Climate change action and the new MFF: earmarking ‘climate’ financing in times of the Covid-19 pandemic
Just before the Covid-19 pandemic struck the EU, in January 2020, the Commission presented its proposal for a ‘European Green Deal’ investment plan, providing details on the EU’s transition to a carbon-neutral economy by 2050. In this proposal the Commission also touched upon how to use the funding for climate action in the 2021–2027 Multiannual Financial Framework (MFF) to maximise its impact. Following the Covid-19 pandemic and the public health and economic crisis, the EU and its Member States are now facing challenges of an unprecedented nature. Both the European Parliament and the European Council have therefore asked the Commission to revise its initial MFF proposal. Martin Weber, Director of the Presidency, provides an analysis of how climate change action was and is being integrated in the current and upcoming MFF. He shares some thoughts on how the Covid-19 induced economic crisis may affect the possible shape of the next MFF and the capacity of the EU budget to support the Member States’ transition to becoming carbon-neutral.
By Martin Weber, Director of the Presidency
Fighting climate change — one of the EU’s strategic priorities and a major challenge
There is no doubt: fighting climate change is one of the strategic priorities of the EU. Already back in 2015, the EU played a major role in negotiating the Paris Agreement (the UN Framework Convention on Climate Change) whose goal was to keep the long-term increase in global average temperature to well below 2°C above pre-industrial levels; and to pursue efforts to limit the increase to 1.5°C.
Transitioning to a carbon-neutral economy is, however, highly ambitious, as new technologies and perhaps a change of habits are needed to meet the strict emission targets: the 2030 target of a 40% reduction of greenhouse gas emissions implies that emissions must go down every year by at least 1.4% per year, i.e. 70% faster than so far achieved. Beyond 2030, the annual emission reduction rate will need to be two to three times greater in order to achieve the 2050 objective. Most experts agree that reaching such levels of reduction will also need significant changes in our way of life and consumption patterns. How difficult this will be is illustrated by the effect of the Covid-19 crisis and the lockdown on this year’s carbon dioxide emissions. According to a recent study presented in nature climate change, global carbon dioxide emissions have fallen by around 17% in 2020 so far and, depending on the duration of the confinement, may be down by 4% to 7% for the entire year. By way of comparison, following the financial and economic crisis in 2009, they fell by 1,4% (which was, however, only a temporary reduction, followed by a 5,1% rise in 2010). So even a significant economic crisis causes only a limited and temporary reduction in greenhouse gas emissions.
ECA Journal Short Read
Multiannual Financial Framework (MFF) — agreement with seven year span, currently amounting to about €1 trillion, EU’s crucial tool to align its finances with increased strategic priority of climate change action, but difficult to do so because of long-term characteristics and commitments made.
Mainstreaming climate change action into the EU budget — one in five euro target close to being achieved, more and more extra-budgetary means — for example through the EIB — employed to address international commitments made, for instance in the 2015 Paris Agreement.
European Green Deal — proposals for new MFF — aiming at €320 billion climate mainstreaming — overtaken by Green Deal aiming at over €500 billion from EU budget plus additional €279 billion through InvestEU. Key considerations:
•European Green Deal as a political priority enshrined in the political guidelines;
•the European Green Deal represents an additional significant shift in spending priorities for the EU budget itself;
•even a significant increase to a 40% share of climate-related spending within the EU budget would possibly not be sufficient on its own to finance the transition to a carbon-free economy.
Covid-19 crisis support plans — possible game changer, integrating economic support measures with Green Deal objectives, with Commission EU budget proposal of for next MFF of €1850, including €750 billion for the EU recovery instrument (‘Next Generation EU’), with conditions to promote transition to a green economy with lower CO2 emissions. But whether this will be the case… still to be decided.
Financing this transition will be a costly undertaking. In June 2019, the Commission estimated that it would cost an annual €260 billion more in investments to meet the current 2030 climate and energy targets, representing about 1.5% of EU GDP in 2018.(1) Just before the COP 24 meeting in Katowice, (Poland), the Commission indicated it would cost around 2.8% of the EU’s GDP, i.e. additional investments in the range of €175–290 billion annually at current prices, to achieve climate neutrality by 2050. To put it bluntly: the transition to a carbon-neutral economy will require massive investments.
The MFF: a tool to align the EU finances with political objectives and strategic priorities
The popular expression ‘Don’t tell me what your priorities are, just tell me what you spend your money on and I will tell you what they are’ applies not only to our private spending, but also to public sector budgets. What does this mean for the European Union? And what is proposed for the future?
