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Fiscal straightjacket set to block energy transition, leading Green warns

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The co-president of the Greens in the European Parliament has warned that the EU’s transition to net-zero greenhouse gas emissions is doomed to fail unless the bloc relaxes rules on public debt and deficit spending, presenting a new report that highlights the scale of investment needed.

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A Green MEP has warned that maintaining strict limits on public debt and deficit spending for reasons of “ideological dogma” could undermine EU efforts to reduce greenhouse gas emissions to net zero by mid-century.

Presenting an analysis commissioned by the Greens/EFA group in the European Parliament, co-president Philippe Lamberts said on Tuesday (30 January) that it was futile to hope that private financing would provide the full €40 trillion that the report’s authors they estimate they need to be invested until 2050.

Lamberts highlighted the EU’s plans to massively improve the energy efficiency of Europe’s building stock. “Many homeowners in Europe only have their house as capital, they don’t have an extra one or two hundred thousand euros to renovate it,” she said. “So without massive public support, the wave of renovations won’t happen.”

The report from the Rousseau Institute, a French think tank, suggests that European governments will need to allocate the equivalent of an additional 1.6% of GDP to the energy transition, roughly doubling public spending to 510 billion euros a year across the block to attract private individuals. investment. Around two-thirds of the additional investments will be needed in the construction and transport sectors, he concludes.

But ongoing reforms to the EU’s tough fiscal rules, which cap national debt at 60% and budget deficits at 3% of annual gross domestic product (GDP), do not come close enough to freeing up necessary resources. public finances, Lambert told reporters in Brussels.

Crucially, he said, neither governments nor the European Parliament, which is currently working out a compromise on the rules, have accepted the idea of ​​an exclusion of green infrastructure spending. France had led a group of countries pushing for such public investments to be excluded from the calculation of adjustments required when countries run excessive deficits.

“The tax rules being discussed right now will make these investments legally impossible,” Lamberts said. Even countries that do not have excessive debt will be unlikely to be able to channel public money into the transition. “Member states will not consider these investments simply because they want to stay within the limits set by the rules,” the Belgian MP said.

“I’m sorry but you can’t look at reality through the eyes of an… ideologically blind accountant, and that’s what’s happening right now,” continued Lamberts, who as shadow parliamentary rapporteur for the economic governance review he was preparing for an evening round of negotiations. behind closed doors. “We need to be realists, not ideologues here. It’s about survival.”

Presenting the report alongside Lamberts, lead author Guillaume Kerlero de Rosbo sought to put his team’s estimate of the additional public spending needed into perspective. The report highlights that the sum is less than the €338 billion allocated by the EU for Covid recovery funding, or the €359 billion annually spent by member states to subsidize fossil fuels. “We believe it is very important to put this extra 260 billion euros of public money into context,” Kerlero de Rosbo said.

As well as arriving just hours before the latest round of negotiations on new EU fiscal rules, the report was published exactly a week before the European Commission is due to publish its recommendations for a new gas emissions reduction target on 6 February greenhouse by 2040. A leaked draft communication circulated in Brussels last week suggests that the Commission intends to support a 90% reduction in net emissions compared to 1990, the lower limit of a five-point range recommended by the independent scientific advisory committee of the EU.

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