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REPORT

2011

Unlocking the Potential of the EU BudgetFinancing a greener and more inclusive economy

Intelligent Investments

EU

Volume Two

AuthorSebastien Godinot, Economist, WWF European Policy Office Tel: +32 (0)2 740 0920 email: [email protected]

CoordinationWWF European Policy Office - Communication DepartmentAlexandra BennettFlorence Danthine

Contributions from the WWF networkAndreas BaumuellerIoli ChristopoulouAimee GonzalesIsabelle LaudonTony LongIrene LuciusMatthias MeissnerSergey MorozSally NicholsonCelsa PeiteadoSam Van Den PlasArianna Vitali Roscini

Graphic DesignLies Verheyen - Mazout.nu

Language EditingDerek McGlynn - Writeaway

Published in March 2011 by WWF-World Wide Fund for Nature (Formerly World Wildlife Fund), Brussels, Belgium. Any reproduction in full or in part must mention the title and credit the above-mentioned publisher as the copyright owner. © Text 2011 WWF. All rights reserved.

WWF presents two volumes focusing on two complementary approaches to the EU Budget. This one, Volume Two - Smarter Spending, focuses on where and how to allocate the next EU budget when increasing investments in specific sectors and areas that underpin a green economy. It also proposes raising the bar and developing an ambitious leveraged approach and it examines the revenue side of the EU budget. This volume should be considered in conjunction with Volume One - Smarter Spending, which proposes an integrated set of tools with which the EU budget can be environmentally proofed in a simple, practical and effective way.

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COnTEnTSExECUTIVE SUmmaRy InTROdUCTIOn PaRT 1 - THE EU BUdgET ExPEndITURES 2014-2020

1. The overall EU budget2. Common Agricultural Policy (CAP)3. Cohesion Policy4. Research and innovation funds5. External dimension6. Financing LIFE+ and Natura 20007. Marine and fisheries funds8. A new leveraging fund for sustainable energy and transport infrastructures9. Other EU spending10.New headings according to the EU 2020 Strategy11. Final result for the EU budget 2014-2020

PaRT 2 - RaISIng THE BaR: an amBITIOUS lEVERagIng aPPROaCH

1. Boost financial engineering using the EU budget2. Develop national energy efficiency funds (notably for building retrofits)3. Launch green project bonds with the EIB4. An integrated approach to maximise synergies

PaRT 3 - THE REVEnUE SIdE OF THE EU BUdgET1. The net-payer approach jeopardises the EU project2. The urgent need for innovative finance (notably for international climate commitments)3. Options for further consideration

COnClUSIOn

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Page 6 | Unlocking the Potential of the EU Budget - Volume Two - Intelligent Investments

ExECUTIVE SUmmaRyPaRT 1 - THE EU BUdgET ExPEndITURES 2014-2020

Overall EU budgetNoting the current economic climate, WWF is calling for the EU budget 2014-2020 to stay the same in relative terms, at 1.13% of the EU GNI for commitment appropriations, meaning an estimated budget of €1,148 billion.

Common Agricultural Policy (CAP)The CAP budget would remain the same as today in nominal terms (€404 billion or 35.2% of the EU budget). WWF demands that 50% is devoted to Pillar 2 (rural development), that 50% of Pillar 1 direct payments support the environment;and that 50% of Pillar 2 goes to agri-environmental measures.

Cohesion PolicyThe share of the Cohesion Policy in the EU budget 2014-2020 should remain, stable (35.7% of the EU budget, or €410 billion). WWF demands that the percentage of the Cohesion Policy funding contributing directly or indirectly to the environment be increased to 50% from today’s 30%. Such funding should focus mostly on energy

Figure 1: EU Budget 2014-2020 Research

education

smart Cohesion Policy

leveraging fund for smart

infrastructures

CAP Pillar I

CAP Pillar II

sustainable Cohesion Policy

lIFe+

Marine-fisheriesFund

Inclusive Cohesion Policy

Citizenship etc

eU as a global player

Administration

Unlocking the Potential of the EU Budget - Volume Two - Intelligent Investments | Page 7

savings and renewable energies, increased support for ecosystem and biodiversity protection (especially Natura 2000) and Green Infrastructures, and a shift in the transport support policy to move to decarbonised and highly efficient transport modes and infrastructures.

Research and innovation fundsEU funds for research and innovation should be increased by 33%, to €77.4 billion in the period 2014-2020 (6.7% of the EU budget). WWF demands that funds for environmental research are increased by 50%. At least 50% of all energy research funding should be devoted to renewable energies and energy efficiency and the amount of funding for ITER should be capped.

External dimensionThe total external dimension of the EU budget should amount to €100.2 billion (8.7% of the EU budget). WWF demands that funding for the Overseas Development Assistance (ODA) for the Development Cooperation Instrument (DCI) be doubled, the set up of a new additional climate fund of €20 billion for international climate-related finance commitments; and a tripling of the ODA’s funding for the environment and biodiversity. In addition, WWF is not in favour of the European Development Fund’s budgetisation.

Financing LIFE+ and Natura 2000WWF demands that LIFE+ reach 1% of the EU budget 2014-2020 or €11.3 billion, of which 50% should be spent on biodiversity. Of the €6 billion needed to finance Natura 2000 annually, the EU budget should provide 75% shared between 4 EU funds: CAP, Cohesion Policy, LIFE+ and the European Fisheries Fund.

Marine and fisheries fundThe amount should remain the same as today (0.6%); WWF demands that 50% of this is devoted to the environment.

A new leveraging fund for sustainable energy and transport infrastructuresReplacing TEN-T and TEN-E, this fund would stem from the margin of the EU budget 2014-2020, amounting to €31 billion (2.7% of the EU budget).


PaRT 2 - RaISIng THE BaR: an amBITIOUS lEVERagIng aPPROaCH

Unprecedented levels of investment in European transport and energy will be required over the next decade to reach the EU energy and climate targets by 2020: investment by the private sector is required.

Boost financial engineering using the EU budgetTwo umbrella mechanisms (an EU Equity Platform Mechanism to provide equity and a Risk Sharing Platform Mechanism to provide loans and guarantees) would gather the different financial instruments. This scaling-up could potentially increase the effectiveness and impact of the financial instruments. WWF welcomes this move forward and supports its development: environmental targets and indicators should contribute to measuring the effectiveness of the financial instruments in the mechanisms.

Support the set up of national energy efficiency funds (notably for building retrofits)The new Energy Efficiency and Savings Directive should make these funds mandatory and ask that they become an entry point for the different sources of financing available. This will ensure that resources are pooled together and create critical mass, avoiding fragmented, overlapping funding options that are not user-friendly for the potential beneficiaries.

Launch green project bonds with the EIBThe project bonds must be green bonds, i.e. they should focus exclusively on sustainable decarbonised highly energy and resource efficient infrastructures (renewable energies, smart grids in the energy sector and rail and public urban transport). In the transport sector, given the impact of big infrastructure projects, every project must follow very strict environmental criteria and benefit from a strong monitoring system.


PaRT 3 - THE REVEnUE SIdE OF THE EU BUdgET

The current net-payer approach jeopardises the EU projectThe net-payer approach is flawed and the revenue side is complex and unclear. In addition, the net-payer approach does not reflect the EU added-value, and the EU budget also suffers because a holistic approach is lacking as regards total public expenditure.

The urgent need for innovative finance (notably for international climate commitments)Climate requires international financing at a scale that cannot be provided with the existing public budgets: new taxes are needed.

Options for further considerationWWF is particularly interested in taxes which have a double dividend, meaning that they raise public revenue but also contribute to orientating taxpayers or consumers towards more sustainable behaviour. In this regard, environment, energy and climate taxation, but also taxation in the financial sector, are of particular interest. EU institutions should further consider and carefully assess the different options and their relative benefits, taking into account the principles proposed by the Parliament. Notably, a consensus has been found in the fact that increasing environmental taxation should be used to reduce labour taxation.


InTROdUCTIOnAccording to Pavan Sukhdev1, “governments have a central role in changing laws and policies, and in investing public money in public wealth to make transition possible. By doing so, they can also unleash the trillions of dollars of private capital in favour of a green economy”2. The European Union should put the green economy at the heart of its project. The next seven-year European budget, the Financial Perspective 2014-2020, is a key opportunity to radically advance the greening of the European economy.

The lastest UNEP report on the green economy3 challenges the myth of a trade-off between environmental investment and prosperity, instead it points to the current gross misallocation of capital. It demonstrates that a green economy is about reconnecting with what is real wealth and re-investing in, rather than just overexploiting natural capital.

Together with a coalition of environmental NGOs4, WWF is demanding that the EU budget 2014-2020 prioritises three key elements which are needed to tackle the core environmental challenges of our time:

• energy savings and climate change mitigation and adaptation;• protection and restoration of ecosystems and biodiversity; and• sustainable and highly efficient use of resources.

Spending public money for public goods and better focusing on common European and global challenges would deliver clear and measurable environmental, social and economic results. The EU needs to ensure that its own budget will strongly contribute to and not undermine the achievement of the key European 2020 targets, notably the environmental targets of: improving energy efficiency by 20%, producing 20% of energy from renewable sources, reducing greenhouse gas

1 Head of UNEP’s Green Economy Initative and on secondment from Deutsche bank2 UNEP (2011), Towards a Green Economy: Pathways to Sustainable Development and Poverty Eradication3 Ibid4 Including Birdlife, CEE Bankwatch Network, Conservation International, European Environmental Bureau,

Friends of the Earth Europe, Transport & Environment and WWF. See Changing perspectives – How the EU budget can shape a sustainable future, November 2010


emissions by 20 (or 30% if conditions are met) and stopping biodiversity loss. To do so will require environmental proofing of the EU budget which can be accomplished by:

• ensuring that the EU funds are not used for projects that undermine the achievement of 2020 targets by mainstreaming environment throughout the whole budget; and

• allocating and increasing EU investment in areas and sectors that stimulate the green economy and will become the lead markets of the future.

Figure 2: Adding more value to the EU budget

Own resource Expenditures Leveraging

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PaRT 1 - THE EU BUdgET ExPEndITURES 2014-2020

1. THE OVERall EU BUdgET

1. Stabilising the EU budget in relative terms

One of the lessons of the financial and economic crisis is that all EU Members States are in the same boat. To face the huge challenge of exiting the current crisis and tackling our unsustainable development model, WWF believes that we need more Europe rather than less: European cooperation, if properly organised, provides multiples benefits for European citizens, business and consumers and makes each Member State stronger.

The EU budget is a key tool of the European Union, although it is very small in relative terms: the figure below shows the difference between the EU budget and the federal budgets of the United States and the Canada. The EU budget currently accounts for 2% of public expenditure in Europe.

Figure 3: Budgets of federal states, EU and total public budgets in 2010 (% of GDP)

Federal/eU budget total public budget*

United states

60 %

50 %

40 %

30 %

20 %

10 %

0 %Canada eU

* euro zone for EU total public spendingSource OECD


Several other issues have to be taken into account:

• The Lisbon Treaty’s creation of a European diplomatic service and greater empowerment of the EU, with new competences in the fields of energy, research, space policy and immigration, will logically require more resources;

• Further EU enlargement during the period 2014-2020 would likely require additional resources;

• The EU budget has already decreased in relative terms in the last decades, falling from 1.21 % of EU Gross National Income (GNI) in the Financial Perspective 1993-99 to 1.13 % in 2007-2013 (based on commitment appropriations)5 meaning that the current EU budget would be 23% bigger if the same relative terms had been kept. The payment appropriations are always lower than the commitment appropriations6. Both are clearly below their legal ceiling of 1.29% for commitment appropriations and 1.23% for payment appropriations7;

• Since 1995, the EU budget has increased by only 8.2% in real terms, while at the same time the national budgets have increased by an average of 23%, i.e. nearly three times as much8;

• The next EU budget begins in three years’ time, in 2014 and lasts until 2020. As serious as the current crisis is, it would be used wrong to jeopardise European financial capacity for a whole decade while the economic situation will very likely change a lot in the next ten years.

On the other hand, the present times are very difficult for EU Member States. The economic crisis was followed by massive recovery packages and bank bail-outs which have led to an increase of public debt and prompted Member States to implement austerity measures.

It is difficult either to reduce or to increase the EU budget for the abovementioned reasons. Therefore, WWF demands that the EU budget stays the same in relative terms, at 1.13% of the EU GNI for commitment appropriations and 1.07% for payment appropriations9.

