The European Union’s next seven-year budget rightly aims to hike funding for tackling climate change, but it should not come at the expense of the bloc’s poorest and most carbon-dependent regions.
The European Commission’s proposed Multiannual Financial Framework for 2021-2027, now being debated in the European Parliament and Council, would raise funding for climate change efforts to 25 percent of the total budget, from 20 percent over 2014-2020.
That translates into a rise from €206 billion to €320 billion. It would increase energy funding under the Connecting Europe Facility to €8.6 billion, from €5.8 billion, and money under the environmental protection and climate action program LIFE to €5.4 billion, from €3.4 billion.
So where would the cuts come from? Funds for regional development and cohesion, according to the Commission’s proposal.
“Job losses in the mining sector are expected to reach 77,000 in 2025, and 160,000 in 2030.”
This raises serious concerns for the EU’s poorer member countries, which still rely heavily on coal mining and power generation and other carbon-intensive industries. Among those worst-affected regions: Silesia in Poland, Yugoiztochen in Bulgaria and Sud-Vest Oltenia in Romania.
Bulgaria, Poland and Romania have the lowest GDP-per-capita rates in the EU, so the financial burden of reducing carbon emissions already poses a huge challenge. For Poland alone, the investment outlays needed to decarbonize the power sector between 2021 and 2030 alone will amount to approximately €60 billion.
The EU’s regional development and cohesion funds should be a source of investment aimed at facilitating the modernization of the power sectors in these countries — in line with the EU’s climate change targets and the international Paris Agreement. As of now, however, these funds are going to be cut, and their rules don’t allow for full support of the power sector’s upgrade.
The Multiannual Financial Framework proposal also lacks support for the transformation of coal-dependent member countries and regions in the form of a dedicated “Just Energy Transition Fund,” as proposed by some in the European Parliament.
Coal-related jobs are already in decline. As of 2015, around 237,000 people worked in the EU coal sector, and around 215,000 more held jobs indirectly linked to it. But the mining sector is expected to lose some 77,000 jobs as of 2025, and 160,000 up to 2030. More on new JRC study EU coal regions: opportunities and challenges ahead here.
Most of those jobs are in Poland, Bulgaria and Romania. As mentioned above, those are the countries with the lowest GDPs per capita. They also have the highest risk of job losses in sectors that depend on coal.
“A Just Energy Transition Fund should help to ease the enormous financial burden of cutting emissions for those that rely on carbon-intensive electricity.”
A fund dedicated to the just energy transition is therefore a much-needed tool. A fund of €4 billion to €5 billion, as proposed by Parliament committees, could support the creation of new jobs for coal-dependent workers who face losses, especially in the circular economy.
In addition, the funding would support the transition away from carbon-intensive electricity generation, by modernizing power sectors and supporting innovation. Existing power generation infrastructure could then be replaced with lower-emitting conventional energy sources, as well as zero-emission renewable energy.
And finally, a Just Energy Transition Fund should help to ease the enormous financial burden of cutting emissions for EU states and regions that rely on carbon-intensive electricity.
One could argue that the Modernization Fund set up under the Emissions Trading System reform for 2021-2030 will fulfil the objectives laid out for the just transition fund. The Modernization Fund is dedicated to financing low-carbon investments in the EU’s 10 poorest countries.
“We should not forget that the transformation of the energy mix away from coal will take decades.”
Unfortunately it cannot, because the Modernization Fund’s primary objective is to support upgrades of energy systems and improve energy efficiency. As a result, it is not focused on coal-dependent regions, and it doesn’t hold the adequate financial resources to both significantly support diversification of the energy mix and grids, as well as the social ramifications of the shift away from coal.
We should not forget that the transformation of the energy mix away from coal will take decades.
Poland only started this transformation in 2009, when the EU’s package of climate and clean energy targets was adopted. It has since achieved remarkable results — increasing the share of installed renewable energy capacity from 4 percent to 20 percent, and reducing the share of coal to 70 percent.
By comparison, Western European countries with much higher GDP-per-capita rates started to transform their energy mixes as far back as the 1970s, yet they are still far from phasing out coal.
So yes, one could argue that the European Commission’s proposed Multiannual Financial Framework for 2021-2027 marks a step in the right direction in supporting climate change targets.
But, as almost always, the devil lies in the details. It turns out that the proposal does not provide enough financial support for those EU countries that rely most heavily on carbon-intensive electricity generation, and which will bear the biggest burden of decarbonization.
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