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EU states slow to claim recovery funding for greener roads and heat

07 May 2021 Cristina Brooks

France, Spain, and Germany have applied for EU pandemic recovery grants to pour into greener buildings, hydrogen, and electric vehicles (EVs), but most EU states submitting the applications have not sought all the available funds.

The member states which have applied urged others to hurry and submit applications to share in the €800 billion ($960 billion) pot of conditional loans and grants, called the Recovery and Resilience Facility (RRF), so money would begin to flow before the summer's end. Some countries have yet to ratify the policy.

Due to around half the EU's 27 member states delaying their applications, no clear picture of spending has emerged, but it does not seem as though the loan package is pushing the energy transition as much as the European Commission (EC) had hoped it would when the relevant regulation entered into force on 19 February.

About half of the package is offered in the form of loans and about half in grants, but only four out of the 14 states submitting plans to date have sought loans. The countries seeking loans so far are Slovenia, Poland, Greece, and Italy.

"In some cases, members have requested the maximum allocation, in other cases, they have requested less than they could request under the loan facility," EC spokeswoman Marta Wieczorek said during a 4 May press conference in response to a question from the audience about Poland not taking up the entire loan available.

States have until August 2023 to request the loans, but to do so they may need to update their submitted recovery plans with reforms and investments. All states are due to notify the EC of their plans between 30 April and mid-2022.

Greener plans possible

States seeking RRF funding must submit plans that meet several targets, including a requirement to spend 37% on the green transition and 20% on the digital transition.

Energy transition money should go towards investment and reforms in the areas of renewable energy, renovations to improve building energy efficiency, and green mobility infrastructure, for example, EV charging stations, the EC advised.

Renovation programs that improve energy efficiency in buildings feature in several plans (from France, Italy, Spain, and Slovakia), and hydrogen features in some (Germany, France, Italy, and Spain), according to analysis by the German climate change research body the Wuppertal Institute and think tank E3G.

E3G's analysis suggested that the Spanish (spending 31% of the funds sought on greening), Finnish (42%), and Slovakian (30%) plans were among those allocating more to green projects. Poland (18%), Portugal (19%), and Slovenia (5%) were more limited in such allocations. Italy and Portugal's green spending focused on climate change adaptation, it said.

Still, E3G criticized the green ambitions of the plans overall. "Although member states have used the opportunity to introduce much-needed investments in energy efficiency, renewables, and clean transport solutions, these investments rarely go beyond incremental improvements," said E3G in a statement.

It explained that the next two months would be an important test for the EC as it scrutinizes the plans' milestones and specifies how recovery funding will be used.

The process could "to a large extent determine the fate" of the political agreement called the Green Deal, which will help to enact the EC's target to lower its emissions by 55% compared with 1990 levels by 2030 on its path to net-zero.

Certain states' use of the RRF to invest in fossil fuel-linked sectors could hurt progress towards the target, according to a statement from wind power association WindEurope. "Previous drafts of the Romanian RRP earmark too much spending for natural gas infrastructure and not enough for electricity grids," said the association.

Italy

Italy has requested the largest amount of RRF funding so far: €192 billion ($232 billion), of which 64% was in the form of loans and the rest was grants.

About €69.8 billion ($85 billion) of this was earmarked for the green transition, with much poured into the energy efficiency of public and private buildings. Italy also earmarked €18 billion ($22 billion) to increasing the share of energy produced from renewables, enhancing the industrial supply chain, incorporating hydrogen, and upgrading network infrastructure.

Italy's plan earned high marks from green umbrella group CANEurope for its focus on greening road transportation responsible for heavy air pollution in cities. It provided funding for construction of 1,000 km of city cycle paths as well as 1,626 km of tourist cycle paths.

France

France has requested a total of €40.9 billion ($49.7 billion) in grants under the RRF.

Environmental projects made up €20 billion (about $24 billion) of this, according to a government summary.

Most of France's requested funding will go to greener vehicles, government fleets, and railways, but some will go to retrofitting of private homes, social housing, and public buildings.

The funds will also be used to achieve the goals in France's Climate and Resilience Bill that its parliament's lower chamber, the National Assembly, approved on 4 May and sent to the upper chamber, the Senate. Emissions reduction targets for France's aviation industry have been controversially excluded from the legislation, although it did include a partial ban on short-haul domestic flights in favor of using trains.

