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Germany reluctant to grant additional funding to EU’s Green Deal

The German finance ministry has made clear it will not pay more into the EU budget to bolster the Commission’s…

Moreover, the European Investment Bank (EIB) does not need a capital increase as European climate targets can be reached "with the EIB's existing resources," the German finance ministry commented. Under the Commission’s proposal, the EIB was meant to grant a public sector loan, backed by the EU budget, to mobilise between €25 and €30 billion of investments.

Where will the funds come from?

On January 14, Ursula von der Leyen, the new President of the European Commission unveiled its financial plan to shift Europe towards carbon-neutrality by 2050.

Of the staggering €1 trillion funding for the EU Green deal, some €503 billion will come from the EU budget, plus some €25 billion from the EU emission trading system (ETS) funds. InvestEU, an umbrella organization of European investment banks and national banks are hoped to help mobilize private sector monies of at least €279 billion.

To ease the burden in Europe’s traditional coal regions, a ‘Just Transition Mechanism’ has been set up to help mobilise at least €100 billion over the period 2021-2027 in the most affected regions by alleviating the socio-economic impact of the transition. This fund will receive €7.5 billion of „fresh EU funds,“ the Commission pledged, with another €30 and €50 billion set to come from the European Regional Development Fund and the European Social Fund Plus.

How much of this is new money?

The European Green Deal Investment Plan builds on the Commission's proposal for the future long-term budget 2021-2027. Running for 7 years, it will mobilise 25% of the EU budget for climate financing and invest in environmental objectives through several EU programmes.

Extrapolated to 10 years, assuming the climate target will be at least maintained post -2027, the long-term budget is expected to deliver €503 billion. The next long-term budget 2021-2027 is currently under negotiation. The numbers are extrapolated to ten years, without prejudice to the final agreement on the next long-term budget and the one after 2027.

The Plan also builds on the contributions from national budgets to EU projects, on public and private investments mobilised by InvestEU and the ETS funds

EU push compels Germany to act

In Germany, green investment is rising quickly in volume, but sustainable finance experts warn that the government needs to find a clear position on how it plans to integrate finance in its environmental policies in order to shape developments rather than just following them.

Though sustainable investment still only account for about 3 percent of the country’s overall investment, the volume of assets managed in retail funds under the so-called ESG (environmental, social, governance) criteria in Germany has doubled over the past five years from €15 billion to over €30 billion. More coherent action, and pan-European coordination would be needed in the future, to help enact aspirations under the EU Green Deal


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