EU Divided Over Cost Burden Of Climate Deal

  • Date: 10/12/19
  • EurActiv

Eastern European countries, backed by trade unions, are putting pressure on EU leaders to come up with “fresh money” to support the energy transition in coal-dependent regions as part of a Green Deal due to be unveiled this week.

As the European Commission prepares to outline its Green Deal on Wednesday (11 December), worries are being expressed that one of the key elements of the proposal, the Just Transition Mechanism, may end up being a mere rebranding of existing EU expenditure.

Funds allocated under the new EU scheme “should be ‘fresh money’ and not come from reallocation” of existing funds, said Emil Wojtowicz, Vice-President for Finance at PGE, a state-owned utility which is the largest electricity producer in Poland.

Wind Europe, a trade association, also called for “fresh EU money,” saying the new fund “needs to be considerably higher” than the €5 billion initially envisaged by the European Parliament.

According to Wind Europe, the new EU fund should prioritise highly carbon-intensive regions, notably those heavily reliant on coal mining, it said in a joint statement with power industry association Eurelectric, and other trade groups in the electricity sector.

“How to finance the energy transition, bringing on board all citizens, is the most important issue for us,” said Jerzy Buzek, a former Polish prime minister turned EU lawmaker, who spoke at a EURACTIV event last week.

Buzek led the Parliament’s calls last year to set up a Just Transition Fund, a proposal that was later endorsed by Ursula von der Leyen, the Commission’s new president.

But the amount of money initially envisaged under the fund – €4.8 billion – is now largely insufficient in view of the EU’s increased climate ambitions, the Polish MEP argued.

New objectives, new tools

When she took office earlier this month, von der Leyen pledged to make Europe “the first climate neutral continent in the world” by 2050. That implies revising the EU’s climate target for 2030 – from a 40% reduction in greenhouse gas emissions to a 50-55% cut by the end of the next decade, she said.

“€5 billion is nothing,” Buzek insisted, adding a “€30-40 billion” figure would be more appropriate to help European regions that are most heavily impacted by industrial change. “We are in a quite different situation,” he added, saying the Just Transition Fund was initially conceived at a time when the EU was aiming for a 40% cut in emissions by 2030.

The former Polish PM drew attention to the ‘Yellow Vests’ protests in France, which were sparked by a 10 euro cent increase in fuel prices, and strikes over rising electricity prices that toppled the Bulgarian government years before. […]

Conditionality

While the amount of funding available under the EU budget is the chief concern for Poles, Czechs and Hungarians, it is not the only one. Whether the funds available will be allocated at all is another source of worry.

According to PGE, a minimum of 80% of the new fund should be made available to coal regions facing the biggest transition difficulties.

However, these monies could be blocked due to concerns over the rule of law in key beneficiary countries like Poland and Hungary. Warsaw is currently facing an infringement procedure under so-called “Article 7” of the EU treaty because of persistent threats to the independence of judges.

And under the current budget proposal, EU regional funds would only be offered to countries that meet their clean energy targets for 2020, a condition that would bar Poland from receiving any EU support.

“Conditionality will certainly be a very important consideration in the whole Commission proposal,” admitted Marc Lemaître, the EU official. “If one sets up a just transition fund, one should also be sure that the transition progresses, otherwise it’s a bit problematic,” he said at the EURACTIV event.

“To us it is very clear that the concentration will be very important,” Lemaître added, saying the new fund “cannot be ‘saupoudrage’” – a French term to mean a dilution of money over multiple beneficiaries.

Money for what?

Another concern relates to areas covered by the new Just Transition Mechanism. According to PGE, the money should not only go to retraining workers laid off as a result of coal plant closures – it should also help finance the large capital expenditure needed to build new power plants.

Poland is betting big on offshore wind to help the country wean itself off coal. But even as it steps up renewable energy plans, Warsaw is also pushing hard for new gas and nuclear plants to fill the power capacity gap left by coal plant closures.

Replacing Poland’s obsolete coal power fleet is a top political priority for the country, both for environmental and energy security reasons. But even as it steps up renewable energy plans, Warsaw is also pushing hard for new gas and nuclear plants to fill in the gap.

However, EU finance available to support new gas plants may soon be drying up. Last month, the European Investment Bank decided to phase-out funding for power plants running on fossil gas.

“They say no lending for the gas sector. Well, that’s a horrifying decision,” Buzek said.

“I must tell you very honestly: I don’t need a climate bank,” the veteran Polish MEP said. “I need an energy transition fund to do everything possible to go smoothly through the energy transition.”

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