The EU Budget for Climate Action: A Comprehensive Guide to Its Benefits, Challenges, and Opportunities

The EU budget for climate action is one of the most powerful tools. It supports climate action in Europe and beyond. In fact, the EU has committed to spend at least 30% of its 2021-2027 budget on climate-related activities. It amounts to about €550 billion. However, the EU budget for climate action is not as simple or straightforward as it may seem. Moreover, it involves a complex and uncertain process of negotiation, allocation, implementation, and evaluation. It also faces various challenges and opportunities that require collective action and political will. How does the EU budget for climate action work? What are its benefits and challenges? Engage with this initiative and reap the rewards. Let’s explore how! In this article, we will give you a comprehensive guide to the EU budget for climate action.

We will explain what the EU budget is? How it works, how much the EU spends on climate action? What are the main programs and instruments that support climate action? What are the challenges and opportunities that lie ahead. We’ll share practical tips and recommendations for engaging with and benefiting from the EU climate action budget. We’ll show you how to access the EU’s budget and make your mark on a sustainable future. By the end of this article, you will have a better understanding of the EU budget for climate action. We will also explain how it can help you and the planet.

What is the EU budget, and how does it work? 

The EU budget is the financial plan that sets out how the EU spends its money. It covers a period of seven years, known as the multiannual financial framework (MFF). The current MFF runs from 2014 to 2020, and the next one will cover 2021 to 2027.

The EU Budget for Climate Action is funded by three main sources: own resources, other revenue, and borrowing. Own resources include customs duties, value-added tax, and contributions from member states based on their gross national income. Other revenue includes fines, interest, and surplus from previous years. Furthermore, the Eurozone nations actively utilize borrowing to finance specific instruments. For example, the €800 billion NextGenerationEU recovery fund, aimed at propelling Europe toward a sustainable future.

Policies and Programs

The EU Budget for Climate Action is allocated to various policies and programs. The aim is to promote the EU’s values and objectives. For example peace, solidarity, democracy, human rights, innovation, competitiveness, cohesion, and sustainability. The EU budget is divided into seven headings: smart and inclusive growth; sustainable growth; security and citizenship; global Europe; administration; compensation; and special instruments.

The decision-making process for the EU Budget for Climate Action involves three institutions: the European Commission, the European Parliament, and the Council of the EU. The European Commission proposes the budget. Then, the European Parliament represents the citizens. Subsequently, the Council of the EU represents the member states. Adopting the budget requires a multi-stage process, where stakeholders negotiate, consult, amend, and ultimately approve its contents. Several actors play a crucial role in the budget’s adoption, participating in negotiations, consultations, amendments, and final approval.

Negotiations among the European Commission, the European Parliament, and the Council of the EU lead to the agreement on the Multiannual Financial Framework. It sets out the main priorities and financial framework for the EU budget. The MFF determines the size and structure of the EU budget, and it reflects the EU’s long-term political priorities.

EU Budget Benefits

The EU budget benefits different sectors and regions in various ways. For example, it supports research and innovation, infrastructure development, agriculture, education, and social cohesion across the EU. It also provides funding for projects that promote economic growth, job creation, and environmental sustainability. The EU budget plays a crucial role in fostering economic and social development, reducing regional disparities, and promoting cooperation among member states.

When comparing the size and structure of the EU budget with other major economies or organizations, it is important to consider the EU’s unique political and institutional framework. The EU’s specific objectives and policies drive the design of its budget, reflecting its unwavering commitment to solidarity, cooperation, and sustainable development.

By understanding how the EU budget works and its main priorities, we can appreciate the significant role it plays in shaping the EU’s future and promoting the well-being of its citizens. The EU budget is a powerful tool for advancing the EU’s values and objectives, and it provides opportunities for member states, sectors, and regions to benefit from EU funding and support. To understand the broader context of the EU’s climate action, refer to the Climate Change Report 2023.

How much does the EU spend on climate action?

Climate action is a key priority of the EU Budget for Climate Action. The EU has committed to spending at least 20% of its 2014-2020 budget on climate-related activities, which amounts to about €220 billion. Moreover, the EU has actively raised its climate action target for the 2021-2027 period to 30%, resulting in a significant investment of at least €550 billion in climate change initiatives.

