The first allocations of recovery funds are flowing to Central and Eastern European capitals. While the European Commission has endorsed most national recovery and resilience plans submitted by these countries, watchdog civil society organisations fear they may be another missed opportunity to deliver the long-awaited green breakthrough.
Probably not since their accession to the EU have Central and Eastern European (CEE) countries been faced with such a window of opportunity to modernise their economies.
The first disbursements from the €724 billion Recovery and Resilience Facility (RRF), aimed at mitigating the economic and social impacts of the coronavirus pandemic while also boosting the green and digital transitions, led to a sense of optimism for those countries lagging behind on the path towards climate neutrality.
In the case of CEE countries, whose economies still remain more stagnant and dependent on fossil fuels than those of the rest of the Union, this huge financial boost comes at a very crucial moment: it could be decisive for cleaning up strategic polluted sectors and protecting citizens from surging fossil gas prices by boosting building restoration and clean heating deployment.
State of the art
In record time, Brussels has given the green light to 22 out of the 26 National Recovery and Resilience Plans (NRRPs) submitted by Member States. Only the Netherlands has yet to present their plans to the Commission, while the assessments of the Polish, Hungarian, Bulgarian and Swedish plans are still in progress.
Bulgaria was the latest EU country to send a recovery plan, delayed due to internal political issues, as a caretaker government has been at the helm of the country since former Prime Minister Boyko Borissov concluded his mandate in May.
The case of Poland and Hungary is rather different since their plans were submitted on time more than 6 months ago. Their approval is being held up by the Commission over rule-of-law concerns, which is one of the pillars to be secured in the plans in order to access funds.
The rest of the NRRPs drafted by Eastern governments have already obtained the go-ahead from the European Commission. To bear the scrutiny of EU officials, each national plan must ensure that at least 37% of spending is allocated to investments and reforms towards EU climate goals, while the remaining 63% respects the principle of do-no-significant-harm. A criterion that, as we shall see below, has been applied quite flexibly,
According to the Commission’s assessment, Eastern countries largely deliver on the percentage required by the measures to secure the green transition (37%). In the case of Slovakia, EU auditors say that 43% of the plan’s total allocation for reforms and investments supports climate objectives, while the figures are 42% in Czechia and Slovenia, 41% in Romania and 38% in Latvia.
To reach these green ratios, Eastern governments have deployed a different battery of measures that range from renewables development to biodiversity protection, but also converge on a common ambition: the decarbonisation of transport and buildings.
Rail, cycling and electrified mobility receive significant prominence in all Eastern plans, especially for Romania which is allocating 20% of its recovery funds to refurbishing its transport system, with €3.9 billion to modernise its railway network and €1.8 billion to support greener and safer urban mobility. Countries such as Czechia and Latvia have also earmarked 16% of their recovery budgets to clean transport infrastructure (from electric charging stations to cycle lanes).
Regarding building renovation, which constitutes a key measure to improve energy efficiency and support households tackling energy bills, most plans of the East include substantial commitments, with Czechia at the forefront. Around 23% of the total €7 billion from the Czech RRF has been approved to finance large-scale renovation programmes aimed at increasing the energy efficiency of residential and public buildings, childcare and long-term care facilities.
Slovakia will also use their recovery budget to improve the energy and green performance of at least 30,000 residential units, while Latvia will dedicate 14% of their RRF to increasing energy efficiency in residential buildings, public buildings and businesses.
Probably the least ambitious plan for the decarbonisation of these two sectors is the one of Slovenia, which allocates only 5% to the refurbishment of public buildings and 7% to rail infrastructure.
Fossil gas as usual
All that glitters is not green within the Commission-approved Eastern recovery plans. The lack of strategic vision, the poor engagement of civil society in the drafting, the ambiguity of certain proposals, the general overlooking of reforms and a strong focus on investments, some at risk of doing serious harm, make the actual scope of recovery plans in Eastern Europe far less promising than the Commission’s assessment.
Among the plans endorsed by the von der Leyen Commission, one can find blatant examples of measures misaligned with EU climate goals that may end up supporting fossil fuels.
Despite the positive approach of the Slovakian building renovation wave on energy efficiency, the plan also includes €50m for investments into fossil gas boilers, when clean heating alternatives, such as heat pumps and solar thermal heating, are already available and would help to tackle energy poverty and domestic emissions.
Besides heating, fossil gas appears in most Eastern recovery plans as a needed investment for moving away from coal, producing hydrogen or even fueling transport.
Romania has planned to use the recovery funds to develop infrastructure for the distribution of fossil gas and hydrogen, which, according to our Romanian member Focus Eco Center, aims to consolidate and extend the national transport grid of fossil gas. This would obstruct the development of other viable projects in renewable energy.
Furthermore, the recovery plans still under Commission scrutiny (Hungary, Bulgaria and Poland) contain a strong focus on gasification of coal regions and development of fossil fuel infrastructure. Our Paris Agreement Compatible scenario on energy proves that fossil gas is not needed as a “bridge fuel”, since the leap-frogging from coal to renewable electricity generation is possible and desirable since solar and wind generation costs are cheaper now than fossil gas.
All these projects draw a worrying scenario where Eastern Europe walks into a potential long-term fossil gas lock-in, putting the EU’s climate and energy goals at risk.
‘Do Not Significant Harm’ failure
An aspect of strong common concern highlighted by civil society organisations in these countries is that the lack of clarity on the ‘do no significant harm’ (DNSH) principle will leave the door open for Member States to finance dirty projects with EU money.
Most EU Governments carried out a box-ticking exercise of existing EU legislation to comply with the DNSH principle instead of delivering accurate, truthful assessments to ensure environmental protection.
Many recovery plans do not contain enough detail to allow for the assessment of their environmental impacts and only in very rare cases did Member States use independent experts to conduct initial DNSH assessments. In addition to a lack of transparency, third-party verification and public consultation, the time pressure and absence of guidance contributed to the questionable outcome of National Recovery and Resilience Plan assessments.
Lessons learned from the recovery plans must lead to a revision of the ‘do no significant harm’ principle for further EU funding programmes. Together with the Green10 NGOs, the EEB recently sent to the European Commission a list of recommendations for a robust and stringent ‘do not significant harm’ mechanism for public finance.
The most significant failure of the NRRPs is certainly the lack of reforms that would align national expenditures and taxation systems with the aim of EU funding. In fact, national policies often make a farce of EU funding.
There are glaring examples of how CEE Member States engage in this funding sleight of hand. Several countries still subsidise the burning of coal and urban sprawl, while almost all finance unsustainable agricultural practices. Numerous national budgets envisage the construction of huge new motorways and continue to provide immense tax allowances for the use of company cars.
Generally, there are no plans to remove environmentally harmful subsidies and internalise external costs in any Central and Eastern European country. All in all, much more national public funding is spent on environmentally harmful practices than the funding provided for the environment through the RRF. This situation augurs for a further rapid deterioration of the environment.
Such inconsistency between EU climate objectives and Member States’ energy policy has its roots in Article 194 of the Treaty on the Functioning of the European Union, which recognises the right of Member States to “determine the conditions for exploiting its energy resources, its choice between different energy sources and the general structure of its energy supply”. This is why EU funding rules play a crucial role in steering countries energy policies.
At this stage in the global climate and environmental emergencies, we can no longer afford to spend public funds on programmes and projects that would seriously harm our future.