To understand better what this means for the European Union, we have to look at the EU’s multiannual budget, the multiannual financial framework (MFF).(2) It defines for a period of seven years where the EU’s revenue comes from and, in particular, determines how much each of the Member States must contribute. On this basis, it sets the limits for EU spending over a period of several years, and the maximum amounts available for each major spending area (or heading) for each year. Put simply, the MFF serves two main purposes: it ensures budgetary discipline and predictability with regard to EU finances; and it allocates financial means to the Union’s’ political objectives and strategic priorities. In principle, the implementation of each and every priority should be secured by sufficient financial resources. (3)
So how do the MFFs reflect the EU’s political objectives and strategic priorities in this area? And to what extent do they contribute financially to the EU’s ambitious climate policies?
The 2014–2020 MFF’s ‘one-in-five’ target: a starter for mobilising additional EU spending on climate change action
Already in December 2013, when the negotiations for the current 2014–2020 MFF (4) between the Commission, the European Parliament and the Council were finalised, a first significant effort was made to mobilise additional EU funding for climate and environmental policies: altogether, one fifth of the EU budget was earmarked to accomplish the EU energy and climate-related targets. It was also agreed to do this through ‘mainstreaming.’ This means that funds within the different budget headings will be earmarked for climate-related measures, which taken together should correspond to 20% of the EU budget, or one out of every five euro spent.
However, this specific form of implementation of the EU budget — where climate action financing is dispersed across the various budget headings — makes it more difficult to determine the exact amount of EU funding actually allocated to climate issues. In particular, around three quarters of the 2014–2020 MFF still address the traditional EU spending areas of cohesion and agriculture. These shared management funds — for which the management is shared between the EU and the Member States — are largely compartmentalised and pre-allocated to spending priorities, as agreed upfront between the Member State and the Commission. While Member States have to work within a number of EU rules that must be complied with, there also remains a margin of discretion for each Member State to ensure these EU funds can be spent according to national preferences.
In 2016, in our special report 31/2016, we raised doubts as to whether the 20% target for the 2014–2020 MFF could be met by the end of 2020 (see also on page 47). In 2019, the Commission’s own estimates confirmed that there were difficulties in the first two years, but indicated that the climate-related spending under the 2014–2020 MFF met or even exceeded the target in the following five years (see Figure 1).
Figure 1 — Climate-related spending in the EU budget, 2014–2020 (€ billion and percentage of the EU budget)
However, there are also other studies which indicate, at least for the cohesion policy area, that Member States allocated far less than 20% of the EU funding to projects related to energy efficiency, renewable energy and related infrastructure, and research and innovation for climate action (see also on page154). Part of the differences can probably be explained by which headings of the EU budget are analysed, the period taken and which criteria are used for climate-related spending, as also discussed in our 2016 report.
However, taken as a whole, it appears that the EU budget has mobilised a significant amount of climate-related funding, and come at least close to meeting its ‘one-in-five’ target
Climate change action has become an international commitment for both the EU and Member States
Following the Paris Agreement, which came into force in November 2016, it became clear that the necessary additional financial means to implement this ambitious climate policy were simply not available in the EU budget, as the 2014–2020 MFF had been agreed between the Member States back in December 2013. In addition, it was clear from the outset that amounts of such magnitude could not be easily provided through public spending alone. Private financing will also need to play a role in addressing this gap.
This illustrates a key dilemma of the EU budget: unlike national budgets, most of EU spending is for investments which need planning security. And the EU budget clearly is a long-term, and therefore rather inflexible, financing plan: once it has been agreed, it sets the spending frame for the entire period, and re-negotiating such a complex package requires significant political will. This is particularly a problem if policy objectives and strategic orientations change significantly during an MFF period. In this case, the financing of investments no longer matches the new priorities.
The solution to this problem was to provide much of the EU funding for climate action during the period 2015–2020 through the European Fund for Strategic Investment (EFSI) (5), managed by the European Investment Bank (EIB) outside the MFF. In 2019, EFSI spending on climate action already amounted to more than €19 billion. This corresponds to more than half of the climate-related funding under the MFF in the same year (see Figure 1). But there is one main difference: most of the spending under the EU budget is in the form of grants, but all of the EFSI spending is repayable.
MFF negotiations launched in May 2018
Against the backdrop of the EU’s climate policy objectives following the 2015 Paris Agreement, the negotiations for the post-2020 MFF provided a new opportunity to address the question of the adequacy of funding in the EU budget to reduce the risks and impacts of climate change.
