In recent months we have published a series of stories about how the 27 EU countries want to invest the money they have received through the corona recovery fund. In this latest episode of “Decarbonizing Europe” we look back at the implementation of the plans. Although this series ends with this story, we continue to monitor the efforts of the countries and report on new developments.
“Even if we assume that 37 percent of all those plans go to climate investments and add the money from the Cohesion Fund, there is still a significant investment gap to meet the EU’s 2030 targets,” notes Olivier Vardakoulias. He is an economist at Climate Action Network Europe (CAN Europe).
The European Commission’s corona recovery fund (SRF) is intended to help Member States with economic growth. crisis by overcoming the corona pandemic. Originally, the intention was also to pave the way to a greener Europe, as had already been laid down in the European Green Deal. Within the plans, 37 and 20 percent of the final budget, respectively, should go to climate and digitization.
More than two years after the launch of the support fund, the world has completely changed. The Russian-Ukrainian conflict put a new goal high on the agenda: independence from Moscow’s gas. To free itself from that dependence, the Commission introduced REPowerEU: the European plan to end dependence on Russian fuel. Furthermore, the European Parliament voted in favor of measures leading to a zero-carbon future.
Vardakoulias: “Some problems were embedded in the regulation itself. The first concerns provisions for investments, which, for example – under certain conditions – still allow investments in fossil fuels. Another critical point is the definition of green investments. In essence, the definitions were too broad. With some expenses, you can really wonder whether it is money that is actually being spent on the green transition.”
The lack of precise definitions allowed Member States more freedom in their planning. This did not necessarily lead to positive results. Without clear and precise guidelines about what is green and what is not, countries planned projects that were not necessarily environmentally friendly. An example comes from Greece, where millions were invested in gray infrastructure. Such as dams to protect against flooding, with potentially harmful consequences for biodiversity. And so, for example, the original Slovak plan included an action to finance fossil gas boilers.
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One of his interests is the transition to an environmentally sustainable economic model.
When the plans were checked in Brussels, many of these ideas were scrapped from the plans. In February, the Commission published the first document on the implementation of the RRF. In it, the Commission states that 40 percent of the total budget goes to climate investments; more than the 37 percent of the target.
“However, if stricter definitions are used, as the Green Recovery Tracker has done, the numbers are lower,” Vardakoulias said. According to the economist, the simpler structure of the recovery plan compared to other EU funds leads to less control over resources.
In order to respond quickly to the corona crisis and get money for their plans, many countries went through the decision-making processes with great strides. As a result, citizens had little or no room to participate in the process. The various governments planned projects on their own. In many cases there was only minimal involvement of civil society in the development of the plans.
Things changed somewhat when monitoring implementation. “Some countries have established ad hoc monitoring committees. Others have a special committee in their parliament to monitor implementation. But in many Member States there is nothing. The amendment to the SRF regulation submitted by the Commission for RepowerEU should be used as an opportunity to re-open and strengthen the provisions on public participation,” emphasizes the economist.
Vardakoulias has further critical comments. “First, there is a lack of funding for energy communities and decentralized energy more broadly, which also need government support for investment. Secondly, I find the financing of the decarbonisation of transport as included in the recovery plans unimaginative. Most of the investments concern the installation of charging points for private electric vehicles and smaller investments for the renewal of buses in public transport. Decarbonising our transport system cannot be done just by replacing combustion engines. I expected more investment in other and more innovative forms of public transport and multimodal transport networks. Third, the investments in the circular economy and biodiversity included in the plans are not ambitious enough.”
Since last February, Europe’s dependence on Russian energy has become a hot topic. This has created new scope for starting up projects with fossil fuels. “Some of the measures of the REPowerEU strategy overturn the previous green principles. In other words, if the European Commission’s proposal to amend the SRF Regulation goes through, Member States will be able to fund fossil fuel projects through REPowerEU.
“That will certainly happen, as long as the countries can demonstrate that such a project helps to get rid of Russian gas. This result could be really negative,” emphasizes Vardakoulias. REPowerEU presented a combination of short, medium and long term objectives. The measures are based on three pillars: reducing demand, diversifying suppliers for the import of conventional (fossil) fuels while future-proofing the associated infrastructure, and accelerating the transition to renewable energy sources.
On July 18, Ursula von der Leyen announced that the Commission has concluded an agreement with Azerbaijan. This means that natural gas imports from that country will double by 2027. But the Member States also operate autonomously. Outgoing Italian Prime Minister Mario Draghi and Algerian President Abdelmadjid Tebboune have agreed to increase gas exports to Italy.
What will happen after 2026?
All projects should be completed by 2026. If there is no successor to the corona recovery plan, this could delay the greening of Europe. Not all countries are also able to finance the contributions for the billion-dollar programs themselves. According to Vardakoulias, different levels have to be taken into account.
“Governments have barely started spending the reparations. At this stage, the impact of the resources in daily practice is still low. The priority should be on making full use of available resources and a short-term climate action policy. At the same time, talks need to start quickly on establishing a permanent fund to finance investments in climate and green transition in the medium term.”
According to the economist, governments are now mainly focusing on investments with the money from the corona recovery fund. As a result, investments from other funds for a greener Europe are lagging behind. “That requires extra actions. Both at the national level and at the level of financial regulators and supervisors (including the European Central Bank) with regard to private investment. These actions can also help to ensure that sufficient money is invested in the green transition,” Vardakoulias summarizes.