The EU is planning to create two investment funds to encourage Poland and other reluctant eastern European countries to support a landmark deal on cutting greenhouse gas emissions next month, notes the Financial Times in a recent report.
At a summit in October, EU leaders are expected to agree to climate and energy targets for 2030, signing off on a package of emission rules that will shape investment in European power networks and industry for the next 15 years.
In January, the European Commission proposed that the 28-member bloc should reduce emissions by 40 per cent from 1990 levels. Although larger nations such as Britain and Germany supported this goal, opposition from eastern European nations – led by Poland – has prevented a quick deal.
Coal-dependent Poland argues that the costs of a 40 per cent cut would be disproportionately expensive for eastern member states, predicting that its own domestic power prices would rise 120 per cent by 2030. The Czech Republic is also nervous because an unusually large share of its economy is based on energy-intensive manufacturing. To assuage these concerns and strike a deal, Brussels is proposing that the European Investment Bank should manage two investment funds – called the new innovation facility and the modernisation fund – that would help poorer EU nations reduce emissions from their power networks and factories.
Officials in Brussels said the two funds would be built up by allocating 9 per cent of the new issuance of the EU’s carbon allowances between 2021 and 2030. The EU’s cap-and-trade market for carbon is the world’s biggest, covering some 11,000 factories and power stations that have to buy more allowances if they want to increase emissions above their limit. EU officials said it was difficult to put a value on the proposed funds because of the shifting carbon price. One predicted that it would originally be "billions of euros” but said that could increase to "tens of billions” if the price of carbon recovered.
This fluidity in the potential value of the funds worries eastern European diplomats, who do not believe that the carbon price will recover as strongly as commission officials suggest. "We cannot sign a 2030 deal where we are told: ‘don’t worry, we’ll sort out the details later’,” one central European envoy said.
According to the EU’s own estimates, the poorer 15 countries will probably need to spend €47.6bn between 2021 and 2030 on upgrading their power plants and infrastructure. Polish officials insist they do not want to sign a deal before Brussels provides a specific estimate for what Warsaw will need to spend. Still, Polish officials admit that they are unlikely to win a reduction of the 40 per cent target and will instead have to focus on maximising their pay-off from EU funds.
