EU finance ministers reached a political agreement in principle (‘general approach’) on the legislative proposal to introduce ‘REPowerEU’ chapters in the national recovery plans under the Next Generation EU Recovery Plan (see EUROPE 13033/17, 13031/22).
During a short public debate, Czech Minister Zbyněk Stanjura noted that there was a “qualified majority” of Member States supporting the Czech Presidency’s latest compromise proposal. Aware that not all ministers were “totally happy” with the solution presented regarding the funding and the allocation key for this European funding, he said that he hoped for an agreement with the European Parliament by the end of 2022.
The legislative proposal seeks funding from the current EU budget and the European Recovery Plan to reduce Member States’ dependence on Russian hydrocarbons. It initially planned to fund the ‘REPowerEU’ chapters through: - the loan component of the Recovery and Resilience Facility (RRF), the main budgetary instrument of the Next Generation EU still available (around €225 billion); - transfers from the Cohesion Policy and the Common Agricultural Policy (about €52 billion in total); - an envelope of €20 billion from the market stability reserve of the EU ‘ETS’ (GHG emissions trading system).
On Tuesday, the Ecofin Council decided that 75% of the €20 billion to be allocated to Member States in the form of grants would come from the Innovation Fund for climate change and 25% from ‘frontloading’ the auctioning of greenhouse gas emission allowances by 2026. For Mr Stanjura, the Czech compromise “does not disrupt the functioning of the ETS while ensuring a credible source of funding”.
MEPs, on the other hand, advocate fully funding this envelope through the advance issuance of allowances through the ETS (see other news).
Concerning the loan component of the RRF, the EU Council is asking Member States to communicate, within 45 days of the entry into force of the future regulation, whether they intend to call on the loans to which they are entitled, knowing that they have until August 2023 to do so.
The European Commission will then have to make proposals on the next steps. Mr Dombrovskis acknowledged that the EU Council is not determining what will be done with the loans still available after August 2023, wanting to see more clarity on what the Member States will decide for themselves. Mr Stanjura said that several Member States, including the Czech Republic, were still trying to identify projects that could be financed by loans and other means.
It should be noted that the remaining funds from the €5 billion Brexit adjustment reserve and the Just Transition Fund will be able to contribute to the funding of the ‘REPowerEU’ chapters.
In a statement, the Commission says it will look at ways to extend the flexibility of the rules governing the cohesion funds over 2014-2020 to be able to increase funding. This initiative was welcomed by the Slovak minister, who said that the specific needs for reducing his country’s dependence on Russian hydrocarbons went “far beyond” the agreed text.
In order to benefit from specific funding, Member States will have to develop ‘REPowerEU’ chapters to be integrated into their national recovery plan. The EU Council limits this obligation to cases where Member States will require additional funding in the form of loans from the RRF or funds from other programmes. It will also be possible for Member States to call for pre-financing of up to 15% of the financial assistance dedicated to the ‘REPowerEU’ chapters.
Allocation key. Deciding on the distribution key to redistribute the €20 billion from the ETS was the subject of intense technical discussions up until Monday evening.
The Ecofin Council thus modifies the distribution key by introducing a formula that takes into account the cohesion policy, the dependence of Member States on fossil fuels and the increase in investment prices, according to the EU Council’s communiqué.
For Romania, the distribution key is mainly based on cohesion indicators and reflects the dependence on fossil fuels while taking into account the concerns of Member States regarding the mobilisation of the stability reserve.
According to a complex formula, five countries would take the lion’s share: Poland and Italy with €2.8 billion each, Spain with €2.6 billion, France with €2.3 billion and Germany with €2.1 billion.
See the compromise agreed in the EU Council: https://aeur.eu/f/3dr (Original version in French by Mathieu Bion)