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View from Brussels: The EU’s magic money tree starts to bloom

Trillions of euros in both public and private funding are going to be up for grabs over the next 10 years for investment in new technology, infrastructure and other projects. EU officials are currently putting the final touches to the rules that will govern what can and cannot be funded.

When not scrambling to try and manage the coronavirus crisis, the EU institutions have been busy attempting to drag the massive Brussels machinery onto a greener, more sustainable trajectory.

That is because the EU’s executive branch, the European Commission, has based most of its policies around its flagship Green Deal programme and much of the bloc’s political legitimacy is deep-rooted in sticking to the Paris Agreement on climate change.

Earlier in November, the EU’s money-lending arm, the European Investment Bank (EIB), revealed how it will funnel its financial warchest into projects over the course of the coming decade.

Most of its policies on what energy projects can be funded were set last year, when the bank decided to mostly exclude fossil fuels from its loan books. There are loopholes for some gas projects and there is a lengthy transition period.

The latest review clarified what the transport sector can expect from the EIB’s trillions. New airports will be excluded, as will investments in kerosene-fuelled aircraft. Existing hubs will still qualify for cash if they can demonstrate their business case.

Environmental groups wanted a ban on new motorway builds but that was not included. New road projects will instead be subject to a much more rigorous climate assessment to check whether there is demand and if the project will help boost e-mobility.

Bank President Werner Hoyer said that the new rules are “a major contribution to Europe’s role leading the way toward decarbonisation and a green, resilient and socially inclusive economy”.

However, Xavier Sol from green NGO Counter Balance, warned that “in practice, it means that the EIB will not become Paris-Agreement-aligned by the end of 2020. In light of the climate urgency, this is a missed opportunity.”

Much of the funding granted by the EIB will be guided by the Commission’s jargon-heavy ‘sustainable finance taxonomy’, a long set of rules that govern what can be labelled as a sustainable investment.

Given the direction of travel of most government policies and regulations, a green label will likely become a prerequisite for large-scale investors, many of whom are already divesting from previously lucrative areas like coal power plants.

Draft guidelines published on 20 November take in the agriculture, manufacturing, energy, transport and research sectors, as well as areas that are more specific like forestries, waste management and plastics.

According to the draft, road vehicles will be eligible for inclusion under the taxonomy so long as they meet stringent emission standards criteria. By 2025, they will have to be zero-emissions to be classed as sustainable.

For plastics, the text says they can be included so long as they “are fully manufactured by mechanical recycling of plastic waste” or include chemical recycling processes. That prompted anti-waste groups to complain about loopholes.

The taxonomy rules will now be turfed out to consultation until January before a final decision can be made.
One overriding factor that still needs to be resolved is a deadlock over the EU’s next long-term budget. The deal, worth €1.8tn, has not been agreed yet because of a spat between member countries over rule of law issues.

If the dispute cannot be resolved then the new budget, which is due to kick in at the beginning of 2021, will not be given the green light and essential funding programmes will not get the cash they have already been allocated.

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