The EU actively implements a system called “climate mainstreaming” to track its climate spending, effectively integrating climate objectives into all areas of the budget. For each program or instrument, a percentage of its expenditure is classified as contributing to climate action, either fully or partially. This percentage is based on a methodology that assesses the expected impact of each activity on reducing emissions or enhancing adaptation.

Emissions Trading System (ETS)

The EU also supports climate action through its own resources. For example, it collects revenues from its emissions trading system (ETS), which is a market-based mechanism that puts a price on carbon emissions from power plants and industries. The EU Emissions Trading System (ETS) generates about €15 billion per year. It is actively used to finance low-carbon projects in member states.

The EU Emissions Trading System (ETS) takes aim at climate change by capping the total amount of greenhouse gases power plants and industries can release. The cap is gradually reduced over time, which creates a scarcity of emission allowances and increases their price. Companies can buy and sell these allowances on the market, which gives them an incentive to reduce their emissions and invest in low-carbon technologies. The ETS has several benefits, such as providing a clear and predictable price signal for carbon emissions, encouraging innovation and efficiency, and generating revenue for climate action. However, it also faces some challenges, such as the risk of carbon leakage, which occurs when companies relocate their production to countries with weaker climate policies, and the risk of price volatility, which can affect the competitiveness of some sectors.

Programs and Projects

The EU budget funds various programs and projects that aim to support climate action across different sectors and regions. For example, the LIFE Climate Change Mitigation and Adaptation program provides €905 million to develop and implement innovative ways to respond to climate change. The Innovation Fund finances innovative low-carbon technologies to reach climate neutrality in Europe. The Modernisation Fund supports modernizing energy systems and improving energy efficiency in 10 EU countries. The EU also provides funding for research and innovation, infrastructure development, agriculture, education, and social cohesion across the EU.

Compared to other countries or regions, the EU is one of the largest providers of public climate finance in the world. According to the data compiled by the European Commission, close to half of the funding is dedicated to climate change mitigation actions and around 20% to climate change adaptation initiatives in developing countries. The EU has also set ambitious targets for reducing greenhouse gas emissions, increasing the share of renewable energy, and improving energy efficiency by 2030. However, there is still room for improvement, and the EU needs to accelerate its transition to a low-carbon and climate-resilient economy to meet the goals of the Paris Agreement and limit global warming to 1.5°C.

What are the main EU programs and instruments that support climate action?

The EU has a wide range of programs and instruments that support climate action across different sectors and regions. Some of them are:

• The European Green Deal: A comprehensive strategy to make Europe the first climate-neutral continent by 2050. It includes a set of policies and initiatives that cover areas such as energy, transport, industry, agriculture, biodiversity, circular economy, and social justice.
• NextGenerationEU: A temporary recovery instrument that aims to help rebuild a post-COVID-19 Europe that is greener, more digital, and more resilient. It has a total budget of €750 billion, of which 37% will be allocated to green transition.
• Horizon Europe: The EU’s flagship research and innovation program. It has a budget of €95.5 billion for 2021-2027, of which 35% will be dedicated to climate-related objectives. It supports projects that address global challenges such as clean energy, green mobility, climate resilience, and biodiversity.
• The LIFE program: The EU’s funding instrument for the environment and climate action. It has a budget of €5.4 billion for 2021-2027, of which 63% will be allocated to climate action. It supports projects that demonstrate innovative solutions, best practices, and awareness-raising activities in the fields of mitigation, adaptation, and governance.
• The European Regional Development Fund (ERDF) and the Cohesion Fund (CF): The main instruments of the EU’s cohesion policy. They aim to reduce economic and social disparities among regions and promote sustainable development. They have a combined budget of €242.9 billion for 2021-2027, of which 30% will be allocated to climate action. They support projects that improve energy efficiency, renewable energy, low-carbon transport, urban development, and other climate-related areas.

Supporting climate action across the EU and beyond

These programs and instruments play a crucial role in supporting climate action across the EU and beyond. They provide funding, expertise, and guidance to various stakeholders, including governments, businesses, NGOs, and citizens, to help them transition to a low-carbon and climate-resilient economy. By leveraging these programs and instruments, we can accelerate the pace of climate action and achieve our common goals of mitigating and adapting to climate change.

