Green recovery after COVID-19: Last chance for V4 to climate transition?

2020-11-29

The recovery of European economies after the coronavirus pandemic may become – thanks to national recovery plans financed by the EU funds – a prelude to catching up with climate goals. Are the Visegrad countries ready to seize the opportunity?

By: Aneta Zachová (EURACTIV.cz), Patrik Szicherle (Political Capital), Anna Wolska (EURACTIV.pl), Michal Hudec (EURACTIV.sk)

Recovery of the economy after COVID-19 crises is one of the main priorities for all the EU countries. But making it successful will not only depend on the amount of money, but also on whether it will be spent effectively. Experts say that the reconstruction of economies after the pandemic may become a prelude to catching up with climate goals.

Transforming the European economy into more green and eco-friendly belongs to one of the most important objectives of the European Union. Five years after the Paris Agreement, Ursula von der Leyen announced an increase in the greenhouse gas reduction target from 40% to 55% by 2030 compared to 1990, saying that the target is "ambitious and feasible". The EU intends to achieve climate neutrality by 2050.

At the same time, the European Commission has announced a review of all EU policies to achieve the climate neutrality objective, including the Emissions Trading Scheme (ETS), which is to be extended to further sectors of the economy.

The countries of the Visegrad Group are not among the EU leaders in terms of climate policy. Poland is the only country that has so far failed to declare the goal of climate neutrality in 2050. The Czech Republic intends to expand its nuclear power plant in Dukovany despite the controversial role of nuclear energy when it comes to green transformation. In almost all V4 countries the renewable share target is far from expectations.

The opportunity for change is provided by EU funds - the Multiannual Financial Framework and Next Generation EU - which may significantly change the situation in each country. So, how national governments of V4 plan to spend their EU funds in the context of post-pandemic economic recovery regarding the European Union's long strategy to be climate-neutral by 2050?

CZECH REPUBLIC

In Czechia, climate spending under the Next Generation fund is considered rather as a burden than an opportunity to transform the economy. So far, the government has fight for the highest flexibility as possible when it comes to EU funding distribution. Moreover, it has not communicated the European climate policy to the public very well. For example, the European Green Deal is mentioned by the government mostly with negative connotation as a policy that can damage or even destroy the Czech industry.

The Czech Republic expects at around EUR 7 billion from the Next Generation initiative. The Czech Government in its draft of the National Recovery Plan pointed out that the Czech Republic wants to invest large part of the recovery funds (EUR 4.45 billion) into the transport infrastructure and green transition. When it comes to fight against climate change, the Czech government wants to invest into sustainable mobility, including e-mobility or railway electrification, and energy efficiency, especially building renovations.

The draft of the National Recovery Plan has been prepared by the Industry, Trade and Transport Ministry based on the inputs from other resorts. "We have allocated 40% to the green projects, we exceed the mandatory quota by 3%," said Industry, Trade and Transport Minister Karel Havlíček.

However, the Environmental Ministry raised objections during the comment procedure and pointed out that the plan does not reflect the "do no harm" principle despite the fact that the Commission insists that the EU will not support projects with negative impacts on the environment.

Moreover, experts criticize the government for a lack of strategic visions. "The government has delivered a compilation without any strategical discretion. There are both concrete measures with disputable impacts and very general proposals with unpredictable effects. Currently, the draft of national recovery plan does not fulfil the EU’s taxonomy criteria neither 37% investments into the green transition," said Anna Kárníková, head of environmental organisation DUHA.

Currently, the Czech energy and heating systems are still dependent on coal. One of the chapters of the national recovery plan is dedicated to the transformation of the industry and energy. The plan mentions necessity of transition to the low-emissions and local sources of energy such as biomass, waste, secondary sources or gas. It also mentions investments into the renewables, including accumulation.

According to the Czech Renewable Energy Chamber, the government wants to invest 3-5% of the NG EU to the renewable energy sources. The Chamber considers such amount as insufficient.

"Together with the European Renewable Energies Federation (EREF) we will ask the European Commission to check whether the National recovery plan respects the principle of 37% funds allocation in to the climate measures," said Štěpán Chapula, president of the Czech Renewable Energy Chamber, who warned that large part of this "green funds" could go to the large energy and heating companies instead of small and medium enterprises.

