The EU’s economic recovery plan has been released. Is it really a marker for the rest of the world to follow?
At the end of May, the EU set out its ‘green’ recovery plan, to rebuild its economy on greener lines post Covid-19. But is it hyperbole or a truly outstanding example for the world, and indeed the UK?
In recent days, the EU has set out a €750 billion plan, which includes targeted reinforcements to the long-term EU budget for 2021-2027 to bring the total financial firepower of Covid-19 recovery efforts to €1.85 trillion.
This money, earmarked under the name Next Generation EU, is a big deal. “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,” said European Commission President Ursula von der Leyen.
Evidently, cash at the very least is not lacking. But what is the industry and thought leadership reaction to the concept, and can it really help virus-stricken business?
The headlines…
Euractiv, the overarching EU media network, writes that 25% of spending for climate-friendly expenditure “will apply throughout” the EU’s updated budget proposal and recovery programme from the COVID-19 crisis.
Further, spending will be guided by a sustainable finance taxonomy, channelling private investments into technologies that contribute to at least one of six pre-defined environmental objectives, such as climate change mitigation.
A “do no harm” test embedded in the taxonomy will in principle exclude fossil fuels and nuclear power, and green criteria will also apply to the so-called solvency instrument aimed at shoring up companies in need of liquidity. It sounds positive for low carbon firms.
But, writes Euractiv, environmentalists expressed mixed feelings about the recovery plan, with reactions ranging from enthusiasm to outright scepticism. Greenpeace called the Commission’s recovery plan, “patchy at best”.
Even though the plan includes several eye-catching green programmes, such as home renovation schemes, taxes on single-use plastic waste and a digital tax, it does not categorically end existing support for gas, oil, coal and industrial farming.
Meanwhile, The Guardian argues that critics worry there are no hard guarantees against the money seeping into dirty projects. The paper also notes climate conditions on large parts of the main EU budget have been lifted for three years because of the pandemic – understandable but hardly a sustainable panacea.
Part of the fund, the €150bn React EU programme, allows member states to decide how to spend the money; the worry is most of the almost €2tn in coronavirus rescue funds spent by EU nations so far has had no green guarantees.
EU green recovery; truth or fiction?
The big challenge with the EU, and part of the logic behind more centralist business-focused Brexiteers, has been that the organisation is simply too unwieldy. Myriad separate budgeting programmes, under different titles, can make traceability and transparency in addition to pace of action cumbersome. There’s evidence of this in the latest promises.
Then again, the programme promises over a million green jobs. The Guardian says green-leaning business and investor groups call it bold and substantive. Yet for now, weeks of wrangling remain between EU countries to actually finalise the deal.
Unlayering the onion
The EU’s sheer complexity and multiple layers of at times infuriating bureaucracy make any totally transparent judgement of the plan tricky at this stage.
Perhaps though, this isn’t the key. From an aspirational point of view, it is worthy. Few necessarily expect the UK to hit its net zero targets on time. But the logic is that by working towards them, worthy benefits are achieved in any case; sometimes it isn’t about the loftiest goals, but about the progress that comes by trying to reach them, even if this ends in ‘failure’ on targets.
The EU Commission President, Ursula von der Leyen has said: “Sooner or later we will find a vaccine for the coronavirus. But there is no vaccine for climate change. Therefore [we] need a recovery plan designed for the future.” Few would disavow her words.
Our view
The full PDF of the plans is available here. The Hub’s analysis is that for now, on an aspirational level, the plans seem positive, but questions marks remain. The EU’s own website observes that reaching a rapid political agreement on Next Generation EU and the overall EU budget for 2021-2027 should be done by July, but isn’t there yet.
Either way, given the unprecedented impact of the virus and the truly horrifying impacts across Europe and the world, it is encouraging to see plans like this emerging.
At home, pressure is rising on Boris Johnson to unveil similar UK programmes to get the economy back on track. Britain’s most powerful business leaders have called on him to set out economic recovery plans that align with the UK’s climate goals to help rebuild a resilient UK economy in the wake of the coronavirus crisis.
Whatever Johnson does, or how the EU fares, one thing is clear. Coronavirus continues to disrupt and reshape the very fundamentals of daily working life. Can this one day be leveraged for the positive? Time will tell.