Climate deal ‘difficult’ unless EU budget stalemate broken

 

Climate deal ‘difficult’ unless EU budget stalemate broken

 

Hungary and Poland’s EU budget veto could leave the bloc ‘with its trousers down’ at a U.N. summit.

 

BY KALINA OROSCHAKOFF AND KARL MATHIESEN

December 7, 2020 8:06 pm

https://www.politico.eu/article/climate-deal-unless-eu-budget-stalemate-broken/

 

Climate change and rule of law collide in Brussels this week, as EU leaders try to reach an agreement to slash emissions by 2030.

 

To get the climate deal, the European Council summit will have to break a standoff caused by Poland and Hungary blocking the EU's €1.8 trillion budget and recovery fund for 2021-2027. Budapest and Warsaw have objected to attempts to link payments to compliance with the rule of law.

 

Speaking in the German parliament on Wednesday, Chancellor Angela Merkel made an explicit link between the two issues, saying that the veto threat "is a problem that lies ahead of another really decisive question at tomorrow's Council, namely how the European Union commits itself to [a] more ambitious climate target … whether we succeed in this depends very much on how far we get with the financial issues.”

 

Hungary and Poland have a “good chance” of getting their way in the EU budget fight, Hungarian Prime Minister Viktor Orbán said Tuesday. But the other 25 countries show little sign of giving way to demands from Warsaw and Budapest.

 

After a year in which many EU leaders and the European Commission have placed climate at the very top of their political priority list, the messy dispute over rule of law undermines the bloc's unity at a time when its climate ambitions require maximum togetherness.

 

If leaders can't reach an agreement at their Thursday and Friday summit, Europe risks being embarrassed at a U.N. climate meeting on Saturday. “We would be caught with our trousers down,” said an official from one Western European country.

 

Although a deal on the EU climate target is technically possible without agreement on the budget package — the two are linked. Officials say countries first need to sign off on the budget to finance the green transition and support countries, like Poland, that have harder roads to travel to decarbonize.

 

“Is an agreement likely? I think it’s possible,” a senior EU diplomat said on Monday. “But it won’t be possible, or it's difficult to see it’s going to happen, if there’s no agreement on MFF [the Multiannual Financial Framework].”

 

The future budget would help provide billions of euros for the Just Transition Fund (JTF), set up to help coal-reliant countries weather the immediate shock of cutting fossil fuels. Poland would be the prime beneficiary.

 

“On the one hand, you’re not agreeing on a budget, and on the other, you’re asking for more money … It’s a bit ridiculous. Climate change is climate change, now it’s brought into the rule of law discussion,” said an EU diplomat from a country keen to strike a climate deal this week. 

 

Governments have been negotiating to raise the 2030 greenhouse gas emissions reduction target from a 40 percent cut to a net 55 percent cut, something the European Commission proposed in September.

 

But striking a deal is going to need lots of cash. Warsaw, Budapest and regional allies such as the Czech Republic, Slovakia and Bulgaria want the EU to ramp up support to help them drop fossil fuels and green their economies.

 

The poorer and coal-reliant countries worry they’ll have to shoulder a bigger burden for speeding up emissions cuts than wealthier and greener nations, and want assurances in any deal this week that a new 2030 target will be backed up by financial and regulatory support measures — in a so-called enabling framework.

 

“We will want to know how we are going to achieve” the higher cuts, said a Czech official. The enabling framework currently on the table, the official said, “we don’t feel is sufficient.”

 

Warsaw has been pushing for boosting access to Modernization Fund revenues under the Emissions Trading System to help finance upgrades to the country’s energy system. It’s also long lobbied for greater support under the JTF.

 

But EU leaders in July agreed to allow full access to the JTF only to countries that have adopted a climate neutrality objective at home, something that Warsaw hasn’t done.

 

According to positions reviewed by POLITICO, countries like Bulgaria and the Czech Republic also want any deal to allow them to pick their energy technology of choice to hit the goals, especially natural gas and nuclear power, which is splitting the bloc. Draft conclusions for this week's summit suggest concessions to a number of these demands, including a commitment to account for "different starting points" and national circumstances, and "respect the right of the Member States ... to choose the most appropriate technologies."

 

A group of nine western European nations including the Netherlands, Spain, Luxembourg and incoming Council presidency Portugal, which are all pushing for a deal this week, argue, however, that the funds are already available — thanks to the budget and recovery package’s provision that 30 percent of spending should go toward climate efforts.

 

The European Commission hopes that Commission President Ursula von der Leyen can use Saturday's virtual U.N. climate summit — called to announce new goals and financial commitments — to declare a major political step in the 55 percent target.

 

“Even if we were unfortunately to get stuck,” a Commission official said, “there’s a lot the EU could present there. I think the EU position is widely recognised as ambitious, so I think we’ve got our place at that table.”

 

Jacopo Barigazzi contributed reporting.