In June 2017, when the Commission issued a reflection paper on the future of the EU finances, increasing EU funding for climate action was not yet at the forefront of the debate. This changed in May 2018 when the Commission issued its first proposal for the 2021–2027 MFF. According to this proposal, the commitment appropriations were to increase from €1 087 billion (in 2014–2020) to €1 279 billion (in 2021–2027) at 2018 prices (see Figure 2).
Figure 2 — Commission’s first MFF proposal for 2021–2027
In particular, the Commission proposed to continue the mainstreaming approach, but to increase the target for climate-related spending by five percentage points from 20% to 25%. In monetary terms, this would have amounted to €320 billion spending for the 2021–2027 MFF through climate mainstreaming, (6) or around €45 billion per year in 2018 prices (as compared to €217 billion in the current 2014–2020 MFF, i.e. around €31 billion per year). This would have more than doubled the expenditure being earmarked for climate objectives across all EU programmes over the seven-year period.
The EU’s new political priorities after the 2019 EP elections
From the beginning of the MFF negotiations, many observers expected that the negotiations would really start only in the second half of 2019, to be concluded under the German Presidency in the second half of 2020. This was mainly because it was considered doubtful whether an outgoing European Parliament should (and could) negotiate and adopt such an important and politically sensitive agreement, without creating the risk that the newly elected parliament would request a reopening of the negotiations. Moreover, the (budgetary) implications of the UK withdrawal had not yet been determined at that moment.
The sequence of events in 2019 — with elections to the European Parliament in May 2019 and the nomination of Ursula von der Leyen as the new President of the European Commission and her election by the Parliament in July 2019 — created a unique opportunity to align EU spending priorities for the 2021–2027 period with the EU strategy on climate change and the EU´s international commitments under the Paris Agreement. In this context, it was helpful that the EU Institutions involved in the MFF negotiations set out their strategic priorities for the post-2020 period before the MFF negotiations went into their final phase during 2020. In October 2019, the political guidelines for the mandate of the incoming Commission were adopted. They closely followed the strategic orientations adopted by the European Council in June 2019. Both strategic documents, apart from listing other important issues as political priorities (such as protecting EU citizens’ freedom and EU external borders, developing a strong and inclusive EU economy, etc.), explicitly name the mitigation of climate change and building a climate-neutral EU as one of the top priorities for the 2019–2024 period.
The European Green Deal proposed in December 2019
From a climate policy perspective, the key initiative of the new Von der Leyen Commission is the proposal for a ‘European Green Deal’ made in December 2019. As regards climate change, it aims to make the European Union the first climate-neutral bloc in the world by 2050 through a combination of regulatory and budgetary measures (see Box 1).
In January 2020, the Commission presented an investment plan as part of this European Green Deal. Altogether, this plan aims to mobilise €1 trillion of private and public investments by 2030). It also provides further details on how to use the funding for climate action in the 2021–2027 MFF, including on how to finance the transition towards less carbon-intensive technologies in specific regions (see Figure 3).
Box 1- Regulatory measures proposed as part of the ‘European Green Deal’
As part of the European Green Deal, already existing EU regulations would be revised and new regulations would be proposed in various fields in the upcoming period : this would include, for example:
a comprehensive plan to increase the EU 2030 climate target to at least 50% and towards 55%, in a responsible way;
a proposal on a European ‘Climate Law’ enshrining the 2050 climate neutrality objective;
proposals for revisions of relevant legislative measures to deliver on greater climate ambition, following the review of the Emissions Trading System Directive; Effort Sharing Regulation; Land use, land use change and forestry Regulation; Energy Efficiency Directive; Renewable Energy Directive; CO2 emissions performance standards for cars and vans;
a proposal for a revision of the Energy Taxation Directive;
a proposal for a carbon border adjustment mechanism for selected sectors, thereby counteracting the risk that companies transfer production to countries that are less strict about emissions.
In addition, in this roadmap the Commission announced a number of initiatives in the field of standardisation, investment and innovation, national reforms, and international cooperation.
Figure 3 — How will the ‘European Green Deal’ Investment Plan be financed?
Around half of the total funding for investments under the ‘European Green Deal’ — €503 billion — would come directly from the EU budget, mainly as grants. The financing model for the remaining part would largely build on the EFSI blueprint. In particular, the EU budget would be used to provide guarantees to the ‘InvestEU’ initiative, which would generate national public and private investment amounting to another €280 billion. This EU support would be re-payable and take the form of loans, guarantees and equity investments. This part of the investment plan would be managed by the EIB as well as national and international financial institutions. In addition, there would be the Just Transition Mechanism (JTM) (7), providing targeted financial support to Member States to reduce the carbon-intensity of their economies. Finally, the EU Emissions Trading System (EU ETS) should be transformed into a new revenue source for the EU budget (8).
