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EU Update – December 2020

17/12/2020

EU Heads of State agree on 2021-2027 budget and European Recovery Plan

On 10 December, the European Council found an agreement on the EU’s Multiannual Financial Framework (MFF) for 2021-2027 and the Recovery Plan. Member States can now proceed with the ratification of the Own Resources Decision, which allows the Commission to borrow on the markets under the €750-billion Recovery Plan. The European Parliament still needs to approve the MFF, the EU’s €1.1 trillion seven-year budget, but MEPs involved in the negotiations already expressed their satisfaction with the deal. In total, up to €1.8 trillion will be spent by 2027 to boost the EU’s economy in the face of the COVID-19 pandemic and, at the same time, to make European economies more sustainable and digital, partly thanks to the €750 billion recovery fund.

European Council finds consensus on updated 2030 emissions reduction target

On 11 December, the European Council endorsed a binding collective EU target of a reduction of at least 55% in greenhouse gas emissions by 2030, as proposed by the European Commission in its Climate Target Plan in September 2020. Negotiations on the reduction target had been stalling over the past months, mainly over disagreements regarding the enabling framework of how to help EU countries, especially the poorer and more fossil-fuel-dependent Member States, in their energy transition. The final agreement reassures financial and regulatory support, as well as the use of nuclear and natural gas technologies as transitional measures. Additionally, the deal calls for a reform of the EU Emissions Trading System (ETS), and specifically the Modernization Fund, to provide more support for coal-reliant countries. The EU’s updated climate goal will now be written into a draft European Climate Law and transmitted to the United Nations at the end of the year as the bloc’s formal commitment under the Paris Agreement. The updated emissions reduction target will significantly influence the roll-out and review of EU sectoral climate legislation expected for next year.

European Commission publishes EU Strategy for sustainable and smart mobility

On 9 December, the European Commission published a comprehensive ‘Sustainable and Smart Mobility Strategy’ together with an action plan of 82 legislative and non-legislative initiatives that will be taken over the next four years. The strategy outlines the plan for the EU transport system to achieve its green and digital transition. By 2030, the Commission aims to have at least 30 million zero-emission cars and 80 000 zero-emission lorries in operation and by 2050 nearly all cars, vans, buses as well as new heavy-duty vehicles will be zero-emission. The final objective, in line with the European Green Deal, will be a 90% cut in emissions by 2050. This will be achieved by making all transport modes more sustainable, making sustainable alternatives widely available in a multimodal transport system and by putting in place the appropriate incentives. Actions that will be taken at EU level will include measures to reduce the current dependence on fossil fuels by replacing existing fleets with low- and zero-emission vehicles and boosting the use of renewable and low-carbon fuels. In addition, the EU will increase the support to shift activity towards more sustainable transport modes, for example by shifting a substantial amount of freight onto rail and inland waterways. Moreover, there will be a push to fully internalise the negative externalities through carbon pricing mechanisms and infrastructure charging. All external costs of transport within the EU should be covered by the transport users at the latest by 2050.

Brexit update

Despite months of intense negotiations, the political differences between the EU and UK on issues such as level playing field provisions, governance and fishery, could still not be overcome. After an inconclusive meeting between Prime Minister Boris Johnson and President of the European Commission Ursula von der Leyen on 10 December, the European Commission has now published the Union’s no-deal contingency plans and the legislation to support them. With Member States remaining aligned on the position that no deal would be preferable to a bad deal and that there is no chance of an extension of the transition period beyond 31 December, it is unclear whether the last stretch of negotiations will yield results.