The ‘Trialogue’ negotiating process, being lead by the Cypriot Presidency of the EU, and involving the European parliament, the European commission and the European council (the member states), started for real in September, and the race is on for binding conclusions to be agreed by the end of the year that will frame the ways in which roughly 1 trillion euros is spent all over Europe.

A clear indication of how tortuous the whole process is going to be was provided by European Council president Herman van Rompuy’s recent announcement of a newly scheduled European summit meeting for November 22-23 that is intended to be purely dedicated to the MFF 2014-20.

So far things are shaping up to be a repetition of the same sad old story we’ve seen during EU budget preparations for previous funding periods: instead of acknowledging that the EU budget – relatively small compared to national government budgets – should serve primarily European objectives and policies, member states are instead opting for a narrow-minded approach and pursuing purely national interests during the negotiations.

While the European Commission’s MFF proposal gave a clear qualitative and strategic direction for future EU spending, the member states are either solely showing an interest in how to trigger as much cash as possible out of the common EU pot, or playing to their domestic audiences by promoting a cut of their contributions to the common budget.

Reaching agreement on the overall budget figures may see the “Friends of Cohesion” (a group of member states, mainly from CEE, that receive more EU funding than they transfer to Brussels in late night, last minute horse-trading where they have to defend their share against the so-called “friends of better spending”. The latter grouping of states may rather be categorised as “friends of cutting the EU budget”, a group of member states lead by Germany and the UK (the “net payers” to the EU budget) who want to downscale the future EU budget while maintaining their rebates.

Climate mainstreaming

It was of course the European commission that started the budget ball rolling in earnest with the publication of its Budget for Europe 2020 package last summer. In it the commission recommended that in order to reach the EU’s agreed climate and energy targets by 2020, at least 20 percent of the future MFF 2014-2020 should support climate action. Environment NGOs such as Bankwatch that have worked on EU funds issues over many years, and that are actively engaging in the current negotiations, strongly support this ‘climate mainstreaming’ initiative – only they are asking to increase it to 25 percent of the next MFF. This proposal was supported by a recent report from the European parliament’s Environment committee calling for at least 30 percent MFF dedication to climate action.

In tandem, NGOs are insisting on a robust implementation of this climate mainstreaming to ensure that all relevant EU funds maximise their climate benefits. Among the measures that would enhance delivery of these benefits are rewarding projects that have the best climate performance with certain financial incentives, and ensuring that climate change is a specific selection criteria in the programming cycle for projects that should get underway in member states next year if and when the MFF is settled.

These demands are vital, because here is the thing: in spite of the commission’s 20 percent proposal, NGOs calculate that currently only around 10 percent of the next MFF will support climate action.

There is still a huge gap of 154 billion euros between current proposals and 25 percent climate spending in the next MFF. Only three funds, representing 12 percent of the total MFF, reach the target: the LIFE program (55 percent for climate action), Horizon 2020 (35 percent) and the Connecting Europe Facility (33 percent). All other funding lines are a long way off the target: external action is at 14.3 percent, and Cohesion Policy, aimed at supporting the development of Europe’s regions, only reaches 11.3 percent.

This funding gap may cause extra headaches for member states at a later stage, as the currently amended regulations (Annex I of Common Provisions Regulation) demand that “the visibility of contributions towards the goal of a spending of at least 20% of the Union budget on climate change mitigation shall be ensured.”

With only 3.7 percent currently for climate action according to NGO estimates, the Common Agricultural Policy is by far the most worrying EU fund in terms of climate mainstreaming.

Cohesion needs to be more than just a sticking plaster

As EU budgetary spending under Cohesion policy is of prime importance for the new member states in which Bankwatch operates, our focus during the Trialogue process is on ensuring that these particular EU funds contribute to reaching the EU 2020 environmental targets, creating regional green jobs, enhancing economic opportunities and addressing the environmental challenges of climate change, biodiversity loss and resource inefficiency.

The Cohesion funds can and should do more than simply come to the rescue of beleaguered national budgets in these times of austerity and widespread recession. They should instead help to set economic development on a radically more sustainable and inclusive path.

This, we believe, can only be ensured if the Trialogue parties – European parliament, European commission and European council – work together constructively with Europe’s 500 million inhabitants and our collective environment uppermost in their minds.

Press headlines on the future Budget discussions are already replete with the word ‘battle’; there is even a liberal sprinkling of ‘blood on the carpet’ warnings beginning to appear in descriptions of what lies ahead in the negotiations. Bankwatch has the following main suggestions to the various parties – all aimed at peaceful, equitable and sustainable outcomes derived from future Cohesion policy spending.