When it comes to renewable energy, the Czech government’s plan is not very ambitious neither specific. In the e-mobility sector, the situation is different. The Industry, Trade and Transport Minister emphasized the role of hydrogen in future clean mobility and it wants to invest in hydrogen filling infrastructure. Moreover, the draft recovery plan includes creation of a dense network of public and private charging stations for electric vehicles and charging infrastructure for buildings and municipalities. Car fleet of the Czech state sector and the Prague public transportation services should be electrified. The government wants to provide businesses with a support scheme motivating them to buy electric cars as well.

The Czech Government is also preparing plans on how to use money from the Just Transition Fund or Modernization Fund. The large energy companies should be included in these plans, the Ministry of Regional Development claimed, because their role in green transition of the whole country will be crucial.

HUNGARY

Hungary joined the environmental protection train rather late. The country was one of four who prevented the European Union from adopting a climate neutrality goal at a summit in Brussels in June 2019, only to agree to it after receiving assurances that nuclear energy could be included in the country’s final energy mix.

According to Eurostat data from February 2019, Hungary was the only state where the proportion of green energy had fallen consistently since 2013. The share of renewables is especially low in electricity. Another issue is that while Hungary already (almost) met its 2020 renewable share target of 13%, the majority of it consisted of firewood, which is not one of the most environmentally friendly renewables. In terms of the country’s future energy mix, the government sees two main pillars in electricity production in the country: the Paks II nuclear power plant and solar panels. 

A large portion of the prime minister’s 2020 state of the nation address held before the country felt the effects of the novel coronavirus pandemic, discussed the government’s climate plans. The country’s recently approved climate protection action plan focuses on terminating illegal waste disposal sites, banning single-use plastics, forcing large companies to downsize their economic footprint, planting ten new trees after every newborn, and supporting electric transportation – among others. In June 2020, the National Assembly approved the climate law, stating that Hungary would become climate neutral by 2050.

The pro-government think tank Századvég noted in an analysis concerning the climate law that the fight against climate change needs to follow five basic principles. They say that climate agreements must be based on the cooperation of member states, large polluters must bear the brunt of the costs, these costs should not be deferred to citizens, the EU must remain neutral towards any technology, and nothing should be done that carries irrational costs.

According to Benedek Jávor, the head of the Representation of Budapest in Brussels, the government’s climate strategy cannot be understood as a comprehensive climate policy agenda, it is a communication piece without meaningful content. He emphasized that he does support the cabinet’s declared goals, but some of it are unrelated to climate policy (e.g., waste management), some are simply the transposition of EU directives (e.g., banning single-use plastics), while some are mistargeted because besides greenfield energy investments, much more support should be aimed at the general population. 

The green components of the planned 2021-2027 EU Multiannual Financial Framework (MFF) and the Next Generation EU (NGEU) recovery fund will open up new opportunities for Hungary as well, but a lot depends on how the government is planning to use these funds. Greenpeace Hungary told Political Capital that these funds must be bound to taking into account the goals laid down in the Paris Treaty. Companies who receive these funds, they say, should create a sustainable development business plan with a carbon neutrality goal.  

Benedek Jávor told Political Capital that the green EU funds should be used to improve the energy efficiency of buildings, including those of the poorest families; supporting green energy investments, including the use of wind power, which is essentially banned at this time; decarbonizing transportation; and a thorough water and forest management reform. In terms of transportation, Greenpeace says that besides improving infrastructure for pedestrians and cyclists, electronic vehicle manufacturing must be developed, too. 

Independent MP Bernadett Szél notes that Hungary should focus new EU green funding on the energy efficiency of the homes of the general population, which have a 40-50% energy saving potential. She adds that this energy efficiency program should be ran by municipalities at the local level. Greenpeace Hungary agreed with Benedek Jávor and Bernadett Szél on the importance of supporting the energy efficiency of homes owned by the general population. 

The Energiaklub, a CSO working on energy-related issues, recently published an analysis highlighting that the establishment of new wind turbines is "not blocked by the laws of nature or technological barriers, but legislation. " The study notes that improving wind energy capacities could significantly lower Hungarian energy imports without it costing as much to the taxpayers as the Paks II power plant. 

However, the government remains committed to nuclear power. Századvég’s analysis points out that nuclear energy is carbon neutral, and reservations about it have led to a failure to reduce fossil fuel-based electricity production in several countries. 