The European Green Deal — a game changer for EU spending on climate action?
The European Green Deal proposal should not only be seen as a commitment to mobilise significant amounts of finance for fighting climate change. Quite possibly it also represents a significant shift in spending priorities for the EU budget itself. According to the Commission, the expenditure it plans to allocate to the European Green Deal corresponds to nearly 40% of the initial Commission proposal for the entire MFF period, i.e. significantly more than the 25% target initially proposed, even if some of the €503 billion would have been allocated to environmental matters other than climate.
Whether such a substantial reallocation was likely to be agreed by the Member States during the negotiations is debatable. However, in February 2020, there was already a general political agreement to increase at least the mainstreaming of climate-related spending in the EU budget. The 25% target was included in the ‘Negotiating Box’ published by the Presidency of the Council in December 2019. And President Von der Leyen had explicitly stated that she would not accept any MFF deal with less than 25% of budget expenditure earmarked to support climate objectives.
In any case, even a 40% share of climate-related spending within the EU budget would not be sufficient on its own to finance the transition to a carbon-free economy. As for the EFSI, the Commission’s European Green Deal proposal relies on leveraging guarantees from the EU budget: over half of the intended €1 trillion investments would be made through repayable forms of financial support, in the form of loans, guarantees and equity investments.
Covid-19 pandemic struck in March 2020
Everything changed with the Covid-19-induced public health, and, more importantly, economic crisis. From March 2020 onwards, as an immediate response to the Covid-19 crisis, Member States started to put in place unprecedented fiscal support measures to prevent a major economic recession. The Eurogroup has estimated that these national measures correspond to more than 3% of EU-27 gross domestic product (GDP), and measures to provide liquidity support for sectors and companies facing difficulties to more than 16% of EU-27 GDP.
They were complemented by a number of initiatives by the European Stability Mechanism (ESM) and the European Central Bank (ECB) for Member States in the eurozone: This includes in particular the ESM’s €540 billion’s ‘Enhanced Conditions Credit Line’ (ECCL) to cover some of the costs of the Covid-19 crisis support (limited to up to 2% of a euro area country’s economic output) and the ECB’s ‘Pandemic Emergency Purchase Programme’ (PEPP), a temporary €750 billion programme for purchasing private and public sector securities to counter the economic effects of the Covid-19 crisis.
For all other Member States — i.e. those outside the eurozone — the EU support is more limited: in particular, the ‘Coronavirus Response Investment Initiative’ has allowed frontloading of €37 billion of spending from the European Structural Investment Funds (ESIF) and a more flexible use of these funds on Covid-19-related measures in 2020. Also, the EU budget provides a €1 billion guarantee to the EIF, to ensure that banks provide sufficient liquidity to bridge capital needs, in particular, of SMEs. However, no additional money has been made available. Moreover, the EIB has set up a €25 billion guarantee fund for mobilising up to €200 billion of investments through local banks and other financial intermediaries, and specific support schemes for SMEs, mobilising up to another €40 billion of financing.
Never waste a good crisis
Until March 2020, the 2021–2027 MFF negotiations thus seemed to follow their largely pre-determined path. The Covid-19 crisis, however, gave a new impetus to the on-going negotiations, opening up the possibility for the Commission to make innovative proposals to further develop the EU budget. In March 2020, the European Parliament asked the Commission to reformulate and adapt its spending priorities and submit a new MFF proposal to the legislators. Moreover, in April 2020, the European Council joined the European Parliament in asking the Commission to make a proposal on how to finance the reconstruction of the economy in Member States, agreeing in principle to set up a dedicated recovery fund.
Some of the proposals made so far could have a profound impact on the way EU budgets are financed and spent, and may even result in a significantly larger MFF including the SURE reinsurance scheme and the recovery plan. As early as April 2020, the European Commission proposed a new instrument ‘Support mitigating Unemployment Risks in Emergency’ (SURE), as a €100 billion reinsurance scheme for national unemployment insurance systems, but focussed on short-time work and schemes that avoid lay-offs during shocks like Covid-19. The SURE initiative will be part of the MFF, but has been proposed using Article 122 of the Treaty on the Functioning of the European Union; a measure that does not require the European Parliament’s approval.
