Blog Post

A breakdown of EU countries’ post-pandemic green spending plans

An analysis of European Union countries’ recovery plans shows widely differing green spending priorities.

By: and Date: July 8, 2021 Topic: European governance

Policymakers have made a clear commitment to use the European Union’s post-pandemic recovery plan, Next Generation EU, to accelerate the bloc’s green transition. The underlying idea is simple: seize a moment of unprecedented economic and social disruption to reinforce the reorientation of Europe’s economic model towards sustainability, and in particular to accelerate the implementation of the European Green Deal. This idea also reflects a growing recognition that green investments have high fiscal multiplier effects and they can achieve in one swoop a so-called ‘triple dividend’: promoting economic growth, fostering job creation and reducing greenhouse gas emissions.

In practice, this has meant setting a 37% minimum target for spending on climate objectives under the Recovery and Resilience Facility (RRF), the largest component of Next Generation EU.

For this it is of course necessary to define ‘green’, ‘climate’ and ‘environmental’ spending. The regulation establishing the RRF (Art. 18) includes three different requirements in this respect for EU countries’ recovery and resilience plans, which are the framework for RRF spending:

(1) All proposed measures must respect the ‘do no significant harm’ principle in relation to environmental objectives, and adherence to this must be demonstrated;

(2) Countries must explain how their plans contribute to ‘the green transition’. This term refers to both environmental and climate-change objectives and is not subject to a target;

(3) At least 37% of a plan’s spending must go to measures which are specifically meant to support climate-change objectives, a narrower aim than the ‘green transition’. The regulation provides coefficients to be used for the calculation of each measure’s contribution to the target.  Note that there are also coefficients for ‘environmental objectives’, but no minimum share of spending was established for these.

Bruegel’s dataset of EU countries’ recovery and resilience plans shows that all countries have so far met this 37% minimum requirement.

In the following, we look at both the climate and environmental components of the national plans in the RRF framework to understand better countries’ green spending priorities. Looking at both of these areas helps understand whether national spending plans reflect the environmental priorities of the European Green Deal, beyond only complying with the climate spending requirement of the RRF.

Overall priorities

We first looked at each country’s green spending, as categorised under the European Commission’s green ‘flagship areas’: ‘Power up’, ‘Renovate’, ‘Recharge and Refuel’ (referring, broadly, to cleantech, buildings energy efficiency and sustainable transport). This provides an understanding of overall spending priorities. Note that the numbers we present here are different from the allocations to climate-change objectives, as reported in the national plans, since we count the full allocations of measures included in the relevant categories (though some components might not contribute to climate objectives) and exclude some measures that contribute to the 37% target but have a non-green primary focus.

When classified this way, national allocations differ significantly (Figure 1). For the EU as a whole, ‘Recharge and Refuel’ is the main green spending priority, accounting for more than a third, or €86 billion. For countries including Estonia, Germany, Hungary, Latvia and Romania, this item even accounts for 50% or more of all green spending. Italy and Spain also have notably high sustainable transport allocations.

The ‘Power up’ priority has been allocated around a quarter of spending at EU level, or €55 billion. Shares are, however, much larger in countries including Cyprus, Czechia and Poland, which allocate close to two-thirds or more to this area. Though not visible in Figure 1, Sweden also spends money on this, but the amount could not be singled out based on the information in the plan, and is therefore captured by ‘other green’.

The smallest green flagship is ‘Renovate’ (energy efficiency of buildings), which receives €48 billion in the EU. France, Greece, Latvia, Slovakia and Belgium go against the trend by devoting considerably higher shares to improving their building stocks.

Finally, ‘other green’ in Figure 1 captures spending that could either not be put into one single category, or which is primarily devoted to other items in support of the green transition. This concerns €34 billion of spending on measures such as reforestation or biodiversity protection. For Sweden it includes broad ‘climate investments’ with many different elements. Luxembourg directs half of its green spending to environmental protection and biodiversity, and Croatia plans relatively high spending on waste and water management and tourism. Finally, a significant share of Slovenia’s ‘other green’ goes to water management and flood prevention.

A more detailed examination

While the Commission’s flagship-based classification is useful to get an overall idea of green spending priorities, a more granular breakdown is required to thoroughly understand the measures countries intend to put in place (Figure 2). Bruegel introduced its own classification system to allow for such a deeper analysis.

Unsurprisingly, this more detailed classification reveals significantly varying national spending priorities. In EU aggregate terms, spending to increase the energy efficiency of buildings takes the largest share, with €45 billion, almost a fifth of total green spending. Belgium and France have made this the largest component of their green spending, devoting around 28% to it. Greece, Latvia and Slovakia spend even higher shares on this, reflecting what we saw in Figure 1.

The second biggest category at EU level is public transport, with €34 billion, or 15%. This is a particularly large part of planned green spending in Romania (47%) and also in Austria, Hungary, Latvia and Lithuania, where it accounts for more than a third of green spending.

We created a separate category for high-speed trains, which ranks third in size with €26 billion, or 12%. Almost all the planned investments are in Italy (€24 billion), where it is one of the largest spending categories. The rest of the spending on high-speed trains is planned most notably in Czechia and Germany.

The fourth biggest category in the EU is renewable energy sources, which receives €23 billion, or around 10% of green spending. Most of this spending will be concentrated in three countries: it the biggest green component for Poland with 37% (€9 billion); Spain and Italy will also be big spenders in absolute terms, with €5 billion and €6 billion respectively.

Finally, it is interesting to note that measures specifically targeting hydrogen come in seventh place at EU level, behind electric mobility and climate adaptation. Countries will spend in total €11 billion (5% of green spending) on this category, with €3 billion of spending planned in Germany, €3 billion in Italy, €2 billion in France, and around €1 billion each in Poland and Romania.