Greenpeace Hungary recommends that decision-makers follow a wide set of criteria when thinking about economic recovery. They say that economic stimuli cannot weaken already existing environmental regulation and large emitters should not receive state support

There is a long-running debate concerning potential job losses due to green policies. Mr. Jávor said that the green funds are in themselves suitable to create jobs, including in areas affecting by high unemployment, "all that needs to be done is taking this criterion into account as well and launching complex programs, the components of which support each other and help maintaining jobs. "   

According to Bernadett Szél, manufacturing and replacing insulation, doors and windows, a boiler program could create numerous jobs on various skill levels, even in crisis areas.

Hungarian actors differ on how to achieve the country’s climate goals, the main difference being their approach to nuclear and wind energy. The incumbent Hungarian government will likely end up tailoring the use of EU green funding to its own climate strategy.

POLAND

The Multiannual Financial Framework project for 2021-2027 and the Next Generation EU initiative provide for a total of EUR 159 billion for Poland, of which EUR 124 billion are subsidies. It is already known that over a third of this amount will have to be spent on projects related to climate protection.

This is most clearly seen in the funds for economic reconstruction after the COVID-19 pandemic. Poland is entitled to EUR 57.3 billion, 23.1 billion of which are grants. However, 37% of this money will have to be spent on economic development through implementation of the guidelines for the green transformation of the European economy.

Poland will be the fourth largest beneficiary of the Reconstruction Fund in the first phase of the distribution of funds. In the second phase, however, Poland can count on the sixth, highest allocation of all the Member States, although the final distribution will not be known until mid-2022.

As part of its National Plan for Reconstruction and Resistance Enhancement (KPO), Poland is to define a plan of economic reforms and strategic projects for 2021-2023, which will allow it to achieve these objectives.

Initially, it was assumed that the KPO would be ready to be sent to the European Commission before the end of 2020, but now the Ministry of Funds and Regional Policy announces that a list of specific projects should be expected only in the first quarter of next year. Individual ministries and local governments have already submitted almost 1200 projects to the KPO.

The Deputy Minister of Funds and Regional Policy, Waldemar Buda, assured that the final list of approved projects is still being prepared. Many of them are to be related to environmental and energy issues.

"We want to focus primarily on projects concerning flood protection and water retention, the transition to a closed-loop economy or the development of renewable energy and improvement of energy efficiency" - said Waldemar Buda.

It is already known that the KPO is to finance, among other things, the thermal modernisation of residential buildings, as well as support for the construction of new ones equipped with renewable energy installations; the introduction of sustainable transport rules along with the facilitation of pedestrian traffic in towns and cities; and funding for the development of renewable energy in Poland. Among the projects submitted by the regions, there are also those that focus on revitalising mining areas or supporting their inhabitants in the process of transformation towards a greener economy.

However, environmental organisations are appealing to the Polish government for the KPO to cover all sectors of the economy. This is the only way, in their opinion, to ensure consistency of all policies with the objective of climate neutrality. WWF Poland list some recommendations in its “Zero Emission Poland 2050” report.

They point to the necessity of improvement of water infrastructure in Poland with simultaneous renaturalization of rivers, increase of the role of forests in climate protection, increase of investments in creation of a system of energy self-sufficiency of schools and public buildings in communes, co-financing of conversion of vans into zero-emission ones, improvement of public transport and cycling infrastructure, further decarbonization of energy and development of energy storage.

The director of WWF Poland Mirosław Proppé emphasised, that the Reconstruction Fund "is a loan for investments, which must be repaid by giving a development impulse". "These are not structural funds that were intended to equalise the level of development and life in individual countries. With these funds, we have the opportunity to strengthen our economy and make it more resilient to future shocks such as pandemics and climate change. It is also an opportunity to improve the global competitiveness of our businesses. A chance to improve innovation and reduce the carbon footprint of Polish products and services", he argued.

MEP Adam Jarubas (EPP), a member of the Committee on the Environment, Public Health and Food Safety (ENVI), points out that Poland will have over EUR 50 billion to spend on green investments over the next seven years.

"This money should primarily support the energy transformation and improvement of environmental conditions, specifically prosumer power plants, biogas plants, thermo-modernisation projects (including a wave of buildings renovations and the national coal furnace exchange programme), offshore wind power or projects supporting district heating," says the MEP.

