After five long days and nights of negotiations, European leaders struck a deal on the seven-year EU budget and “Next Generation EU” recovery plans on Tuesday. What did this European Council tell us about the politics of green and resilient recovery in the EU? Jennifer Tollman, Johanna Lehne and Rebekka Popp explain.
Jennifer Tollmann and Johanna Lehne are policy advisers and Rebekka Popp is a researcher at E3G, an independent think tank operating to accelerate the transition to a climate-safe world.
Two steps forward on climate
It is easy to forget just how central climate has become to European politics since the last European budget negotiations in 2013. Post-Paris Agreement and in the wake of the COVID-19 outbreak, European citizens are placing a clear priority on climate action. Calls for a green recovery from within the EU and without, meant that this time around, EU leaders were under pressure to agree a baseline commitment to climate action:
- a 30% target for climate-spending;
- to adhere to the Green Deal’s “do no harm” principle across the rest of the funds; and
- to link these funds to achieving a “new” 2030 climate target – to be agreed by the end of the year.
While questions remain over exactly how climate earmarking and “do no harm” provisions will be put into practice and monitored, this represents a substantial investment in a better recovery.
But one step back on climate champions
However, this Council session also showed the evolving challenge of European climate politics: climate is maturing and becoming a top political item, which gives it political weight but also exposes it to trade-offs.
This new status proved particularly challenging for some of Europe’s strongest traditional climate champions. Nowhere was this clearer than with the (now 4 +1) “Frugals”.
Their focus on quantity over quality of funds saw concrete delivery instruments on climate (alongside health and innovation) traded off against objectives on increasing the share of loans vs. grants and member state control.
The climate leadership of the Nordics has been put to the test and it wasn’t quite ready for the new, elevated nature of the climate debate, which requires finance and economy ministries back home to be as bought into climate action as environment ministries.
This may yet come back to haunt them as their single-minded focus saw cuts being made to areas of core strategic interest to European citizens and European competitiveness.
Poland’s climate backfire
While Poland partnered with Hungary to successfully water down rule of law provisions, its efforts on climate bore tainted fruits. Poland succeeded in having only half of the total Just Transition Fund be conditional on a commitment to implement the EU’s 2050 climate neutrality target.
But this came at the cost of a €20 billion haircut – effectively halving the overall fund. Better safeguards will need to be developed to ensure against countries like Poland using the remaining funding to prop up a coal industry that is fast becoming uncompetitive.
There’s a lot still to play for – and a strong European core that could deliver
The Franco-German engine with Merkel firmly at the helm and Italy and Spain onside was a large part of what got the deal across the line. This strong European core needs to continue to deliver: ensuring the monitoring mechanisms are in place to guarantee the EU budget and recovery package unlock a path to climate neutrality and enable a “new” 2030.
The European Parliament also has a key role to play in strengthening the governance of the funds to ensure consistency with the EU’s climate neutrality goal. MEPs should secure a role for the Parliament in assessing national recovery plans and stipulate the use of the EU sustainable finance taxonomy for climate tracking and monitoring, including for the non-climate spend.
What does it mean for global recovery?
Internationally, the disappearance of funds meant to support international recovery and humanitarian aid from the recovery package is unlikely to win much praise. Particularly, at a time when the EU is trying to enhance its international leverage as it pursues open strategic autonomy.
One potential redeeming feature is that around 10% of the EU budget (roughly €15 billion per annum) is dedicated to cooperation and investment in the “Neighbourhood and the World”.
The agreed deal can stand up to international comparison, moving European domestic green recovery beyond rhetoric. However, international partners will now expect the EU to come good on the promise of a “new” 2030 target, with particularly small island states and least developed countries looking to the EU to agree to at least 55% greenhouse gas emission reductions by 2030.
Once the European Commission delivers its promised “Impact Assessment” of increasing the 2030 target in late September, it will be up to Charles Michel and Chancellor Merkel at the helm of the German EU presidency to make the rounds ahead of the October European Council.
Member states are broadly converging around an increase in the range of 50-55% but we should expect many more long nights before this gets narrowed down to a new target.