Green budget rules and other issues in EU summit talks
15 July 2020 | Markets
Plans to reserve 30% of European Union spending for climate objectives will not be the hottest topic on the agenda when EU leaders meet on Friday (17 July). And that may be good news for the climate.
Instead, leaders are expected to fight over the size of the EU’s €1 trillion budget for the next seven years (2021-2027) and haggle over a proposed €750 billion recovery fund from the coronavirus crisis.
Other hot issues include the rebates that richer EU nations will get from their contribution to the EU budget as well as the share of loans and grants that will be distributed under the recovery plan – a battle pitching frugal Northern states against the poorer South.
“Green conditionality is one of the less difficult ones,” admitted an EU diplomat with insider knowledge of the discussions taking place between European heads of states and governments.
At an EU summit last December, Poland was the only country that refused to sign up to a joint statement backing the bloc’s objective of reducing emissions to net-zero by 2050.
And ahead of this week’s budget talks, Warsaw warned it would reject proposals to link the disbursement of EU money to climate goals.
“We do not see any need to implement any conditions to the Just Transition Fund regulation,” said a Polish diplomat. Moreover, conditions linked to the EU’s long-term budget are “undermining the objectives of the regulation which is supposed to help regions most affected by the transformation,” the diplomat said.
“A just transition cannot be based on conditionality but inclusiveness,” the Polish diplomat told.
But even though these questions are central to the EU’s recovery fund, they are not expected to be a show-stopper when EU leaders meet on Friday.
Earlier this week, the bloc’s 27 environment ministers – including Poland’s – signed a joint statement calling for a green recovery from the coronavirus crisis.
Europe’s recovery effort “must go hand in hand with ambitious and cost-effective climate action and environmental protection,” the ministers said after informal talks held on Monday (13 July).
Poland’s climate minister, Micha? Kurtyka, signed up to the joint statement, signalling Warsaw’s willingness to compromise.
“The current pandemic has reinforced our belief that the path of transformation leading towards low and zero emissions is absolutely correct,” Kurtyka wrote in a recent op-ed.
“Poland absolutely needs green investments as they are going to help drive the economy, create new jobs and strengthen the competitive advantage of our domestic businesses on the international markets,” he said.
The key for Warsaw is whether it will receive enough cash from EU coffers to help it reach its climate goals.
“Poland is committed to the energy transformation and it is crucial to ensure adequate financial resources for continuity of actions towards climate neutral EU,” the Polish diplomat told.
Updated “negotiation box”
Monday’s meeting of environment ministers came after the presentation last Friday of an updated “negotiation box” on the EU budget and recovery plan. The new package was presented by European Council President Charles Michel after a mini-summit with German Chancellor Angela Merkel who holds the EU’s six-month rotating presidency.
“For the first time we propose to target 30% of funding on climate-related projects,” said Michel, a higher share than the 25% proposed by the European Commission in 2018.
“Climate transition remains our top priority,” Michel said in a statement, adding that expenses under both the EU’s long-term budget and recovery fund “will comply with our objective of climate neutrality by 2050, the EU’s 2030 climate targets, and the Paris Agreement”.
For EU leaders, agreeing on green budget rules will be a delicate balancing act. On the one hand, rules need to be flexible enough to satisfy the needs of countries like Poland but they also need to be strict in order to reassure frugal countries like the Netherlands, Austria and Denmark that EU money will be wisely spent.