Finally, on 27 May 2020, the Commission presented its detailed proposals for a recovery plan. The proposal sets out the 2021–2027 MFF, with commitment appropriations slightly decreased to €1100 billion at 2018 prices compared to the first proposal. However, in addition to the ‘core’ MFF and as part of the budget, there should be a €750 billion recovery fund ‘Next Generation EU’ to be repaid over 30 years (see Box 2).
Box 2 — Further details on the Commission proposal for a ‘Next Generation EU’ recovery fund
This instrument should focus on the first years of recovery, rather than becoming permanent. It will be available to all Member States, but will focus on those parts of the Union that have been most affected and where the needs are greatest. The € 750 billion would be debt-financed and the financial support would be partly through grants (€ 500 billion) and partly repayable (€ 250 billion). Spending should be aligned with the EU policy goals, and in particular climate and digitaliszation. It should focus on the first years of recovery, rather than becoming permanent. All funding would be made through the EU budget. It would thus be subject to parliamentary oversight (and external audit by the ECA). Repayment of the debt would not begin before 2028.
There would be three spending priorities: the largest part wouldill focus on public investment and reforms, mainly through the ‘Recovery and resilience facility’, providing both €310 billion in grants and €250 billion in loans. This spending wouldill be administered through the Cohesion programmes and the ‘Just Transition Mechanism’, but allocated between Member States on thea basis of needs rather than their relative wealth. A second priority wouldill be to support private investments. For this, the ‘InvestEU’ programme would be strengthened to help invest in strategic industries and a new ‘solvency support instrument’ wouldill be set up under the EFSI with a €75 billion guarantee from the EU budget to allow for a recapitaliszation of companies who are at risk of insolvency as a result of the lockdown. The third priority wouldill entail additional funding through existing programmes such aslike ‘RescEU’ and ‘Horizon Europe’, as well as a new public health programme, ‘EU4Health’.
Both initiatives — i.e. SURE and the recovery fund — will be debt-funded, which would be a novelty for the EU budget.(9) Moreover, the spending of both initiatives would take place through the EU budget rather than through parallel inter-governmental arrangements outside the MFF.
Nevertheless, it is not difficult to predict that the new initiatives for the 2021–2027 MFF will be intensely discussed in the coming weeks, raising new questions and reopening old ones, such as:
- how will the additional debt funding be sourced: will there be also other new own resources such as taxes on the digital economy, one of the economic winners of the Covid-19 crisis, a tax on large companies’ operations, a carbon levy on non-EU imports or a plastics tax as suggested by the Commission?
- by how much will the recovery fund increase, overall, the next MFF?
- to what extent will the additional recovery spending be front-loaded? Until when will the recovery fund provide support?
- to what extent will the support from the recovery fund be grant-based, rather than re-payable?
- who will receive funding and, most importantly, for what? Will there be any additional conditions? How will the Commission monitor the investment decisions by Member States?
- how will the implementing rules look? What will be the accountability and accounting arrangements?
We are in unchartered waters here. Never before did we see such a fundamental impact on the MFF negotiations, so late in the process, and against a background of such a level of uncertainty as regards the economic and fiscal outlook of the EU and its Member States. Negotiations between Member States are also hampered by the continued lockdown and travel restrictions that make it more difficult, if not impossible, for the heads of state to meet in person in the coming weeks.
And finally, we will need to see how this ambitious Commission proposal will work out in the legislative procedure between the Council and the European Parliament. In the end, the Member States need to agree to the proposal unanimously, but the European Parliament still has the right to reject such a compromise.
‘More for more’? Not necessarily for the EU’s spending on climate action
What does this new MFF proposal mean for climate-related funding? Obviously, a key aspect is whether there will be an overall increase in the EU budget, and if so, by how much, in particular because the revised Commission proposal has maintained the 25% target for climate mainstreaming across all MFF spending. As a result, a larger EU budget — thanks to additional funds from the ‘Next Generation EU’ plan — should in principle lead to more spending on climate-related measures. Both the European Commission and the European Council have underlined that the European Green Deal should serve as a ‘compass’ for a revamped 2021–2027 MFF, stressing in particular the need for investments in green and digital technologies. This was also echoed by 17 European ministries who called on the Commission to use the Green Deal as a framework for recovery plans and underlined the need for solutions in line with the objectives of the Paris Agreement. And there is no lack of suggestions from NGO’s on which investments should be prioritised. (10)
Whether this will be the case remains to be seen. For example, a Covid-19-induced recession could lead to changes in public opinion. Poorer citizens may be more reluctant to bear the cost of climate-friendly policies, because in the short-term such policies could destroy even more traditional jobs. The national governments’ overriding priority will be to minimise the economic impact of the Covid-19 crisis and maintain employment levels. In an economic crisis, investments in low-carbon technologies compete more than ever with other investments, such as building transport infrastructure, which are at least in the short run often more job-intensive. In addition, the technological capacity (and willingness) of Member States to invest in low-carbon technologies as part of the economic recovery may differ.