Depending on which classification system is used, at EU level some €220 billion of the RRF funds is set to be spent on green elements. This is certainly a welcome and necessary effort, but it pales in comparison to the €350 billion per year that will be needed by 2030 to realise the aspirations of the European Green Deal.

All but three EU countries have submitted their national recovery plans at time of writing. The European Commission is in the process of assessing the compliance of these plans with the RRF regulation and so far has endorsed and sought Council of the EU approval for 14 plans. Once approved (most likely on 13 July), countries can receive their first disbursements of up to 13% of the total amount they have been allocated. The money for this is already being raised through the issuing of bonds by the European Commission, which started on 15 June 2021. Timely disbursement and implementation of the approved plans will then be essential if the RRF is to have an impact on the European economy, and on the European climate and environmental transformation.

The authors are grateful to Zsolt Darvas for comments.

Recommended citation:

Lenaerts, K. and S. Tagliapietra (2021) ‘A breakdown of EU countries’ post-pandemic green spending plans’, Bruegel Blog, 8 July


Republishing and referencing

Bruegel considers itself a public good and takes no institutional standpoint. Anyone is free to republish and/or quote this post without prior consent. Please provide a full reference, clearly stating Bruegel and the relevant author as the source, and include a prominent hyperlink to the original post.

Read article More on this topic More by this author
 

Blog Post

REPowerEU: will EU countries really make it work?

By acting together, the European Union can optimise its response to the energy crisis in all scenarios but each country will have to make concessions.

By: Simone Tagliapietra Topic: Green economy Date: May 18, 2022
Read article More on this topic More by this author
 

Blog Post

European governance

Does the war in Ukraine call for a new Next Generation EU?

The European Union should take significant economic measures in response to the war in Ukraine, but a new Next Generation EU is not needed yet.

By: André Sapir Topic: European governance Date: May 17, 2022
Read about event More on this topic
 

Upcoming Event

Jun
23
14:00

BRI 2.0: How has the pandemic influenced China’s landmark Belt and Road Initiative?

China's Belt and Road Initiative is undergoing a transformation after two years of pandemic. How is it changing and what are the consequences for Europe.

Speakers: Alessia Amighini, Eyck Freymann, Alicia García-Herrero and Zhang Xiaotong Topic: Global economy and trade Location: Bruegel, Rue de la Charité 33, 1210 Brussels
Read about event
 

Past Event

Past Event

[Cancelled] Shifting taxes in order to achieve green goals

[This event is cancelled until further notice] How could shifting the tax burden from labour to pollution and resources help the EU reach its climate goals?

Speakers: Niclas Poitiers and Femke Groothuis Topic: Green economy, Macroeconomic policy Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: May 12, 2022
Read article
 

External Publication

The Global Quest for Green Growth: An Economic Policy Perspective

A review on green growth and degrowth arguments.

By: Klaas Lenaerts, Simone Tagliapietra and Guntram B. Wolff Topic: Global economy and trade, Green economy Date: May 5, 2022
Read article Download PDF
 

Policy Contribution

European governance

Fiscal support and monetary vigilance: economic policy implications of the Russia-Ukraine war for the European Union

Policymakers must think coherently about the joint implications of their actions, from sanctions on Russia to subsidies and transfers to their own citizens, and avoid taking measures that contradict each other. This is what we try to do in this Policy Contribution, focusing on the macroeconomic aspects of relevance for Europe.

By: Olivier Blanchard and Jean Pisani-Ferry Topic: European governance, Macroeconomic policy Date: April 29, 2022
Read article
 

External Publication

European governance

Green public procurement: A neglected tool in the European Green Deal toolbox?

A new EU regulatory action in public procurement could unlock the potential of green public procurement and add an important element to the European Green Deal toolbox.

By: André Sapir, Tom Schraepen and Simone Tagliapietra Topic: European governance, Green economy Date: April 26, 2022
Read article More by this author
 

Blog Post

Owning up to sustainability risks: the EU should champion international standards

To keep European Union capital markets open and integrated, new international standards should be reflected in future European law and accounting practice to provide further incentives for a reallocation of capital, reflecting in particular climate risks.

By: Alexander Lehmann Topic: Banking and capital markets, Green economy Date: April 26, 2022
Read article Download PDF More on this topic
 

Working Paper

The low productivity of European firms: how can policies enhance the allocation of resources?

A summary of the most important policy lessons from research undertaken in the MICROPROD project work package 4, related to the allocation of the factors of production, with a special focus on the weak dynamism of European small and medium-sized enterprises (SMEs).

By: Grégory Claeys, Marie Le Mouel and Giovanni Sgaravatti Topic: Macroeconomic policy Date: April 25, 2022
Read article More on this topic
 

Blog Post

Climate migration: what do we really know?

While uncertain, studies suggest that climate change will cause significant internal and international migration over the next century.

By: Klaas Lenaerts and Simone Tagliapietra Topic: Global economy and trade Date: April 25, 2022
Read article More on this topic
 

External Publication

What drives implementation of the European Union’s policy recommendations to its member countries?

Article published in the Journal of Economic Policy Reform.

By: Konstantinos Efstathiou and Guntram B. Wolff Topic: Macroeconomic policy Date: April 13, 2022
Read article Download PDF More on this topic
 

Working Paper

Knowledge flows and global value chains

Trade and industrial policy can support productivity growth through global value chains by providing the right legal environment that supports the formation of longterm business relationships.

By: Marta Bisztray and Niclas Poitiers Topic: Global economy and trade Date: April 13, 2022
Load more posts