As he stresses, it is also necessary to replace old power units and to modernise networks generating huge energy losses. "Support is also needed for projects that are part of a closed-loop economy, research and implementation projects using hydrogen in transport and industry," Adam Jarubas says.

Poland has not yet officially supported the tightening of EU CO2 reduction targets and the EU's commitment to achieve climate neutrality by 2050.

"Regardless of supporting or vetoing climate neutrality at national level, our entrepreneurs, citizens and local authorities will still operate under a legal regime established for the entire EU. I believe that the government should agree to this objective, although it will be very difficult to achieve it", he says.

He adds that "regardless of the Green Deal policy, Poland still has to bear high costs associated with the energy transformation, because it is economically inefficient and socially unacceptable to continue on the >>black, coal<< side of the force."

Adam Jarubas also points out that this will be much more difficult with a significant (50%) reduction in financial support from the EU. And the lack of support for the EU's climate objectives may make it more difficult for Poland to access funds from the Just Transition Fund, for example.

SLOVAKIA

Since the fall of the iron curtain in 1989, Slovakia was quite successful in lowering the CO2 emissions, mainly because of the structural changes of the economy. In comparison with 1990, Slovakia achieved the reduction of more than 40 percent of CO2 emissions.  Nevertheless, many challenges remain. They are nicely illustrated by the number of missed national targets - a few examples are share of renewables in gross energy consumption, energy efficiency in final consumption, recycling or particulate matter concentration in the air. With the upcoming of new programming period for the absorption of eurofunds, funds from European recovery plan and Just transition plan, Slovakia will have available almost six billion euros for climate and environmental measures. 

Early October, Slovak ministry of finance published a framework document - A modern and successful Slovakia, which will serve as a roadmap for a national recovery plan. Veronika Remišová - minister of investments and regional development - confirmed four priorities when it comes to green policies financed from the recovery plan. These are drinking water, clean air, waste management and climate - which means support for renewables, energy efficiency and green transport.

However, number of activists and politicians including Martin Hojsík - member of the European Parliament for the Renew Europe - criticize the document for the lack of ambitions. „Emission reduction target 53 percent by the end of 2030 is insufficient and not based on the goal of achieving carbon neutrality by 2050," Hojsík writes in his opinion piece published by EURACTIV.sk.

On the other side, Lívia Vašáková - an economic counsellor to the Slovak government disagrees and claims, that measures proposed in the document are so ambitious, it will be a political challenge to enforce them. Truth is that with the target of 53% reduction of emissions by 2030, government only counts with 12% reduction within upcoming decade. "If Slovakia keeps the same rate of greenhouse gas emissions reduction in the next decades, it will only achieve a 77% reduction in 2050," Hojsík warned.

The areas pinpointed by the government as some of the most promising when it comes to lowering emissions are industry and heating. In both, government counts with gas as a transitional fuel.

"Many heating plants still use coal burning for heat production, which also pollutes the air. Between 2021 and 2025, most of them will switch to gas and biomass in a sustainable volume," states the document. Karol Galek - deputy minister of economy said, that in heating and industry, gas can help replace coal, lower the emissions and improve quality of air. The priority is to get rid of coal. 

Executive director of Slovak Gas and Oil Association Richard Kvasňovský also calls for investments in the gas infrastructure. In the contrary to some environmental groups, Kvasňovský considers these investments useful, so the infrastructure can prepare the country for future transport of biomethane and hydrogen. According to Lucia Szaboová from Green Restart organization, Slovakia should focus on local energy sources and gas should only be considered as the last option. One of these local sources is geothermal energy. Szaboová claims, that if Slovakia used more geothermal energy in heating, it would not only decrease the emissions, but also dependency on Russian gas. 

Geothermal energy can also play a role in the transformation of Horná Nitra - Slovak largest coal region. Ministry of economy is considering it as one of the energy sources - beside biomass and gas, that can be used in heating of the region after heat production from coal is stopped in 2023. However, Slovak branch of the Friends of the earth association pointed out, that current proposals for heating Horná Nitra after 2023 lack transformation potential and none of the proposed project take a comprehensive approach of the issue.

Government wants to decide about future of the heating in this region this fall.

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