EU ‘Green Deal’ will cost at least €1.000 billion
European Commissioner Johannes Hahn estimates that the European ‘Green Deal’ will cost at least 1.000 billion euros. He now has to convince the European finance ministers of the ‘Sustainable Europe Investment Plan’.
That plan is the investment structure of the ‘Green Deal’ that was proposed in December. To achieve its main goal, a climate-neutral Europe in 2050, the entire economy has to be redesigned.
According to the Commission, the ‘Sustainable Europe Investment Plan’ will generate at least 1.000 billion euros in investments over the next ten years for the greening of society. A conservative estimate.
Roughly half of that should come from the EU budget and 140 billion euros from the member states. The rest (almost 400 billion euros) are public and mainly private investments. Part of the EU money will be used to cover risks for private investors so that they will come forward earlier. To how much extra investment this will lead, has been deliberately underestimated.
Breugel: not enough
Nevertheless, the Commission is counting its chickens before they hatch, says the Brussels-based think tank Bruegel. Of the 500 billion euros from the EU budget, 400 billion would have been used for environment-related matters anyway. So little extra effort. The national contributions (140 billion) and the hoped-for investments (400 billion) are also often budgets that have been planned for some time.
But these investments are only a first step. Estimates by the Commission and Bruegel indicate that the 2050 goal will require investments of at least 300 billion euros per year. Three times the Commission’s plan, at 3.000 billion over the next ten years.
After all, the ‘Green Deal’ is about a total revolution: closing polluting industries, making the energy supply sustainable, and making mobility independent of fossil fuels. Also, billions will be needed for planting more forests, large-scale house renovations, and sustainable agriculture.
The enormous investment can’t be paid from the current EU budget. That includes 1% of the EU’s gross national income. The Member States themselves have to contribute a share. Last week, the German government earmarked more than 40 billion euros for the closure of the polluting brown coal and coal-fired power stations. However, the biggest financiers of the green revolution are private parties, such as pension and investment funds.
But the problem today is not so much a lack of money, but good investment projects. Cheap money is everywhere, thanks to the European Central Bank. Banks pay money to safely deposit their surplus capital with the ECB and now give their customers almost zero percent interest. Investing and investing brings more return.
Making better use of opportunities
The totally new green economy creates enough investment opportunities, but these are often not exploited by poorly functioning governments. The Commission provides experts and advice to assist the Member States in this task. And it is needed. There is currently a backlog of 300 billion (almost two annual budgets) in the use of the regular EU budget. It is usually the poorest Member States that spend their EU subsidies the least effective.
However, it is not yet certain that the requested 1.000 billion euros will materialize. Half of this should come from the EU budget, which is currently being negotiated for the period 2021-2027. The Netherlands, Denmark, Sweden, and Austria want the lowest possible budget. Most other member states are arguing for more money than at present. And green investments are also under heavy debate.