Emmanuel Macron and Angela Merkel

The European Union has thrown down a green gauntlet for its Covid recovery. Leaders reached a landmark €1.82 trillion budget and COVID-19 recovery package early on Tuesday morning based on European Council President Charles Michel’s compromise proposal.

“Europe’s recovery will be green: the new budget will power the European green deal, it will accelerate the digitalisation of Europe’s economy,”  President of the European Commission, Ursula von der Leyen said.

Thirty 30 per cent (€546 billion or AU$844b) of the total expenditure will target climate-related projects, to be invested between 2021 and 2027. Projects will comply with the EU’s objective of climate neutrality by 2050, the EU’s 2030 climate targets and the Paris Agreement.

A new plastic levy will be introduced in 2021, when the commission is expected to propose a carbon adjustment measure, to protect its borders from “carbon leakage”, and a digital levy, both of which would be introduced by the end of 2022.

A revised proposal on the EU emissions trading scheme (ETS) may extend it to the aviation and maritime sectors.

There are individual targets for the European Regional Development Fund (30 per cent); Common Agricultural Policy (40 per cent) and the Just Transition Fund (€30b or AU$49b).

In January, the European Parliament welcomed the commission’s proposal for a Green Deal, but called for more stringent greenhouse gas emission reductions (55 per cent by 2030).

The Parliament also wants to see legally binding targets for biodiversity in Europe and for the fair, healthy and environmentally friendly production of food.

The Just Transition Fund

“The Just Transition Fund is a fundamental part of the European Green Deal and indispensable for its success,”according to Marko Pavi?, Croatian Minister of Regional Development and EU Funds and President of the Council.

“It will play a key role in ensuring that we tackle climate change together as a union, in a spirit of solidarity between member states and regions, so that no one is left behind.”

Adopted on 6 July, it will be made available to specific European regions and territories dependent for jobs on the fossil fuel economy to diversify their economies, create jobs and help people acquire new skills and competences.

It includes investment in SMEs and start-ups, research and innovation, transfer of advanced technologies, affordable green energy, as well as decarbonisation of local transport.

Lawmakers were criticised for leaving a loophole to allow investment in natural gas projects, “if they qualify as environmentally sustainable in accordance with the Taxonomy Regulation and comply with six additional cumulative conditions”.

But it’s hard to see how they could, since in principle the “do not harm” condition embedded in the sustainable finance taxonomy – a tool setting out performance thresholds for economic activities to help green transition – should exclude the financing of all fossil projects as they undermine the EU’s long-term emission cutting goals.

Nuclear energy and tobacco products are fully excluded from the scope of support.

Cash for sustainable transport and carbon capture

Almost €2.2 b will go into 140 transport projects.

These will include a “very strong emphasis” on projects reinforcing railways, including cross-border links and connections to ports and airports.

“Inland waterway transport is boosted through more capacity and better multimodal connections to the road and rail networks. In the maritime sector, priority is given to short-sea-shipping projects based on alternative fuels and the installation of on-shore power supply for ports to cut emissions from docked ships”.

Projects include the Rail Baltica project, which integrates the Baltic States in the European rail network, as well as the cross-border section of the railway line between Dresden (Germany) and Prague (Czechia).

The shift to greener fuels for transport (19 projects) with almost €142 million (AU$230bn) for 17,275 charging points on the road network and the deployment of 355 new buses.

One already funded carbon capture project will continue: The CarbFix2 INEA project captures carbon dioxide from the air which is then dissolved in water and turned into stone at the Hellisheidi geothermal plant in Iceland. CarbFix2 started in August 2017 and runs until 31 January 2021.

The Netherlands comes in for criticism

One observer, Mike Barr, said The Netherlands would miss its 2020 targets in renewables, something it could see occurring as early as 2014.

“This is a country with a year on year budget surplus of €5 billion. It could easily have ensured it met its 2020 commitments. Noteworthy is that the same country, voting against a recovery package, is nevertheless very happy providing state aid to the like of [its hosted oil company] Shell.”

Shell is engaged in an advertising campaign touting its green credentials. However, these represent a fraction of its operations.

The commission will be able to borrow up to €750 billion (AU$1216b) on the markets. Half will be distributed in the form of grants to member states and half in loans. Individual nations now have to vote on the decision.

David Thorpe is the author of  Solar Technology,  Energy Management in Buildings and  One Planet Cities. Learn more by enrolling on this year’s online Post-Graduate Certificate in ‘One Planet’ Governance.

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