The European Parliament approved on Thursday a draft law that would allow for billions of euros to be redistributed towards a plan to make the European Union independent of Russian fossil fuels.
The plan, named REPowerEU, was proposed by the European Commission earlier this year to invest in new energy saving measures, boost clean energy production, and diversify energy supply amid a crisis fuelled by the war in Ukraine.
The parliament overwhelmingly endorsed by a vote of 471 to 90 having EU governments amend their COVID-19 recovery plans to include measures to save energy while amending the proposal to prioritise investments to tackle energy poverty for vulnerable households and small companies.
“It was adopted with a very large majority. This shows the importance of this legislation and the united position of this house,” said European Parliament President Roberta Metsola.
“It also shows that every available euro must be used to help member states to tackle the energy crisis. The clear message from the parliament…is that we need this legislation now.”
The parliament agreed that the EU should redirect the unused loans left in the pandemic-era Recovery and Resilience Facility (RRF), worth around €225 billion, into REPowerEU.
Lawmakers also want an additional €20 billion in grants, proposed by the Commission, to come from an earlier auctioning of carbon emission allowances under the EU Emissions Trading System.
States need to submit new plans to unlock the money under REPowerEU, which aims to mobilise up to €300 billion in low-interest loans and grants before the end of the decade.
Romanian MEP and co-rapporteur Siegfried Muresan told Euronews that addressing energy poverty should become one of the main objectives in national programmes.
“This will be done through investments, which will increase our energy efficiency and, in turn, will bring down costs for energy bills, for families and companies,” he said.
Muresan, a member of the centre-right European People’s Party, said however that he does not think the funds should be used for direct transfers to help vulnerable citizens.
“The RRF is a performance-based mechanism, whereby funding is allocated for measures based on the completion of certain milestones and targets,” he explained.
“There are other EU instruments which aim at providing support to vulnerable citizens, such as the Fund for European Aid for the Most Deprived which supports actions to provide food and/or basic material assistance.”
How to finance support for vulnerable families?
In their last summit in Brussels, EU leaders asked the Commission to come up with new proposals “to protect households and businesses, in particular the most vulnerable in our societies.”
Germany recently came under fire for announcing a €200 billion package to help citizens and business to cope with the energy bills, as other EU countries do not have the fiscal space to do so.
The German package raised fears of unfair competition and fragmentation in the single market.
“REPowerEU is about investments, and so it would better remain like that. Support to vulnerable families and businesses would better be engineered via different schemes,” said Simone Tagliapietra, an expert in energy policy at the Brussels-based economic think tank Bruegel.
Tagliapietra said one option would be to follow the model of SURE — an EU programme that supported short-term employment schemes and kept people in jobs during the pandemic.
SURE was funded through an issuance of €100 billion in social bonds, but Muresan does not agree that it should be part of the solution.
“SURE was adopted at a different time and in different circumstances. There are ongoing discussions, but compared to the pandemic, the EU has done many things as well during this crisis, such as securing gas supply while cutting demand, or mitigating the effects of high energy prices on households and businesses. We will have to see how the current crisis evolves and what other measures will be the needed,” he said.
The European Parliament also called on the Commission to identify additional sources to complement the financing of REPowerEU actions, such as providing the flexibility to use unspent EU funds, particularly from the 2014-2020 budget.
Tagliapetra agrees that this could be another option “to create an EU Energy Crisis Response Fund.”
“To be credible, additional resources would need to be added, via joint EU borrowing,” he said.
But the idea of joint EU borrowing, which would come on top of the €750 billion from COVID-19 recovery fund and REPowerEU, is expected to be met with opposition from frugal EU countries.
“We should rather focus on how to repay the debt (from the recovery fund) rather than to create additional one,” added Muresan.
“In order to directly support families and companies, Member States can use their national budgets and set up such support schemes for the most vulnerable consumers, as the EU Budget is generally an investment tool,” the MEP added.
But countries struggling with slim budgetary margins to address the ongoing crisis may want a new and robust common EU solution, in particular considering the growing possibility of a recession.