A billion euros to avoid the “climate shock”

If this European Commission was born under the green color of sustainability, yesterday it presented its financial strategy to achieve the great objective, to reach climate neutrality in 2050 to avoid the “climate shock”. Specifically, it plans to mobilize up to one trillion euros in the next decade, yes, through a lot of financial engineering. A relatively modest investment of Community funds, supported by money from the member states, the European Investment Bank, which will stimulate private initiative that will allow us to reach this almost magical figure that the European Commission has set.

The plan foresees that 500,000 million will come out of the community budget, to which would be added an additional 114,000 million contributed by the member states. From here, InvestEU, the European mechanism to stimulate investment, will mobilise some 279,000 million euros in support of economic projects, mostly from the private sector. On the other hand, it is expected to raise 100,000 million for the just transition mechanism. These are the calculations that Brussels officially presented yesterday to set the financing of its great project, the energy transition.

“Ensuring that no one is left behind” is the slogan with which Brussels presented its financial strategy

In addition to boosting investments, an important part of the plan is also dedicated to a key point, aid for the transition to soften the impact on the sectors and countries that are most affected by the energy change. A mechanism that expects to mobilize 100,000 million euros during the period 2021-2027, that of the next financial perspectives of the European Union. These funds are essential to convince the most reluctant, read Hungary and the Czech Republic, to make the commitment to reach a climate-neutral continent by 2050. And without forgetting Poland, the most problematic country, which dissociated itself from the commitment.

At the last summit of the European Union 28 countries assumed the great objective, to make Europe the first climate-neutral continent by 2050, but with one exception: Poland accepted that this date be included in the conclusions of the meeting, but specifying that it did not commit to fulfill it. The Warsaw strategy seems clear, it will only join the project if it is compensated for the damage that the transition will entail for its economy. In their case they will certainly be high, given that their energy depends on almost 80% of coal.

These funds are the ones that must convince them, without forgetting other countries – in the case of Spain, for example – that will demand that not all the money goes to the least collaborators, for many reasons they have, and that the enthusiasts of energy change are harmed.

One of the essential pieces to “leave no one behind”, in a phrase coined by Commission President Ursula von der Leyen, is the just transition fund, which will receive 7.5 billion euros from the new EU budgets in the period 2021-2027. This is really new money. From here, there is the co-financing of the countries. The fund will mainly provide grants to the regions. Examples cited include helping workers adapt to the labour market of the future, as well as supporting investments in the clean energy transition. It is designed in part to help do without coal.

“We need to show solidarity with europe’s worst-affected regions, such as mining regions and others, to ensure that the green deal gets everyone’s support and has a chance to become a reality,” said commission vice president Frans Timmermans.

This just transition fund is also complemented by private investments to be mobilised by InvestEU, and support from the European Investment Bank. Each country will have to make its transition plans, which must be approved by Brussels to have access to these funds.

Source: The Vanguard