The new EU Budget: Commission’s Regional Development proposals and key issues for the environment

Today, the Commission starts putting some flesh on the bones of its plans for EU spending after 2020. Their communication earlier in May set out some broad principles, which we commented on here. Over the next week or so, they will be publishing detailed legislative proposals for the different programmes; and regional affairs Commissioner Corina Crețu set the ball rolling by announcing proposals for cohesion spending.

The proposals today cover the European Regional Development Fund (ERDF), the Cohesion Fund (CF), and the unexcitingly-named but important Common Provisions Regulation, which creates the over-arching framework for management of the structural and investment funds. Later proposals will cover Rural Development (as part of the package of Common Agricultural Policy spending due to be published on 1 June); and the Maritime and Fisheries Fund (also on 1 June). Puzzlingly, the Common Provisions Regulation proposal does not seem to apply to the European Agricultural Fund for Rural Development, suggesting that the CAP rural development spending is no longer being treated as part of European structural funds, and (worryingly) that it will not be subject to the same level of governance and the same conditions.

At the time of writing, while the Commission’s press release had been published, and the proposals had been presented to the press by Commissioners Cretu and Katainen, the link to the legal proposals and background paper was still not working. In any case, we expect the proposals to show limited detail on how the Commission’s apparently ambitious new target for 25% of the EU budget to be spend on climate change will be measured – this will depend on future Commission implementing decisions on how much weight to apply to different types of project.

The main environmental issues covered in today’s proposals are the broad objectives of the expenditure, details on how Member States should build climate issues into their planning for structural funds expenditure, and the further development of the system of “ex ante conditionalities” in the 2014-2020 programmes, a set of baseline requirements for Member States to meet before they submit their programmes, allowing the Commission to encourage better implementation of a range of EU policies, including climate and environment ones.

Broad objectives

The list of objectives of the policy has been simplified and narrowed down to just 5; with policy objective 2 being “a Greener, carbon free Europe, implementing the Paris Agreement and investing in energy transition, renewables and the fight against climate change”. Together with objective 1 (“Smarter Europe”), it will get more funding than the others, with between 65% and 85% of expenditure focused on them. And policy objective 2 includes broader environmental issues, not just climate, with water, waste, and the protection of Natura 2000 sites part of the mix.

Partnership agreement

The process for setting up a “partnership agreement” between the Commission and the Member States on the use of their funding, which was introduced in the 2014-2020 period, and enabled the Commission to encourage Member States to improve their focus on EU environmental priorities, remains, largely unchanged. 

Conditionality

The initial impression is that the conditionality system, although renamed as “enabling conditions”, has much the same level of detail as before; and our research has already identified that on a number of issues, the conditionalities had a real impact on improving attention to environmental issues in some Member States. The Commission has also proposed a common set of rules to apply to all 7 of the funds operated under shared management; which in theory should make implementation simpler and more predictable, and which also create the possibility of ensuring harmonised and tougher rules against fossil fuels-based investments.

Other issues

One other interesting element in the proposals is the Commission’s detailed proposals for how it will use the stick of withholding structural funds receipts to encourage improved performance from Member States on sound economic governance (including, for example, taking action to correct excessive budget deficits), and to ensure respect for the rule of law. It will be interesting to see how these survive through the legislative process. While there will be some Member States that are either nervous of them, or hostile, others, particularly those who are net contributors to the EU budget, will see them as a valuable step to ensuring that EU expenditure is part of a wider deal with net beneficiary countries.

The Commission has introduced a focus on city-level expenditure, with 6% of funding to be “dedicated to local development strategies”; given the importance of the urban dimension in tackling a range of environmental issues, including climate mitigation and adaptation, but also resource management and the circular economy, local environmental interests should already be thinking about how they can maximise the benefits of this funding.

Finally, we can expect the national presentation of the proposals to focus largely on the “winners and losers” in terms of the share of funding each country receives, with questions at the press conference already suggesting that poorer countries were being treated unfairly. The Commission’s allocation key includes a basket of new criteria, including “climate change”, which affects how the 20% of funding not allocated in accordance with per capita GDP is distributed, but detail on how this operates was not yet available.