With the European Green Deal, the European Union turned green into its defining colour, setting ambitious climate targets and unleashing a wave of legislation to get there. But ensuring that achievements will not fall short of commitments will be challenging, notably as the decarbonisation cost becomes more visible to people while changing political conditions constrain the politics of climate action. To this end, the EU must prepare to increase the financial resources allocated to supporting its green goals in the coming years.
It must be clear to all that what the EU has embarked on is no less than an industrial revolution. A revolution that, unlike those of the past, is set against a tight deadline. Even if its benefits will by far outweigh costs, even in strict economic terms, this transformation will still entail significant pain along the road. Some assets will lose value, some jobs will be destroyed, and some regions will suffer. Competitiveness will be challenged. The macroeconomic implications of the transition to carbon neutrality may well turn out to be temporarily negative.
This changeover can only succeed if it commands broad enough support, which in turn requires that equity considerations be put at the forefront of the policy agenda. No household should be required to undertake an investment it can’t afford. This concern must be a priority for each and every member state, but also for the EU as a whole.
These problems were identified early on by the European Union and it has acted accordingly to tackle them – for instance, with the establishment of the Just Transition Fund. However, these efforts may prove insufficient. Social and economic costs are becoming more apparent. Political conditions are changing and the wide consensus that European decarbonisation ambition once commanded is visibly eroding. The green transition is getting divisive and for member states governments, the temptation to blame ‘Brussels’ for its adverse implications is growing. Ultimately, what is at risk is the credibility of the green transition. At some point, investors and companies may start wondering if the EU has enough resolve to carry through its ambitious plans. That would be a disaster.
To safeguard the European Green Deal moving forward, the EU must launch preparations for a new EU green investment plan, which should ensure that EU green grants remain at least at the current level of €50bn per year after the Recovery and Resilience Facility (RRF) is phased out in 2026. Making up for the annual shortfall would require new resources to the tune of at least €180bn between 2024 and 2030.
In terms of expenditure, the new green investment plan should be structured differently from the RRF. First, funds should not primarily be pre-allocated nationally. Secondly, projects should fit a strong and clear EU strategy, rather than being a collection of national shovel-ready projects. EU funds should be used to tackle the increasing distributional implications of climate policy across Europe, to ensure the political viability of the process. Thirdly, EU funding could be linked to climate and energy governance. Conditions should be attached, such as minimal national governance structures being in place for countries to access EU funds, so that, moving forward, all EU members have at least some supporting structures to guide and manage their transition in a more coherent and efficient way.