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EU leaders strike a deal on post-corona package and increase climate action spending target

L-R – Marke Rutte, Angela Merkel, Ursula Von der Leyen, Emmanuel Macron, Charles Michel. Copyright European Council.

“In fact, it is the first time, the first time in European history that our budget will be clearly linked to our climate objectives.”

After four days and nights of intense negotiations, EU leaders have agreed a deal today on a post-corona recovery package and European budget for 2021-2027. They have also decided to link the budget to their climate objectives and increase the EU’s climate action spending target to 30%, with a view to achieving the new EU 2030 climate target that is to be updated by the end of the year.

Overall, EU leaders agreed to jointly borrow €750 billion to respond to the coronavirus pandemic.

The EU’s recovery fund, to be composed of €390 billion in grants and €360 billion in loans, will be attached to a new €1.074 trillion seven-year budget, the Multiannual Financial Framework (MFF), on which heads of state and government also reached unanimous agreement — bringing the total financial package to €1.82 trillion.

Commenting on the agreement, European Council President Charles Michel (@eucopresident) said: “I believe this agreement will be seen as a pivotal moment in Europe’s journey, but it will also launch us into the future. In fact, it is the first time, the first time in European history that our budget will be clearly linked to our climate objectives. The first time, the first time that the respect for rule of law is a decisive criteria for budget spending. And the first time, the first time that you are jointly re-enforcing our economies against a crisis.”

The European Commission’s proposal on the entire package, which comprises the revamped Multiannual Financial Framework (MFF) 2021-2027 and additional funds specifically tailored to support the economic recovery until 2024 called ‘Next Generation EU’, has in place an overall climate mainstreaming target of at least 25%.  However, today’s decision by the European Council will increase the climate spending target to 30% and couple this financial boost with a commitment to achieve a new, substantially increased climate target for 2030. As a general principle, all EU expenditure should be consistent with Paris Agreement objectives and comply with the objective of EU climate neutrality by 2050.

The green finance section of the EU’s Green New Deal is also linked to this new agreement.

Nevertheless, although environmental group Climate Action Network (CAN) supported the target increase and welcomed the news, it said in a statement that the legislation for the ‘Next Generation EU’ does not specify how the new funds would contribute to achieving the set climate spending target. And subsidies for fossil fuels are still possible.

Member States now need to draft spending plans fit for the climate crisis, and ban harmful measures such as investments in new fossil gas infrastructure.

In a statement, CAN said that investing in the transition towards climate neutrality presents a win-win situation for the “frugal four” (referred to Austria, the Netherlands, Denmark and Sweden, who were critical about the proposed size of the fund before it was green lighted and its mixture of grants and loans )and net-recipients in Southern and Eastern Europe.

“It offers guarantees for the budget net-payers that EU funds will be spent wisely in line with higher climate ambition, in renewable energy and energy savings which provide three times more jobs than fossil fuels,” the group added. “What’s more, a green recovery will benefit the fossil fuel regions in their swift transition away from fossil fuels, and allow them to avoid escalating costs of climate change.”

Markus Trilling, finance and subsidies policy coordinator at Climate Action Network (CAN) Europe said: “This ambitious decision to link the recovery funds with EU’s climate commitments must now trickle down to the Member States’ spending plans. What leaders will put in their plans will define the EU’s response to both the climate and economic crises in the next ten years. Now, EU leaders must use the full potential of EU funds to boost climate action and exclude support to fossil fuels.”

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