European Finance-Climate Pact (own-initiative opinion)

EESC opinion: European Finance-Climate Pact (own-initiative opinion)

Key Points:

  • The EESC is firmly committed to the United Nations 2030 Agenda for Sustainable Development and the Paris Agreement. However, our current trajectory will at best only limit the increase in temperature to 3°C or more, which is well beyond what is stipulated in the Paris Agreement.
  • At the same time, Europe needs a renewed impetus and a new project, one that is based on cooperation and convergence rather than competition, and which demonstrates the tangible added value it can bring to Europeans, particularly young people. It is now imperative that we adopt a proactive European policy and provide a clear direction for the socio-economic model that we want for today but above all for future generations.
  • Europe needs to prove that it can provide a favourable environment for creating high-quality, well-paid jobs that respect the environment as well as a real economy which benefits all: European employers, workers and individuals.
  • The next multiannual financial framework (2021-2027) must promote economic development and jobs and enable the EU to achieve its objectives and contribute to the transition to a low-carbon economy by 2050.
  • The Commission, the European Court of Auditors and the World Bank refer to similar amounts: the equivalent of EUR 1 115 billion will have to be invested each year in the EU from 2021 in order to move forward and meet the EU's 2030 targets . This EUR 1 115 billion includes a significant share of the current investments which should be redirected towards sustainable development (green earmarking). The cost of non-action would be EUR 190 billion per year (or 2% of the EU GDP) .
  • The finance-climate pact aims to redirect the money that could bring about a new financial bubble towards the fight against climate change and the real economy. It must also receive new financing, especially for small and medium-sized enterprises. The pact must provide a new roadmap for European leadership and should be accompanied by an integrated plan (in cooperation with China and India - key players in the fight against climate change).
  • The EESC believes that this roadmap should cover all aspects of a policy to tackle climate change: a fair transition (measure to mitigate the effects of the change, but also to compensate for damage and loss), as well as real policies for adapting to climate change. The circular economy model should be given priority as much as possible and its regulatory framework improved. Everything will need to be financed on the basis of adequate budgets to redirect current investments (green earmarking) and new sources of accessible funding.
  • To achieve the Paris Agreement goals a significant share of the investments for combating climate change should be realised by the private sector, further to the public fundings.
  • According to the EESC, and as the Commission points out, a unified EU classification system (taxonomy) must be developed with a view to maintaining sustainable projects (and rejecting those that are not) and identifying areas in which investments can have the most impact. The European Parliament supports this approach and also proposes the introduction of a "green label". This label should be granted to investments that comply with EU taxonomy and the highest sustainability standards, with a view to ensuring the positive earmarking of investments .
  • The projects to be supported, which will be in line with the United Nations' Sustainable Development Goals and which require significant resources for innovation and R&D, will need to be enforced through a tool making it possible to visualise the various sources of financing (including the future multiannual financial framework) and based on different initiatives:
  • redirecting funding towards sustainable investments through "green earmarking" and, in this context, promoting "green labelled" loans from the European Investment Bank (EIB);
  • using quantitative easing by the European Central Bank (ECB) as a source of financing;
  • increasing to 40% the share of European Fund for Strategic Investments dedicated to combating climate change;
  • the EU must show a level of ambition that will match the challenge of fight against climate change; an average 40% of its global budget (MFF 2021-2027) must be allocated to this objective;
  • increasing the corresponding share of the European Cohesion Fund over and above the current 20%;
  • using 3% of pension and insurance funds;
  • supporting businesses, particularly SMEs, in their R&D investments up to an amount of EUR 100 billion devoted to this purpose;
  • respecting the financial assistance commitments made to the countries of the South which are contributing to the fight against climate change;
  • introducing a clause on the "Paris Agreement" that is effectively binding in EU trade agreements.