5 Jaroslaw Pietras (2008), The future of the EU budget - In search of coherence of objectives, policies and finances of the Union

6 Ibid7 From 1 January 2010 onwards, the own-resources ceiling has been changed from 1.31% to 1.29% of EU GNI

for commitment appropriations, and from 1.24% to 1.23% for payment appropriations following the Council Decision (2010/196/EU, Euratom) of 16 March 2010 and the Communication (COM(2010)162 final) on the Adaptation of the ceiling of own-resources of 16 April 2010

8 European Parliament (2006), Report on the future of the European Union’s own-resources (2006/2205(INI)), Committee on Budgets, Rapporteur Alain Lamassoure

9 European Commission, http://ec.europa.eu/budget/prior_future/fin_framework_en.htm


2. Stabilising the EU 2014-2020 budget at €1.148 billion

There are three possible estimates for the future EU budget: high (increasing the EU budget share of EU GNI up to the legal ceiling), medium (stabilising it), and low (reducing it). Figure 3 below provides details for each of the three EU budget options.

Figure 4: The three options for the EU budget 2014-2020(commitment appropriations)

Hypothesis: annual growth rate of EU GNI (2)

Rationale of annual growth rate

Result (billion €)

% of EU GNI

High estimate

2.55% from 2014

Average annual growth rate 1997-2007 (3)

1197 1.29% (legal ceiling)

Medium estimate

1.85% from 2014

Average annual growth rate 1996-2009 (3)

1148 Stabilisation (or slight decrease) compared

with 1.13% for 2007-2013

period

Low estimate (1)

1.5% from 2012

Below average annual inflation rate and growth rate

1085 Strong decrease

compared with 1.13% for

2007-2013 period

(1) Based on the letter of 5 Member States to President Barroso10

(2) The same growth rate is applied to the EU Budget(3) Eurostat

10 Letter of 5 Member States (United Kingdom, France, Germany, Netherlands, Finland) to President of European Commission,18 December 2010, http://www.number10.gov.uk/news/statements-and-arti-cles/2010/12/letter-to-president-of-european-commission-58224


The low option is based on the letter of 5 Member States of last December11, stating that:

• for the current EU budget 2007-2013 “the action taken in 2011 to curb annual growth in European payment appropriations should therefore be stepped up progressively over the remaining years of this financial perspective and payment appropriations should increase, at most, by no more than inflation over the next financial perspectives” and

• for the next EU budget 2014-2020: “the commitment appropriations over the next multi-annual financial framework should not exceed the 2013 level with a growth rate below the rate of inflation.”

According to Eurostat, the average EU27 annual inflation rate for the last six years (2005-2010) has been 2.5%12. In calculating the EU budget for the years 2012-2013, a very low 1.5% annual rate was chosen, which is below the rate of inflation as suggested by Member States. It is based on the recently voted 2011 EU budget (€134.263 billion of payment appropriations according to the Commission13). WWF used an average difference between commitment and payment appropriations of 5.5%, based on the current Financial Perspective, when calculating commitment appropriations. For 2014-2020, WWF used the same very low 1.5% annual rate. The result would represent a decrease in the share of EU GNI, meaning a relative loss of impact for the EU budget.

The medium option of €1148 billion, which is WWF’s preferred option, stabilises the EU budget in relative terms compared to the EU GNI, if the EU GDP annual growth rate is 1.85%. The EU budget would decrease in relative terms if the EU GDP growth were above 1.85% per year.

11 Ibid12 http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&init=1&language=en&pcode=teicp00013 http://ec.europa.eu/budget/prior_future/fin_framework_en.htm


14 According to the Commission decision of 7 July 2009 (2009/545/EDC). Investing half of CAP in rural development has been proposed by Poland

15 Figures from the European Commission, Agricultural Policy Perspectives Briefs, Brief n°2 16 European Commission, Rural Development in the EU – Statistical and Economic Information Report 200917 European Commission, The CAP towards 2020 : meeting the food, natural resource and territorial challenges

of the future, 18 November 2010, COM(2010) 672 final

2. COmmOn agRICUlTURal POlICy (CaP)

1. Investment priorities

A WWF assumption for the EU budget 2014-2020 is that the CAP budget will remain the same as todays, in nominal terms: €404 billion or 35.2% of the EU budget 2014-2020.

For a more balanced CAP that actively encourages farmers to engage in an innovative, agri-ecological transition towards sustainable farming and which delivers needed rural vitality, WWF demands that the future CAP budget follow a 50/50/50 rule, meaning:

• at least 50% of CAP funding, or €202 billion, to be devoted to Pillar 2 (rural development), which is to receive only 23.8% of CAP funding in the current period 2007-2013)14;

• at least 50% of Pillar 1 (direct payments) to be for the environment, or €101 billion; and

• at least 50% of Pillar 2, or €101 billion, allocated for agri-environmental measures (currently a minimum of 25% has to be applied).

2. Direct payments

Pillar 1 would get €202 billion as opposed to €308 billion in the current period. The EU average today in € per hectare of annual direct payment is around 260 € /ha /year15. As the EU comprises 172.5 million ha of farmland16, this figure would lower to an average 167 € /ha /year in the period 2014-2020.

Half of it, or 84 € / ha / year, would be allocated to the environment, which is the greening component as introduced by the Commission’s communication on the CAP towards 202017. This amount could be further shared between different types of payments, depending on the characteristics of the greening component.


3. Rural development

In order to rebalance the CAP, rural development should get 50% of the funding. This represents €202 billion, as opposed to €96.2 billion in the current period 2007-2013. Roughly doubling rural development would also require a doubling of co-funding from Member States. As this may be difficult in a time of austerity, it is proposed that the EU co-financing rates are increased by up to 90-100%, to facilitate Member States’ co-financing of priority measures, such as organic farming, High Nature Value (HNV) farming, Natura 2000 and the Water Framework Directive. Other measures would keep an EU co-financing rate of 50-75% depending on specific situations.

Half of the Pillar 2 budget should be for targeted agri-environmental measures. This is in line with the Commission’s communication on the CAP towards 2020: “within this framework, environment, climate change and innovation should be guiding themes that steer the policy more than ever before”18.

This will represent an important shift which can realistically be achieved. Indeed, Axis 2 (agri-environment measures) represents 44.1% of rural development in the current period 2007-2013. As shown by the figure below, there are already several Member States where Axis 2 is over 50% of rural development. It should be noted that the current measures 211 Natural handicap payments to farmers in mountain areas and 212 Payments to farmers in areas with handicaps, other than mountain areas in Axis 2 should not be counted as agri-environmental measures but rather as measures for balanced territorial development (Axis 3). Figure 4 below gives the percentage of Axis 2 in rural development and of Axis 2 minus the measures 211 and 212 (on average these two measures represent 32% of Axis 2). Even without these two measures, there are several Member States devoting almost 50% or more of rural development to the environment. The 50% target for the future CAP 2014-2020 is thus realistic.

18 European Commission, The CAP towards 2020 : meeting the food, natural resource and territorial chal-lenges of the future, 18 November 2010, COM(2010) 672 final


Figure 5: Share of Axis 2 in rural development for several Member States

% of Axis 2 in rural development

% Axis 2 except measures 211-212

Ireland 80 54

Finland 73 50

United Kingdom

73 49

Austria 72 49

Sweden 70 48

Denmark 63 43

Luxembourg 59 40

Czech Republic

56 38

France 53 36

Slovenia 52 35

Slovakia 50 34Source:European Commission 19

Fostering organic farming

A WWF demand is that organic farming expands to represent 20% of EU farming by 2020, as compared to the 3.9% of farmland it represented in 2007 (or 34,5 million ha by 2020 as opposed to 7,8 million ha in 200820). Organic land use increased by 21% between 2005-2008, a rate of 7% a year. WWF hypothesises that an improved rate of increase of 10% a year from 2009-2013 and thereafter 15.5% a year from 2014-2020 would allow the 20% target to be reached by 2020. This represents a total increase of 26.7 million ha between 2008-2020, and 20 million ha during the seven years period 2014-2020.

This objective needs strong support in the form of payments for conversion of lands as farmers move to organic farming, over a few years. To make it more attractive, it is proposed to give an EU average payment of €200 per hectare per year during three years, based on a 90-100% EU co-financing rate. This would amounts to a total of €12 billion during the period 2014-2020. The average amount per hectare would then be further elaborated, taking into account the specific situation of each Member State and different rates of payments proposed accordingly21.

19 European Commission, Rural Development in the EU – Statistical and Economic Information report 200920 European Commission, http://europa.eu/rapid/pressReleasesAction.do?reference=STAT/10/30&type=HTML21 E.g. in France in the current period, farmers converting lands receive €100 per hectare per year for pasture,

€200 for annual crops, €350 for legumes or wine-growing and €950 for market gardening or fruit trees (for three years)


Supporting High Nature Value farming

HNV farming is of much importance with biodiversity protection among the key benefits. Specific agri-environment measures supporting HNV should be prioritised, benefiting from an EU co-financing rate of 90-100%. Agri-environment should be targeted by promoting specific practices for specific environmental objectives, for example maintenance of defined grazing regimes, shepherding of remote pastures, late mowing of hay meadows, transhumance and specific livestock types22. It is difficult to define the level of support needed through rural development when the support for permanent pasture is not yet defined in Pillar 1. In all cases, the payment should be attractive enough to make sure that farmers have a clear interest in applying the measure.

Supporting Natura 2000

For the general elements on financing Natura 2000, see chapter 6 “Financing LIFE+ and Natura 2000”. Over the period 2014-2020, €1.9 billion should be provided per annum by the CAP, making a total of €13.3 billion. Comparing this amount, which is what is needed according to the Commission and Member States, with the extremely meagre amounts voluntarily committed in the current 2007-2014 period (€550 million, including spending for the Water Framework Directive)23, illustrates the need for a mandatory financing plan for Natura 2000.

Implementing the Water Framework Directive (WFD)

The issue of water protection was rightly labelled one of the “new challenges” in the CAP Health Check. Given the close convergence of the future CAP (2014-2020) with the end of the first WFD cycle in 2015 and the start of the second WFD planning cycle (2015-2021), the timing of the CAP reform offers an ideal opportunity to better integrate the requirements of the WFD.

“Based on the recent assessment by DG ENV on agricultural measures in a selection of draft River Basin Management Plans, the necessary funding from the CAP should be up to €10 billion a year for the first cycle of the WFD implementation”24. It is expected that the second WFD planning cycle (2015-2021) will require approximately the same annual amount of funds. This would imply that €70 billion will be required for the period 2014-2020. Given the importance of this amount, it should be further analysed to ascertain if some measures should be implemented first (i.e. to set levels of priority) and how it can be co-financed partly by Member States.

22 See EFNCO, Birdlife, Butterfly Conservation, WWF (2010), CAP reform 2013 – last chance to stop the decline of Europe’s High Nature Value farming?

23 European Commission, Rural Development in the EU – Statistical and Economic Information report 2009. Axis 2, measures 213 and 224

24 Keynote on post 2013 CAP and water protection in Europe by the Expert Group on the Water Framework Directive & agriculture, June 2010


Fostering Farm Advisory Services (FAS)

In 2005, according to the Commission, only 20% of farmers in the EU27 had basic or full training in agriculture, ranging from less than 1% in Malta to 71% in Netherlands25. According to UNEP and Cedefop, the requirement for skilled agricultural (and fishery) workers in Europe will already be about 2.2 million people in 201526. Training, guidance and lifelong education will become more important than ever for farmers in order to help them to adapt to the challenge of delivering environmental public goods. The CAP will fail to tackle these challenges if the current advisory system is not reformed, adapted and strengthened. For more about the qualitative aspects please refer to the Volume One - Smarter Spending (CAP, Tool 3: Increase support for training and guidance for farmers to enhance sustainable farming).

In terms of funding, WWF’s hypothesis is that FAS will need on average €1,000 per farm and that 10% of farms would benefit from FAS every year. Given that there were 13.7 million farms in EU27 in 2007, it amouunts to a total funding need of around €9.6 billion for the period 2014-2020. This amount should not be restricted to farmers only but also be available for trainers, farm advisers, etc. The funding would come from rural development but it is important to note that the European Social Fund is also available for FAS: better synergies should be developed between EU funds and this also applies to national funds for vocational training.

Other measures

The measures proposed above include priority measures but are not exhaustive. Support for other environmental measures should be maintained or increased, e.g. animal welfare payments and forest-environment payments.

In addition, non-environmental measures should be supported such as support for young farmers and small farmers, investments in infrastructure and farming modernisation based on environmental criteria, and specific payments in difficult areas.

25 European Commission, Rural Development in the EU – Statistical and Economic Information Report 200926 Cedefop, Future Skill needs in Europe. Focus on 2020, 2008. UNEP et al, Green Jobs: Towards decent work

in a sustainable low-carbon world, 2008


3. COHESIOn POlICy


WWF assumes that the share of the Cohesion Policy in the EU budget 2014-2020 will be stable (35.7% of the EU budget). The Cohesion Policy 2014-2020 would then amount to €410 billion.

