EU financial instruments presentation for low carbon strategy

1. The potential of EU financial instruments to foster a
low carbon strategy
(in an equitable and coherent way)
Jorge Núñez Ferrer
CEPS
Jorge.nunez@ext.ceps.eu
European Dialogue on the Energy & Climate Challenge
IDDRI/CEPS/FEEM
Second meeting, Warsaw, 23 & 24 June 2010
“How to finance the EU low carbon strategy within the framework of equity, solidarity and participation”

2. Present Budget critique
Financial Perspectives 2007-2013
Common agricultural policy
33.94%
Competitiveness
for growth and
employment,
8.58%
Cohesion, growth and
employment
35.67%
Citizenship,
freedom, security
and justice, 1.25%
Rural
development,
9.06%
EU as a global
player, 5.73%
Administration,
5.77%
INEFFICIENT,
WASTEFUL
BADLY TARGETED
INEFFICIENT,
MISUSED
INCOHERENT
TOO SMALL, INCOHERENT
SLOW
AMBITIOUS, BUT
NO FUNDS
INEFFICIENT TOOLS
?
EU BUDGET DOES NOT FITEU BUDGET DOES NOT FIT
PRESENT OBJECTIVESPRESENT OBJECTIVES

3. EU Budget main potential
• Solidarity: Best existing financial solidarity instrument
between European states.
• Guidance: Incentive for attracting investment into specific
areas through its leverage instruments.
• Loan guarantee, financial
engineering: A very powerful instrument to release
loans to the private sector for more risky venture capital
investments or large complex longer term projects ( + EIB, EIF).
• Coordinated external action: Theoretically
considered more efficient
• Should follow the principles of subsidiarity, additionality,
proportionality and value added

4. What can the EU budget do?
1. Reinforce R&D in renewable
technologies and their deployment
2. Assist in the development of an
integrated energy market in Europe
(supergrid)
3. The use of the Cohesion Policy to foster
low carbon technologies and low carbon
zones
4. Coordinate external action

5. Reinforce R&D in renewable
technologies and their deployment
• Increase funding to support SET
Plan
• Combine with PPPs and EIB
• Increase RSFF of EIB
• Leverage €1bn -> €5 bn
Today €2bn -> €10 bn ->Expand!
• Coordinate were possible with
Cohesion policy
• Reform financial mechanisms
• Balance bureaucracy and efficiency
• Ensure a focus on objectives rather than
process
CSP power plant
PPP + EU structural funds + RSFF (Spain)

6. Reinforce R&D in renewable
technologies and their deployment
CSP power plant
PPP + EU structural funds + RSFF (Spain)
R&D Investment is necessary:
Global technological race is on
Leadership of EU and EU’s
competitiveness and growth
is at stake

7. Help integrating the energy market
• Fund interconnectors through
TENs
• Combine with PPPs and EIB
• Use loan guarantee systems
• Leverage €1bn -> €20 bn
• Coordinate with Cohesion Funds
in cross border areas
Competitiveness funds TEN component

8. Financing the development of
low carbon zones
• Cohesion policy needs climate
proofing
• Public procurement needs
reforming
• Require carbon balancing
• Focus on energy efficiency
• Finance grid and interconnectors
in cohesion countries
• Create LOW CARBON ZONES (REGIONS)
• Combine with PPP, EIB, SET Plan
• Use for new technology demonstration
and deployment
• Smart grids
• Focus on achieving
objectives
• Performance rather than
procedure & irregularities
• STRATEGY, COHERENCE AND
COMPLEMENTARITY
• MOST IN NATIONAL HANDS
Cohesion Policy

9. Financing the development of
low carbon zones
Cohesion Policy
• Impacts:
– Replaces obsolete systems
– Makes coherent system
– Attracts FDI and companies
– Region is centre of interest
– Job creation
– Sustainability increase
• Low(er) opportunity cost
• Benefits will repay costs

10. • Rural development needs
climate proofing
• Expand funding for energy,
biomass use, adaptation
• Increase forestry funding
• EU budget should not fund a
whole policy use wealth weighted
co-financing -> EU side shrinks
• Separate funding into income
and cross compliance
components
• Link payments to costs of
compliance of specific farm
practices (cross-compliance)
CAP
Rural Development

11. Use of ETS revenues
External action SET PLAN
ETS REVENUES
Use ETS Revenues to
assist financing SET Plan
and external action for
adaptation
and mitigation
Coordinated external action
and common financing for
Copenhagen Commitments
crucial to Influence process

12. NEEDS
• A LOT IS IN NATIONAL HANDS
1. Change mentality
2. Increase strategic capacity
3. Check systemic problems
• EU
1. Change incentive system
2. Review financial procedures
3. Introduce objective monitoring – rather than
ex-ante evaluations, procedural and
irregularity controls

13. http://www.ceps.be/book/future-sustainable-competitive-and-greener-eu-budget-integrating-climate-change-objectives
http://www.sieps.se/en/publications/rapporter/can-reforming-own-resources-foster-policy-quality.html
http://www.europarl.europa.eu/activities/committees/studies/download.do?language=en&file=20293#search=%20value
%20added%20of%20agricultural%20
http://www.europarl.europa.eu/activities/committees/studies/download.do?language=en&file=20293#search=%20value
%20added%20of%20agricultural%20
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