European Commission 2 May 2018. Presented its proposal for the European Union's Multiannual Financial Framework (MFF) for 2021-2027. Details of individual policies and spending programmes will be published between 29 May and 12 June 2018. The European Commission calls for the legislative process related to the MFF 2021-2027 to be completed before the European Parliament elections in May 2019. The following is an assessment of the key currently known MFF 2021-2027 proposals for the energy sector.
Key proposals on the expenditure side of the energy sector and climate change targets
The European Commission has proposed an increase in funding for climate change goals from 20% under the MFF 2014-2020 to 25% of the entire EU budget in 2021-2027. In absolute terms, this means an increase in spending on this goal from €206bn to €320bn in 2021-2027. In particular, it has been proposed to increase funding for the Connecting Europe Facility in the area of energy to €8.6 billion (from €5.8 billion in 2014-2020) and in the LIFE programme (Programme for the Environment and Climate Action) to €5.4 billion (from €3.4 billion in 2014-2020). At the same time, the European Commission has proposed a reduction in funding for regional development and cohesion funds to €273 billion and an expansion of the catalogue of criteria on the basis of which these funds will be allocated to include such factors as unemployment rate, climate change, reception and integration of refugees, as well as a closer link between spending and the Commission's proposals and recommendations under the "European Semester".
Unfortunately, the Commission, as part of its energy and climate policy priorities, has not proposed supporting the transition of coal-dependent countries and regions, e.g. in the form of a dedicated energy transition fund postulated by the EuropeanParliament.1 It should be noted that this would be in line with the assumptions of the Platform of Coal Regions in Transition established by the Commission in 2017. Moreover, the call for such a dedicated fund has been repeatedly made by European trade unions2 as well as EURELECTRIC - the largest organisation representing the European electricity industry3. According to PKEE, the final shape of the MFF 2021-2027 should include among its priorities effective support for energy modernisation in countries and regions heavily dependent on coal, which would be in line with the Union's ambitions. on climate change and the objectives of the Paris Agreement.
Key proposals from the European Commission on the revenue side of the Multiannual Financial Framework 2021-2027 for energy and climate objectives - part of the revenue from CO2 auctions is to become a new own resource for the EU
In connection with the exit of the United Kingdom from the European Union and the need to seek additional sources of revenue, the European Commission proposed in the system of the EU's own resources to raise funds, among others, from the sale of CO2 emission allowances under the EU ETS. The proposal assumes that Member States will contribute to the new EU budget up to 30% of revenues from the sale of emission allowances allocated in accordance with Article 10(2)(a) of the EUETS Directive4. At the same time the Commission proposes to exclude aviation allowances, allowances from the Modernisation and Innovation Fund and the Solidarity Pool from the new source.
The European Commission also proposes to impose an obligation to pay into the 30% the equivalent of the market value of allowances that may be allocated for free to electricity generators under Article 10c of the EU ETS Directive. It is estimated that 1 European Parliament, Report on the next MFF: Preparation of the Parliament's position on the post-2020 MFF. (2017/2052 (INI)), A8-0048 / 2018, 28.2.2018.2 European Trade Union Confederation, Renewed EU industrial policy - ETUC response. Adopted at the meeting of the Executive Committee on 25-26 October 2017.3 EURELECTRIC Statement, Multiannual Financial Framework beyond 2020, October 2017. 4 COM (2018) 325 final, Proposal for a Council Decision on the system of own resources of the European Union, Brussels, 2.5 .2018.value of the revenues that would have been generated by the Member State if the allowances had not been allocated for free. This applies to the following countries eligible to benefit from free allocation to electricity generators - Bulgaria, Czech Republic, Estonia, Croatia, Hungary, Latvia, Lithuania, Poland, Romania and Slovakia. The exact percentage threshold of the contribution, which may not exceed 30%, is to be specified in implementing legislation.
PKEE's main proposals for the Multiannual Financial Framework 2021-2027 on energy and climate targets
The Polish Electricity Association supports the increase of financial means for climate objectives to the level of PLN 25% in the Multiannual Financial Framework 2021-2027. However, we are concerned about the decrease of funds for regional development and cohesion funds, which can be allocated to investments aimed at modernization of the Polish power sector.
Given that the sector is largely coal-based, the transformation of the electricity sector in Poland requires relatively much more investment than in other Member States. Estimates indicate that Investment outlays necessary to decarbonise the sector only in the period 2021-2030 will amount to ca. PLN 250 billion, while the cost of purchasing ETS allowances will be ca. PLN 130 billion (over EUR 30 billion).
This is a huge challenge for a country where GDP per capita is still among the lowest in the European Union5 . Thus, regional development and cohesion funds will be an important source of funding to help overcome this challenge in line with the Union's climate policy objectives and the provisions of the Paris Agreement.
We are concerned that there is no specific fund earmarked for a fair energy transition for coal-dependent regions. In particular, these funds should be earmarked to accelerate the sector's transition to low emissions, to reduce energy poverty and to support innovation in the energy sector.
The lack of creation of such a fund, together with the reduction of resources for regional development and the cohesion fund, severely restricts the possibilities for energy transformation by Member States and regions with a high proportion of employment in coal mining and electricity generation, including Poland. Given that most of these countries and regions have a GDP per capita below the EU average, such a transformation will be a huge challenge for them. Failure to prioritize this challenge within the framework of the MFF 2021-2027 funds may result in growing disproportions in the level of development of European regions and lower their competitiveness, and thus be contrary to the priorities of the European Union.
We are in favour of the Commission's proposals to increase budget revenue, inter alia , by increasing own resources. At the same time we think that provisioning the EU budget should be evenly distributed between the Member States and take account of their financial capabilities in a fair way. We therefore take a negative view of the proposal to raise funds from the sale of EU ETS allowances.
Poland's share of total EU CO2 emissions is about 9%. Poland's share of EU emissions is three times higher than its contribution to the EU budget of about 3%. The share of up to 30% of the proceeds from auctioning the domestic pool of allowances is a much greater burden for Poland than for Member States with a smaller share of EU emissions compared to their contribution to the EU budget. This burden becomes even greater when taking into account that the Commission proposes to include in the contribution also up to 30% the equivalent of a free right for energy modernisation.
At the same time, it should be stressed that, according to the European Commission, the revenues generated by the above contribution from the EU ETS will be, on average, per year only between 0.65% and 1.64% of total EU budget revenue in 2021. 2027 r. (On average, from ca. EUR 1.2 to 3.0 billion annually depending on the price of rights). Experience to date with the evolution of EU ETS allowance prices confirms their high unpredictability. Therefore, it is right to ask about the possibility of finding another, fairer and more predictable source of income, less controversial and less burdensome than obtaining funds from the sale of EUETS allowances proposed by the European Commission.