WWF demands that 50% of the next Cohesion Policy contributes, directly or indirectly, to the environment, as compared with the 30% the European Commission estimates is being allocated today27.

In addition, WWF demands as a priority that:

• the Cohesion Policy support of energy savings and renewable energies be increased;• support for ecosystem and biodiversity protection (especially Natura 2000) and

Green Infrastructures is increased; and• for the transport sector, there is a shift of Cohesion Policy support towards

decarbonised and highly efficient transport modes and infrastructures.

The unspent or uncommitted resources of Cohesion funds should remain in the Cohesion Policy budget and not be returned to the Member States, in order not to jeopardise the coherence of the Cohesion Policy.

2. Future Cohesion Policy expenditure

WWF has estimated what the future Cohesion Policy sectoral funding should be based on different scenarios. The potential results are presented in Figure 5 below.

Simultaneously, WWF is proposing a new set of expenditure categories for the Cohesion Policy, based on the former categories but updated to take the following elements into account. The categories should:

• integrate the new structure of the EU 2020 strategy, as suggested by the Commission’s Communication on the EU Budget Review;

• increase the thematic concentration by introducing subgroups of categories;• simplify by merging categories that are not very different; and• redefine or specify the scope of the categories where relevant, to ensure eco-condition-

ality of climate mitigation (low carbon emissions) and adaptation (resilience), energy savings, biodiversity protection and resource efficiency (e.g. water and land use)28.

27 European Commission (2011), Regional Policy contributing to sustainable growth in Europe 2020, COM(2011)17final

28 See the Tool “Set the Set mandatory priorities in the regulation and reform categories of expenditures to match with investment measures” in Cohesion Policy, and annex 1 in WWF report Delivering what Europe needs - Financing a greener, smarter, safer and more inclusive economy, complementary to the present report


Figure 6: Cohesion Policy expenditure 2014-2020

New Code

Old code

New categories of expenditures

€ 2007-2013

% 2007-2013

€ 2014-2020

% 2014-2020

Priority 1. Smart Europe 167,7 48,7% 176,7 43,1%

1.1. Research and technological development (R&TD)

64,1 18,6% 65,2 15,9%

111 1 Energy and resource efficient R&TD activities in research centres

5,8 1,7%

112 2 Energy and resource efficient R&TD infrastructure

9,7 2,8%

113 3 Technology transfer and improvement of cooperation networks between …

5,5 1,6%

114 5,7,8 Assistance to energy and resource efficient R&TD in firms

28,0 8,1%

115 4,9 Assistance to energy and resource efficient R&TD in SMEs

12,6 3,7%

116 6 Assistance to SMEs for the promotion of eco-friendly products, production processes that reduce resource and energy use, and environmental management systems

2,5 0,7% 5,0 1,2%

1.2. ICT Infrastructures 15,2 4,4% 16,4 4,0%

121 10 Telephone infrastructures 2,3 0,7%

122 11,12 Information and communication technologies

4,1 1,2%

124 13 Services and applications for the citizen

5,2 1,5%

125 14,15 Services and applications for SMEs 3,6 1,0%

1.3. Energy Infrastructures 6,6 1,9% 13,7 3,4%

131 33-34 Smart grids and metering for renewable energies

0,6 0,2% 1,755 0,4%


132 39 Renewable energy: wind 0,8 0,2%

9,5 2,3%

133 40 Renewable energy: solar 1,1 0,3%

134 41 Renewable energy: biomass 1,8 0,5%

135 42 Renewable energy: hydroelectric 1,2 0,4%

136 42 Renewable energy: geothermal 42 above

137 42 Renewable energy: other 42 above

138 43 Co-generation 43 below

1,2 0,30%

139 43 Energy efficiency in the energy production and distribution

43 below

1,2 0,30%

35,36,37,38

Natura gas, petroleum products 1,2 0,3% Phased out

1.4. Transport Infrastructures 81,7 23,7% 81,4 19,9%

141 16,17,18,19

Railways and mobile assets, with a priority on improving the current netwworks to improve transport efficiency, mitigate negative impacts and adapt to climate change

23,9 6,9% 35,8 8,7%

142 20,21,22,23

Road rehabilitation and modernisation to improve transport efficiency, mitigate negative impacts like emissions and biodiversity impacts and adapt to climate change

40,0 11,6% 8 2,0%

143 24 Cycle tracks 0,6 0,2% 1,8 0,4%

144 25,52 Urban public transport 7,8 2,3% 15,6 3,8%

145 26,27 Multimodal transport to improve transport efficiency, mitigate negative impacts like emissions and biodiversity impacts and adapt to climate change

2,1 0,6% 10,4 2,5%

146 28 Intelligent transport systems to improve transport efficiency, mitigate negative impacts and adapt to climate change

1,1 0,3% 5,4 1,3%


147 30 Ports modernisation to improve transport efficiency and reduce or mitigate negative impacts

3,6 1,0% 3,5 0,9%

148 31,32 Modernisation of existing inland waterways to improve transport efficiency, manage flood risk and adapt to climate change

0,9 0,3% 0,9 0,2%

29 Airports 1,9 0,5% Phased out

Priority 2. Sustainable Europe 71,7 20,8% 119,0 29,0%

2.1. Energy savings in non energy sectors 15,4 4,5% 35,0 8,5%

211 43, 78 Energy savings in housing renovation

5,2 1,5%

23,0 5,6%212 43 Energy savings in public buildings

renovation43

above

213 61 Integrated projects for highly energy and resource efficient urban regeneration

10,1 2,9% 12,1 2,9%

2.2. Ecosystem-based climate change adaptation and risk/pollution prevention

13,0 3,8% 18,4 4,5%

221 47 Air quality 1,0 0,3% 1,2 0,3%

222 48 Integrated prevention and pollution control

0,7 0,2% 0,8 0,2%

223 50 Rehabilitation of industrial sites and contaminated land

3,5 1,0% 4,1 1%

224 49, 53, 54 Ecosystem-based risk prevention and climate change adaptation

7,8 2,3% 12,3 3,0%

2.3. Water and waste 28,4 8,2% 32,8 8,0%

231 44 Management of household and industrial waste

6,3 1,8%

232 45 Management and distribution of water (drinking water)

8,1 2,4%

233 46 Water treatment (waste water) 13,9 4,0%


2.4. Ecosystem and biodiversity protection and Green Infrastructures

2,7 0,8% 20,5 5,0%

241 51 Ecosystems and biodiversity protection and restauration in Natura 2000 sites

2,7 0,8% 13,3 3,2%

242 new Assistance to green infrastructures and ecosystems connectivity

new 6,7 1,6%

243 51 Awareness raising on ecosystems and biodiversity protection

51 above

0,5 0,1%

2.5. Sustainable Tourism 12,3 3,6% 12,3 3,0%

251 55,56 Protection and preservation of the natural heritage for sustainable tourism promoting natural values of regions

2,5 0,7%

252 58 Energy and resource efficient protection and preservation of the cultural heritage

2,9 0,9%

253 57,59,60 Energy and ressource efficient preservation and development of cultural infrastructure and services

6,8 2,0%

Priority 3. Inclusive Europe 89,7 26,1% 94,0 22,9%

3.1. Increasing the adaptability of workers, enterprises and entrepreneurs

14,3 4,2% 16,4 4,0%

311 62 Life-long learning systems and strategies in firms…

9,7 2,8%

312 63 Design of innovative and more productive ways …

1,9 0,6%

313 64 Development of specific services for employment, training …

2,8 0,8%

314 new Development of skills of the workforce in the building renovation sector

new 2,0 0,50%

3.2. Improving access to employment and sustainability

58,8 17,1% 61,1 14,9%

321 65 Modernisation and strengthening labour market institutions

2,3 0,7%

322 66 Implementing active measures on the labour market…

12,2 3,5%

323 67 Measures encouraging active ageing working lives..

1,0 0,3%


324 68 Support for self-employment and business start-up

3,2 0,9%

325 69 Measures to improve access to employment…

2,6 0,8%

326 70 Action to increase migrants’ participation in employment …

1,2 0,4%

327 71 Integration into employment for disadvantaged people…

10,1 2,9%

328 72 Education and training systems to develop employability…

8,7 2,5%

329 73 Measures to increase participation in education and training …

12,5 3,6%

330 74 Developing human potential in research and innovation…

4,9 1,4%

3.3. Social infrastructures 16,5 4,8% 16,5 4%

331 75 Highly energy and ressource efficient education infrastructure

7,3 2,1%

332 76 Highly energy and ressource efficient health infrastructure

5,2 1,5%

333 77 Highly energy and ressource efficient childcare infrastructure

0,6 0,2%

334 79 Highly energy and ressource efficient other social infrastructure

2,9 0,8%

82,83,84 Support to compensate additional costs due to accessibility deficit, size market factors, relief difficulties

0,6 0,2% Phased out

Priority 4. Partnership and capacity building

15,5 4,5% 19,7 4,8%

411 80 Promoting partnerships, pacts and initiatives through the networking of relevant stakeholders

1,3 0,4%

412 81 Mechanisms for improving good policy and programme design

3,6 1,0%

413 85 Preparation, implementation, monitoring and inspection…

7,8 2,3%

414 86 Evaluation and studies; information and communication…

2,9 0,9%

Total 344,3 100,0% 409,9 100,0%

Total (direct and indirect) for the environment 30,3% 51,0%


3. Smart Europe: foster eco-innovation and smart infrastructures

Eco-innovation

Promoting eco-innovation and new ‘green-collar’ jobs, especially in small and medium enterprises (SMEs), ranks high in the priorities for regional support. Indeed, SMEs are the main drivers of innovation, and they also create a high number of jobs. Supporting eco-innovation is therefore very relevant.

Global markets for environmental goods and services are projected to double, from about €950 billion today, to around €2,000 billion in 202029. Correspondingly, the funding for European SMEs focused on eco-innovation should be doubled, in order to make sure that they will contribute to and benefit from this trend. Assistance to SMEs for the promotion of eco-friendly products, production processes that reduce resource and energy use and environmental management systems should increase from the current €2.5 billion (0.7% of Cohesion Policy) to €5 billion (or 1.2% of the Cohesion Policy funding) in the period 2014-2020.

Energy infrastructure

Given the Commission’s emphasis on 2020 energy targets, WWF estimates that the Cohesion Policy funding devoted to energy will increase from the currently modest 1.9% (€6.5 billion) to 3.35% (€13.7 billion), with the following shifts in expenditure:

• an increase in the amount for smart grids and metering by tripling the amount from €586 million (0.2% of Cohesion Policy 2007-2013) to €1.8 billion (0.4%);

• a doubling of the amount for renewable energy from €4,7 billion (1.4%) to €9.5 billion (2.3%), based on the recent communication on renewable energy in which “the Commission calls the Member States to ensure a doubling of annual capital investments in renewable energy from €35bn per year to €70 billion”30 - renewable energy should be a mandatory thematic priority in the future Cohesion Policy;

• a maintaining of the same percentage for co-generation and energy efficiency in energy production and distribution (0.3% or 1.3 billion each); and

• a phasing-out of support for petroleum and natural gas products that increase emissions. The very small amounts allocated to these categories (€1.2 billion or 0.3%) suggest that capital intensive oil and gas activities do not need Cohesion Policy funding, which is money that could be better invested in energy savings or renewable energy in all European regions.

29 German Federal Ministry for the Environment (bMU) and Federal office for the Environment (UbA) (2009), Umweltwirtschaftbericht 2009, Berlin and Dessau-Roßlau

30 European Commission, renewable Energy: Progressing towards the 2020 target, COM(2011) 31 final


Transport infrastructures

Transport is particularly challenging, as emissions for this sector in Europe have grown by 34% since 1990, whereas those of all other sectors have decreased. Every single EU-funded transport project should therefore contribute to the reduction of greenhouse gas emissions. In addition, a hierarchy of measures is needed, based on a state-of-the-art methodology taken from best practice31 and used to set different rates of co-financing reflecting the environmental impact of each option. Prevention would receive the highest priority, followed in decreasing order by influence on the choice of transport mode, improvements in the use of existing networks, improvement of the existing infrastructures and only as a last resort, the realisation of new capacity investment.

WWF recommends significant change for the field of transport. The priority needs to be put on decarbonised highly efficient transport, and there is a strong need to redefine the expenditure categories.

