EU’s Green Deal Needs a Budget Behind It

A day-long conference in Brussels underscored the urgency of making the EU’s 2021-2027 budget a green one. There’s a window of opportunity to do so — and the game is on. Paul Hockenos reports

The EU’s energy and climate policy depends on an effective financial plan. (Public Domain)

After a ten-year hiatus – and trip across the Atlantic – the Green New Deal, or Green Deal, as it has been reframed by the incoming European Commission, is back on the table in Brussels. The President-elect of the Commission, Ursula von der Leyen, has proclaimed that, “The Green Deal represents an unprecedented opportunity for Europe to move away from fragmented policy-making.” This has turned up flame on discussion in the EU over the upcoming five-year term’s climate policies, and nothing is hotter than fray over the next seven-year budget.

“The financing decisions that are being made in the EU right now,” says Markus Trilling of the Climate Action Network (CAN) Europe, a worldwide network of over 1,300 NGOs, “will affect Europe’s energy systems and climate protection plans for decades to come. The EU either can lock in fossil fuels for many decades or set the political and legal framework for achieving climate neutrality in agriculture, infrastructure, buildings, transportation and other areas.” This EU budget has to be transformative, he says, one that permeates all of the EU’s many policy fields translating into substantial greenhouse gas reductions and climate-resilient development. All levers have to be mobilized in coming years in order to change course, Trilling says.

Trilling made these points at the conference “An EU Budget to Address the Climate Emergency: How to fund a Green New Deal for Europe” in Brussels on October 15, sponsored by several groups, including the Heinrich-Böll-Stiftung. The conference happened against the background of the EU’s ongoing negotiations over the Multiannual Financial Framework (MFF) for 2021 to 2027 – in other words, the EU budget. Trilling, among others at the conference, underscored that the budget, which totals €1.13 trillion (€162 billion a year) is the last investment cycle that will impact the EU’s 2030 climate goals. The logic of the entire budget must be to “unlock investments in all climate-relevant sectors and to catalyse the transition towards a net-zero greenhouse gas emission economy,” according to a policy briefing issued by CAN Europe, Green Budget Europe, European Environmental Bureau (EEB), and other organizations in attendance.

Already, the EU has pledged that 25% of the next budget will go toward climate protection (a 5% increase over the current MFF.) Several speakers including Patrick ten Brink, the EEB’s EU policy director, stressed that the share should be upped to 40% if the EU is serious about hitting the 2030 climate goals. There is still enough wriggle room, ten Brink argued, to transform the budget into one that could make that possible. Negotiations over the budget between the EU’s institutions – the Parliament, the Commission, and the Council — will last well into 2020. Thus the MFF is far from a fait accompli.

The EU’s budget is not large compared to those of the member states: just 2% of the EU-28’s total public spending. But its financing programs – such as the Common Agricultural Policy (CAP), the cohesion funds, and infrastructure investments — are hugely important to high-emission sectors such as agriculture and transportation. And they are also disproportionally important to many of the smaller and lower-income countries. Moreover, EU spending can spur investment in climate-related sectors in national economies, ratchetting up its “transformative potential,” according to several of the conference’s speakers.

Yannick Monschauer of the consultancy Navigant said: “The EU can lead by example with its budget. It can’t intervene directly in the budgets of the member states but it can say ‘look at what we’re doing, you can do it too.’” He says that “climate proofing,” a tool designed to support the integration of climate change impacts, can happen across sectors.

“We need a strong Europe that guides us,” says Tinne van der Straeten, a Green in the Belgian parliament. “It can push national states to allocate money to climate funding.”

There was a consensus at the conference that EU financing for fossil fuel development should be phased out, which will be the case for coal as of 2021. However, there were differences of opinion of how quickly funding, such as R&D or innovation-related for gas, should happen, as well as whether nuclear power counts as a “low-carbon” energy source.

But gas is contested terrain.

Speakers from the European Council and the Commission’s DG Budget spoke of sympathies in some member states for funding aid to gas-related projects. Those countries, such as Poland among others, contend that gas is necessary for their transition to climate neutrality – as a transitional energy source when phasing out coal. Currently, the European Commission is in favour of allowing 1% of a member state’s total financing to go toward gas-related areas.

“There are going to be compromises, this is how it works,” said Thomas Pickartz, a German representative at the European Council. “Some of these compromises,” he admitted, “will water down a greener Europe, but if we don’t accept compromises, we’ll have no deal,” he said, referring to the negotiations that will begin between the EU institutions on the budget.

“Far too often the EU has paid the polluter, and this must stop,” countered Andras Lukacs of the Budapest-based Clean Air Action Group. Lukacs underscored the problem of the national states contradicting EU-funded policies and programs. Currently, fossil-fuel subsidies in member states are estimated to range from €39 billion to over €200 billion a year.

“Gas isn’t much better than coal,” said Matthias Runkel of Green Budget Germany, echoing the statements of several speakers and attendees. “EU funds are also used for airports and other environmentally harmful practices,“ he says, referring to reports of the German Environment Agency (UBA).

As for the 40% green spending target that many of the NGOs in attendance backed, the representatives from the Commission and Council provocatively noted that if so much goes to climate-related programs, then other programs, perhaps the Erasmus program, could face cuts.

Orsolya Dominiczky of CEEweb, a coalition of environmental NGOs in Central and Eastern Europe, was just one speaker who underscored the importance of EU climate finance not exacerbating social inequality. It is critical, Dominiczky said, to acknowledge widespread energy poverty in the region, namely high cost of energy relative to income. “The cost of a transition to clean energy systems is costly. The burden for these countries is bigger.”

Since the CAP comprises about a third of the MFF, and cohesion funds another third, several speakers addressed the many ways that they can be employed to decarbonize the EU’s economies. The CAP payments, they stressed, have to reward farmers and agri-businesses that practice sustainable agriculture. They could, for example, help farmers move away from intensive, high-emission livestock production.

But an EU official from DG Budget cautioned against trying to turn all EU programs into climate protection measures. The CAP, for example, he noted, was designed to stabilize the income in the agriculture sector. This is what stands in the Treaty of Rome, and this is what his DG must do, he said. “DG Budget is not a free agent,” he warned.


Paul Hockenos is a Berlin-based journalist and author of Berlin Calling: A Story of Anarchy, Music, the Wall and the Birth of the New Berlin.

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