Can the EU tie green strings to its pandemic recovery plan?

The figures suggested on May 27 for the European Union’s pandemic recovery add up to more money than the bloc has ever handled. As well as the EU’s proposed €1.1 trillion seven-year budget for 2021-2027, European Commission President Ursula von der Leyen also unveiled a €750 billion stimulus package of grants and loans designed to help the EU countries and sectors worst hit from the fallout of the coronavirus crisis. That totals a cool €1.85 trillion. And, as officials were at pains to emphasise, the recovery will be built on green foundations.

Frans Timmermans

Shrewd politicians know never to let a crisis go to waste and the coronavirus is an opportunity for Brussels to revive its green agenda. The Commission’s plans to create a carbon-neutral EU by 2050 through its ambitious European Green Deal could well be bolstered by the systemic shocks that the pandemic has wrought on the economy – and notably the transport system. The airline industry has been left reeling as passenger flights have been cancelled. Carmakers are suffering as factories have been forced to close or operate at lower capacity. The lockdowns have given a boost to cycling, scootering and walking as alternatives to driving.

Series of measures in the Transport Sector

Von der Leyen says the battered European economies should be rebuilt through environment and tech-friendly investments “The recovery plan turns the immense challenge we face into an opportunity, not only by supporting the recovery but also by investing in our future: the European Green Deal and digitalization will boost jobs and growth, the resilience of our societies and the health of our environment,” she said.

Commission Vice-President Frans Timmermans, who is responsible for the European Green Deal, said the recovery package would include a series of measures in the transport sector. These include providing €40 billion for a ‘Renaissance of Rail’ programme, €20 billion for car scrappage schemes to support purchases of clean vehicles, €40-€60 billion for research and development into clean mobility, investment in a European network of one million electric vehicle (EV) charging points, and support for clean urban transport systems like hydrogen buses and trams.

The updated EU budget proposal and recovery programme have stipulations saying that 25% of the spending should be reserved for climate-friendly expenditure. The new conditions aim to bring green strings back into funding to counter the effects of the government spending spree unleashed after the Commission lifted its state aid restrictions in March. Nearly €2 trillion was spent in national state aid for ailing businesses with almost no terms attached – 52% of that aid was spent by Germany alone – but the Commission says now is the time to insist on green strings.

Think Boldly

Von der Leyen added that the recovery aid could be repaid through a tax on large carbon emitters and an extension of the Emissions Trading System (ETS). Influential Green MEP Karima Delli, who also chairs the European Parliament’s Transport and Tourism Committee, went further, saying that “we must set up a kerosene tax, a carbon border adjustment as well as a tax on heavy-duty vehicles.”

All this is extremely audacious and there are already warnings that the programme could be cut down to size when more frugal-minded EU governments start to scrutinize it. But the political momentum is behind the Commission’s ambition. Von der Leyen and Timmermans are seizing on the popular mood to rethink some of our fundamental political, economic and societal principles in the post-pandemic world. This is moment to think boldly, and a green recovery could be the right cure for Europe.