Lack of high quality investment projects could impede drive towards carbon neutrality, while coal-dependent countries are ‘in denial’ over scale of transition, and the commission is accused of ‘creative accounting’ in drawing up the budget
The EU unveiled details of the €1 trillion European Green Deal investment drive earlier this week as commission president Ursula von der Leyen continues her attempt to convince member states to make huge steps towards decarbonisation over the next 10 years.
Half of the amount for the new scheme will come from existing money allocated for green causes in the EU’s budget, including for R&D planned in the EU’s upcoming Horizon Europe research programme.
Contributions from member states would add more than €100 billion, while EU guarantees would aim to leverage private sector spending of €280 billion.
But the plan immediately faced scrutiny over its financing claims. “We are absolutely in favour of a more circular economy, but we are against the recycling of promises and money," said Johan Van Overtveldt, chair of the European Parliament's budgets committee. "Creative accounting and financial adventures will not get the commission very far towards finding the €1 trillion needed to fund their new climate and energy plans," he said.
The European Commission is presenting its push for carbon neutrality by 2050 as an opportunity for businesses, which will create new jobs and improve living conditions. But the transition is expected to be painful for coal-dependent countries and require massive public and private investment well beyond Brussels.
The commission admits that over and above seed money, one of the main challenges in putting the plan into practice will be finding high quality projects that are ready to get off the ground. “The availability of such investment projects does not yet match the demand,” the commission said in its briefing paper.
To address this problem, Brussels is proposing to provide technical support to foster development of a pipeline of high quality green projects.
Both small projects, such as household energy renovation, and larger ones, for example, the installation of networks of electric vehicle charging stations, will be eligible for financing. Projects involving nuclear power won't be funded, except for those related to Euratom's programme for nuclear research and training.
While the green deal is pitched as a business opportunity for Europe, commission officials are frank about its massive cost.
EU countries like Poland and Czech Republic are further behind in the shift towards greener economies, and EU officials privately concede there is a high risk of job losses in carbon-intensive sectors.
Regions where jobs depend on fossil fuels, including coal, lignite, peat and shale oil, will be hit in particular by the transition, the commission says. A €100 billion ‘just transition mechanism’ is designed to help out those regions that will be most affected.
The money will be raised in Brussels and the member states, as well as contributions from the European Investment Bank and the private sector. A portion of the budget for the EU’s regional policy will also be transferred to this new mechanism.
Poland, which relies on coal for more than 80 per cent of its electricity production, is expected to benefit most from this climate fund. Other big beneficiaries will include Germany, Romania, Czech Republic and Bulgaria.
The green deal proposal is flawed, but the cost of Europe doing nothing is “tremendous”, argues Ewan McGaughey, senior law and economics lecturer at King’s College London.
“Even without climate damage, [there are] public health implications of fossil fuel burning: coal, oil and gas causes billions of euros of lung and heart disease. It's also a huge opportunity to cease our dependence on dictators' oil and gas, like Saudi oil, or Putin's gas pipelines including Nordstream2,” he said.
EU countries in denial
EU member states will be expected to stomach unpopular policies to achieve the EU’s lofty transition goal.
“The problem is the willingness,” says Joanna Flisowska, senior coal policy coordinator at CAN Europe, a climate change pressure group. “It’s going to be a challenge, but the sooner you face the inevitability of the transformation, the better. There is still a fair bit of denial in some countries, however.”
Last year, Poland refused to join European leaders in pledging to meet the 2050 targets because of concerns it will not get enough EU financial support to modernise its energy sector.
“There’s a special coal commission in Czech Republic to figure out how to phase out the fuel. There is not the same attempt yet to face reality in Poland,” says Flisowska.