Enshrining the Partnership Principle

In order to ensure the equal engagement of environmental and socio-economic partners throughout MFF 2014-20 programming and funds deployment, we support the European Parliament’s proposal for strong partnership through multi-level governance and the European Code of Conduct. This needs to be reflected in the national level monitoring committees but also during the preparation of partnership contracts and Operational Programmes, with technical assistance money made available for partners. Broader, more inclusive engagement in these processes – when allowed to happen – has brought qualitative improvements to EU funds spending (see discussion of the Well Spent map of projects inside this edition of Bankwatch Mail.)

Furthermore, the European Commission should adopt the entire Partnership Contract proposed by the member states. In this context it is of particular importance that all elements of the Partnership contract remain under the Commission’s oversight, especially those related to evaluating environmental performance in the past and the future. Member states would like to see only the financial part of the Partnership contract being subject to the Commission’s approval.

Strengthening biodiversity and environmental considerations

We support the European Parliament’s proposal for stronger language on sustainable development to be inserted into the Cohesion policy framework, including specifically for biodiversity and ecosystem protection. We support too the European Parliament’s proposals to assess the climate impacts of programmes, complementing Strategic Environmental Assessment and the biodiversity impacts of major projects.

EU leaders have repeatedly committed to halt the decline of biodiversity, while at the same time governments and the European commission are spending far too little money on the implementation of the Natura 2000 scheme – the backbone of nature conservation in Europe. In central and eastern Europe, there are multiple cases of Natura 2000 sites being threatened by infrastructure projects such as major road projects and airports that seek EU funding support. Much tougher protective measures therefore need to be at the heart of the future Cohesion policy. We also support the European Parliament’s proposal to explicitly mention Natura 2000 under the environment investment priority within Cohesion policy, and further support the European Parliament’s proposal for ‘ecosystem-based’ climate adaptation and risk prevention.

The need to ramp up the quality of Cohesion policy investments

The Council is proposing to weaken ex-ante conditions attached to Cohesion investments. This would have repercussions for the oversight and ultimate quality of investments. Instead we would like to see an improvement in the results orientation of the Cohesion Policy: this requires ex-ante conditions and an adequate performance framework based on targets and indicators.

Ensuring the European Regional Development Fund delivers its low carbon potential…

Within the Cohesion policy, the ERDF is an important spending instrument that reaches all corners of the EU. We are calling first of all for a higher thematic concentration for the low carbon objective within ERDF sponsored projects in order to contribute to the Europe 2020 Strategy and 2020 targets on renewable energy, energy efficiency and climate change. We recommend a minimum of 22 percent low carbon investments flow via the ERDF to developed regions, with 12 percent to go to less developed regions (or even 15 percent if low-carbon investments from the Cohesion Fund are taken into account), as is currently proposed by the European Parliament.

Moreover, there is the very real possibility that investment priorities in the ERDF could be further impaired, very likely harming the realisation of Europe 2020 Strategy targets. Thus we support:

• The European Parliament’s proposal for SME support to explicitly include eco-innovation and resource efficiency.
• A compromise to limit the scope of cogeneration and district heating and cooling support to high efficiency distribution networks – this would avoid the subsidising of fossil fuels.
• The Council’s proposal to expand the low carbon objective to specifically mention sustainable multi-modal urban mobility and land based measures – such a step would have positive impacts on climate mitigation and adaptation.
• The Council and European Parliament’s proposal explicitly mentioning the ‘restoration’ of biodiversity under the environment investment priority.

…and zero tolerance for rebranding fossil fuel subsidies as low carbon initiatives

Within the complex, inter-related regulatory texts that are being discussed as part of the MFF 2014-20 discussion, there is one highly alarming drive to permit EU funding support for fossil fuel infrastructure under the guise of low carbon investment.

Within the ERDF’s draft regulatory text, the Council is seeking to ensure the subsidising of fossil fuels by supporting the development of gas under the transport and infrastructure investment priority. Similarly, within the draft text that will guide Cohesion Fund spending, there is a European Parliament proposal to expand the scope of cogeneration and district heating and cooling that would allow for funding for fossil fuel related investments.

One of the prime movers in these cloak and dagger fossil fuel manouevres is MEP Jan Olbrycht. Despite a vote against the Polish MEP’s proposal in the European parliament’s Regional committee this summer, Olbrycht is not lying down and appears intent on pushing his perverse concept within the Trialogue process.

If such a notion gains any credence as part of the negotiations, it would undermine much of the pro-climate motivation that exists within the current negotiating texts. Agreement on more ambitious pro-climate imperatives throughout the future Cohesion policy, as Bankwatch is calling for, ought to relegate the ‘fossil fuel as low carbon’ mantra to the waste paper basket under the negotiating table.

Learn more: Keep up to date with the EU budget negotiations on Twitter by following @SustEUfunds

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