What are the benefits and challenges of the EU budget for climate action?

The EU budget for climate action has many benefits, such as:

• It helps the EU achieve its commitments under the Paris Agreement and the UN Sustainable Development Goals.
• Also, it supports the transition to a low-carbon economy that is more competitive, innovative, and resilient.
• Moreover, it creates new opportunities for growth, employment, and innovation in sectors such as renewable energy, green transport, circular economy, and climate services.
• In addition, it enhances the resilience and adaptation of communities, ecosystems, and infrastructures to the impacts of climate change.
• undoubtedly, it fosters cooperation and solidarity among countries and regions to address common challenges and pursue shared interests.

However, the EU budget for climate action also faces some challenges, such as:

• The complexity and uncertainty of the budgetary process, which may affect the timely and effective allocation and execution of funds.
• The coordination and coherence of the various programs and instruments, which may have different rules, procedures, and objectives.
• The monitoring and evaluation of the results and impacts of the climate spending, which may require robust indicators, data, and reporting systems.
• The accountability and transparency of the budgetary management, which may require strong oversight, audit, and control mechanisms.
• The communication and engagement of the stakeholders and beneficiaries, which may require clear information, guidance, and feedback channels.

How can you get involved and benefit from the EU budget for climate action? 

The EU budget for climate action is not only a matter of institutions but also of citizens. Therefore, it requires the active participation and support of all stakeholders, including civil society, private sector, academia, media, youth, women, etc. Here are some ways you can get involved and benefit from the EU budget for climate action:

• Educate yourself and others: Learn about the benefits and opportunities of the EU budget for climate action, as well as the rights and obligations of beneficiaries and taxpayers. Share this knowledge with others to raise awareness and promote informed discussions.
• Advocate for allocation and implementation: Advocate for the allocation and implementation of the EU budget for climate action by your country, region, or sector. Encourage policymakers to prioritize climate-related policies and programs and align them with the EU’s climate goals.
• Engage with authorities and institutions: Engage with your national or regional authorities, as well as the EU institutions and agencies, to provide feedback and input on the EU budget for climate action policies and programs. Participate in public consultations, attend meetings, and join relevant networks or working groups.
• Explore funding opportunities: Explore and seize the new funding opportunities that the EU budget for climate action offers. Look for grants, subsidies, or financing schemes that support innovative projects contributing to climate mitigation or adaptation. Stay updated on funding calls and eligibility criteria.
• Partner and collaborate: Partner and collaborate with other stakeholders across borders to share best practices, exchange information, and build networks. Collaborative initiatives can leverage resources, expertise, and experiences to achieve greater impact and address common challenges.

By engaging with the EU Budget for Climate Action, you can contribute to shaping climate policies and driving positive change. Together, we can work towards a sustainable and resilient future for all.

Final Words

The EU budget is a powerful tool to support climate action in Europe and beyond. It reflects the EU’s commitment to achieve its climate goals and targets, as well as its leadership role in the global fight against climate change. Moreover, it supports the transition to a low-carbon economy that is more competitive, innovative, and resilient. It creates new opportunities for growth, employment, and innovation in sectors such as renewable energy, green transport, circular economy, and climate services. In addition, it enhances the resilience and adaptation of communities, ecosystems, and infrastructures to the impacts of climate change. It fosters cooperation and solidarity among countries and regions to address common challenges and pursue shared interests.

However, the EU budget for climate action also faces some challenges that require collective action and political will. These include the complexity and uncertainty of the budgetary process; the coordination and coherence of the various programs and instruments; the monitoring and evaluation of the results and impacts; the accountability and transparency of the budgetary management; and the communication and engagement of the stakeholders and beneficiaries.

The EU budget for climate action is not only a matter of institutions but also of citizens. Therefore, it is crucial that all stakeholders get involved and benefit from it. By educating ourselves and others about the benefits and opportunities of the EU budget for climate action, advocating for its allocation and implementation, engaging with authorities and institutions, exploring funding opportunities, and partnering with other stakeholders, we can make the EU budget for climate action a reality and a success for Europe.