The European Commission got a rude awakening from its green dreams as critics assailed its financial plans to tackle climate change.
Ursula von der Leyen’s Commission on Tuesday unveiled proposals for a €1 trillion, 10-year European Green Deal Investment Plan, intended to help Europe become the first carbon-neutral continent by 2050.
But the EU executive immediately faced questions about how such a large amount of money would be generated. Its plans rely on fresh money from the next long-term EU budget, which is currently the subject of fierce negotiations among member countries. They also rely on national governments using other EU cash for green purposes and on the European Investment Bank (EIB), private investors and public bodies coming up with much of the money.
“We are absolutely in favor of a more circular economy, but we are against the recycling of promises and money,” said Johan Van Overtveldt, a former Belgian finance minister and current 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,” said Van Overtveldt, a member of the European Conservatives and Reformists group.
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“In today’s Green Deal funding proposals, the Commission make promises against the EU’s yet to be agreed long-term budget and place a sizeable extra burden on the EIB’s shoulders. After that it is not clear exactly where the rest of the money is going to come from,” he added.
The Commission’s leadership, however, said it hopes to trigger investments.
“The Green Deal comes with important investment needs, which we will turn into investment opportunities,” von der Leyen said. “The plan that we present today, to mobilize at least €1 trillion, will show the direction and unleash a green investment wave.”
That promise of cash is also aimed at swaying opinion in regions facing the cost and uncertainty of decarbonizing.
“What we are doing here is a message to coal miners in Asturias, western Macedonia or Silesia. To the peat harvesters in the Irish Midlands, Baltic regions reliant on oil shale, and many more,” said Frans Timmermans, the European Commission executive vice president responsible for the Commission’s flagship European Green Deal policy.
“We know that you face a steeper path towards climate-neutrality. And we know that the prospect of a different future, a cleaner one, might be a welcoming prospect in general, but the road to it looks daunting today,” he said.
As part of its broader plan, the Commission is proposing a seven-year €100 billion Just Transition Mechanism, but only about 10 percent of the initiative would come from newly proposed EU budget allocations — and even that depends on goodwill from the 27 EU governments, who will get more details when the Commission presents its proposals to ambassadors on Wednesday.
The Commission foresees some of the Just Transition Mechanism cash coming from money given to national governments for cohesion funding, meant to reduce inequalities within the EU. Many EU countries are slated to face steep cuts in cohesion funding under the Commission’s proposals for the 2021-2027 budget cycle.
The EU executive also envisages leveraging public financing and generating private investment through the InvestEU program, as well as member countries pitching in funds from their national budgets.
In a debate at the European Parliament in Strasbourg, German Green MEP Niklas Nienaß took aim at Timmermans.
“Mr. Timmermans, please. We both know there is not €100 billion in the Just Transition Mechanism but €7.5 billion,” Nienaß declared. “When a street magician tries to trick its audience in such a way, we call that a sleight of hand.”
So far, the Commission has not provided a breakdown of how much different countries can expect to receive from the proposed €7.5 billion in new money for the Just Transition Fund. Governments have already begun the scramble to claim some of the cash.
Instead, it published a complex formula for determining the amount of funding each country would get, using criteria such as greenhouse gas emissions of industrial facilities, employment in mining of coal and lignite, employment in industry and gross national income per capita when compared with the EU average. The Commission is also proposing a €2 billion ceiling on how much any single country could receive from the fund.
Once made public, national allocations are likely to generate tensions among capitals, as governments vie for more funding for their constituents.
While expressing support for the Commission’s ideas, local leaders raised concerns about their feasibility.
“All additional financial promises by the Commission are high hopes for the moment — but will they be able to deliver in the regions?” said Vojko Obersnel, mayor of the Croatian port city of Rijeka.
Obersnel, the rapporteur on the Just Transition Mechanism for the European Committee of the Regions, said that €7.5 billion does not “make up for the severe cuts to the overall cohesion policy budget” currently under discussion.
The Commission acknowledged the proposal hinges on a lot of “ifs” and theoretical multipliers.
In a memo published alongside its proposal, the Commission said that its trillion-euro European Green Deal Investment Plan is based on numbers that are “extrapolated to ten years, without prejudice to the final agreement on the next long-term budget and the one after 2027.”
Nevertheless, commissioners presenting the plan Tuesday said they expect EU governments to agree on new money for their initiative. “Fresh money is €7.5 billion, full stop,” said Budget Commissioner Johannes Hahn, before abruptly ending a press conference in Strasbourg.
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