The EU has announced that its coronavirus recovery package for the bloc will be geared towards green transformations. The seven-year €1 trillion budget proposal and a €750 billion recovery plan will focus on both green and digital initiatives. As confirmed by the European Commission President Ursula von der Leyen, who made the announcement on 27 May in a speech before the European Parliament, 25 per cent of the budget will be set aside for climate action. The stimulus and recovery package, officially titled Next Generation EU, hopes to ‘build back better’ and contribute to a greener, more sustainable and resilient society.
The amount will be earmarked for climate-friendly expenditure and is applicable throughout the EU’s recovery programme with regard to the Covid-19 crisis. At the heart of this proposal is the EU Taxonomy which is a tool to ‘help investors, companies, issuers and project promoters navigate the transition to a low-carbon, resilient and resource-efficient economy.’ The taxonomy sets performance standards for economic activities which substantially contribute to one of six environmental objectives, do no significant harm (DNSH) to the other five, and meet minimum safeguards. The DNSH test mostly excludes technologies like nuclear power, which are seen as exacerbating environmental issues such as pollution prevention and control. The DNSH principle will be applied to this recovery instrument, as per a senior EU official.
Green factors will be part of the criteria of the loans and grants distributed to EU member-states under this recovery fund. The green strings attached will also apply to the solvency instrument aimed at helping companies in need of liquidity. The underlying idea is for the EU economy to recover in a direction that is green and digital. Such conditions will also help in restoring a level-playing field between rich and poor EU member-states. During the pandemic, EU national governments have spent nearly €2 trillion in state aid for ailing companies and small businesses, none of which had any green condition. This fund will follow the Commission’s Green Deal, which was announced in December 2019. The Green Deal was proposed as a framework of legislation which could help the 27-member bloc achieve its goal of net-zero greenhouse gas emissions by 2050.