Given that transport infrastructure already receives the biggest share of expenditure in the Cohesion Policy, it is not foreseen that it will increase further. Remaining stable (at €81.4 billion or 19.8%) it is important that shifts between the different modes of transport are encouraged:

• the priority should be put on intelligent transport systems and multimodal transport to improve transport efficiency, mitigate negative (emissions and biodiversity) impact and help adaptation to climate change - respectively meaning a fivefold increase from €1.1 billion (0.3% of Cohesion Policy 2007-2013) to €5.4 billion (1.3% of Cohesion Policy 2014-2020) and from €2 billion (0.6%) to €10.4 billion (2.5%);

• rail support should increase by 50% from €23.9 billion (6.9%) to €35.8 billion (8.7%) and be refocused on improving existing networks to improve transport efficiency, mitigate negative impacts and improve adaptation to climate change;

• there should be a doubling of the amount budgeted for public urban transport from €7.8 billion (2.3%) to €15.6 billion (3.8%);

• road support should be redefined to improve transport efficiency, mitigate negative impacts, such as increased emissions or biodiversity impacts, and to help adapt to climate change – it would mean dividing road support by five from €40 billion (11.6%) to €8 billion (2%);

• airport support (€1,9 billion) should be phased-out: aviation is the most polluting mode of transport and has a hugely negative impact on climate change. The EU is introducing aviation in the ETS directive and is even considering an air traffic tax as a source of revenue, so simultaneously giving grants to this sector would lack

31 A solid basis already exists for such a carbon proofing methodology, including well-to-wheel calculations and the HEATCO study (2006)


coherence. In addition, there is a lack of economic sense in constructing regional airports when most are not economically viable32.

• there should be a tripling in support for cycle tracks; and• the focus on ports and inland waterways should be redefined to improve transport

efficiency, manage flood risk and adapt to climate change, with no change in the level of funding.

4. Sustainable Europe: boost energy savings and protect biodiversity

Boost win-win-win energy savings to achieve the Europe 2020 target

The best route to Europe’s energy, economic, security and climate protection goals involves energy savings. But reaching the 20% energy efficiency target by 2020 will require far more than just monitoring –adequate funding is of the utmost importance. Energy savings, especially in the housing sector, is a no regret solution having optimal cost-effectiveness. Europe is currently behind schedule - a HSBC study found that current measures will only reduce energy consumption by 9% by 2020 as opposed to 20%. Such a massive failure is equivalent to the energy of seven Nabucco pipelines or to the energy consumption of Germany. The Commission is aware of this issue33. Accordingly, strong measures have to be taken: energy savings must be a mandatory thematic priority in future Cohesion Policy.

The European Parliament, in its Resolution on Revision of the Energy Efficiency Action Plan, called on the Commission “to use the mid-term review in order to allocate more funds for energy efficiency programmes and to promote the possibility to use up to 15% of the ERDF (European Regional Development Fund) for energy efficiency”34.

WWF supports this proposal. Assuming that the share of the ERDF remains the same in the next period, 15% would represent €35.1 billion – or 8.6% of the total Cohesion Policy funding. It would be shared between urban regeneration (with the same percentage of the Cohesion Policy as today: 2.9% or €12.1 billion) and energy savings in housing and public buildings (€23 billion or 5.6%).

32 e.g. new regional airports in Poland are being constructed using EU money. In the meantime, existing airports have a hard time attracting airlines. The usual practice is a hidden donation - paying airlines for promotion. The Podkarpackie region, a remote and relatively poor region in south-eastern Poland decided to pay Ryanair €6 million for the placing of the region’s logo on an aircraft - in order to avoid cuts in con-nections from the regional airport. Constructing new airports in eastern Poland’s Bialystok or Lublin means that the regional authorities will spend a lot of money in the future to attract cheap flights

33 José Manuel Barroso, Presid-ent of the European Commission, speech on growth and economic governance – orientation debate on energy and innovation, 5 January 2011: “I am unhappy with the progress made on energy efficiency. (…) I would like to see the European Council agree on concrete measures to reach the 20% target by 2020”

34 European Parliament, Resolution of 15 December 2010 on Revision of the Energy Efficiency Action Plan (2010/2107(INI)), article 82


Invest in self-maintaining biodiversity and green infrastructures

Experts increasingly recognise that investing in natural capital and green infrastructures can be more cost effective than conventional expenditure, particularly in regard to risk prevention and climate adaptation (e.g. floodplain restoration instead of dyke building). A healthy environment can deliver services of better quality and for a better price than conventional practices (e.g. purifying water). In addition, ecosystems are self-maintaining to a large extent and therefore have limited annual management costs. The protection of ecosystems and biodiversity, in line with the EU 2020 target, has to be seen as a cost-effective opportunity rather than a financial burden.

The investment cost for appropriately managing Natura 2000, which is the cornerstone of EU biodiversity policy and the key tool for stopping biodiversity loss, is estimated at €6 billion a year (for more see chapter 6 - Financing LIFE+ and Natura 2000). The share of Cohesion Policy should be €1.9 billion a year or €13.3 billion for the period 2014-2020 (3.2% of Cohesion Policy). Given that the 25,000 sites of Natura 2000 constitute the core environmental networks in Europe, it is estimated that green infrastructures ensuring environmental connectivity could represent half of the Natura 2000 cost, or 6.7 billion (1.6%). These key investments should be mandatory thematic priorities of the future Cohesion Policy.

WWF also supports the following measures:

• the same share of Cohesion policy support for air quality, integrated prevention and pollution control, rehabilitation of industrial sites and contaminated land, as today (respectively 0.3% or €1.2 billion; 0.2% or €0.8 billion; 1% or €4.1 billion);

• the merging of risk prevention and climate change adaptation based on ecosystems - they should be increased from 2.3% to 3% (€12.3 billion), given that climate impacts will unavoidably increase, requiring more funding for adaptation;

• water and waste should get approximately the same shares of Cohesion Policy as today, with 8% or €32.8 billion; and

• support for tourism should be redefined to support energy and resource-efficient preservation and development of natural heritage and cultural infrastructure and services.


5. Inclusive Europe: increase green (re)skilling of the workforce

Skill shortages in the EU are a potential threat to green expansion. Several sectors already face skill shortages35 and there are signs that these shortages could hamper the greening of the economy36. The Directive on Energy Efficiency of Buildings combines environmental and training measures. However, according to several national trade unions, a shortage of skilled people exists and as a consequence there will not be enough qualified workers to implement the Directive37. The following information was available on skill shortages in the EU38:

• the British CBI states that sectors going ‘green’ are experiencing a skills-gap due to the shortage of supply of technical specialists, designers, engineers, and electricians;

• Germany’s renewables industry is suffering from a shortage of qualified workers ;• there are even a skills-gap for sales staff in the retail sector and for project

managers specialising in delivering a range of mitigation and adaptation solutions; and

• often more skills are needed for the renewable energy sector (i.e. consulting skills, communication skills).

As a consequence, the European Parliament, in its Resolution on Revision of the Energy Efficiency Action Plan, called on “Commission, Member States as well as local and regional levels of government to increase their efforts to enhance education and training of energy efficiency experts of all kinds, but particularly of intermediary technicians, and in all sectors, but especially in the entire building value chain and in SMEs to upgrade skills of construction crafts; thereby creating green local jobs while facilitating the implementation of ambitious energy efficiency legislation,” and “calls in this context for a full exploitation and increase of the structural and cohesion funds for training purposes”39.

35 Cedefop (2008). Future Skill needs in Europe. Focus on 202036 UNEP et al. (2008). Green Jobs: Towards decent work in a sustainable low-carbon world 37 ETUC (2006). Mid-term review of the 6th Community Environment Action Programme. Position of the

European trade union confederation (ETUC)38 ECORYS (for the European Commission DG Environment), Environment and labour force skills - Overview

of the links between the skills profile of the labour force and environmental factors - Final report, December 2008



Accordingly, WWF recommends two changes in the Cohesion policy:

• a more precise definition of the scope of several measures with a view notably to build a fully decarbonised and highly energy and resource efficient economy; and

• the introduction of a new category for the development of workforce skills in the building renovation sector, given that the building sector has much potential for green employment but has a shortage of skilled workers in retrofitting operations - €2 billion (0.5%) is proposed for this measure.

6. Increase support to partnership and capacity building

Experience shows that increased partnership helps to improve the quality, relevance and effectiveness of EU spending, and ensures that socio-environmental concerns are better addressed. In addition, a more inclusive approach is likely to create more confidence in the allocation of EU budget funds, providing a much higher public acceptance and facilitating project implementation. This is particularly relevant for the Cohesion Policy which deals with a huge number of local investments in all European regions.

Capacity building is considered as one of the main bottlenecks of the current Cohesion Policy – meaning that improved capacity building at all levels (national, regional, local and beneficiaries) would improve the delivery of the Cohesion Policy.

Expenditure for partnership and capacity building should be increased from €15.4 billion (4.5%) to €19.7 billion (4.8%).


4. RESEaRCH and InnOVaTIOn FUndS


Given the strategic importance of research and innovation in building a fully sustainable economy, and the strong emphasis that the EU 2020 Strategy puts on the need to foster research and innovation, WWF assumes that the EU funds for research and innovation will be increased by 33%, from €58.2 billion in the current period40 to €77.4 billion in the period 2014-2020 (6.7% of the EU budget).

WWF specific demands include:

• that funds for environmental research (including climate change) are increased by 50%, from €1.9 billion today to €2.8 billion in the next budget;

• that at least 50% of all energy research funding is devoted to renewable energies and energy efficiency, moving from €1.2 billion to €5 billion in the next EU budget;

• that there be a cap on the amount of funding for ITER; and• that transport research funding is shifted to decarbonised, highly efficient

transport solutions.

2. Environmental research (including climate change)

In the current period, only €1.89 billion goes to “environment research including climate change”. Not only is the amount extremely small given the huge environmental challenges that Europe has to tackle, it is also focused on basic scientific research while funds are lacking for applied research, especially for ecology and climate adaptation.

The TEEB study41 underlined both the enormous services provided by ecosystems, and the huge cost of destroying them. But it also highlighted the limited knowledge about this issue and the urgent need to foster additional research. At the European level, the current cost/benefit analysis of Natura 2000 is still very uncertain and also requires additional research.

WWF demands, therefore, that the amount in increased by 50%, to €2.8 billion during the period 2014-2020. This increased funding should notably fill research gaps in areas such as ecosystems services and sustainable agriculture in the new Member States42.

40 It includes the Seventh Framework Programme (FP7) and the Competitiveness and Innovation Framework Programme (CIP)

41 The Economics of Ecosystems and Biodiversity (TEEB) (2009)42 e.g. half the scientific papers on farmland birds are from the United Kingdom and most are from Western Europe


3. Energy research

Devote at least 50% of energy research funding to energy efficiency and renewable energy

In the period 2007-2013, the EU energy research funds are as follows:

• fund for nuclear energy: Euratom €2.75 billion43 for the period 2007-2011 and an additional €2.5 billion for 2012-201344, or a total of €5.25 billion for 2007-2013; and

• “energy research” in FP7: €2.35 billion, of which 51% was spent on renewable energy, energy efficiency and smart grids during 2007-201045.

In the current EU budget, only 16% of energy research funds are for energy efficiency and renewable energies, while 69% goes to nuclear energy. According to the Commission’s communication on the EU Budget Review, “future research and innovation funding must contribute directly to the achievement of Europe 2020.” The communication adds that: “the EU should contribute to remedy decades of shortfall in energy research, which has left Europe lagging behind in terms of developing domestic energy supplies and tackling the challenge of reduced emissions.” The EU 2020 strategy has set climate and energy targets for 2020: 20-30% emissions reduction, 20% energy efficiency improvement and 20% renewable energy production. Accordingly, EU energy research funds should focus on these three priorities.

In addition, the European Parliament has called the Commission “to make energy efficiency one of the key priorities of the 8th Framework Research Programme”, and asked for “a significant increase in the EU’s future budget, particularly for renewable energy, smart grids and energy efficiency, by 2020 compared with the current level”46.

Accordingly, the current imbalance in the support for energy efficiency and renewable energy and other energies should be corrected. WWF demands that at least 50% of all EU funds for energy research focus on energy efficiency and renewable energies. Assuming that such funds are increased by 33% to €10.1 billion, €5 billion of it should be devoted to energy efficiency and renewable energies.

43 http://cordis.europa.eu/fp7/budget_en.html44 European commission, http://europa.eu/rapid/pressReleasesAction.do?reference=IP/11/256&type=HTML45 FP7 Energy budget distribution so far (2007-2010)46 European Parliament resolution of 15 December 2010 on Revision of the Energy Efficiency Action Plan


Cap EU support for ITER

ITER (International Thermonuclear Experimental Reactor) is a fundamental research project in the nuclear sector, based in Cadarache (France). ITER’s aim is not to produce electricity from nuclear fusion but to produce stabilised plasma for 400 seconds (a bit less than 7 minutes): this issue of one of several that need to be solved to eventually allow energy to be produced from nuclear fusion. According to the scientist Jacques Treiner47, if all these issues are successfully solved, the production of electricity from nuclear fusion could be envisaged, at the soonest, in 2080-2100. This cannot be justified from a climate perspective at it will be too late for even the long-term 2050 target48.

