EU budget: Where’s the climate and environment?

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV.COM Ltd.

The EU's Paris Agreement commitments mean it should be targeting a doubling of its climate budget allocation. [European Commission]

Discussions on the EU’s post-2020 accounts have begun. But it seems like climate, energy and the environment itself have already been forgotten in the talks, warns Damien Demailly.

Damien Demailly, Initiatives Coordinator at the Institute for Sustainable Development and International Relations (IDDRI)

These discussions will be no trivial matter. To paraphrase the President of the Commission, Jean-Claude Juncker, the budget is not an accounting exercise: it translates policy priorities and ambitions. Defining the next EU budget amounts to defining the Europe we want.

According to the Communication the Commission has sent to the European Parliament and the Council of Heads of State to prepare the discussions, climate, energy and, more generally, environmental protection are not included in the EU’s priorities for the coming decade.

No new proposal has been made to increase the leverage of the EU budget on public and private investment in the energy and ecological transition, whether in Europe itself or in the countries with which it cooperates.

Two years after the signing in Europe of the Paris Agreement on climate change, this is somewhat surprising, especially given that a number of European leaders, including Emmanuel Macron, have said that these issues should be central to the political project of the EU. A Europe that protects should also protect Europeans from global environmental problems.

Investing more in the ecological transition

We should not underestimate the role of the EU budget. Despite its small size – 1% of EU GDP – this budget represents a significant share of public investment in many Member States, with increasing leverage on private investments.

And with its budget, the EU already plays a significant role in terms of investment in the energy and climate transition. In recent years, it has in fact committed to spending 20% of its budget on climate action.

This is a significant target, but insufficient in light of investment requirements, if only to keep its promise – again insufficient – of achieving 40% cuts in its greenhouse gas emissions by 2030.

The EU therefore needs to significantly increase – or even double – its budget target for the climate. It could also set complementary targets for biodiversity and natural resource protection.

Whatever the case, these targets need to be adapted to the different EU funds, specialised in innovation, infrastructure and agriculture, etc. And since the devil is in the details, special attention will need to be given to the definition, monitoring and reporting of this expenditure considered to be “green” to ensure a transparent and informed public debate.

Avoiding stranded assets

Alongside its function of investment in the ecological transition, the budget must also avoid “locking in” the European economy through investments in unsustainable infrastructures, which jeopardise the ecological transition and whose medium-term profitability is compromised.

The EU currently plans to support 53 gas infrastructure projects: either they will still be operating in 30 years’ time, in which case Europe will have failed to achieve carbon neutrality, or they will become stranded assets. What can be done to prevent this waste?

Currently, every programme and every European fund has its own climate and biodiversity “conditions”, which must be met in order to receive funding.

The harmonisation and tightening of these rules need to be placed on the agenda for the budget discussions. One approach for infrastructures could be to draw up a list of investments excluded from any EU support, or receiving reduced EU co-financing that is due to diminish over time; an exclusion list that would supplement the classification of sustainable infrastructure that the High-Level Expert Group on Sustainable Finance is calling for.

This would be a strong signal sent by the EU to all investors, whether the Member States, local authorities or – of course – companies; the signal that the ecological transition is inevitable.

Greening the EU’s “own” resources

The next EU financial framework can also strengthen this signal, while increasing the EU’s own resources. The EU is still a budget dwarf, being 90% dependent on contributions from Member States. The goal of the Commission – if not of all Member States – to develop EU own resources is an excellent opportunity to green this outline for a common tax scheme.

Alongside the tax on web giants or the financial transaction tax (FTT), the Commission is considering using revenue from the auctioning of carbon quotas on its carbon market, or even a tax on plastic. These avenues need to be explored and supported, along with a common tax on energy or on airline tickets.

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