One-fifth of EU budget earmarked for tackling climate change

30 June 2011, Environmental Finance

Environmental policy and climate change action will be “mainstreamed” into all areas of the EU budget from 2014, the European Commission announced late on Wednesday night, with climate-related expenditure making up at least 20% of EU financing.

Funding for energy infrastructure and low-carbon R&D is also set to increase.

The Commission is proposing that the EU budget for the seven-year period (2014-20) would rise to EUR1,025 billion ($1,484 billion), compared to EUR975 billion for the current seven-year period.

This would include a ‘Connecting Europe Facility’ that would use “innovative financing tools”, including project bonds, to speed up investment in Europe’s energy and transport networks, and help the integration of renewables into the electricity grid.

Likewise, the EU plans to commit higher levels of funding to the fight against climate change in developing countries and allocate EUR80 billion for research and innovation – with the energy sector being a key recipient of funds. The Commission also proposed EUR3.2 billion for the environmental LIFE+ programme with EUR0.8 billion specifically for climate action.

Green NGOs had called for at least 35% of the EU budget to be used to tackle climate change and Tony Long, director of WWF’s European Policy Office, said the Commission’s budget proposal “holds out the promise of some minor environmental advances but is largely business as usual for Europe”.
Ben Caldecott

Ben Caldecott, Climate Change Capital: mainstreaming is “the right way forward”

Markus Trilling, EU funds coordinator for Friends of the Earth Europe and Bankwatch, said the budget “calls for European public money to be spent wisely and smartly for the benefit of future generations but, in reality, it still allows for wasteful, fossil-fuelled spending”. He said that the Commission must now produce “strong regulation to make sure funds are invested in energy and resource efficiency and renewable energy, and the promise of this budget is not simply empty words”.

Ben Caldecott, head of European policy at environmental investment management firm Climate Change Capital in London, told Environmental Finance that “fundamentally the idea of mainstreaming climate change and environmental policy is the right way forward.” He also welcomed the Commission’s “emphasis on catalysing private sector investment” and its “proposal for better coordination of R&D spending in the clean-tech sector” to bring the EU up to speed with the US, Japan and China.

“Europe is leading the way and taking action, but we still continue to invest in high carbon infrastructure that results in significant carbon lock-in,” added Caldecott. “We need to be much clearer across the EU about how long a transition window we are going to give polluting industries – there will be a point where European economy will not be able to support carbon intensive infrastructure and business models.”

These proposals are only the start of a lengthy negotiation between member states and the European Parliament over the future EU spending plan. The Commission should come forward with regulations for the budget in the autumn, with a final agreement on the issue expected at some point in 2012.