For the first time, the EU climate ambition is backed by an unprecedented financial package. The recovery and cohesion policy funds are planned to be two major components to accelerate the energy transition and reach towards climate neutrality by 2050.
Bankwatch makes sure these EU funds support transformative and sustainable investments that advance energy consumption reduction, sustainable renewables and smart grids, ideally owned by communities.
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We closely follow international public finance and bring critical updates from the ground.
Key facts
Climate ambition
The EU with the Green Deal has an ambitious agenda to decarbonise its economies: 55 per cent GHG reduction by 2030, more renewables and energy efficiency, paving the way for climate neutrality in 2050. This requires colossal investments and should be reflected in how the EU funding instruments are being used today.
Climate spendings
There is an unprecedent chunk of money coming from the EU: on top of the ‘traditional’ 2021-27 EU budget (more than EUR one trillion), a recovery package amounting EUR 750 billion is in place to help Member States recover from the pandemic and address long-term challenges. Cohesion policy remains a big part of the EU budget (one third) and is a decisive tool to invest in future oriented investments. Those funds have to contribute between 30 and 37 per cent for climate action.
Public participation and transparency
The transition won’t happen without citizens and it is necessary to involve everyone in the decision-making. Including on how the EU funds are programmed and spent. Rules for engaging citizens are in the European Code of Conduct on Partnership.
Key issues
Climate ambition
CEE countries are not on track and reluctant to implement this agenda (NECPs are not ambitious enough). Multiple factors are preventing the transformation: lack of political will, fear for the consequences of the transition (economic and social), misconceptions and false solutions, scepticism of people, resistance to transformative projects (renewables). Positive measures are however implemented in some cases and a prove that solutions exist and are possible in CEE.
Climate spendings
The EU funds are a major source of investments in CEE countries and represent in average more than 40 per cent of their GDP. CEE countries are the main beneficiaries of cohesion policy. These funds are a unique opportunity to direct investments for climate and people. They should be used for more qualitative projects and transformative investments to accelerate the fight against climate change. Rules are in place to limit harmful investments (fossil fuels limitation, ‘do no significant harm’ principle) but Member States still have some leeway to support dubious projects.
Public participation and transparency
To make sure the EU funds meet the challenges, public participation is key. That means the public should have access to information, be able to contribute to the design of the programmes, and monitor their implementation.
Background
Bankwatch campaigners closely follow the process and implementation of spending EU funds in eight countries (Estonia, Latvia, Poland, Czechia, Slovakia, Hungary, Romania, Bulgaria). As those funds are under shared management, it is up to Member States to define the measures, in line with the funding rules. We review the programme documents, participate in consultations and reach out to national authorities to ensure the highest ambition when they implement those funding programmes. We also make sure the relevant stakeholders are heard during the preparation and implementation of the programmes, and we contribute to share information and build capacity, allowing the local communities to benefit from those opportunities. We report back to EU institutions what we witness on the ground and we inform EU decision-makers on to ensure using full potential of EU funds and the highest level of ambition.
Cohesion funds – programming period 2021-2027
The current process is the third programming period for Bulgaria. The Partnership Agreement and the operational programmes have not been finalised or approved by the European Commission yet.
EU financing – EUR 10.8 billion
- Some allocations in the transport sector contribute to more sustainable electricity and heating energy supply for the country, ensuring better railway infrastructure.
- The big road projects are highly questionable, as they facilitate the oil dependency of certain sectors of the national economy and can potentially have a serious negative impact on biodiversity.
- The main focus is on the implementation of the projects rather than a significant systematic shift towards a better quality of life and sustainable economy.
Recovery and Resilience Facility
The preparation of the recovery plan was difficult, as it happened during a period of political instability in the country. The real reform commitments were undermined, leading to several serious changes in the priorities and projects. Currently, Bulgaria is on its fifth version of the plan after two rounds of comments from the European Commission.
EU financing – EUR 6.5 billion
- National sectoral strategies do not adequately respond to and are not fully in line with the EU climate priorities and legislative initiatives.
- The lack of a timely implementation of significant reforms in key sectors such as energy and transport has affected the plan’s level of ambition.
- One good improvement in the plan is that the government refused to replace coal with gas in Maritza Iztok, following recommendations from civil society. The construction of a 1 GW steam and gas power plant was proposed, but the idea was abandoned in January 2022.
Cohesion funds – programming period 2021-2027
Both the Partnership Agreement and the operational programmes lack ambition in the area of environment and climate mitigation.
EU financing – EUR 21.1 billion
- Support for the installation of gas boilers and allocation of substantial amounts to gas infrastructure instead of direct electrification can be found in several operational programmes.
- Civil participation and the meaningful involvement of partners is often neglected. Consultations thus far have been too formal and the outcomes were not reported nor properly reflected in the programmes.
Recovery and Resilience Facility
Czechia’s recovery plan achieves a green spending share of 25 per cent, which is below the EU’s benchmark of 37 per cent.
