5th Feb 2023

Tensions foreseen over push to link climate funds to rule of law

  • Linking the climate fund to the rule of law would especially affect Hungary and coal-dependent Poland (Photo: Kris Duda)
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Leading MEPs want to make access to the EU's climate funds conditional on member states' adherence to democracy and the rule of law - as part of the fightback against democratic backsliding.

The proposal, however, is likely to aggravate existing tensions with Hungary and Poland over judicial independence, potentially harming vulnerable citizens and small businesses.

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The €72bn new climate fund aims to help tackle energy poverty in the EU and overcome some member states' reluctance to expand carbon-pricing policies to the building and road transport sectors.

And it could also counteract a possible public backlash against climate measures.

But EU member states that do not adhere to the principles of the rule of law and fundamental values should not be beneficiaries, Esther de Lange and another conservative lawmaker, David Casa from Malta, said in a draft report.

"Certain countries, of course, won't like it but the rule of law is so fundamental that it should be a condition sine qua non," de Lange told a news conference on Thursday (10 February)

The proposal would especially affect Hungary and coal-dependent Poland, which have both already been put under the Article 7 sanctions procedure over corruption and judicial independence issues.

And it would likely become a controversial issue in final negotiations with the EU council, aggravating intra-EU tensions even further.

"Linking the fund with the rule of law may cause some controversy…[because] there is a risk that doing so could limit the ability to benefit those who need it the most," an EU diplomat told EUobserver.

The European Commission is currently holding up post-pandemic recovery funds to Hungary and Poland, sparking rows not only with Warsaw and Budapest but also with MEPs.

Next week, the European Court of Justice will rule on the legality of the novel conditionality mechanism, which allows the bloc to suspend EU funds if a member state does not respect the rule of law.

But linking climate transition funds to the rule of law could be another motivation for member states to comply with EU law, according to Zsolt Darvas from the Brussels-based think tank Breugel.

"This will provide further incentives to comply with EU rule of law standards. Not benefiting from the fund will not improve the social situation in these countries and then they will have to find resources from elsewhere, which could prove to be difficult," Darvas said.

The European Commission proposed the "social climate fund" last summer as part of its Fit-for-55 package to support the energy transition for poor households over the 2025-2032 period.

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