Brussels launches a trillion euro plan for the ecological transition

One trillion euros to reduce CO2 to zero. The European Commission, chaired by Ursula von der Leyen, is due to approve on Tuesday a funding plan that aims to mobilise one trillion euros over the next decade to ensure Europe becomes the first continent to achieve climate neutrality by 2050.

The plan, to whose draft EL PAÍS has had access, ensures that “the transition to a climate-neutral and sustainable economy will require significant investments.” The document argues that the public sector must “take the lead, but it is private actors who must provide the volume” of the tremendous economic, social, technological and industrial transformation underway.

The Commission’s plan (known in English as the Sustainable Europe Investment Plan or SEIP) aims to use huge resources from the Community budget to stimulate investment; design a legal framework that facilitates and attracts private capital; and to reserve special items for less wealthy EU partners and for regions with high dependence on energy sources or industries with high levels of emissions.

“We want the European Union to become a model and to be the world leader in this area,” von der Leyen said Friday in Zagreb, where the European Commission held the first meeting with the six-monthly presidency of the European Council, occupied since January 1 by Croatia.

The meeting sought the support of the Croatian government of Andrej Plenkovic for a Green Plan that, according to Von der Leyen, “I am convinced that it will become the new European growth strategy.”

But Croatia is one of the few partners in Central and Eastern Europe that embraces with some enthusiasm a decarbonisation strategy that shakes partners such as Poland, Hungary, the Czech Republic and even certain regions of Germany. And other partners, including Spain, while strongly in favour of the ecological transition, fear losing EU funds that could be concentrated in countries from the former Soviet bloc whose industrial and energy model requires much more costly modernisation.

Despite numerous reluctances, the European Council approved at the December summit the target of achieving net zero CO2 emissions by 2050. But in return, the European Commission pledged to present an ambitious and generous funding plan that clears the doubts of countries with a more costly transition, in particular, Poland.

Von der Leyen has fulfilled her promise and this Tuesday she will specify the financial arm of a Green Plan that could place Europe at the forefront of the fight against climate change.

The document to which this newspaper has had access details the resources to mobilize one trillion euros between 2021 and 2030. A good part, 485,000 million euros, will come from the next EU Financial Framework (2021-2027). Brussels intends to allocate 25% of these budgets to policies linked to the fight against climate change, which will force a reorientation in part of the spending models of the traditional structural funds and the common agricultural policy.

The Commission’s plan estimates that this Community budget will entail a co-financing from the national coffers of 115,000 million euros, which would already raise the available capital to more than half a trillion.

The second major contribution would come from InvestEU, the program formerly known as the Juncker plan, which aims to mobilize 280,000 million, between public and private resources.

A third item, baptized as Innovation and Modernization, would be financed through the resources generated by the sale of CO2 emission rights in the European market created years ago for the commercialization of these titles. The Commission estimates that this resource could contribute 12,000 million euros. And Brussels intends to allocate that money primarily to countries with a Gross Domestic Product well below the European average.

The plan is completed with the creation of a Transition Fund that, over the next decade, would be the catalyst for investments worth 143,000 million euros. Its priority destination would be regions with high dependence on energy sources such as coal or areas with industries with high energy consumption.

Financial Engineering

The showy and bulky figure of the trillion euros is not without criticism nor does it completely appease countries and industries concerned about the cost of a restructuring with a magnitude unprecedented recently.

Objections to von der Leyen’s plan point to the reliability of financial engineering that with a limited volume of resources aspires to reach multimillion-dollar figures. The 280,000 million euros from InvestEU, for example, will come from a fund that will only have a guarantee of 38,000 million euros from the COMMUNITY budget, with only 40% in hard cash.

Brussels recalls that the same doubts were raised at the beginning of the Juncker plan, which with a minimum guarantee aspired to mobilize 300,000 million euros. The goal was achieved and the plan has been extended to reach half a trillion euros. With that successful precedent, the Commission now hopes to mobilise some €93 billion a year. And 30% of that item (about 28,000 million euros per year) would be concentrated in the projects of the ecological transition with greater risk for the private investor.

The SEIP also raises suspicions about the risk that it will drain resources from the Structural Funds to projects related to the transition and that it will leave infrastructure or investments that facilitate economic convergence, the original objective of European cohesion policy, without financing.

Brussels recognises that reorientation is inevitable. And it proposes that at least 25% of the next EU budgetary framework (for the period 2021-2027) be allocated to policies related to climate change. In the Cohesion Fund and the Structural Funds this contribution will amount to 40%. And in agricultural policy, 40% of direct payments to farmers will be linked to environmental objectives.

Source: The Country