The pandemic crisis may lead to the collapse of the EU Green Deal in support the achievement of both the 2030 Co2 emissions reduction targets and climate neutrality by 2050. This would represent  an unprecedented failure for the EU.

After months of arduous, bitter discussions and negotiations between the governments of the Member States and  the European Commission on the contents and form of the so-called recovery instrument, the European Council reached an agreement on both the recovery instruments: (“Next Generation EU”) and the EU’s 2021-2027 multiannual financial framework. The agreement includes a €750bn recovery fund as proposed originally by the European Commission, to be disbursed over in the three years period in 2021-23.

However, several allocations due to EU running programmes dealing with Green Deal – related issues have been cut substantially in negotiations. Therefore funds for education, health, research and innovation, and ecological and just transition have been brutally cut back as the debate revolved mostly around the amounts of money that were politically acceptable, not what the need the EU’s recovery and Green Deal needs are.

The Council ultimately committed to allocate 30% of the recovery fund and budget 2021-2027 to climate measures. This means that up to €547.2 billion could be made available for investments over the next seven years to help achieving the EU’s climate targets. It is unclear, however, whether the 30% relates to the EU budget and the recovery fund together, or whether the necessary share could be covered by only one of the two instruments.

But even that would not be enough. The Commission itself now estimates that at least €1.46 trillion must be invested each year to achieve the current 2030 climate targets.

A figure that is utterly unattainable, given the state of both public finance and the private sector. Public investment in the Eurozone failed to make up for a steep drop in private investment after 2008 due to the global financial crisis. Additionally, net public investment shrank in the eurozone because of the subsequent governments’ debt crisis and has remained essentially at zero since then.

The European Parliament harshly criticized the Council’s cuts in EU programmes, claiming that long-term EU priorities such as the Green Deal and the Digital Agenda are put at risk, and threatening not to approve the budget agreed by national governments. MEPs are prepared to withhold their consent for the long-term EU budget until a satisfactory agreement is reached in the upcoming negotiations between Parliament and the Council, preferably by the end of October at the latest for a smooth start of the EU programmes from 2021.

MEPs have never rejected an EU budget so far. If they were to align with the Council’s positions on this matter, the EU’s credibility on the commitment to fight climate change would be severely undermined.