The European Commission has presented an updated long-term budget and announced a €750bn ($826bn) recovery plan to spur post-COVID recovery and to build a green economy for the next generation.
The new proposal comes after European leaders stated that they want to make the European Green Deal the centre of the region’s post-COVID recovery. Both France and Germany have called for a green recovery plan for every sector of the economy.
The proposal calls for investing €91bn a year in building renovations, which is expected to spur another €350bn in private investment. More than €1bn will be set aside to support green hydrogen production, as much as €60bn for zero-emission trains, and billions more for renewable energy, as well as support for the sale of electric cars. The EU heads of state and governments will discuss the proposal in meetings on June 18 and 19.
The plan requires approval from the 27 national leaders and their parliaments, and if given the green light, it would be the first time that the bloc raised large amounts of common debt in capital markets.
Money raised through Next Generation EU will be channelled through EU programmes in the revamped long-term EU budget, specifically through the EU Green deal initiative channels.
European Commission President Ursula von der Leyen said: “The recovery plan turns the immense challenge we face into an opportunity, not only by supporting the recovery but also by investing in our future: the European Green Deal and digitalization will boost jobs and growth, the resilience of our societies and the health of our environment. This is Europe’s moment. Our willingness to act must live up to the challenges we are all facing. With Next Generation EU we are providing an ambitious answer.”
The Green Deal recovery strategy includes:
- A massive renovation wave of buildings and infrastructure and a more circular economy, bringing local jobs;
- Rolling out renewable energy projects, especially wind, solar and kick-starting a clean hydrogen economy in Europe;
- Cleaner transport and logistics, including the installation of one million charging points for electric vehicles and a boost for rail travel and clean mobility in our cities and regions;
- Strengthening the Just Transition Fund to support re-skilling, helping businesses create new economic opportunities.
Magnus Hall, president of European electricity association Eurelectric, said the recovery strategy “should help accelerate our transition to a cleaner future. By prioritising investments in areas such as fossil-free energy, EV charging infrastructure, distribution grid reinforcements and electrification of heating systems, we have a unique opportunity to stimulate employment and address the climate challenge at the same time.”
He said utilities “have seen a significant impact on their revenues amid a plummeting electricity demand, moratoria on bills and low electricity prices. This year, investments of utilities are expected to fall by up to 15%, while the electricity demand will drop 6 to 10%.”
However, Hall stressed that “in spite of these difficulties, the power sector continued to decarbonise the generation mix. Renewables covered more than 40% of the electricity generation, thanks to favourable weather conditions and more capacities coming online. At the same time, coal was progressively pushed out of the mix, its output falling by 27.5% in the first four months of the year, compared to 2019.”
Jonathan Maxwell, chief executive of Sustainable Development Capital and investment manager of the SDCL Energy Efficiency Income trust, said the recovery plans “include a significant push for renovation in existing buildings and infrastructure – this is a particular area of opportunity and is where 40% of current greenhouse gas emissions emanate’’.
“Building renovations involve energy efficiency and energy efficiency goes hand in hand with cost reduction, greenhouse gas emission reduction and improved productivity. It is a huge opportunity for better more sustainable growth as we move into recovery.”
He added: “We will not achieve our 2030 carbon emission reduction targets with supply side measures alone. We have to reduce the amount of energy that buildings use with more efficient use of electricity, more efficient heating and cooling solutions, more efficient lighting more, efficient industrial processes and more efficient transportation solutions.”