Coronavirus: EU’s recovery deal lacking climate spending accountability, green groups warn

Following four nights of negotiations, the European Union (EU) has agreed its biggest joint borrowing plan ever recorded, pledging €750bn to a coronavirus recovery package, but green groups have expressed concerns that focus and accountability on green spending have "taken a battering".

Coronavirus: EU’s recovery deal lacking climate spending accountability, green groups warn

The updated deal raises spending on climate action from 25% to 30%

EU leaders have at long last struck an agreement on a bloc-wide recovery from the coronavirus pandemic. The recovery package remains consistent with proposals raised in May, which suggested that a €750bn spending package on green and digital transitions would be featured a within the EU’s updated seven-year €1trn budget.

As the negotiations headed into the fourth night, EU leaders committed to the €750bn (£677bn) recovery package, which will be shared amongst the 27 Member States in the form of grants and loans.

The European Central Bank has warned that the EU’s economy could shrink by between 8-12%, as a result of the pandemic, and member states spent months liaising with the European Commission to agree on a recovery package.

In response, the package promises €390bn in grants to nations hit hardest by the pandemic, namely Spain and Italy. The remaining funds will be made available to all EU nations in the form of low-interest loans.

European Commission President Ursula von der Leyen heralded the deal. “Europe as a whole has now a big change to come out stronger from the crisis. Today we have taken a historic step that we can all be proud of,” said von der Leyen. “Tonight is a big step toward recovery.”

Green spending

However, concerns have been expressed by green groups for a perceived lack of accountability as to how nations should be spending in alignment with the EU’s Green Deal, which features an ambition to become the first carbon-neutral continent.

A total of 30% of the recovery package has been ringfenced for spending on green and digital transitions. Spending will be guided by a new sustainable finance taxonomy, which will also encourage private investment into technologies that will contribute to at least one of six environmental metrics and objectives set out by the EU, including climate change mitigation.

An important aspect of the green recovery plan is that the EU has integrated into the upcoming Multi-Annual Financial Framework (MFF), which will outline spending across the EU from 2021 to 2017. As such, it is the Commission, not the Member States that will oversee how the funding is spent.

The plan itself states the following: “Reflecting the importance of tackling climate change in line with the Union’s commitments to implement the Paris Agreement and the United Nations Sustainable Development Goals, programmes and instruments should contribute to mainstream climate actions and to the achievement of an overall target of at least 30% of the total amount of Union budget and NGEU expenditures supporting climate objectives.

“EU expenditure should be consistent with Paris Agreement objectives and the “do no harm” principle of the European Green Deal. An effective methodology for monitoring climate-spending and its performance, including reporting and relevant measures in case of insufficient progress, should ensure that the next MFF as a whole contributes to the implementation of the Paris Agreement. The Commission shall report annually on climate expenditure. In order to address the social and economic consequences of the objective of reaching climate neutrality by 2050 and the Union’s new 2030 climate target, a Just Transition Mechanism, including a Just Transition Fund, will be created.”

Despite these measures, Transport and Environment (T&E) has called for green spending to be raised to at least 50% that is also supported by the new sustainable financing taxonomy.

T&E’s executive director William Todts said: “We cannot accept the paradox that something called ‘Next Generation EU’ invests 70% of its funds in an older generation’s economy while asking young Europeans to foot the bill. Our fight must continue. Surely the European Parliament will amend this historic plan and make it fit for the future.”

T&E also express concern over the “do no harm” principle, which acts as a parameter for the 70% of the funding that isn’t explicitly set aside for climate action. It outlines that no spending should take place on projects that will cause environmental damage, such as fossil fuel production. However, T&E argues that the principle is lacking in clear definition.

This point has been echoed by the European Corporate Leaders Group (CLG Europe). The organisation’s director Eliot Whittington notes that the clarity and accountability of the deal “took a battering”.

“The deal struck during these marathon negotiations is a major EU milestone and has delivered the first post-Brexit budget, pulling together billions of Euros for recovery and policy priorities,” Whittington said. “However, the clarity, focus and accountability of how those funds will be managed took a battering.

“A reduction in additional money for key priorities such as just transition and innovation is disappointing, yet significant funds have been added, and the increase from 25% to 30% of earmarking for climate action is a step in the right direction. The emphasis must now be on the effective deployment of money to achieve net-zero emissions by 2050 and increase the 2030 target to at least 55%.

“The eventual unity shown by heads of state is an encouraging sign EU decision-makers can speed the pace of the zero-carbon transition, but this was a missed opportunity to offer detail on how a green recovery can be achieved and put in place the confidence that can deliver essential private investment.”

Matt Mace

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