EU financing – EUR 7.85 billion
- The plan will finance the installation of gas boilers for a total amount of EUR 67 million.
- There is not enough money going into the renovation of buildings.
- The participation of civil society in the preparation of the plan was limited: after the initial pressure of non-governmental organisations, some of the proposals were partially reflected in the plan but without any further discussion.
Cohesion funds – programming period 2021-2027
Estonia is using Cohesion Policy funds for accelerating the transition to climate neutrality, but the operational programme includes harmful investments and lacks important policies for energy transformation and ecosystem restoration.
EU financing – EUR 3.3 billion
- Emissions reductions will be hampered by harmful investments in road infrastructure that undermine the shift from road to rail transport. Instead, funds could be used for expanding rail infrastructure and improving urban mobility.
- The demand for building renovation support is very high and the amount foreseen by the government under Cohesion Policy funds is not enough to support the costs.
- With only one activity (wetland restoration) funded by the operational programme, biodiversity remains far too low on the list of priorities for Estonia.
Recovery and Resilience Facility
The recovery plan includes positive and necessary investments but lacks the transformative measures necessary for accelerating the green transition beyond industry and businesses.
EU financing – EUR 862 million
- Promoting the introduction of integrated renewables-based hydrogen technologies might lead to a positive climate impact, but biomass-based hydrogen must not be promoted.
- Estonia is not on track to fulfil the investment level targets set by the EU Biodiversity Strategy 2030, namely to dedicate 7.5 per cent of spending under the EU budget to biodiversity by 2024, and should allocate more towards protecting and restoring biodiversity.
- The interpretation of the ‘do no significant harm’ principle remains unclear in the plan. For instance, the Rail Baltica construction measure is presented as an important component of greening Estonia’s transport system, but as currently planned the project directly threatens important ecosystems and habitats.
Cohesion funds – programming period 2021-2027
The new Partnership Agreement includes the reduction of greenhouse emissions; however, the scale of this is not specified. Allocations set under Cohesion Policy funds in Hungary are not sufficient to cover the actual investment needs.
EU financing – EUR 22 791.1 million
- Cohesion funding covers rather superficial investments in energy efficiency and the deployment of relatively few renewable energy sources, and it fails to promote an ambitious energy transition.
- Biodiversity proofing is not sufficient and biodiversity conservation is a small, separated element among giant projects that aim to boost economic growth.
- Currently 5.66 per cent of the resources aim to conserve biodiversity, and this allocation belongs to only one programme, whereas, by 2026, 10 per cent of Cohesion Policy funds should be dedicated to biodiversity conservation.
Recovery and Resilience Facility
Hungary’s recovery plan, if approved, would achieve a green spending share of 37 per cent and another 13 per cent of the funding might have either a positive or negative impact on the green transition depending on the implementation of the relevant measures.
EU financing – EUR 7.2 billion
- Hungary’s plan misses important opportunities for green transition, for example, it fails to promote the improvement of buildings’ energy efficiency or deep renovation, despite the actual need in the country.
- Less than 0.1 per cent is allocated to biodiversity projects, and there are no guarantees that conservation objectives will be met.
- Nature conservation interests are not represented in the monitoring committee, despite CSOs’ repeated requests.
Cohesion funds – programming period 2021-2027
While the Latvian Partnership Agreement is still not available to the public, the operational programme has already been consulted with civil society.
EU financing – EUR 4.24 billion
- Climate measures do not look promising enough to achieve the planned overall climate goals.
- The operational programme does not make a measurable contribution to the renovation of buildings, and deep renovation is not mentioned in the programme.
- Biodiversity remains poorly addressed – although the operational programme includes relevant actions for nature that are compatible with the Biodiversity Strategy for 2030, there are some core nature protections and nature restorations targets that are left behind.
Recovery and Resilience Facility
Latvia’s recovery plan achieves the share of 37 per cent of funds for climate goals. The plan identifies three main areas for reforms and investments: reducing greenhouse gas emissions in the transport sector, increasing energy efficiency and adapting to climate change.
EU financing – EUR 1.82 billion
- Based on the fact that there is energy poverty in the country, the planned investments that are aimed at improving private and public energy efficiency measures should be higher than those allocated to the transport sector.
- Complementary investments in research and innovation are also envisaged under the climate component, where support will be directed towards research and product development aimed at achieving the EU’s Green Deal objectives.
- The realisation of 29 irrigation projects may potentially harm biodiversity and should not be included in the plan based on the ‘do no significant harm’ principle.
Cohesion funds – programming period 2021-2027
The Partnership Agreement and the main operational programme in the area of climate and environment lack transformative ambition and repeat the shortcomings from the previous EU budgeting period: they focus on large-scale infrastructure projects rather than investments in green transition.
EU financing – EUR 76.54 billion
- While investments in renewables, energy efficiency or biodiversity are underfunded, significant allocations are earmarked for fossil gas infrastructure development, road construction or river regulation.