ITER was initially expected to cost €5 billion, but its budget has more than tripled to €16 billion. Given that its construction is scheduled for 2014 and that it is only scheduled to be finalised in 2038, other cost overruns would seem unavoidable. As part of an international consortium, the EU has committed to finance 45% of the cost (80% by the Commission and 20% by France). Therefore, given the initial massive overruns, the cost for the EU budget has skyrocketed from €2.7 to €7.2 billion. The Commission had to look for an additional €1.3 billion just for the years 2012 and 201349, and it recognises in the communication on the EU Budget Review that ITER (and other large scale projects) are “subject to significant cost overruns and their governance is not well-suited to the direct management of the EU institutions”.

The ITER programme was developed prior to the global financial and economic crisis and the resultant massive public deficits and austerity measures that have become commonplace. In this new context, and also given the loss of control over ITER costs and governance, the level of priority given to ITER should be reassessed by the EU institutions, following full scrutiny of the project by an independent third party. Meanwhile there are other low-carbon energy programmes which can deliver results by 2020 and which remain are unfunded, notably concerning energy savings.

In addition, ITER overruns that have to be paid from the EU budget do not lead to an increase in funding, due to the legal ceiling on the size of the EU budget: instead they are managed through cuts in other EU-funded activities, jeopardising the strategic planning and consistency of the EU budget.

WWF therefore demands that, at a minimum, the EU budget support for ITER in the period 2014-2020 be capped from the outset.

47 Jacques Treiner, Presentation on ITER in the European Parliament, 8 December 201048 See also IEA (2008), Energy Policies Review – The European Union49 http://europa.eu/rapid/pressReleasesAction.do?reference=MEMO/10/165


4. Transport research

The current FP7 devotes €4.16 billion to “transport research including aeronautics”. The Commission’s communication on the EU Budget Review advocates a “European core network shifting freight and passenger flows towards more sustainable transport modes”. EU transport research should thus follow the same priorities and the funds should concentrate on:

• decarbonisation of transport as a high priority;• high energy efficiency of transport; and• mitigation of other negative impacts, like ecosystem fragmentation and air

pollution.

5. ExTERnal dImEnSIOn1. Investment priorities

• Overseas Development Assistance (ODA) from the Development Cooperation instrument (DCI) should be doubled to reach €33.8 billion in the period 2014-2020;

• €20 billion should be committed to a new additional climate fund for international financing commitments;

• EU ODA for the environment and biodiversity should be tripled from today’s €890 million to €2.67 billion;

• Humanitarian aid could be increased by the amount of the emergency aid reserve, going from €5.6 to €7.3 billion50

• WWF assumes that the other EU funds related to the external dimension will be stable in relative terms (i.e. accounting for the same percentage of the EU budget) at €39.2 billion;

• The total for the external dimension of the EU budget would therefore amount to €100.2 billion or 8.7 % of the EU budget 2014-2020, rising from €55.9 billion or 5.7% for the preceding period.

WWF is not in favour of the European Development Fund’s budgetisation, given that the conditions to successfully integrate it in the EU budget are not met.

50 The humanitarian aid budget has always been insufficient in the last years. To avoid the heavy burden of asking each year for the emergency aid reserve to be used for this purpose, the humanitarian aid budget could be increased


2. Increasing ODA to fulfil commitments

External policy has been reinforced within the new institutional framework of the Lisbon Treaty. It is an area where the EU can have a strong added-value, by centralising or at least coordinating with Member States. The EU has made ambitious commitments to support the least developed countries on many global environmental issues, including climate change and biodiversity. It has, therefore, to propose European answers to these challenges.

The EU and Member States have committed ODA to reach 0.7% of EU GNI by 2015, a commitment which is not currently on-track. In 2009, the EU ODA reached 0.42% of GNI, amounting to €49 billion. According to Development Commissioner Piebalgs, “this higher level of ambition needs to be reflected in the level of funding for external action”51.

WWF demands that ODA focuses on the poorest countries. For that purpose and to get back in line with the 0.7% commitment, WWF is calling for a doubling of the funding for the Development Cooperation Instrument (DCI), from €16.9 billion in the current period to €33.8 billion in the period 2014-2020.

3. No EDF budgetisation when conditions are not met

Incorporating the European Development Fund (EDF) into the general budget does make sense. It would imply more coherence, transparency and accountability. However, it may also have negative impacts like a decrease of the overall EU development budget and a diversion of funds and weakening of elements of partnership. Therefore, budgetisation should only be considered if conditions are met that will safeguard the EU’s development policy as well as the ACP52 countries’ interest and the central innovative elements contained in the Cotonou Agreement and the EDF.

If the EDF is budgeted, the development budget should be increased by a value at least equivalent to the 10th EDF, in real terms, which will accordingly increase the overall development cooperation amount.

Funding for ACP should be ring-fenced: long-term protection and reinforcing of funds for the ACP countries (mainly low-income) should be ensured in the EU budget and the annual budget cycle. Elements of co-management and joint decision-taking, political dialogue between equal partners and the principles

51 Hearing of the Commissioner Piebalgs by the European Parliament special Committee on the EU budget, 01 February 2011. EU budget commissioner Janusz Lewandowski also states that “Increase for development is needed by 2020 (EU Observer, UK rebate ‘no longer justified,’ Brussels says)

52 African, Caribbean and Pacific Group of States


of ownership and participation guaranteed by the Cotonou agreement must be maintained and strengthened.

These conditions are not met currently.

4. Contributing to climate finance

In the United Nation’s Copenhagen Summit on climate change in 2009, the EU committed to mobilising, jointly with other developed countries, $100 billion annually by 2020 to address the climate mitigation and adaptation needs of developing countries. In addition, the EU committed to €7.2 billion of so called “fast-start finance” during 2010-2012. Fast start finance is a yearly average of €2,4 billion, a figure which was almost attained in 2010 (2.39). A small part of it comes from the EU budget for external dimension so it can be assumed that the next EU budget will also contribute to climate finance.

According to WWF53, mitigation and adaptation costs are expected to extend up to or beyond $200 billion by 2020, based on work done by Lord Stern and others, of which $100 billion should be borne by public finance. Europe is due a fair share of it, amounting to a third or $33,3 billion (€25.3 billion). In calculating the amount of climate finance needed each year starting from €2.4 billion in 2012 to €25.3 billion in 2020; it is assumed that the increase will be linear. It is important to bear in mind that upfront investments are the cheapest and the most effective in mitigating and adapting to climate change; in order to have the best cost-effectiveness, climate finance should not be delayed. This result is a total of €110 billion for the period 2014-2020, as shown by Figure 6 below.

Figure 7: Total EU27 climate finance 2010-2020

53 WWF Recommendations (2010), High Level Advisory group on Climate Change Financing

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

30

25

20

15

10

5

0

€ bi

llion


If we assume that the EU budget contribution to European climate financing could be the same as the EU budget contribution to European ODA (around 20%), it means that a total of around €20 billion will be needed in the EU budget 2014-2020, both for mitigation and adaptation. This is a conservative estimate, which does not take into account any potential new findings estimating higher costs of climate mitigation and adaptation in Southern countries, for example.

Climate financing is not ODA; it is additional funding. In order to avoid double counting, separate reporting is needed, thus a specific fund should be created in the external dimension of the EU budget, to ensure full transparency and accountability.

5. Increasing biodiversity support

In 2002-2005 on average, only 2.8% of ODA was devoted to biodiversity54 or around $3 billion in 2006. This is obviously not enough to match the funding needs for biodiversity protection, or even more narrowly for protected areas. Most analysts agree that there is a large unmet need for biodiversity finance, especially in the developing world.

Several estimates are available on the need for additional biodiversity financing. They imply that:

• $1,1 billion is required to cover the basic expenses associated with protected-area management in developing countries and countries with economies in transition55;

• $12-13 billion per year, over 10 years, is needed to expand and manage protected areas in developing countries56; and

• up to $45 billion per year, over 30 years, is needed to secure an expanded network of protected areas covering 15% of terrestrial and 30% of marine ecosystems, mainly in the tropics. This estimate includes a provision for compensation of opportunity costs occurred by current resource users57.

Following the Convention on Biological Diversity (CBD)’s summit in Nagoya (COP10), the CBD 2011-2020 strategic plan targets at least 17% of terrestrial and inland water, and 10% of coastal and marine areas (target 11). In addition, the EU

54 OECD (2007), Statistics on Biodiversity-Related Aid55 World Institute for Conservation and Environment, Vreugdenhil, D(2003), Protected Areas Management,

Biodiversity Needs and Socioeconomic Integration56 Bruner A., Hanks J. and Hannah L., How much will effective protected area systems cost? Presentation to

the 5th IUCN World Parks Congress, 8-17 September 2003, Durban, South Africa57 Balmfort, Bruner, Cooper, Costanza, Farber, Green, Jenkins (2002), Economic reasons for conversing wild

nature, Science 297 950-953, 9 August


Council of 25-26 March 2010 has committed to stepping up the EU’s contribution to halting the loss of biodiversity worldwide.

The estimates above on the need for additional biodiversity financing are enormous compared to the current EU ODA for environment ENRTP-Environment (including biodiversity) of €890 million. Therefore, WWF demands that this amount is tripled in the EU budget 2014-2020 to €2.67 billion.

6. FInanCIng lIFE+ and naTURa 2000


WWF demands that the European dedicated fund for the environment, LIFE+, increases to 1% of the EU budget 2014-2020, which corresponds to multiplying it by five to reach €11.3 billion, from today’s €2.1 billion, or 0.2% of the EU budget 2007-2013.

50% of LIFE+ should be used for biodiversity, or €800 million a year, of which:

• 90% for Natura 2000, or €720 million a year; and• 10% for other biodiversity issues, or €80 million a year.

To finance Natura 2000, €6 billion is needed annually, according to the Commission and Member States58. The EU budget should provide on average 75% co-financing or €4.5 billion a year, shared between four EU funds: CAP, Cohesion Policy, LIFE+ and the European Fisheries Fund.

2. LIFE+: to reach 1% of the EU budget

LIFE+ is the EU’s only dedicated fund for the environment. It is a tiny fund but it is cost-effective and supports small projects and small actors that fall below the rader for other types of EU funding (e.g. small municipalities in Eastern Europe, civil society organisations, etc).

As concluded at the major stakeholder conference held in Brussels on 15-16 July 2010 on financing Natura 2000, the value of an enhanced LIFE instrument was emphasised. LIFE+, although limited by resources, is of particular value for start-up activities, providing targeted and substantial direct funding. Given its strong

58 Coordination Group for Biodiversity and Nature (meeting 02/03/2010), Financing Natura 2000 – State of Play, Agenda item, and European Commission (2004), Financing Natura 2000, COM(2004)431 final


nature conservation dimension it covers a wide range of actions. It was noted that the LIFE+ budget is too small: many selected projects cannot be funded.

The Commission’s communication on the EU Budget Review is clear on the environmental challenges which need to be taken into account in the next EU budget, including climate change, biodiversity loss and resource inefficiency. A specific fund of just 1% of the EU budget would seem to be a minimum requirement in order to finance all relevant environmental projects that cannot be financed by other EU funds.

Just 40% of LIFE+ is currently devoted to nature and biodiversity. According to the Commission’s communication on the EU Budget Review, climate change is going to be mainstreamed throughout the next EU Budget. In that context it makes sense to focus LIFE+ relatively more on biodiversity to contribute to the European 2020 target of halting biodiversity loss. Half of LIFE+ should be devoted to biodiversity, or €800 million a year. As Natura 2000 is the cornerstone of EU biodiversity policy, 90% of the LIFE+ biodiversity funding should support it, or €720 million a year.

20-25% of LIFE+ assistance could target climate change. Climate mitigation is not relevant in LIFE+ given the amounts needed to make any difference. Therefore, LIFE+ should concentrate on ecosystem-based climate adaptation.

3. Financing Natura 2000

Natura 2000 is Europe’s biggest success story in protecting biodiversity. Through a network of 25,000 sites all over Europe, Natura 2000 seeks to protect habitat types and plant and animal species of particular importance and it is the main tool to help meet the target of halting biodiversity loss by 2020.

But only 20% of the total financing needs for managing this network are currently being met59. To overcome this bottleneck, WWF demands that mandatory financing plans are developed by Member States to ensure a sufficient level of prioritised delivery in line with Natura 2000 needs. Article 8 of the Habitats Directive explicitly recognises the need to develop “a prioritised action framework” (PAF) with EU support for the management of sites, through co-financing by Community financial instruments, in light of the excessive financial burden that Natura 2000 places on Member States (see Volume One - Smarter Spending for more information).

