The contribution of the Recovery and Resilience Facility (RRF)—the most important component of the EU's coronavirus recovery fund—to climate policy and the green transition is unclear, according to a new report by the European Court of Auditors. At least 37% of the RRF funds must be used for climate measures. According to the European Commission, €275 billion—42,5% of the RRF funds—have been used to support the EU's climate targets (as of February 2024). However, the auditors warn that this amount could be overestimated by at least €34,5 billion. Further problems also exist with the so-called milestones and targets for climate-relevant measures, the reporting of the money actually spent, and the environmental performance of projects labeled "green."
One of the main objectives of the ARF is to support Europe's climate goals and the ecological transition in EU countries. Unlike usual EU spending, the funds from the ARF are not disbursed to cover incurred expenses, but rather based on the achievement of milestones and targets. The auditors identified several weaknesses. Among other things, due to this specific financing model and the relatively short term of the ARF, there are doubts as to whether all the money earmarked for climate protection is actually serving this goal.
"The RRF is a huge EU-wide investment and, if implemented correctly, is expected to significantly accelerate the achievement of the EU's ambitious climate goals," said Joëlle Elvinger, the Court of Auditors responsible for the report. "However, the recovery plans rely heavily on estimates, there are gaps between planning and practice, and ultimately little indication of how much money is flowing directly into the ecological transition."
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In practice, the climate contribution of ARF measures is not always determined in detail, according to the auditors. To calculate the share spent on climate, the European Commission uses climate coefficients: a coefficient of 100% for measures with a significant contribution, 40% for a not insignificant, positive contribution, and 0% for a neutral or insignificant contribution. However, many measures could not be clearly defined, and the auditors found that the climate contribution was overestimated in some cases. They also found that some projects described as green showed no direct connection to ecological transition upon closer inspection. For example, the climate contribution of a measure to improve the water supply was stated as 40%. In fact, the funds were spent by a government on IT solutions for the digitalization of the supply system. It would therefore have been more accurate to record a contribution of 0% for this. To avoid such cases, the EU auditors recommend that climate-relevant projects be assessed in more detail and with greater discrimination in the future.
The auditors further found that some measures were not as environmentally friendly as they appeared. In one project, water was even literally silted up. This involved a pumped-storage power plant, whose serious environmental impacts had not been assessed prior to funding. To achieve climate spending targets, EU countries provide cost estimates in their plans, which are only reviewed in advance and not after implementation. The actual costs of an ARF measure can, however, deviate significantly from the estimates. Consequently, expenditure on climate measures is not conclusively recorded. To avoid such discrepancies, the EU auditors recommend that future instruments be more closely linked to climate targets. Furthermore, the final accounting and public disclosure of what the money was spent on.
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