- A programme that should be aimed at climate action instead pushes Poland towards fossil gas lock-in.
- Energy communities are not named as a priority project in the programme. They should be supported through the recovery plan, which still awaits approval.
Recovery and Resilience Facility
Poland’s recovery plan has not yet been approved due to concerns about the rule of law, although it had been submitted to the European Commission at the beginning of May 2021. This analysis reflects the latest publicly available version.
EU financing – EUR 58.1 billion
- The available version of the plan raises concerns regarding compliance with the ‘do no significant harm’ principle, low reformative ambitions expressed in milestones, focus on the pace of spending rather than the quality and a large number of fossil gas investments.
- Some potentially harmful investments, like waste incineration, were removed in the course of public consultations, but others, like river regulation, appeared in the version adopted by the government.
- Major changes to the plan are expected as a result of negotiations between the Polish government and the Commission.
Cohesion funds – programming period 2021-2027
Cohesion and recovery funding are tainted by investments in false solutions for a green energy transition.
EU financing – EUR 31 billion
- Fossil gas and hydrogen have been included in one operational programme, specifically for conversion and modernisation of fossil gas transmission, distribution networks for hydrogen.
- Renewable district heating is not prioritised and gas is foreseen to replace coal-based heating systems.
- Operational programmes still refer to the old targets from the 2019 national energy and climate plan and not to the newer objectives set within the European Green Deal.
Recovery and Resilience Facility
In Romania, measures supporting climate action account for 41 per cent of the recovery plan’s total allocation.
EU financing – EUR 29.2 billion
- The plan includes some positive measures that target energy efficiency, renewable energy production and the consolidation of the legislative framework for the renewable sector.
- There are investments in fossil gas and hydrogen foreseen, for both energy production and heating sectors, failing to take into consideration their financial and environmental risks as well as the level of technical efficiency of some of the proposed technologies.
- The energy and biodiversity components of the plan receive smaller financial allocations compared to other components.
Cohesion funds – programming period 2021-2027
The operational programme does not yet create the incentives for energy savings and decarbonisation needed for carbon neutrality in Slovakia.
EU financing – EUR 12.6 billion
- There is a high probability that the ease and pace of spending will be prioritised over support for the highest greenhouse gas savings, best available technologies and socially vulnerable households.
- Incentives and indicators should catalyse decarbonisation, and fossil gas and unsustainable biomass solutions should not be supported.
- Fossil gas boilers have been excluded from the Partnership Agreement – subsidies from natural gas boilers have been recently redirected towards monitoring and other measures to improve air quality.
Recovery and Resilience Facility
Although civil society and energy experts call for essential structural reforms for decarbonisation, the Slovak recovery plan does not have a decarbonisation plan that details its pathway to carbon neutrality.
EU financing – EUR 6.5 billion
- The amount of funding dedicated to clean energy deployment in its recovery plan is far too low to reach investment needs for energy efficiency.
- Gas investments are still eligible to receive money from the recovery fund, and Slovakia’s plan directs some of the money towards gas boilers – contrary to the recent exclusion in the Cohesion Policy.
Reaching for a green recovery
The Recovery and Resilience Facility is an important opportunity for EU Member States to accelerate the ‘green transition’, but have they made the most of this fund?
The report Reaching for a green recovery: what holds back progress in ten EU recovery and resilience plans analyses ten final recovery plans. Key investments and reforms in the national recovery plan are assessed from a climate action perspective and the ‘do no significant harm’ principle. Each country section includes recommendations addressed to the Member State and the European Commission.
We have been monitoring recovery plans in central and eastern European countries from the beginning of the process and prepared assessments of draft recovery plans from Estonia, Poland, Slovakia, Romania, Latvia, Czech Republic, Hungary, Bulgaria.
We have also identified a lack of transparency in the process of creating recovery plans.
Citizens’ Observatory for Green Deal Financing
The Citizens’ Observatory for Green Deal Financing advocates at the EU and national levels for more transparency and a just distribution of EU funds. The observatory aims to promote the voices of local communities in seven Member States through a series of workshops, public events, virtual tours, roundtables, reports and other activities.
Export Credit Agencies (ECAs)
Efforts to eliminate international public finance for gas and coal projects in the EU and its neighbouring regions focus also on enhancing transparency and accountability within European Export Credit Agencies (ECAs). This ensures that they align with EU climate priorities and stop supporting fossil fuel investments.
EU funds and biodiversity
Nature is in crisis. 81 per cent of habitats in the EU are in ‘poor condition’, and without swift action this will only become worse. We need systemic and wide-reaching action and investments to tackle biodiversity loss and help restore nature before it is too late. The EU has pledged 120 billion of the EU budget to be earmarked for biodiversity by 2026, offering enormous potential to restore and protect nature, providing this is properly invested. We are therefore campaigning to ensure these public funds work for – not against – nature.
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