European Green Deal calls for a green EU budget

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European Commission Vice-President Valdis Dombrovskis said that an EU label for 'green' financial products is an idea with "great potential". [European Commission]

Torn between the cuts caused by Brexit and the investments that the European Green Deal requires, negotiations over the next EU budget after 2020 are getting tough. The EU must not, however, pass on the challenge and use 40% of its funds to support climate action, writes Markus Trilling.

Markus Trilling is policy coordinator for finance and subsidies at Climate Action Network (CAN) Europe, an environmental NGO.

Today’s General Affairs Council gathering the EU finance ministers will discuss ‘progress’ made in the negotiations on the next long-term EU budget.

This is yet again expected to be a difficult one, as negotiations are stuck on a number of issues including the total figure and new spending priorities. The fears of having a weaker EU budget because of Brexit should not sideline talks on how to ensure the next EU budget can become a key pillar to boost the clean energy transition.

The post-2020 budget has to adjust to the Brexit gap while trying to accommodate new priorities. The financial shortfall is estimated at €84-98 billion over seven years. This deficit would need to be offset by either unpopular cuts to cherished programs (agriculture, cohesion policy, etc.), increases in Member States’ contributions, the introduction of new resources or a combination of all these options. On top of these are new challenges – including migration, defence, and climate change – and ‘traditional’ treaty objectives which call for sufficient funding.

EU’s budgetary issues are clearly on the president-elect Ursula von der Leyen’s Green Deal agenda. This includes the launch of a “sustainable Europe investment plan” capable to mobilise up to €1 trillion of private investment over the next decade, and the creation of a “Just Transition Fund” to support people and regions most affected by the energy transition.

Claude Turmes: ‘We won the Energy Transition Fund’

The Energy Transition Fund called for by the European Parliament is more than just a pot of money to support coal-dependent regions, says Claude Turmes, Luxembourg’s minister for energy and spatial planning.

Challenges ahead

To make the Green Deal a tangible reality across the EU, the new Commission will need to ensure Member States are spending their EU funds 2021-2027 with the goal to achieve higher climate ambition. At the same time those countries that are opposing the 2050 climate neutrality goal, namely Czechia, Estonia, Hungary and Poland, will seek financial compensation.

The European Parliament took a very positive stance on the next EU budget and EU funding for the regions, voting for the exclusion of all fossil fuels from EU regional development funds. This autumn’s question is if David will stand firm in the negotiations with Goliath: the European Council. The reintroduction of fossil gas in the scope of EU funds as intended by Member States would clearly fly in the face of the Parliament and the spirit of a Green Deal.

Not less important for making the Green Deal deliver on the ground, Member States will soon start their programming of EU funds. They will need to put economy-wide decarbonisation plans and the Just Transition at their heart, rather than a ‘business as usual’ approach that favours carbon-intensive over low-carbon and innovative infrastructure projects.

Ways forward

The European Green Deal can boom if the next EU budget excludes all fossil fuels and dedicates a much bigger share for climate action than under the current 2014-2020 period: from the current 20% to 40%.

Climate becomes top priority in EU's 2020 budget

The European Commission proposed on Wednesday (5 June) a budget worth €168.3 billion for the bloc in 2020, aimed at promoting a more competitive European economy and solidarity and security in the EU.

A Green Deal entails unprecedented investments, not marginal increases. This overall spending target must trickle down in all the EU funding programs accordingly, particularly those that have a direct impact on the environment, like agriculture and regional development. Strong monitoring mechanisms should prevent all EU funds from fuelling climate-harmful projects, such as fossil gas infrastructure.

A European Green Deal delivering on climate neutrality will not fall from heavens or through mere cosmetic measures. It needs a climate-friendly EU budget for the next decade, as it is our investments between now and 2030 that will make or break our response to the climate crisis.

The alignment of the next Union’s budget with the EU’s climate objectives is not only feasible, it is badly needed if our leaders are to tackle the climate emergency seriously.

40% of EU budget should be dedicated to greening the economy, EESC says

The EU’s next multi-annual budget (2021-2027) should dedicate 40% of spending to the low-carbon economy and high-quality jobs, said Rudy de Leeuw, a delegate at the European Economic and Social Committee (EESC), an EU advisory body.

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