How to recover from corona without choking the planet

With emission budgets rapidly shrinking, the current decade is crucial for fighting climate change.

Yet, we need to learn another lesson from the financial crisis of 2009 and prevent history from repeating itself: an uncontrolled post-crisis increase in greenhouse gas emissions.

From a financial point of view, things look good at first glance: on 21 July, the European Council agreed on a recovery package of €750 billion and the next Multi-annual Financial Framework (MFF) of €1,074 billion.

The Recovery and Resilience Facility, worth €672.5 billion, will be the central point of the EU's recovery efforts.

The European Council agreed on an overall climate spending target of 30 percent, possibly triggering climate investments of €322 billion under the next MFF 2021 and 2027 and €225 billion under the EU recovery programs.

However, if we merely scratch the surface, it becomes questionable whether this agreement paves the way to climate neutrality by 2050.

The European Commission has estimated that achieving the current 2030 climate and energy targets will require an additional annual investment of €260 billion. Other estimates assume those targets would require investments of €175 to €349 billion annually.

Moreover, the proposed higher 2030 targets would further increase investment needs. According to Bruegel, a Brussels-based think tank, a target of reducing greenhouse gas emissions by around 50-55 percent by 2030 would require additional investments of around €300 billion a year.

These estimates suggest a significant investment gap, possibly exceeding €1600 billion for the next MFF timeframe or €2,000 billion for the next decade. This is yet another reason why we should be paying particular attention to the effectiveness of spending.

Next to the funding gap, there are other uncertainties whether the Recovery and Resilience Facility will support climate goals.

As a general principle, the European Council agreed that all EU expenditure should be consistent with the Paris Agreement's objectives and should do no environmental harm.

EU expenditures must also comply with the objective of EU climate neutrality by 2050 and the EU's new 2030 climate target. These are important statements but how can they make a difference in real terms?

How not to harm?

To make the "do no harm" principle effective, the EU recovery package should be built on clear criteria and be linked to the standards of the proposed Just Transition Fund: the fund may not support "investments related to the production, processing, distribution, storage or combustion of fossil fuels".

The EU taxonomy regulation can also help to give teeth to the "do no harm" principle.

With these requirements in mind, the Recovery and Resilience Facility should explicitly not be used to fund investments in any type of coal, oil, or gas infrastructures unless funding is aimed at adapting existing natural gas transmission infrastructure to the transmission of hydrogen.

In short, recovery funding should not be eligible for investments that are incompatible with the 2050 climate neutrality objective.

For now, however, the European Council has made no reference to the EU taxonomy regulation.

It only agreed to adopt "reliable criteria for classifying such expenditure", called for an "effective methodology" for monitoring climate spending, and requested an annual report from the European Commission on climate expenditures.

This does not suffice if we want to avoid a similar aftermath as that of the 2009 financial crisis - an emission-intensive economic recovery.

Today, we are given the very last real opportunity to pave the way for sustainable economic development and meeting climate neutrality - an opportunity that should not be wasted.