59 According to a study by the Institute of European Environmental Policy


According authoritative studies from the Commission and Member States60, €6 billion is needed annually to adequately manage Natura 2000 throughout the EU27. WWF demands that the EU budget provides an average of 75% co-financing or €4.5 billion a year to make it attractive for Member States and to ensure strong delivery.

This amount should be shared as follows into the four EU funds that are available to Natura 2000:

• €720 million a year should be provided by LIFE+;• €1.9 billion should be provided by the CAP;• €1.9 billion should be provided by the Cohesion Policy; and• the European Fisheries Fund should provide the remaining support needed for

marine Natura 2000 sites.

7. maRInE and FISHERIES FUndS

WWF assumes that the amount of the fisheries funds in the next period will be the same as today in nominal terms, or €6.75 billion (0.6% of the EU budget). It includes the European Fisheries Fund (€4.3 billion) and the Common Fisheries Policy and Law of the Sea (€2.4 billion). Under the umbrella of the Integrated Maritime Policy, a single fund integrating the several funding sources should be established.

Of the total amount, 50% should be devoted to the environment given the disastrous state of fish stocks and the urgent need for action. Indeed, the European Commission recently reported that “in 86% of European fish stocks, overfishing is so serious that more fish would be caught if there was less fishing. This number is way above the situation outside the EU where the global average is 28% of stocks being overfished. Some 18% of stocks are in such bad state that scientists advise that there should be no fishing.”

60 Coordination Group for Biodiversity and Nature (meeting 02/03/2010), Financing Natura 2000 – State of Play, Agenda item, and European Commission (2004), Financing Natura 2000, COM(2004)431 final


8. a nEw lEVERagIng FUnd FOR SUSTaInaBlE EnERgy and TRanSPORT InFRaSTRUCTURES

1. Priority investments

A new fund replacing TEN-T and TEN-E could be taken from the margin of the EU budget 2014-2020, which is €31 billion or 2.7%. It would support decarbonised and highly efficient transport infrastructures and production and transport of renewable energy. It would be used to leverage private finance as much as possible.

2. The future of TEN-E and TEN-T

It is now most likely that the TEN-E and TEN-T funds will be modified: “the draft communication on energy infrastructure priorities for 2020 and 2030, scheduled for presentation in November, will be followed by a proposal for a new financial instrument to replace the Trans-European Energy Networks (TEN-E).”61

In addition, the TEN-T guidelines are currently under review; several TEN-T projects have been controversial, and the overall TEN-T approach has not proven very effective: by 2010 only 5 out of 30 priority projects have been delivered; in addition, the EU value-added of some projects, and indeed the whole approach of defining 30 huge priority projects, is questionable62. Reviewing TEN-T is a major opportunity to shift the TEN-T priorities from mega-projects to fully sustainable and innovative transport infrastructures, composed of decarbonised, relatively smaller, more cost-effective and more energy and resource efficient projects.

In the field of energy, the future of TEN-E should be focused on renewable energy, including production and transport via smart grids, and energy efficiency.

Both TEN-T and TEN-E funds should be merged and replaced by a new fund focused on sustainable energy and transport infrastructures. It would receive the margin of the EU budget 2014-2020, which is €31 billion or 2.7% and would be used to leverage private finance as much as possible (notably with the European Investment Bank’s support).

61 Euractiv, Brussels finalising EU energy infrastructure plan, 04 October 201062 See Transport & Environment (2011), Carbon proofing of transport investments - how it could work


9. OTHER EU SPEndIng

WWF assumes that for all other EU budget expenditure, the same allocations will be kept. This covers:

• the rest of the (current) Heading 1a Competitiveness for Growth and Employment (lifelong learning, Gallileo, etc)63 at 2.4% or €27.3 billion for the period 2014-2020;

• Heading 3 Citizenship, freedom, security, justice at 1.25% or €14.4 billion for the period 2014-2020; and

• Heading 5 Administration at 5.7% or €65.8 billion for the period 2014-2020.

The Heading 6 of the current EU budget (compensation for Romania and Bulgaria) has been already phased out in 2010.

10. nEw HEadIngS aCCORdIng TO THE EU 2020 STRaTEgy

The Commission’s communication on the EU Budget Review clearly mentions the three priorities of supporting a smart, sustainable and inclusive Europe. WWF assumes that the headings of the EU budget 2014-2020 will be reorganised to reflect these priorities, while the Heading 4 EU as a global player and Heading 5 Administration will remain the same. Therefore, Figure 7 highlights WWF’s proposal for the new budget headings:

63 Research and innovation funds have been singled out, see chapter 5


Figure 8: Headings of the EU budget 2014-2020

1. Smart EuropeResearch

Education (current heading 1a except Research)

Smart Cohesion Policy

New leveraged fund for sustainable infrastructures

2. Sustainable EuropeCAP

Sustainable Cohesion Policy

LIFE+

Marine and fisheries funds

3. Inclusive EuropeInclusive Cohesion Policy

Citizenship, freedom, security, justice

4. EU as a global player

5. Administration

11. FInal RESUlT FOR THE EU BUdgET 2014-2020

The figures on the next page present the expenditure of the future EU budget 2014-2020 in comparison with the current expenditure. For WWF, the figures are important but the percentages are even more so: would the overall EU budget not amount to that which has been estimated and demanded by this volume WWF believes that the percentages proposed here should be maintained in order to ensure a better balance in EU budgeting and to increase the chance that it will deliver on all the aspects of the EU 2020 Strategy for a smart, sustainable and inclusive Europe.


Figure 9: EU budget figures 2014-2020 and comparison with EU budget 2007-2013

EU budget 2007-2013

EU budget 2014-2020

1. Smart Europe 272,6 27,9% 331,9 28,9%Research 58,2 6,0% 77,4 6,7%

Education (rest of heading 1a)

23,2 2,4% 27,3 2,4%

Smart Cohesion Policy * 183,2 18,8% 196,4 17,1%

Leveraging fund for smart infrastructures

8,0 0,8% 30,8 2,7%

2. Sustainable Europe 484,8 49,7% 541,1 47,1%CAP Pillar I 307,9 31,5% 202,0 17,6%

CAP Pillar II 96,2 9,9% 202,0 17,6%

Sustainable Cohesion Policy * 71,7 7,3% 119,0 10,4%

LIFE+ 2,3 0,2% 11,3 1,0%

Marine and fisheries funds 6,8 0,7% 6,8 0,6%

3. Inclusive Europe 101,9 10,4% 108,4 9,4%Inclusive Cohesion Policy * 89,7 9,2% 94,0 8,2%

Citizenship, freedom, security, justice

12,2 1,3% 14,4 1,3%

4. EU as a global player 55,9 5,7% 100,3 8,7%5. Administration 55,9 5,7% 65,8 5,7%6. Compensation for Romania, Bulgaria

0,9 0,1% - -

Total 975,8 100,0% 1148,0 100,0%

* According to the grouping of expenditures proposed in chapter 3, Cohesion Policy and partnership and capacity building are counted in Smart Cohesion Policy.


Figure 10: EU budget 2014-2020

Research

education

smart CohesionPolicy

leveraging fundfor smartinfrastructures

CAP Pillar I

CAP Pillar II

sustainableCohesion Policy

lIFe+



Citizenship etc


Administration

Research

education

smart Cohesion Policy

leveraging fund for smart infrastructures

CAP Pillar I

CAP Pillar II

sustainable Cohesion Policy

lIFe+



Citizenship etc


Administration

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PaRT 2 - RaISIng THE BaR: an amBITIOUS lEVERagIng aPPROaCHUnprecedented investment volumes in Europe’s transport and energy systems will be required over the next decade to meet the EU energy and climate targets by 2020, and set Europe on a sustainable path to achieving an almost decarbonised society by 2050. According to the Commission, for the energy sector alone, €1.1 trillion will be required: €400 billion for distribution networks and smart grids, €200 billion for transmission networks and €500 billion to upgrade and build new capacity generation. For the transport sector, an estimated €500 billion is needed64. While WWF is in favour of very aggressive energy savings targets including a binding 20% energy efficiency target by 2020, which requires lower investment than new energy capacity generation, massive investments in renewable energy and smart grids will be needed to attain 100% renewable energy in Europe by 2050.

In its Communication on moving beyond 20% emissions reduction from May 2010, the Commission stated that the cost of meeting the 20% target had dropped from €70 billion to €48 billion per year by 2020, and that the annual cost of meeting a 30% target would be €81 billion. The additional cost of moving to a 30% target would therefore be some €33 billion, but only an additional €11 billion in relation to the original cost of the climate and energy package. These figures seem very reasonable compared to the ones mentioned in the above paragraph (and they are supportive of a 30% climate target), but reducing energy consumption will obviously not be enough to solve the funding gap.

The EU budget and the national and regional public budgets, given current austerity measures, won’t be able to answer this huge need for investment. Therefore, investments by the private sector are required: the EU should create a framework

64 European Commission, Stakeholder consultation paper on the Europe 2020 Project Bond Initiative, Commission Staff Working Paper, 28 February 2011


to enable these investments through different financial instruments. Several options are available, from strengthening the existing financial instruments to the creation of green project bonds, notably with the European Investment Bank (EIB) and the development of integrated solutions.

1. BOOST FInanCIal EngInEERIng USIng THE EU BUdgET

Financial instruments, as defined by the Commission, are EU measures of financial support provided from the budget of the Union in order to address a specific policy objective by way of loans, equity or quasi-equity investments or participations, guarantees or other risk-bearing instruments, possibly combined with grants. Co-financing via these instruments has been used in the EU budget for more than ten years with the intention of mobilising additional sources of finance and multiplying the effect of EU spending. In the EU budget 2007-2013, a new generation of financial instruments was put in place in cooperation with the EIB.

Different instruments have been created to answer the specific needs of different sectors or beneficiaries: e.g. fostering research and innovation requires loan guarantees, risk sharing facilities and venture capital investments. There are now at least fourteen specific instruments that are used in relation with the EU budget, as shown by Figure 10 on the next page.


Figure 11: Existing financial instruments

Types of EU financial instruments

Examples Use

Loan schemes and blending mechanisms

Loan: Euratom loan facility

To support the financing of nuclear electricity production

Fund structure: European Fund for South-East Europe

Finance to micro-enterprises

Fund structure: European Progress Microfinance Facility

Guarantees, risk-sharing, equity and debt to microfinance institutions in EU27

Combined grant/loan schemes: for banks

Capacity building purpose

Technical assistance schemes: JASPERS

Support managing authorities in EU12 for large scale projects with Cohesion Fund or ERDF

Technical assistance schemes: ELENA

Technical assistance for energy efficiency and renewable energy investments

Guarantee schemes

Portfolio guarantee: SME guarantee facility

Guarantee SMEs

EU Guarantee Fund for External Action

Covers EIB loans to projects in third countries

Risk sharing instruments

RSFF (Risk Sharing Finance Facility)

Support R&D in EU27 (funds from FP7)

LGTT (Loan Guarantee Facility for TEN-Transport)

Support TEN-T investments

Equity instruments

Marguerite fund Direct equity investment in a risk capital fund investing in TEN-E, TEN-T and RES projects in EU27

GEEREF (Global Energy Efficiency and Renewable Energy Fund)

Equity investments in SMEs in third countries

Structural Funds financial instruments

JEREMIE (Joint European Resources for Micro to medium Enterprises)

Provides loans, guarantees and equity investments for SMEs

JESSICA (Joint European Support for Sustainable Investments in City Areas)

Provides loans, guarantees and equity investments for cities

Source:European Commission


These instruments can be extremely relevant for projects which are economically profitable – e.g. for investments in renewable energies or energy savings, where the upfront investments can be paid back in a few years with feed-in tariffs or with energy savings. In addition, several instruments are revolving, which means that the money going back into the instrument – generally after a few years - can be re-used for new projects, increasing the multiplier effect. But even if there are several instruments already available, it seems that they are not used to a great extent. It is difficult to find figures related to the amounts invested by the EU (notably from the EU budget) and even more so to ascertain the leveraging effect of the instruments.

In its communication on the EU Budget Review, the Commission proposes using instruments that can address many different policy needs, and which can be delivered through two general mechanisms:

• an EU Equity Platform Mechanism – to provide equity; and• a Risk Sharing Platform Mechanism – to provide loans and guarantees.

It would lead to a reorganisation of the different instruments under these two umbrella mechanisms. This could potentially increase the effectiveness of the instruments, improve their visibility, reduce transaction costs, ensure simplification and scale-up the overall impact of the financial instruments.

WWF welcomes this move forward and supports its scaling-up. It is important that these instruments are carefully designed for the specific sectors they are intended to support. For example, energy savings in buildings can have an economic return of 4% but will not reach the 15% that private equity investors typically require. Nonetheless, energy savings are profitable and must be actively supported.

