EU Unveils Green Covid-19 Recovery Package – Is Anyone Following Suit?
What’s happening? A €750bn ($826bn) fund to make climate action central to the EU’s Covid-19 recovery has been unveiled by the European Commission. The fund is the world’s largest “green” stimulus, the commission claims.
Why does this matter? Alongside environmentalists, prominent economists have argued Covid-19 stimulus packages should be “green” in nature, stating this will deliver better returns than conventional spending.
The European Commission has set out to do just this, with EU member states, which still need to approve its plan, needing to justify how any allocation of stimulus money will be used to facilitate the aims of the EU’s Green Deal.
To appease those states relying largely on coal for power generation, the EU’s Just Transition Fund to help wind down coal industries will be increased to from €7.5bn to €40bn. Bailout cash to specific companies will also reportedly be provided – on the provision they meet certain environmental conditions. It is suggested funding for these measures will come from additional environmental taxes and tapping into the EU’s Emissions Trading Scheme (ETS).
On technology, alongside increasing spending on more conventional activities such as renewable energy, electric vehicles and building retrofits, the Commission wants to double its hydrogen support mechanism to €1.3bn to help produce one million tonnes of green hydrogen annually. This could be transformational. To support it, a “contracts for difference” scheme is planned, similar to how renewable energy is supported in the UK, to pay producers the difference between a set level and the price of emissions permits in the EU ETS.
All this sounds progressive, but it should also be noted the EU’s wider €1.1tn budget for 2021-2027 has just 25% allocation to climate-related spending.
Are other nations following suit on coronavirus recovery stimulus packages? Canada is looking to do so, linking financial aid provision to the country’s climate goals.
But, what about the world’s largest emitters, the US and China? Given the Trump Administration’s recent rollbacks of environmental legislation, this is perhaps unlikely and, meanwhile, China has already increased its reliance on carbon-intensive industries to recover from the pandemic.
Further thought from Curation – In line with the EU’s forthcoming taxonomy on sustainable investments, EU stimulus cash is expected to be used in a way that “does no harm”. The bloc’s climate commissioner Frans Timmermans, however, said in some areas funding could be used to support gas power projects. Gas may be less emissions-intensive than coal, but this, and other concerns about the lack of clarity on what constitutes a “green” investment, goes back to the central question of how the EU defines what a sustainable activity is. As we have noted, it’s likely this will vary over time and geographically.
Nick Finegold is Founder & CEO of Curation Corp, an emerging and peripheral risks monitoring service.
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