The European Commission recently unveiled the REPowerEU strategy to end the European Union’s dependence on Russian hydrocarbons by 2027 in order to stop contributing financially to Russia’s war effort against Ukraine while accelerating the decarbonisation of the European economy (see EUROPE 12955/4).
The EU institution proposes to amend the regulation (2021/241) establishing the Recovery and Resilience Facility (RRF), the fiscal instrument at the heart of the Next Generation EU Recovery Plan. Member States will be required to submit amendments to their already approved national plans to include a specific chapter on investments and reforms to implement the REPowerEU strategy and will indicate in their revised plans the EU funding needed to complete their revised plans.
The European Recovery Plan is “a powerful tool” that is already in place, which will deliver “quick results” as the funds must be committed by the end of 2023 and consumed by the end of 2026, a European official said on Wednesday 25 May. The official called for “targeted” amendments to the national plans that will potentially include changes linked to the readjustment, expected at the end of June, of the subsidy envelope allocated to each Member State (30% of the total).
On this last point, several countries, including Belgium, risk losing substantial subsidies because growth was stronger than expected in 2021. They point out that the inclusion of a REPowerEU chapter in the national recovery plans further complicates the discussions related to an instrument initially dedicated only to the post-Covid-19 pandemic recovery, while some countries will see their allocation decrease. Some countries are reportedly suggesting changing the distribution key of the RRF.
Among the measures expected in the ‘REPowerEU’ chapters of the recovery plans are the installation of energy infrastructure, decarbonisation of industry, increasing the energy efficiency of buildings, and the reskilling of workers. It should be noted that the legislative proposal creates an exception to the application of the ‘do no significant harm’ environmental principle for investments to improve oil and gas facilities for immediate security of supply.
“This basically means that countries will be allowed to invest in fossil fuel infrastructure that is harmful to the environment”, criticised Damian Boeselager (Greens/EFA, Germany), one of the MEPs who negotiated the regulation establishing the RRF.
The ‘REPowerEU’ chapters added to the national recovery plans will include measures that will not be funded solely through Next Generation EU. According to the European Commission, they will be examined more quickly than when the national recovery plans were first submitted. And this review will be based largely on the country-specific energy policy recommendations that the European Commission presented earlier this week (see EUROPE 12958/1).
For the three countries - Hungary, Poland, and the Netherlands - whose national plans have not yet been given the green light, the European Commission hopes that they will be by then, so that the ‘REPowerEU’ chapter can be included afterwards.
“This is the most likely scenario”, the European official said when asked about the Hungarian plan. If the negotiations are not concluded, we will see. “Hungary could decide to resubmit a comprehensive plan with a REPowerEU chapter”, the official added.
A €300 billion envelope. To finance the ‘REPowerEU’ strategy, the European Commission suggests an envelope of almost €300 billion until 2030, including €72 billion (€20 billion from the ETS, up to €44.8 billion from cohesion policy, and up to €7.5 billion from the CAP) in the form of grants, and €225 billion from outstanding loans under the RRF (see EUROPE 12955/4).
This envelope is not in itself ‘new’ EU money, but a redirection of funds from various financial instruments already provided for under the 2021-2027 Multiannual Financial Framework (MFF). At this stage, many Member States advocate using available financial instruments before considering whether to launch new European debt to cover the EU’s huge investment needs in the green and digital transitions.
Once the legislative proposal amending the ‘RRF’ regulation is adopted, Member States will have 30 days to say whether they wish to call on some or all of the loans they are entitled to under the European Recovery Plan (up to 6.8% of national GNI). Unused loans from one country can be reallocated to other countries, with Italy, Greece and Romania having already drawn down all of their loans at this stage.
The additional mobilisation of structural funds under cohesion policy is not to the liking of the European Parliament’s Committee on Regional Development (REGI).
“Taking resources from the regions and providing them unconditionally to the States jeopardises cohesion across the Union and runs counter to the very objectives of the treaties”, the REGI committee’s chair and coordinators said in a statement. In their view, the existing possibility of transferring 5% of cohesion policy resources is “sufficient”, whereas the European Commission proposes to increase this maximum threshold to 12.5%. And MEPs advocate a revision of the MFF or borrowing from the financial markets to provide fresh money to finance the REPowerEU strategy.
See the legislative proposal to amend the RRF Facility: https://aeur.eu/f/1td
See the European Commission’s guidelines on the modification of national recovery plans: https://aeur.eu/f/1te (Original version in French by Mathieu Bion)