We will need to wait for the outcome of the negotiations to see what this entails for the EU’s financing of climate-related measures over the next seven years. In any case, the Covid-19 crisis has highlighted once again that a more ambitious European Union also needs a more ambitious budget. It is simply unrealistic to expect that an EU budget that corresponds to around 1% of the EU’s GNI is adequate to finance an EU-wide economic recovery, while supporting the 27 Member States in their transition towards carbon-neutral economies.
However, at this stage, one thing is already certain: once the 2021–2027 MFF has been adopted, we, as the EU’s external auditor, will have to examine how the EU budget will be implemented each year on the ground. And in doing so, we will be expected to examine not just whether money has been spent in accordance with the rules, but what for and with what effect. And this will include the financial support provided through the EU budget for the fight against climate change: one of the EU’s strategic priorities and one of the most challenging tasks for our generation and those of the near future.
Notes
(1) Throughout the article, GDP and GNI are frequently used terms. Gross national income (GNI) is a measurement of a country’s income, including all the income earned by a country’s residents and businesses, including any income earned abroad. Gross domestic product (GDP) measures the value of goods and services produced within a country, including national output, expenditure, and income. GNI equals GDP plus wages, salaries, and the property income of the country’s residents earned abroad.
(2) The MFF procedure is based on Article 312 of the Treaty on the Functioning of the EU. The Council, acting in accordance with a special legislative procedure, adopts a regulation laying down the MFF. The Council is required to act unanimously after obtaining the consent of the European Parliament by simple majority.
(3) Article 311(1) of the Treaty on the Functioning of the European Union: ‘The Union shall raise the funds it needs for the purpose of attaining its own objectives and of carrying through its own policies.’
(4) From 2014 to 2020, the EU was entitled to spend up to €959.5 billion in commitments and €908.4 billion in payments (at 2011 prices). During this seven-year period the EU budget thus accounts for broadly 1% of the Member States gross national income (GNI). For comparison, the revenue side of the US federal annual budget in 2019 amounted to $3.5 trillion, corresponding to around 16% of the federal states‘ income.
(5) The EFSI is backed by guarantees from the EU budget and uses them to leverage additional public and private funding by providing loans with preferential interest rates and guarantees, and by financing equity investments.
(6) As regards climate-related measures under the Commission’s direct management, around €5.45 billion was allocated to the sub-heading ‘environmental and climate actions’, in particular the EU Programme for the Environment and Climate Action (LIFE).
(7) The JTM will provide three types of financial support, subject to a programming exercise which is modelled on the partnership agreements between the Commission and Member States under the 2014–2020 European Structural and Investment Funds (ESIF): the ‘Just Transition Fund’ (€30–50 billion), which will provide grants for social and economic transformation in the eligible regions, a dedicated scheme under ‘InvestEU’ to mobilise up to €45 billion in private investment, and a loan facility providing loans to allow for additional investments of €25–30 billion by the public sector.
(8) According to the current plans, the ETS would be extended to cover new sectors (e.g. the maritime sector, emissions from buildings). The extended ETS would serve as revenue for the EU budget: according to the plans, 20% of the revenue from the auctioning of EU ETS could be directly allocated to the EU budget. The Commission plans to publish the related proposal on the revision of the ETS in June 2021.
(9) Another novelty was that the Commission proposal was preceded by two initiatives of groups of Member States: a joint Franco-German proposal of a €500 billion debt-financed recovery fund which would provide support through grants, and be re-financed through Member State contributions to the MFF in later years. The Netherlands, Sweden, Denmark and Austria made a counter proposal which insists that the financial support should be limited to providing back-to-back loans to Member States.
(10) See for example the report of the European Environmental Bureau (EEB), ‘Industrial Transformation for a More Resilient Future,’, May 2020.
This article was first published on the 2/2020 issue of the ECA Journal. The contents of the interviews and the articles are the sole responsibility of the interviewees and authors and do not necessarily reflect the opinion of the European Court of Auditors
