EU budget for climate action: Time to wake the sleeping beauty

Financing the transition

The European Commission will publish its ‘Reflection paper on the future of EU finances’ on 28 June. Against a background of renewed commitments from European leaders towards climate action, the EU budget must be reformed to comply with the requirements of the Paris Agreement, writes Markus Trilling.

Markus Trilling is finance and subsidies policy coordinator at CAN Europe, the largest coalition working on climate and energy issues in Europe, representing 44 million citizens.

This op-ed was first published on Euractiv on 26 June 2017.

Today the EU budget’s full potential to catalyse the zero-carbon transformation in Europe remains largely untapped. The EU Budget still contains subsidies for fossil fuels, and competing priorities and incoherent implementation of climate action are derailing its climate credits.

The outcry of European leaders after US President Trump’s announcement to pull out from the Paris Agreement was loud and indignant, with a number making strong statements to continue the fight against climate change. The European Commission was the first to promise EU leadership on ambitious climate policies. But is this being fully delivered on?

Against this background the European Commission will publish its ‘Reflection paper on the future of EU finances’ on 28 June, part of a broader exercise initiated by President Juncker on the EU’s future direction after Brexit. Therefore the next long term EU budget post-2020 will fall into the scope of considerations on the Future of Europe.

The impact of the EU budget on climate action is significant, there is huge potential to pursue the full integration of climate action measures into the current and future spending of the EU. Such integration would edge the EU ahead in the global race towards clean energy and energy security and safeguard the EU’s own financial system from potential future shocks associated with climate change. It would also avoid stranded assets and make the whole EU budget more efficient.

Current EU finances still fuel polluting activities

The so called Multiannual Financial Framework (MFF) defines the EU’s spending priorities over a seven-year period. The preparations for the next EU budget post-2020 are underway with the European Commission expected to publish its proposal for the post-2020 MFF early 2018. The EU’s current €1 trillion budget for 2014-20 has some important climate-relevant features such as the strategic link to the EU 2020 climate and energy framework and the political target to spend 20% of the EU budget on climate action.

However, while these features indicate important efforts to integrate climate action across EU spending, sectors that are substantially supported by EU funds such as agriculture, transport and housing continue to be major greenhouse gas emitters in Europe

Moreover, the EU budget is far from doing its best to reverse this trend: although the Cohesion Policy funds (Cohesion Fund, European Regional Development Fund and European Social Fund) are set to advancing the ‘shift towards a low-carbon economy’, these EU funds are still supporting gas pipelines, “clean” coal and emissions intensive transport infrastructure.

EU Member States are planning to spend €930 million of their 2014-2020 Structural Funds on gas infrastructure. In some regions, households receive EU funds to replace their old domestic coal boilers with newer coal combustion systems, locking them into fossil fuel use for decades. At the same time, EU funds’ potential to accelerate the clean energy transformation remains largely untapped: Member States plan to spend on average a mere 7% of all their EU 2014-2020 Cohesion Policy funding on energy efficiency, renewables, electricity distribution, storage and smart grids.

The transport sector in Europe has seen its greenhouse gas emissions steadily increase over the past two decades while benefitting from wide-scale EU funding. EU Cohesion Policy funding in the transport sector is heavily biased towards high-carbon transport infrastructure: twice as much is planned to be invested into road infrastructure than into low-emission mobility solutions.

Last but not least the EU budget is bankrolling an intensive, industrialised farming system that is mainly based on high carbon and resource intensive processes, maintaining an unfair system for farmers, a constant crisis on agricultural markets as well as inequitable exploitation of natural resources, and failing to deliver on animal welfare while posing longer term negative public health impacts.

Whereas Cohesion Policy funding is mainly in the hands of Member States, the funds centrally managed by the European Commission are underperforming on climate action as well: the Connecting Europe Facility (CEF), the EU’s large energy, transport and ICT infrastructure investment fund, still heavily supports fossil fuels. In its five calls for projects in the period 2014-2017, it has allocated €1.1 billion of CEF funding to gas projects. This is more than twice as much as electricity interconnection projects have received so far.

Future EU finances can help fill the gap

It is crucial that the next EU budget delivers on and even strengthens the EU’s climate objectives and policies, including the 2030 climate and energy targets. The EU budget can help build a strong domestic market in renewable energies, put energy efficiency first, roll out low-emission mobility, foster technological leadership in the development of clean energy solutions and enable its development partners to profit from progress achieved. It can also help to put citizens at the heart of the clean energy transition.

A reform of the EU budget is needed to bring it in compliance with the Paris Agreement on Climate Change, including its long-term goals and to make EU’s ‘finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development’ (Paris Agreement, Art.2). Now, who will wake that sleeping beauty?

This op-ed was first published on Euractiv on 19 April 2017