Connie Hedegaard at the European Parliament on climate action in the future Cohesion policy
Committee on Regional Development (European Parliament)
Brussels, 20 March 2011
It is a pleasure to meet with the EP Committee on Regional Development for an exchange of views on climate action in the future Cohesion policy. I want to thank whole-heartedly to Madame Chairman Danuta Huebner for the invitation.
Let me start with the wider picture. When the Commission was preparing the proposal for the next 7-year financial framework the core question for me was: How to best spend tax-payers' money in the European Union?
My reply was that in a time of severe fiscal challenges and tough austerity measures it is crucial to focus on:
- challenges that cannot be solved by individual countries or regions alone – in other words where there is a clear EU added value;
- actions whose impact can be magnified by achieving multiple policy objectives at the same time;
- measures which will bring short-term growth and employment but also put us on the right track in the medium-term.
I believe that mainstreaming climate action in European policies financed by the EU budget ticks all these boxes.
Climate change is a global challenge and Europe needs to respond to it in a coherent way. If mainstreamed in other policies, climate action brings multiple co-benefits – sustainable mobility, lower energy intensity and higher energy security, development of new green technologies, and health benefits, etc. And it enhances our competitiveness, growth and employment.
Kick-starting investments in greener technologies and services is recognised to have some of the greatest potential for future exports and industrial jobs. It already employs 3.5 million Europeans.
Think of energy-efficiency – it lowers costs of (mainly imported) energy for households and companies when our bills are on the rise. 2011 was the first year ever when the average annual price of crude oil exceeded $100 a barrel. The total EU bill for energy imports reached EUR 315 billion (up by over 40% from 2010 and almost the size of the whole Greek debt).
Energy-efficiency also boosts local enterprises in the construction sector severely hit by the current crisis. Full implementation of existing and planned energy-efficiency measures could create or retain up to 2 million jobs and generate financial savings of up to € 1 000 per household.
But the shift towards low-carbon climate-resilient economy does not come for free. It requires significant investments. Obviously, they should be borne mainly by private investors. But we also need the EU budget to act as a stimulus for spending in Member states and regions, where the genuine change can be made.
Already today 5-7 % of the EU budget is climate-related. But this is far too little to trigger structural change in our economies. Therefore, our proposal suggests boosting the share of climate-related spending to at least 20 percent of the total EU budget with the contribution from all relevant policies. This 20 percent will be achieved thanks to directly climate-related investments, but also those actions whose link with climate action is only indirect e.g. railways or research in green technologies. We will track all climate relevant expenditure.
The cohesion policy is an ideal tool to boost regional growth and competitiveness and at the same time support the shift towards low carbon and climate-resilient economy. It is in regions and cities where buildings can be retrofitted, clean transport can be developed, depleted energy infrastructure can be upgraded, where renewables and smart grids can be deployed, new green technologies can be researched, and green jobs created.
To achieve this we need to square European growth strategies and the Commission know-how with local ideas, development needs and entrepreneurship. We need both thematic concentration and adequate flexibility for the regions and Member States. I think the proposed Regulations do give a good basis for this.
What tools would we have at our disposal to mainstream climate action in a way which maximises co-benefits for regional development?
One key tool we have at our disposal to achieve results in the cohesion policy will be negotiations of Partnership Contracts and Operational Programmes with Member States and regions. It is their contents that will later decide impacts of the European support. These negotiations need to be guided by our common European growth strategy as well as cross-cutting principles like the one of sustainable development.
One could ask: how about high-potential investments which do not fit this framework but nonetheless fit regional development needs? I am strongly convinced our framework is flexible enough to accommodate most of best-value investments. But cohesion policy is not and should not be the only source of financing regional development. It is a European policy and European funding and it is only logical, in particular in the eyes of those who pay for it, that this scarce source of funding should be concentrated on those regional needs which best fit European priorities.
I also believe strong guidance from the European level helps identify those investments which will benefit regions in the medium and long term. A genuine well-structured dialogue between the EU and its regions will help avoid spending funds on not-so-good projects promoted by influential lobby groups. It will help look beyond upcoming elections, or avoid the trap of copying other regions' behaviour even if this does not make much economic sense.
To measure results of our negotiations we need targets. At the end of the day, the Commission, Parliament and other stakeholders will not only want to know how much money is spent on climate, but e.g. how much greenhouse gas emission reduction this money generated. Therefore, among common indicators for the cohesion policy you will find a few which will help track genuine progress towards climate policy objectives.
Obviously, maximum harvest is achieved if adequate pre-conditions are fulfilled. Legislation and administration need to be well prepared in advance to let investments bring maximum benefits. This would be the role of ex-ante conditionalities. As regards the shift towards a low-carbon economy, the Member States would be required to transpose relevant Directives on e.g. the energy performance of buildings, or energy end-use efficiency. As for adaptation to climate change, i.e. investments in e.g. flood protection, the requirement would be to have national or regional risk assessments for disaster management in place, taking into account climate change adaptation.
Risk resilience, or climate-proofing, will also have to be taken into consideration when projects will be prepared. We do not want to finance a railway in a place likely to be flooded in a decade or two without verifying alternatives or taking counter-measures. I am glad to say that we are quite advanced with a detailed pan-European database on adaptation to the effects of climate change which will allow regions to compare climate-related risks they are likely to face and learn each other's responses.
This negotiation framework focused on results is supported by a two-tier financial earmarking in the European Regional Development Fund. First, the bulk of money should be spent on investments which are most closely linked to the Europe 2020 strategy and its targets – innovation, SME competitiveness and low-carbon investments. Second, within this earmarking, we propose a "floor" for energy-efficiency and renewables. We call it "a floor", because its level is low, much lower than estimated needs. We very much expect that after negotiations spending on climate-action will exceed the floor and match the needs, also thanks to the Cohesion Fund.
Is this an unnecessary rigidity? Not at all. First, as I said, the floor is low thus not difficult to be achieved. It therefore must not be diluted. Second, the category is wide – any investments in energy-efficiency, be it in housing, public infrastructure or SMEs, or any investment in renewables will count towards it. Third, it plays a role of a lighthouse. It shows EU's determination to close the big gap towards its energy-efficiency target and to achieve targets for emissions and renewables. And regional authorities know in advance they need to prepare both the project pipeline and their own capacity well in this field.
In the current perspective, good investments in the field of environment and climate have faced huge delays or were foregone because of the lack of administrative capacity. Without the regulatory floor, even with a good negotiation result, we'd hit the same rocks again, as there would be not enough time for authorities to adjust.
Cohesion policy stakeholders don't think it is a straightjacket either. Let me briefly quote a letter I received from the Assembly of European Regions: "Following a consultation among our members, I'm pleased to inform you that we can state wide support of this specific allocation of ERDF funds in our membership. The AER welcomes the European Commission's proposal of thematic concentration of ERDF funds towards the objectives of the Europe 2020 strategy and recognises the urgent need to act on climate change and to address the challenges of carbon reduction. The obligation to invest 20% of ERDF funds for supporting the shift towards a low carbon economy will help regions make carbon savings and develop innovation and best practice in this field. […]".
Let me conclude by calling on the REGI Committee to support the proposed cohesion policy with particular emphasis on climate action.