In addition, it is of utmost importance to set targets and indicators to measure the use and effectiveness of the financial instruments. Targets should not only be economic and financial: they have to integrate environmental indicators, to ensure that the financial instruments will indeed contribute to achieving the key EU environmental targets by 2020. The financial instruments should primarily support the ten key sectors underpinning a green economy, as identified by the 2011 UNEP report on the green economy: agriculture, buildings, energy supply, fisheries, forestry, industry (including energy efficiency), tourism, transport waste management and water65. The European Parliament, in its resolution on Revision of the Energy Efficiency Action Plan, called on the Commission to “encourage fi-

65 UNEP (2011), Towards a Green Economy: Pathways to Sustainable Development and Poverty Eradication


nancial institutions as well as funding programmes such as the European Invest-ment Bank to give high priority to innovative energy efficiency initiatives, espe-cially when these contribute to other EU goals such as job growth”.

Finally, financial instruments must be developed ambitiously and must be as open as possible, in order not to exclude any potential beneficiaries of EU funds. On the contrary, potential beneficiaries such as small municipalities, SMEs, regional authorities in CEE countries, social housing actors, actors from rural and remote regions are key stakeholders and should benefit from tailored technical assistance to increase their capacity to benefit from these instruments. The European Parlia-ment stressed “the need to develop technical assistance and financial engineering at local and regional authority level in order to support local players in setting-up projects – e.g. by harnessing the EIB’s ELENA technical assistance facility and the experience of ESCOs”66.

When financial instruments are not possible, subsidies must remain available in order not to lose opportunities.

2. dEVElOP naTIOnal EnERgy EFFICIEnCy FUndS (nOTaBly FOR BUIldIng RETROFITS)

1. A specific focus on a huge sector

Buildings are the biggest energy-consuming sector in Europe, accounting for 41% of final energy consumption and 25% of European emissions. The potential for improvement is huge: 30% of this consumption could be reduced by 2020 and the implementation of the Energy Performance Building Directive could create 280,000-460,000 jobs. The building sector is the number one priority in the fight against climate change by reducing energy use.

A lack of upfront investment and financial barriers are regarded as main inhibitors of energy efficiency. Energy saving measures pay back over time and are the most cost-effective way of reducing greenhouse gas emissions from a societal perspective (see McKinsey cost curve 67); however, the need to invest


67 McKinsey &Company, Pathways to a low carbon economy. Version 2 of the Global Greenhouse Gas Abate-ment Cost curve


upfront in order to reap economic benefits in the medium/long-term remains problematic, especially from an individual perspective. In its resolution on the Energy Efficiency action plan, the Parliament called on the Commission to list innovative solutions and best practice in overcoming the lack of upfront finance which is a major barrier to building refurbishment.

In addition, even when incentives are available, lack of information or administrative burdens act as a barriers to the use of the funds. Case studies68 realised in several Member States recommend:

• promotion of simplified procedures such as a single application pack for the different co-financing sources;

• to encourage first-time applicants, technical assistance budgets within operational programmes should be increased; and

• the compatibility between ERDF intervention and other public schemes (such as subsidised interest rates) is an element which should be improved.

2. Foster national energy efficiency funds

The Energy Service Directive69 suggested the creation of National Energy Efficiency Funds to deliver energy efficient improvement and measures at the national level, but these funds are not operative in all Member States. The new Energy Efficiency and Savings Directive should make these funds mandatory and ask that they become an entry point to the different sources of financing available. This will ensure that resources are pooled together and create a critical mass, instead of having a fragmentation of overlapping funding lines that are not easily accessible by the potential beneficiaries. These funds could be sourced from the Cohesion Policy budget, revenues from the auctioning of the ETS allowances, financing from national budgets or resources from EIB, to mention just some possibilities. They should be open to all providers of energy efficiency improvement measures, such as ESCOs (energy service companies), and possibly to all final customers and could provide for grants, loans, financial guarantees and/or other types of financing that guarantee results.

In addition, these resources should be used to leverage additional private money in the capital market. The funds should have the capacity to do innovative engineering (notably including public guaranties, mixed grants/loans, revolving funds, bundling/aggregating of smaller projects, etc).

68 CECODHAS Housing Europe (2010), A mid-term review of the use of Structural Funds for energy efficiency and renewable energy measures in existing housing

69 Directive 2006/32/EC of April 2006 on energy end-use efficiency and energy services, article 11


Successful models have been developed by several Member States, such as the KfW in Germany and Caisse Depots in France. The funds should be built on already existing structures where possible to enable more rapid implementation and start-up.

The Energy Service Directive will be reviewed in the third quarter of 2011, providing a strong opportunity to ensure that the National Energy Efficiency Funds proposed in its article 11 are made mandatory70. Ideally, the funds should encourage the possibility for potential beneficiaries to draft a single funding request that is used to access all types of funding (EU subsidies, national subsidies, regional subsidies, private money from banks). This would make the system:

• much less complex and thus more accessible;• cheaper and more attractive, by reducing transaction costs and gathering

different projects; and• more visible.

3. laUnCH gREEn PROjECT BOndS wITH THE EIB

The European Commission has launched a consultation on a new proposal: the Europe 2020 Project Bond Initiative71. The initiative is similar to project finance for infrastructure (especially in the energy and transport sectors). Given the rather heavy transaction costs, it is unlikely that projects under €200 million will benefit from this mechanism.

For WWF, three elements must be carefully integrated in this framework:

First, the project bonds must be green bonds, i.e. they should focus exclusively on sustainable, decarbonised and highly energy and resource efficient infrastructures. This includes renewable energies and smart grids in the energy sector and sustainable transport (rail and public urban transport). In addition, efforts should be made to use the mechanism for energy savings in different sectors, notably buildings – by supporting ambitious urban renovation projects or by grouping buildings refurbishment projects.

70 For more details see WWF (2011), How to improve Energy Efficiency Policy in the EU, Position Paper71 European Commission, Stakeholder consultation paper on the Europe 2020 Project Bond Initiative, Com-

mission Staff Working Paper, 28 February 2011


Secondly, the eligibility criteria for projects should be decided by the Commission and not by the EIB. All projects must be fully consistent with EU environmental acquis and the environmental targets for 2020, including the halting of biodiversity loss. Every project must set ambitious mandatory environmental targets.

Thirdly, the Commission states that “the EIB would subsequently carry out the due diligence and financial appraisal in the structuring phase”. This is an area of concern for WWF, because big infrastructure projects are complex and usually have a huge, long-term negative impact on the environment. They thus require an important monitoring capacity, especially to assess their environmental impact. But the EIB is known to have very limited staff resources when compared to its important portfolio, and it has very little capacity to access environmental and social considerations. Developing this Project Bond Initiative will increase the burden on the EIB. Therefore, WWF demands that several steps are implemented before the EIB can go ahead:

• very strict environmental criteria must be set for every project in order to eliminate, mitigate or compensate the negative impact of the infrastructure, notably on ecosystem fragmentation and biodiversity – the criteria must be decided by the Commission and not by the EIB;

• a strong monitoring system must be designed for every project - it must be based on several environmental indicators including carbon footprint (GHG emissions) / renewable energy production / energy consumption / land consumption / water consumption / good environmental status of freshwater areas / protection of Natura 2000 sites – and the monitoring must be closely followed by the Commission;

• as is common practice at international level for big projects, an independent and transparent complaint-mechanism must be set-up for every project, in order to receive the potential concerns of stakeholders, including environmental and civil society organisations - the complaint submitting process must be very easy and accessible to all and not a complex legal procedure and the recommendations of the complain-mechanism must be implemented by the project company; and

• the EIB should focus its limited capacities on Europe and not distract itself in projects concerning developing countries, where multilateral development banks like the World Bank have the development mandate, the experience, the capacity and the staff resources which the EIB lacks.


4. an InTEgRaTEd aPPROaCH TO maxImISE SynERgIES

It is of utmost importance that the various financial instruments are carefully articulated to increase clarity and visibility, avoid overlap, maximise synergies and cover all the potential needs so that opportunities are not lost.

For example, guarantees are sometimes the most needed instruments. According to the French bank BPCE72, 92% of eco-innovation is brought forward by SMEs. This is where radical eco-innovation can happen and it is most likely be a key element in putting Europe on a sustainable path. But only 10% of SME eco-innovation projects are supported by equity funds, because they don’t provide an economic return or a growth plan that is found to be attractive enough. In addition, SMEs often struggle to get bank loans because they don’t benefit from a guarantee. If the financial instruments available to SMEs do not cover the full range of their needs and instead, for example, focus mainly on private equity, opportunities will be lost.

To solve this challenge, BPCE proposes the creation of a fund for portfolio guarantees that would guarantee 70% of bank loans for eco-SMEs. The fund would have a global envelope rather than a project-by-project approach, to simplify the banks’ involvement. It would be free and attractive for SMEs. The proposal is based on a successful experiment of the European Investment Fund: it created a similar fund to provide guarantees in its programme “Growth and environment” between 1996-2002, was free and covered 50% of the banks’ loans: it should be reactivated.

72 BPCE (Banque Populaire – Caisse d’Epargne), Propositions pour renforcer le soutien bancaire aux filières industrielles éco-innovantes en France, septembre 2009

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PaRT 3 - THE REVEnUE SIdE OF THE EU BUdgETThe European Union has its ‘own-resources’ to finance expenditure. They are of three kinds:

• traditional own-resources (TOR) — these mainly consist of duties that are charged on imports of products coming from a non-EU state (12%);

• resources based on value added tax (VAT) which is a uniform percentage rate that is applied to each Member State’s harmonised VAT revenue (11%); and

• resources based on gross national income (GNI), which is a uniform percentage rate applied to the GNI of each Member State - although it is an item only introduced in 1988, it has become the largest source of revenue and today accounts for 75% of total revenues;

Figure 12: Resources in the EU budget

Source: European Commission

The fact that more than three-quarters of the EU budget now comes directly from the budgets of Member States has raised several problems, and the need for innovative finance is regularly put on the table.

gnI-based resource 76%

vAt-based resource 11%

Custom duties, agricultural duties and sugar levies 12 %

Other (taxes paid by eU staff, contributions from non-eU countries to certain eU programmes, finesoncompaniesthatbreachcompetitionorother laws, etc,.) 1 %


1. THE nET-PayER aPPROaCH jEOPaRdISES THE EU PROjECT

The current own-resources system of the EU budget suffers from four main difficulties:

1. The net-payer approach is flawed

Over time, the net financial position concept has been recognised as the main measure of the equity of an individual Member State’s contribution to the EU budget. Yet it should be emphasised that this concept is deficient as the possible definitions used to assess net positions are all linked with a number of accounting, substantive and methodological problems. In technical terms, the concept of “net budgetary balances” does not allow for more than pure approximation. Indeed, in several EU countries the choice of methodology determines if the country is a net payer or a beneficiary. Whether a financial position is equitable or not is finally dependent on which criteria are considered as the basis for assessing equity. If they are largely used at the political level, the concepts of ‘equitable repayment’ and net financial position are technically flawed.

In addition, “the existing system can be justifiably blamed for focusing attention on the so-called ‘juste retour’ or ‘equitable repayments’, which means that during Multiannual Financial Perspective discussions Member States are not focused on the contents of policy discussions but on their net financial gains or losses”73. This considerably weakens the construction of the European project.

Ultimately, financing the EU budget which is increasingly based on the contributions of Member States more closely resembles the financing of an international organisation such as the UN rather than an economic-political integration such as the EU.

73 EU Budget Reform Taskforce (2007), EU Budget Review: An Opportunity for a Thorough Reform or Minor Adjustments? Executive Summary of the Final Report


2. The revenue side is complex, unclear and unfair

“The drawbacks of the existing own-resources system, is that it is complicated, it is not transparent and is full of corrections and corrections of corrections”74. According to the European Parliament, “the own-resources are mainly characterised by adding even more special arrangements for certain net contributing Member States, such as reduced rates of call of VAT or gross reductions in annual GNI contributions to the already existing list of exceptions, thereby adding to the complexity and incomprehensibility of the system”75.

The European Council has renewed the decision taken in 2000 to increase the collection premium to be retained by the Member States from 10% to 25% of traditional own-resources, despite the undisputed fact that this percentage bears no relation to the Member States’ actual collection costs and favours Member States that collect a large share in custom duties, to the detriment of those who do not – which is considered as another form of rebate by the Parliament. The 2005 Brussels European Council made it even more complicated and obscure by leaving the UK correction, the “British rebate”, in principle intact and adding further derogations and corrections benefiting other Member States. Indeed, in the period 1988-1992, there was an explicit rebate for the UK and an implicit one for Germany, in the period 2007-2013 there is still an explicit rebate for UK but also an implicit one for Germany, the Netherlands, Austria and Sweden.

This increasing number of rebates and corrections and corrections of corrections makes the system excessively complex, opaque and completely incomprehensible to European citizens76. This obviously does nothing towards fulfilling the requirement of establishing a direct link between the Union and its citizens.

