The €1.8 trillion pandemic recovery plan and long-term budget deal agreed by EU heads of government on 21 July 2020, after nearly five days of haggling, is widely seen as a political and economic landmark. But from an environmental perspective, the package is an opportunity missed. It fails to deliver on the Commission’s earlier promises that action on climate change would be at the heart of the EU’s pandemic response.
On the plus side, the budget package includes a commitment that climate action will be 'mainstreamed’, with a target that 30 per cent of spending on EU policies and programmes should contribute to achieving climate objectives (up from an earlier 25 per cent target). However, the 30 per cent objective is not backed up with robust enforcement or monitoring mechanisms and so may turn out to be little more than a vague aspiration. Meanwhile, plans for extra EU spending on the climate and forest priorities that were set out in the Commission’s pandemic recovery proposal in May have been scaled back or abandoned in order to win political support for a slimmed down financial package at the July European Council meeting.
If the deal goes ahead as agreed by the Council, it will be the wasted opportunity of the decade. This is a large injection of public finance across all sectors at once: a chance to re-imagine our economy, making it more resilient to future shocks - like COVID and climate change. But the recovery package looks more like business as usual.
The budget package agreed at the European Council is made up of two elements. The first is the Multiannual Financial Framework (MFF), the EU’s overall budget for 2021-27, which at €1,074 billion is slightly smaller in real terms than the previous seven-year MFF. The second is a €750 billion pandemic recovery plan, known as Next Generation EU. It provides additional resources on top of those in the MFF specifically to address the economic and social crisis caused by the pandemic.
Next Generation EU will be financed by borrowing money on the financial markets (the first time the EU has done this). €390 billion of the recovery plan funding will take the form of grants. The rest will be made up of loans. The lions’ share of the grant funding (€312.5 billion) goes to Member States, for the period 2021-23. To access it, Member States must draw up national ‘resilience and recovery’ plans, which take account of EU priorities. While there is provision for further monitoring to be introduced later, this is not defined, meaning that the only chance the Commission presently has to question the level of climate ambition is at the moment of approving the national recovery plans. After that, there is no real check: no mechanism for deciding what will really benefit the climate, no need to set binding or even voluntary targets on specific areas of policy, and no process to ensure the plans were actually implemented. Left to themselves, many Member States may only pay lip service to environmental objectives, but not actually put the money behind it.
The compromise thrashed out at the European Council meeting increases the already considerable risk that environmental issues will be side-lined. In the context of a slimmed down overall package, resources have been focussed on Member States and taken away from programmes administered by the Commission. While the stated intention to prioritise spending on the European Green Deal (the EU’s plan to become climate neutral by 2050) is still there, the financial firepower the recovery plan puts at the Commission’s disposal will be much less than envisaged in its original proposal, published in May.
To take a few examples, extra spending on rural development under the pandemic recovery plan has been slashed from €15 to €7.5 billion; money for the Just Transition Fund (a mechanism for easing the green transition of areas highly dependent on polluting fuels such as coal) has been cut from a proposed €40 to just €10 billion. Meanwhile, the original proposal envisaged €10 billion of additional spending on biodiversity (through mobilising private sector resources), but the European Council has downgraded this to an unspecified ‘increase’ in resources for biodiversity.
There is still some hope, however: the budget package agreed at the European Council is not a done deal. It must still be approved by the European Parliament (a decision is expected in the autumn), so there is still a chance to improve it. Indeed, in its initial response to the deal, the Parliament already passed a resolution (not legally binding) which seeks to add a list of conditions of the type environmental NGOs have been calling for.
Among other things, the resolution passed by the Parliament calls for the 30 per cent climate spending target to be made legally binding; it adds a similar condition that 10 per cent of EU budget spending should support biodiversity preservation; that mechanisms should be introduced to monitor and enforce these targets and make sure money is spent appropriately; and that the EU’s taxonomy for sustainable finance should be applied to all EU investments.
Fern fully supports the Parliament in these demands and urges European decision-makers to make sure that both the EU pandemic recovery plan and the regular financial framework genuinely reflect these urgent priorities. We shouldn’t dig ourselves out of the COVID-19 hole by digging ourselves even deeper into the climate one.