France's plan also earmarked funds for "decarbonized hydrogen" and sectors such as aviation. Neil Makaroff, EU policy officer for Climate Action Network France, criticized the funding of the aviation and automotive sectors. "France is using its recovery plan to give big polluters a blank check of €20 billion in tax cuts. Instead, the government could have seized the opportunity of the recovery to invest in renewable energy, to fight against energy poverty, or to regenerate the railway system," he said.

France, Germany, and Spain affirmed on 15 March their agreement to collaborate in their recovery plans regarding hydrogen.

As such, France and Germany are working together to grow hydrogen markets under an EU scheme that authorizes state subsidies, the Important Projects of Common European Interest, to research hydrogen-based technologies and uses including industrial production of electrolyzers, hydrogen in transportation infrastructure, and industrial hydrogen consumption.

The countries also may extend an existing alliance in the battery sector under France's fourth future investment program, known as PIA4.

Germany

In its Recovery and Resilience plan, Germany requested €28 billion ($34 billion), which it plans to help fund as it is higher than the amount the EU had allocated.

Germany said 40% of its plan, or €11.5 billion (about $13 billion), would be earmarked for the climate. In so doing, the German government was going well beyond the EU's targets, it said in a 27 April statement.

Germany aims to expand research into "key issues relating to the supply of green hydrogen" in its plan. It also plans to offer Contracts for Difference subsidies to compensate operators of related technologies during the transition phase.

The German plan foresees major spending on greening its transportation sector. It would support more than 500,000 EVs, 400,000 charging points, 50,000 public charging points, and 2,800 buses with alternative drive systems.

To improve the energy efficiency of buildings, Germany's plan will also finance the renovation of at least 40,000 homes.

But the German plan's weaker energy efficiency backing, its "insufficient" renovation investments, and its support for emissions-producing plug-in hybrid vehicles earned it lower marks from green umbrella group CANEurope.

It also did not include many new greening measures, E3G said. "Often, funds are being used to finance previously agreed programs, rather than to unlock new transformative measures. For example, around 80% of the German RRP refinances previously agreed measures," said E3G.

"The plan fundamentally lacks in ambition and provides little-to-no additional funds for climate protection. Instead, it mainly refinances existing recovery measures," agreed Julian Schwartzkopff, a project manager at nonprofit Deutsche Umwelthilfe.

Spain

Spain has requested about €70 billion ($85 billion) in grants under the RRF, spending about a fifth on sustainable transportation options. For example, EU funds will contribute to investment in a planned EV hub.

In addition, Spain's energy system transition goals would be backed by about €6 billion, which would go towards renewable energy and its integration. It will fund projects such as smart networks, flexibility, and energy storage, as well as ensuring a "fair" transition, according to the plan submitted.

Some funding will go towards Spain's renewable hydrogen roadmap, published last year, which targets the installation of at least 4 GW of electrolyzer plants by 2030. By that date, the country aims to have 5,000-7,500 hydrogen-powered light and heavy vehicles alongside 150-200 buses powered by hydrogen fuel cells.

E3G said Spain was among those countries with a "better draft" because it planned for the longer term and went beyond previous targets. "For instance, Spain has [applied for] recovery funds to implement previously agreed efficiency targets while also setting itself more ambitious energy transition targets," said E3G.

But WindEurope noted that slow environmental permitting for generation projects in the country meant only 100 MW out of 5 GW in Galicia got the green light last year.

Poland

Poland requested nearly €24 billion ($29 billion) in grants under the RRF and €12 billion (about $15 billion) in loans, according to an EC statement.

Poland's plan will see it spend about €437 million ($531 billion) to develop port infrastructure to help install 2.6 GW of offshore wind power by 2026, according to WindEurope.

Critics say Poland's investment plan fell short of the EU's green spending requirement. "The recovery plans of many member states, such as Czechia and Poland, are based on national energy and climate plans that are not aligned with the EU's climate targets, and recovery measures have not been used to enable more ambitious climate goals," said E3G.

Poland's plan posed "significant risks" of financing further fossil fuel buildout, for example, the €3.2 billion ($4 billion) earmarked for efficiency measures that might include gas boilers, said E3G.

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