For these reasons, the Parliament “is deeply convinced that the current system of own-resources based on Member States’ contributions is both unfair to the general public and anti-democratic, and does not help to highlight the commitment to European integration.”77

74 EU Budget Reform Taskforce (2007), EU Budget Review: An Opportunity for a Thorough Reform or Minor Adjustments? Executive Summary of the Final Report

75 European Parliament, Report on the future of the European Union’s own-resources, Committee on Budgets, Rapporteur Alain Lamassoure (2006/2205(INI))

76 See Iann Begg, London Schools of Economics (2007), The 2008/2009 review of the EU budget: real or cosmetic?



3. The net payer approach does not reflect the EU added-value

Further, the net financial positions of Member States do not reflect the true benefits associated with EU membership. Indeed, the “membership fees” paid by Member States do not do justice to the benefits of the European Union in terms of peace, freedom, prosperity and security.

It may be difficult (and not necessarily relevant) to evaluate peace in Europe in financial terms for each Member State. But figures on trade inside the European Union are available and show that the very existence of the European Union has brought about an increase in intra-Community trade and an increase in the Member States’ wealth. The indirect benefit of national companies exporting to other Member States cannot be denied, but this internal market benefit is not accounted for by the net payer approach78. Figure 12 shows the net commercial balance of several Member States with some Member States which are net benefitors of EU funds.

Figure 13: Net EU budget balance and net commercial balance for EU countries, 2003 (% of national GDP)

Countries Net EU budget balance

Net commercial balance with

Spain

Net commercial balance with Spain, Portugal and Greece

Germany -0,36% 0,67% 0,92%

Austria -0,15% 0,38% 0,59%

Belgium -0,28% 0,93% 1,38%

Denmark -0,11% 0,32% 0,44%

France -0,12% 0,28% 0,44%

Netherlands -0,43% 0,97% 1,55%

Sweden -0,36% 0,54% 0,73%

Sources: Eurostat et Fernandez Martinez, 2004

78 See Jacques Cacheux (2005), Budget européen : le poison du juste retour, Notre Europe – Etudes et recherches n°41


4. The need for a holistic approach on total public expenditure

A holistic approach encompassing total public expenditure in Europe would be the most meaningful when discussing the EU budget’s added-value. Combining national and EU budgets (and even regional budgets in all areas where they are significant) the different expenditure options could be assessed, bearing in mind the subsidiarity principle and the need for the most cost-effective approach.

It is not the case today: every euro paid by a Member State to the EU is accounted for, while the potential benefit of a reduction of national public spending when EU public spending increases is not, resulting in a biased analysis of the real amount of public expenditure: the contributions to the European Union are only perceived as an additional burden for national budgets. The reality is even worse: the bulk of national expenditure is decided without knowledge of what neighbouring countries are doing, unavoidably leading to duplication and fruitless competition, at the detriment of sound and efficient management of the total public expenditure.

In most cases, the EU budget should help to reduce the total public expenditure, i.e. the EU budget would have an added-value each time that a euro spent at the EU level leads to more than one euro saved in a national budget in the same area. This is exactly what large industrial groups do: they pool common services to benefit from economies of scale.

Going forward, the relationship between national budgets and the EU budget should be examined in detail: this has never been done, but there seems to be a increasing will to do it and to provide a more holistic analysis of public expenditure in Europe. It would be a step in the right direction.

Based on these shortcomings, the European Parliament79 and the Commission have made proposals for a new own-resources decision, to gradually replace national contributions, and even to suppress the legal ceiling on the EU budget. For the Chair of the Budgets Committee, Alain Lamassoure, “to cap the EU budget is to cap faith in Europe, and to slam the brakes on solidarity between Europeans”80. He advocates, among others, that the budget ceiling should be abandoned in favour of a “policies-first approach”.

There are basically two approaches to reforming the own-resources system: through corrections to the existing system or through comprehensive reform which would include the introduction of a new tax resource at the EU level.

79 European Parliament legislative resolution on the proposal for a Council decision on the system of the Euro-pean Communities’ own-resources (COM(2006)0099 – C6-0132/2006 – 2006/0039(CNS))

80 Alain Lamassoure, Chair of the Budgets Committee, Working document on financing the Agenda 2020 despite the budgetary crisis, 6 May 2010


2. THE URgEnT nEEd FOR InnOVaTIVE FInanCE (nOTaBly FOR InTERnaTIOnal ClImaTE COmmITmEnTS)

1. Climate finance

European commitments on global public goods, like climate change, at the international level plead in favour of ‘innovative financial instruments’81. WWF estimates that the new and additional public resources required by developing countries to adopt low-carbon pathways and to adapt to the impacts of climate change will amount to at least $160 billion annually, on average, over the five year period 2013-2017 rising to around $200 billion annually by 2020. Only with this amount of public finance will it be possible to leverage the much greater level of private investments required – in the order of $500 billion to $1 trillion annually82.

Within the context of the Copenhagen Accord in 2009, the EU is committed to mobilise, jointly with other developed countries, $100 billion annually by 2020 to address the needs of developing countries for climate mitigation and adaptation. This is at the bottom-end of the range of estimated costs. Little progress has been made on how these funds can be generated but financing must be found.

Innovative sources of finances will be required: they include those which embody the polluter-pays principle and provide incentives for mitigation, for example:

• mechanisms for the control of maritime and aviation emissions (which could raise $24 billion annually)83;

• the auctioning of emissions allowances; and• redirecting fossil-fuel subsidies.

But these sources alone will not generate adequate finance and other sources should be explored such as a tax on financial transactions. A global financial transaction tax of 0.1% could yield between $410 and $1060 billion a year84. The North-South Institute estimates that a currency transaction tax of just 0.005% on the Euro and British pound would raise $16.5 billion annually85. A financial

81 Defined in a recent Commission Staff Working Document on innovative financing at a global level as “new ways of raising revenues, or of complementing them by leveraging private finance, as well as new approaches to already existing fiscal instruments”, SEC (2010) 409

82 The Copenhagen Climate Treaty by members of the NGO Community, Version 1.0, 200983 Financing from international aviation and shipping: turning an emissions problem into a revenue

opportunity, WWF 201084 European Commission, Innovative financing at a global level, SEC (2010) 40985 The North-South Institute, Rodney Schmidt (2007), The Currency Transaction Tax: Rate and Revenue

estimates


transaction tax can provide a sound and stable source of revenue to meet the commitments of developed countries towards developing countries if at least half of the revenue generated is earmarked to support global public goods86. The EU should make positive progress, perhaps starting with a tax on currency exchanges until other regional blocs come onboard with a global and comprehensive financial transaction tax.

Governance and institutional arrangements for managing and disbursing this funding should be negotiated in the appropriate bodies under the UNFCCC87.

2. Biodiversity finance

In Nagoya, the Parties to the Convention made a financial commitment: “by 2020, at the latest, the mobilisation of financial resources for effectively implementing the Strategic Plan 2011-2020 from all sources and in accordance with the consolidated and agreed process in the Strategy for Resource Mobilisation should increase substantially from the current levels.” Funding targets will be agreed at the next Conference of the Parties in 2012.

The EU has committed, as part of its 2020 biodiversity target, to step up its contribution to averting global biodiversity loss. Living up to its commitments to developing countries on the resource mobilisation strategy will be an important first step and will need to be reflected in any future development programmes as well as in the next EU budget. Innovative financial sources such as financial transaction taxes would be appropriate mechanisms.

Given the synergies between climate change mitigation and adaptation activities and biodiversity and ecosystem health, there is a logical argument that climate finance can be used to fund the protection, restoration and enhancement of ecosystem services and biodiversity where they are prioritised by governments in their national planning or by local authorities and local communities for their adaptation activities. For example, support through the Global Climate Change Alliance in Guyana and Tanzania has been invested in mangrove management and natural resource management.

Transparency of reporting is important to demonstrate where and how donors are responding to the requirements and expectations of international environmental agreements and responding to developing country needs and priorities. Indeed, doubts in the developed world have increased as to whether the additional money promised will in the end be ‘old money’ disguised in ‘new envelopes’.

86 WWF (2010), Financial Transaction taxes for climate change and development, http://assets.panda.org/downloads/wwf_position_paper__ftt_final_nov_2010.pdf

87 WWF recommendations to the high-level advisory group on climate change financing, May 2010


3. OPTIOnS FOR FURTHER COnSIdERaTIOn

Before suggesting concrete proposals, the Parliament88 identified five principles for the EU’s own-resources that are important to take into account, namely:

• full respect for the principle of fiscal sovereignty of the Member States;• fiscal neutrality;• no changes to the order of magnitude of the EU budget;• progressive phasing-in of the new system; and• establishment of a clear political link between a reform of revenue and a reform

of expenditure.

In addition, the Commission already proposed two sets of criteria to discuss and even score the different options.



Figure 14: Commission’s criteria to assess different own-revenues options

EU Budget Review (Oct 2010) Tax-based EU own resources: An assessment (2004)

New own-resources should be more closely linked to the EU acquis and objectives, to increase the coherence and effectiveness of the EU budget in the achievement of EU policy priorities

Sufficiency: Would the revenues be sufficient to cover the expenditures of the EU in the long run?

New own-resources should be cross-border in nature

Stability: Would the system bring about stable revenues for the EU budget?

New own-resources should have a harmonised base to ensure an equal application in all the Union

Visibility and simplicity: Would it be visible to EU citizens and would it be understood by them?

If feasible, the new resource should be collected directly by the EU outside national budgets

Low operating costs: Would it be simple to administer and involve low compliance costs?

New own-resources should be applied in an equitable and fair way

Efficient allocation of resources: Would it lead to an efficient allocation of resources in the EU?

The cumulative impact on particular sectors should be taken into account

Vertical equity: Would it involve income redistribution?

The collection of new own-resources should seek to avoid a heavy administrative burden for the EU

Horizontal equity: Would it have an equal impact on equivalent taxpayers across the EU?

Fair contributions: Would this resource raise revenues from the Member States in line with their economic strength?


89 In a federal state like the United States, the same tax can easily co-exist at the federal and at the national levels, notably on corporate profits. See notably McLure, 2005

90 For WWF, 50% of the EU ETS auctioning revenues should be earmarked to support international financial commitments to climate change - not counting towards Official Development Aid objectives nor with the aim of generating reduction offsets

Many concrete options have been proposed and can be regrouped in four areas:

• Taxation parallel to existing national taxes89:- Modulated VAT- Income tax- Taxes on corporate profits

• Taxation in the financial sector:- Transfer of seigniorage revenue (European Central Bank’s profits)- Taxes on dealings in securities- Taxes on savings- Taxes on currency transactions- Taxes on financial transactions- Withholding tax on interest

• Taxation of specific non-financial sectors:- Taxes on transport or telecommunications services- Duties on tobacco and alcohol

• Environment, energy and climate taxation:- Energy taxation (notably excise duties on motor fuel for transport)- Climate charge for aviation- Ecotax and carbon tax- EU revenues from auctioning under the greenhouse gas Emissions Trading

System (ETS)90.

The 2004 assessment by the Commission rated nine options, and found that the ones with the highest scores (according to the eight criteria mentioned in Figure 13) were, in decreasing order, energy taxation, modulated VAT, personal income tax and the climate charge for aviation.

In general, WWF is particularly interested in taxes having a double dividend, meaning that they both raise public revenue and contribute to orientating taxpayers or consumers towards more sustainable behaviour (and thus reduce environmental or social disturbance). In this regard, environment, energy and climate taxation but also taxation of the financial sector is of particular interest. WWF therefore asks the EU institutions to further consider and carefully assess the different options and their relative benefits, taking into account the principles proposed by the Parliament. Notably, a consensus has been found in the fact that increasing environmental taxes should be used to reduce labour taxes.

COnClUSIOnPutting a green economy at the heart of the future EU budget 2014-2020 is the most promising option with which to successfully exit the economic crisis and contribute to a smarter, more sustainable and more inclusive Europe. Reallocating EU budget spending to areas and sectors that underpin a green economy offers huge opportunities to create green and high quality jobs, develop eco-innovation, reduce European energy dependency, preserve Europe’s natural capital and strengthen the European economy.

In reallocating the EU funds for 2014-2020, WWF’s recommendations target the overall EU budget, the Multi-Annual Financial framework, and each specific fund. WWF supports an ambitious leveraging approach using financial instruments to guide private investment towards a green economy, and has examined the available options for EU revenues.

The reallocations proposed by WWF will provide multiple benefits and will put Europe on a more sustainable path toward 2050 while also delivering immediate social, environmental and economic benefits.


This programme is implemented with the support of the European Union.The contents of this publication are the sole responsibility of WWF and can in no way be taken to reflect the views of the European Union.


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