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29th Mar 2024

EU states drag their heels on clean energy funding

A tiny fraction of the billions of euros that have been allocated for clean energy projects in central and eastern European countries have made their way to their intended recipients, according to a new report.

Local authorities do not have the capacity to manage such projects, municipalities and households are too strapped for cash to co-finance this sort of work and sometimes the application procedure is simply too complicated.

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  • Riga: The crisis has pushed clean energy projects down the priority list (Photo: Latvian parliament)

Out of the some €4.2 billion that was allocated for energy efficiency and renewable energy actions in 2007 to 2013 in the 10 countries which joined the union in 2004, only a few hundred million - and mostly only in the Czech Republic - is getting through to actual contracted projects, according to a report published on Monday (16 November) by development finance monitoring group CEE Bankwatch.

Due to the murkiness of some of the reporting and divergent definitions on what counts as a clean energy project, the report's authors could not provide a breakdown for the combined EU10 and gave a detailed analysis of the Czech Republic, Hungary, Poland and Slovakia, and Estonia, Latvia and Lithuania only.

For these seven countries, a total of €1.8 billion has been allocated for energy efficiency measures, but of that, only €292 million are involved approved projects with contracts signed.

In the realm of renewable energy, the ratio is even worse, with less than a 10th of the funding making its way to projects: €99.7 million out of a potential €1.75 billion.

The Czech Republic is rated the best performer out of the seven, although even here the result is not strong: Out of some €600 million allocated to Prague for energy efficiency projects, about €200 million was actually contracted to projects as of the end of this year.

"Green New Deal" rhetoric was powerfully deployed this spring in Europe, with leaders saying that spending on the shift to a low-carbon economy would play a major role in the stimulus funding that was intended to jump-start the European economy.

EU funding regulations were modified in May to allow all member states to devote up to four percent of their EU regional development fund (ERDF) allocations for renewable and efficient energy in housing.

But there is a gulf between the rhetoric and the result, according to the report.

Not a single renewable energy project has been approved in Estonia so far. In Bulgaria, energy efficiency and renewable energy measures for small and medium-sized business have yet to be started. In Lithuania, an apartment modernisation scheme will not start until 2010.

The investment needs and co-financing requirements for small businesses and households at the best of times is too high. As a result of the economic crisis, with shrinking public budgets and limited access to bank loans, the financial burden has become impossible to bear, especially as EU funds are disbursed after the fact.

Slovenia, for example, has not spent a single cent out of the €79 million in EU funds it was allocated for energy efficiency measures because it did not come up with the required 15 percent national co-financing.

In Lithuania, the high-street banks will not back housing renovation programmes even though the government has guaranteed 80 percent of the sums involved.

The report authors cite significant delays in the process, whether in opening a tender, difficulties with procurement procedures and the requirement to get a green light from the European Commission on state aid as the most frequent obstacles.

The managing authorities have limited capacity in the subject, but also, the document says, governments often see climate change mitigation projects as a low priority.

Dennis Abbott, European Commission regional policy spokesman, told EUobserver that clearance of funds usually takes less than two months "so long as we are provided the correct documents. The delay does not exist on the commission side."

"At the same time, it's quite understandable that in times of crisis, the member states find it difficult to put their hands in their pockets or sign off on anything. Of course they're going to think twice."

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