The Commission uses green budgeting as an instrument to enhance the transparency of the EU budget in terms of funding to support climate and environmental objectives, in line with the Paris Agreement and the European Green Deal. In March 2022, the Commission committed to further pursuing its work on this tool, together with the French Presidency of the Council of the European Union and several Member States.
The Commission has set the green transition as one of its key priorities for 2019-2024, as declared by President von der Leyen in her political guidelines. The European Green Deal, adopted in 2019, confirms this ambition. The Green Deal places climate and environmental challenges at the centre of EU activity, with a view to transforming the EU into a fair and prosperous society, with a modern, resource-efficient and competitive economy, where there are no net emissions of greenhouse gases by 2050 and where economic growth is decoupled from resource use. It also aims, under the ‘do no harm’ and the ‘leave-no-one-behind’ principles, to protect, conserve and enhance the EU's natural capital, and to protect the health and well-being of citizens from environment-related risks and impacts. In line with the Green Deal, the European Climate Law, adopted in 2021, specifically prescribes that the EU should become climate-neutral by 2050 and sets an intermediate target of reducing net greenhouse gas emissions by at least 55% by 2030 compared to their 1990 levels.
To achieve these goals, in July 2021 the Commission adopted a package of legislative proposals named ‘fit-for-55’. The package consists of a set of ambitious, inter-connected proposals, balancing between pricing, rules, standards, and support measures, and building on already existing measures (such as the EU emissions trading system) and new instruments (such as a Carbon Border Adjustment Mechanism). The new Social Climate Fund will further reinforce the social dimension of the EU budget by addressing social and distributional impacts of fit-for-55, and more specifically the proposal to extend emissions trading to buildings and road transport. The Social Climate Fund proposal is fully coherent with and complements existing measures under the Just Transition Mechanism and the European Social Fund Plus.
To underscore its commitment to its climate and environmental goals, the EU has set quantitative targets on the shares of its 2021-2027 multiannual financial framework and NextGenerationEU funding. In particular, the EU has committed to dedicating at least 30% of its multiannual financial framework (and NextGenerationEU) to climate-relevant expenditure, and 7.5% of the 2024 annual budget and 10% of the 2026 and 2027 annual budgets to protecting and enhancing biodiversity.
The EU’s green budget is established around four areas: climate adaptation, climate mitigation, biodiversity and clean air. It also includes a strong ‘do no harm’ component that covers both climate and environmental objectives. All activities have to comply with this principle.
Green contribution in 2021 to 2027 (million EUR).
Source: European Commission.
The data available for the 2021-2027 period show that the EU budget is on track to reach its 30% target for climate mainstreaming. For biodiversity mainstreaming, while the 2024 target will be reached, the 2026 and 2027 targets will be more difficult to achieve. The Commission is reflecting on how to further increase the financing in this area with the help of all the stakeholders. Around 90% of biodiversity funding comes from shared management funds. The programming from Member States is therefore important and should be monitored closely in the context of the different EU budget programmes such as the European structural and investment funds, the common agricultural policy, LIFE, European Maritime, Fisheries and Aquaculture Fund, Horizon Europe, and InvestEU. As the same action can contribute to more than one objective, it is important to recall that the figures above cannot be summed up.
At the same time, the focus on results is higher than ever. The new performance framework for 2021-2027 embedded in each budgetary programme’s regulation puts a sharper focus on climate and environmental challenges. This will allow more information to be presented on the green budget contribution of each programme, through a selection of relevant indicators.
Focus on Performance: selection of 2022 results from indicators in relevant programmes
459 362 household have improved their energy classification through the regional funds
A reduction of nearly 14.2 terawatt of annual energy consumption was achieved thanks to the Recovery and Resilience Facility
13 agreements are in force under Sustainable Fisheries Agreements
For 314 endangered species loss is halted or reversed by the LIFE programme
100 EU cities and 12 cities of associated countries have been selected to participate in the Climate Neutral and Smart Cities Mission to become climate neutral by 2030
1.6 million hectares of habitats where loss of biodiversity is being halted or reversed through the LIFE programme
2 500 000 people are benefitting to improved air quality thanks to the LIFE programme
3 640 gigawatt of additional renewable energy has been financed by the Regional Funds
25% of activities under Key Action 1 in Erasmus are climate relevant and 10% of activities under the European Solidarity Corps are climate relevant
202 projects are financed from the LIFE programme to demonstrate and promote innovative approaches to climate change
The Commission is also working towards an ‘aggregate result indicator’ on climate mitigation, to estimate the aggregate impact of the various interventions funded by the EU budget, in line with its impact reporting on green bonds and the European Court of Auditors’ report.
Furthermore, green budgeting is also about greening the revenues of the budget. A new EU own resource based on non-recycled plastic packaging waste, entered into force in 2021 and is expected to generate around EUR 6 billion per year. In December 2021, the Commission proposed two additional green own resources: one based on the EU Emission Trading System (ETS) and one on the Carbon Border Adjustment Mechanism (CBAM). These proposals were adopted in April 2023.
In September 2021, the Commission also introduced the EU green bond framework, under which it plans to finance 30% of the NextGenerationEU package. This framework, which has been validated by an external assessor, provides assurances to investors that proceeds raised through EU green bonds will finance only climate-relevant expenditure. In December 2022, the Commission published its first NextGenerationEU green bond allocation report, showing in detail which investments are financed by green bonds and where allocations have already been made. This is complemented by an online dashboard providing nearly real-time information on green bond eligibility and allocation. The Commission has further committed to reporting on the impact generated by the measures that are financed with EU green bonds. The first impact report will be published in 2023. Currently, the Commission is in the process of developing a robust methodology for this impact reporting, which will also be audited by an independent auditor.
The EU climate methodology has already, wherever feasible, included aspects of the EU taxonomy in order to differentiate non-Taxonomy compliant climate tracking from Taxonomy compliant climate tracking in key areas. These EU climate coefficients are used for a number of important spending programmes, namely the RRF, cohesion policy funds, CEF, and InvestEU.
While the groundwork is laid, a full analysis and quantification of the Taxonomy alignment of the climate spending in these key programmes is currently not possible due to the lack of implementation and associated reporting, especially for cohesion policy funds and InvestEU. An analysis of the Taxonomy alignment of the RRF has been done in the context of the first NextGenerationEU green bond allocation report. It shows that EUR 36.6 billions (out of a total pool of EUR 185 billion) is fully compliant with the EU taxonomy, while an additional EUR 70.5 billion complies nearly fully.