A Green Budget for a Sustainable Future: Adapting the EU Budget to Climate Change

 Adaptation and mitigation for climate change are a global responsibility and the EU has to develop a common strategy to tackle the consequences for the member states as well as fulfilling its international obligations. There are clearly hardly any dissenting voices on such a statement, but there is also little clarity on what this means in practice, in particular: Which actions should be undertaken at European level? Is the budget adapted to the challenges ahead and coherent with EU mitigation and adaptation objectives? What are the costs for the EU and what should or could be the role of the EU budget? Are there sufficient resources to tackle the needs?

There is little certainty on costs. The global financial and budgetary implications of climate change have recently been the subject of numerous studies. A common feature of these studies is the difficulty of calculating costs (and benefits) of climate change policies, which are characterised by immense complexity and great uncertainty. Such financial implications are related to average annual cost estimates, which differ greatly, ranging from 0.6% to 1.6% of total gross domestic product worldwide – or between about €230 and €614 billion annually (based on global GDP for 2006). It should be noted, however, that these figures include both public and private expenditures and that the final level of public spending is subject to political decisions.

The estimated magnitude of the European Union’s share in total global costs could range from €24 to €194 billion annually. According to estimations by CEPS  we judge that realistic scenarios indicate annual costs of €60 billion and above, given the rationale of taking historical emissions levels and thus the historical responsibility for climate change into account. Of these a third are to be covered by the public sector. Financing must cover domestic as well as assistance to developing countries for mitigation and adaptation activities as a result of historical responsibilities, taking into account the need to further reinforce support for humanitarian aid, expected to require increased resources. A key priority is the power sector and the energy system as such, including specific energy sector adaptation. 

The coordination of global action against climate change and its impacts is better dealt with in the framework of organisations like the United Nations Framework Convention on Climate Change (UNFCCC) or other UN organisations. At regional level, however, action is best coordinated by the EU, including to an important extent allocation of financial resources. In principle, cross-border pollutants are most efficiently and effectively dealt with at supranational level, because national policies for abatement of pollution will tend to address only those costs falling on the country’s territory. Supranational action is required to ensure that all externalities are factored in.

The EU budget can internally assist in reducing emissions and diminishing the adaptation burden for those member states that will suffer the most and bear the heaviest financial consequences of dealing with emissions. The former is in accordance with the subsidiarity principle, the latter with the principle of solidarity in the EU .

Externally, the EU can participate in financing the global obligations in the fight against climate change. Coordination of external actions is better served in a common approach.

The EU budget seems thus to have potentially an important role to play in mitigation and adaptation actions. How the EU budget could or should contribute has, however, been scantly discussed. The budget’s role and the necessary instruments are still to be defined with any clarity.

The objective of the Task Force is to create political momentum to ensure that both the new European Parliament and new Commission understand the conditions required for the EU budget to reinforce EU climate mitigation objectives. A briefing in May and a detailed report in autumn will be distributed widely to all relevant personalities and institutions.

This Task Force seeks to:

-       Create a group of stakeholders in all major parties of the European Parliament, who are willing to campaign on a “making the EU budget climate-proof” agenda;

-       Undertake outreach activities in and with the European Parliament to firmly establish an understanding of the conditions required for the EU budget to support EU climate objectives;

- Think through the analytical and political challenges related to making the budget ‘climate proof’;

-       Giving guidance on a direction in the longer term and produce a list of realistic and specific reforms aimed at the present and next financial perspectives, outlining what a climate-proof EU budget would look like.

Chair: Anders Wijkman, Member of the European Parliament

Rapporteurs: 

Jorge Núñez Ferrer, Associate Research Fellow, CEPS; e-mail : Jorge.nunez@ext.ceps.eu
Christian Egenhofer, Senior Research Fellow, CEPS
Arno Behrens, Research Fellow, CEPS
Noriko Fujiwara, Research Fellow, CEPS

Meetings:
1st meeting: 3 March 2009
2nd meeting: 1 April 2009
3rd meeting: 29 April 2009
4th meeting: 15 June 2009
5th meeting: 14 Sept 2009
6th meeting: 14 October 2009

Task Force Report published & launched on 8 December 2009; available here for purchase or download. 

         Energy          Climate Change