asked by EURACTIV whether proposed cuts to the energy infrastructure package would affect Europe’s ability to scale back emissions to 80-95% of their 1990 levels by mid-century, he replied: “of course”.

“Any decision that fails to recognise the need to make rapid progress now increases the costs for the future of providing this infrastructure, and any decision that delays the planning and implementing of grid infrastructure will certainly frustrate investments,” he said.

European leaders signed off on a €5.1 billion envelope for energy infrastructure projects as part of the Connecting Europe facility. This is almost half the European Commission's initial proposal of €9.1 billion, which was intended to leverage €200 billion of private sector funding for vital grid transmission projects, in the form of project bonds. 

Anticipating the widely-expected budget cut, Lowe said that the final sum raised for energy infrastructure “will certainly be significantly below the capacity to stimulate €200 billion.”

This was “obviously disappointing," he said. But the percentage cut in public support would not automatically translate into total investment, he added.

Grid signals

EU officials believe that the budget’s worst problem is the signal it sends out to investors about the EU’s seriousness in tackling grid deficiencies, and a symbolic retreat into national financial concerns at the expense of the bigger European picture.

Last November, the transport commissioner Siim Kallas said that budget cuts threatened EU fundamentals – particularly in the transport and energy sectors – and posed the question of whether Europe-wide policies were needed at all.

The first energy victims of the financial cutbacks may be projects such as a gas pipeline between Latvia and Lithuania, which EURACTIV understands is unlikely to attract public or private investors without EU support. 

However, other aspects of the energy infrastructure package, such as a three-year guillotine on permitting approval procedures for new builds were unchanged by the budget.

The EU's Climate Commissioner Connie Hedegaard, speaking with one eye on international climate negotiations hailed the budget as "a major step forward for our efforts to handle the climate crisis."

"Rather than being parked in a corner of the EU budget, climate action will now be integrated into all main spending areas – cohesion, innovation, infrastructure, agriculture," she said. "If all other major economies were to make similar commitments, it would have a very significant impact."

Making the books looks green

But environmentalists suspect that, far from tripling climate funds in these areas, as the Commission claims, the environmental quotient of budget actions will just be ticked off to make the books look green. 

The climate-friendly credentials of proposals to green the Common Agricultural Policy (CAP) by up to 30% will be counted towards the budget's green character, but arouse considerable suspicion. Some EU officials also see them as ‘greenwash’. 

The prioritisation of agriculture in the final draft – won by France – is widely questioned in Brussels, with proportionately greater cuts being made to the rural development budget than other areas, and allowances being made for its transfer to fund direct payments to farmers.

More generally, the overall reduction of the budget could drain the funding pool for Europe-wide environmental policies, observers say. 

"A smaller budget could trigger unfavourable changes to the proposed concentration of the regional development fund on low carbon objectives," said David Baldock, director of the Institute for European Environmental Policy

"One perverse consequence of drastically cutting the Connecting Europe Facility could lead to greater pressure on the future Cohesion Policy to prioritise road building and fossil fuel facilities rather than more sustainable modes of transport and cleaner energy supply systems," Baldock said.

Hans Marten, the director of the European Policy Center, a Brussels-based think tank, said that he was "depressed" by developments, at a sustainable energy meeting organised by the group as budget negotiators were wrapping up. 

"I have never seen such a display of national interests playing around with so little discussion about Europe's needs," he said. How can we talk about smart grids if we don’t have a unified grid?"

The European Summit of 4 February 2011 underlined the need to modernise and expand Europe's energy infrastructure and to interconnect networks across borders.

Heads of state insisted that no EU member country should remain isolated from the European gas and electricity networks after 2015 or see its energy security jeopardised by lack of the appropriate connections.

On 29 June 2011, the Commission proposed the Connecting Europe Facility to promote the completion of priority energy, transport and digital infrastructures with a single fund of €50 billion, out of which €9.1 billion was dedicated to energy.

The European Commission estimates investment needs of about €140 billion for electricity infrastructure and at least €70 billion for gas through 2020.

  • March 2013: Final approval of energy infrastructure package expected by European Parliament and EU Council of Ministers.
  • By Autumn 2013: List of projects of common interest to be finalised.
  • 2014: Planned entry into force of 'Connecting Europe Facility' (CEF), under which infrastructure will be financed.



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