The initial European Commission proposal would allow practically any fossil fuel investments under the guise of "guaranteeing the short-term security of supply". The European Parliament's amended text did insert safeguards to this initial proposal, but would still allow extensive fossil gas investments, notably new LNG infrastructure.
Ironically coinciding with the Finance Day at COP27 in Egypt, this loophole would be in stark contradiction to the imperative to end all fossil fuel subsidies as soon as possible.
A positive vote to the legislative proposal's provision to allow for more fossil gas investments in Plenary on Wednesday would be a significant backtrack in terms of reducing the scope for fossil fuel subsidies through the EU funds. Investments could allow new fossil gas infrastructure, most notably for LNG, which the current finance EU funds rules don't allow or only partially allow.
The safeguards introduced by the European Parliament are tighter, as the initial Commission proposal would have allowed any oil and gas investments, but remains a very negative development for decarbonising the energy system. It is also unnecessary from an energy security standpoint.
The EU should also be weaning itself off fossil fuel imports, to avoid incentivising partner countries to invest in fossil gas and LNG, to avoid new fossil fueled wars and to curb climate change.
Among other studies, CAN Europe's recent briefing based on the Paris Agreement Compatible Scenario demonstrates that it is possible to wean off Russian gas in only four years, without additional gas imports from elsewhere, with more ambitious action to curb energy demand, ramp up sustainable renewables and roll out flexibility options.
Fossil fuel subsidies tend to be orbiting key issues in the UN Climate Talks. After last year's announcements at COP26 in Glasgow, with countries committing to speed up the phaseout of fossil fuel subsidies and reduce the use of coal, this year's COP27 should add pressure for countries to phase out all fossil fuels and end subsidies, precisely because of the current fossil fueled war.
Nevertheless, the 'REPowerEU' financial proposal would wipe out the EU's credibility in the fight against climate change, its commitments to phase out fossil fuel subsidies by 2025, more so in the post-Russian invasion of Ukraine context, which made more evident than ever the need to move away from fossil fuels and their imports.
The European Parliament resolution is key ahead of trilogue negotiations between the EU Council, Parliament and the Commission, that are expected to kick off after the Parliament's plenary vote.
Also on Wednesday, the European Commission will issue a communication on the Fiscal Reform, which is expected to propose loosening the noose on highly-indebted member states giving them more time to reduce their public debt.
This is necessary to avoid imminent cuts in public spending on climate action, energy transition, health or education. However, the proposal may not pay enough attention to the quality of public spending, i.e., the need to make sure that additional fiscal space goes together with a termination of bad public spending such as fossil fuel subsidies, or investments harming nature and climate.
A good investment should not be generating GDP growth, but rather strengthen the resilience of the EU economies and societies to future shocks by delivering on climate action and social justice.
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