In May, 2018, the European Commission proposed a new Multiannual Financial Framework (MFF) for 2021-2027[1]. The proposal is aligned with the European Union’s political priorities as agreed in the Rome Agenda Declaration from March 2017. One of the pillars of the Rome Agenda for the Future of the EU is a ‘prosperous and sustainable Europe’. The European Union is committed to promoting a ‘sustained and sustainable growth’ and a union where ‘energy is secure and affordable and the environment clean and safe’.

Overall, there is a shift in the composition of the MFF whereby Cohesion policy will amount to 29 percent of the overall budget compared to 34 percent during 2014-2020. The share of ‘Other policies’ goes up from 37 to 49 percent. The proposed allocations per fund are as follows: ERDF (EUR 200,622 million), Cohesion fund (EUR 41,374 million) and European Social Fund+ (EUR 88,646 million). Less Developed Regions would receive EUR 198,622 million, Transition Regions would get EUR 45,935 million and More Developed Regions – EUR 34,843 million. The definition of regions is almost the same with the only difference that the Transition Regions would have a Gross National Income (GNI) of 75-100% of the EU average instead of 75-90% in the 2014-2020 period.

The reform of the Cohesion policy goes along several lines: a focus on key investment priorities, where the EU is best placed to deliver (innovation, SMEs, digitalization, etc.); a more tailored approach to regional development (retaining the existing eligibility categories of - less-developed, transition and more developed regions); clearer and more flexible rules; and a strengthened link with the European Semester and its Country Specific Recommendations (CSR). A macroeconomic conditionality is proposed to secure the fiscal balance of the countries. Ex-ante conditionalities are streamlined and labelled enabling conditions. Potentially linking Cohesion policy funding with the application of the rule of law is also envisaged.

The budget heading III covers the environment and is called Natural Resources and the Environment. The Commission proposals envisage five policy objectives instead of the 11 ones during 2021-2027. Policy Objective (PO) 2 is on a greener, low-carbon Europe by promoting clean and fair energy transition, green and blue investment, the circular economy, climate adaptation and risk prevention and management. These are disaggregated into 21 specific objectives within the ERDF/CF Regulation. For PO 2 the specific objectives include: promoting energy efficiency measures; promoting renewable energy; developing smart energy systems, grids and storage at local level; promoting climate change adaptation, risk prevention and disaster resilience; promoting sustainable water management; promoting the transition to a circular economy; and enhancing biodiversity, green infrastructure in the urban environment, and reducing pollution.[2]

Thematic concentration will require a special spending focus on PO 1 (Smarter Europe) and PO 2 (Greener, low-carbon Europe). For countries with a GNI above 100% of the EU average the PO1+PO2 spending should be at least 85% of the overall spending. For the 75-100% GNI and the below 75% country group at least 30% is proposed to be spent on PO2. According to analysts, the new MFF will mark a significant shift from funding infrastructure towards innovation, broadband and SME support. Additionally, significant priority adjustments will be needed mainly in EU12 countries where there will be a major reduction in infrastructure allocations. This will potentially lead to absorption problems.[3]

Synergies between policy instruments will be encouraged and the most significant links are expected between Horizon 2020 (focusing on European excellence) and ERDF (focusing on regional excellence). The Commission is also proposing ‘the mainstreaming of climate across the budget and enhanced integration of environmental objectives’ in this way making the EU budget a ‘driver of sustainability’. The mainstreaming will take place into the Common Agricultural Policy placing greater emphasis on the environment and climate. Through the European Maritime and Fisheries Fund, the EU budget will continue to support a sustainable EU fisheries sector and the coastal communities dependent on it. It also intends to promote the blue economy in fisheries and aquaculture, tourism, clean ocean energy or blue biotechnology.

The Commission proposes to continue and strengthen the well-established programme for the environment and climate action, LIFE, which will also support measures promoting energy efficiency and clean energy. The Commission intends to allocate EUR 5.450 billion to projects supporting the environment and climate action. This is an increase by EUR 1.950 billion. This funding is split as follows: Nature and biodiversity (EUR 2.150 billion); Circular economy and quality of life (EUR 1.350 billion); Climate change mitigation and adaptation (EUR 0.950 billion); Clean energy transition (EUR 1 billion).

In line with the Paris Agreement and the commitment to the UN Sustainable Development Goals, the Commission proposes to set a more ambitious goal for climate mainstreaming across all EU programmes, with a target of 25% of EU expenditure contributing to climate objectives (compared to 20% in 2014-2020). The functioning of the new vehicle for catalysing private investment, InvestEU, and how effectively it targets low carbon investment is of great importance for tackling climate during the 2021-2027 period[4].

[1] A Modern Budget for a Union that Protects, Empowers and Defends – the Multiannual Financial Framework for

2021-2027, COM(2018) 321 final, 2 May 2018

[2] ERDF and CF Regulation SEC(2018) 268 final

[3] EPRC, University of Strathclyde, Proposals for the MFF and Cohesion Policy 2021-27: a preliminary assessment

[4] Commission budget proposals for 2021-2027: An IEEP guide to the environmental issues

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