The European Union will soon start the drafting process for the Multiannual Financial Framework (MFF), the 7-year programme setting down the long-term financial planning of the Union’s spending. Not only does the MFF reflect the priorities and objectives to achieve for the Union in the coming years, but also the way EU institutions are planning to meet them with specific budget allocations to different areas. So far, the EU budget has been pulling in opposite directions, without a clear vision on what the European Union wants to become in the coming years.   The post-2020 MFF will be debated, negotiated and constructed along with the process of Brexit and the discussions on the future of the EU, which will shape its future aspirations. This makes it even more important for the new MFF to become a real enabler to allocate funds in a much more coherent and efficient manner and to make the EU more resilient, more sustainable and more innovative. Technological development is already challenging the Union’s economy and is having a strong impact on its social fabric, putting the welfare of most vulnerable sectors at stake. In a world where national borders are less relevant for economic activity, solutions have to be outlined at a different administrative level. the EU is already outlining a new common industrial policy to adapt to technology change and the opportunities and challenges that come along with globalization and the increasing trend towards automation. The post-2020 MFF is another step in that direction and we must ensure we take this step firmly.  The decarbonisation of our economy is both a product of and a solution provider to the changing dynamics in technology and the global economy. According to the OECD, coupling climate and economic policies has an important positive impact on growth. The post-2020 MFF is the instrument for the European Union to take a leadership role in the clean energy transition. The Union has already submitted a collective commitment to the low-carbon transition under the Paris Agreement and is working on aligning its domestic climate and energy framework with such commitment. However, in order to better seize the opportunities that the clean energy transition holds, this effort also needs to be collective. Member States are expected to submit their National Energy and Climate Plans (NECPs) on how they intend to meet their climate and energy targets by 2018. Only by coupling these NECPs with a strong, mission-oriented MFF the European Union will be able to provide certainty for investors and lead the way to a decarbonisation that works for citizens.

the framework of the MFF should also undergo both a re-structuration and a re-focusing process to better adapt to our climate commitments. Under the current MFF, the EU is underperforming and not meeting its budgetary climate earmarks. For example, the European Court of Auditors already warned that the EU will probably miss the current 20% target for climate-related investment. On top of that, the current 7-year structure is not in line with the Paris Agreement timetable, which requires a periodic revision of the level of ambition. A 5-year structure would be more responsive to both the EU’s political cycle and the Paris timetable, allowing for a much more coherent alignment between investment needs and planning and making the EU’s multi-annual financial programming more flexible. Therefore, there is significant room for improvement for the new financial framework, both on the side of delivering to the earmarked targets and on the side of making the whole process more flexible and adaptable to the commitments under the Paris Agreement.  On the other hand, the EU’s MFF is currently pulling in opposite directions. Some budget allocations directly collide with the agreements the EU has committed itself to uphold. Investments in gas infrastructure are a glaring example of this. Nowadays, the EU’s Connecting Europe Facility (CEF Energy) has developed a list of Projects of Common Interest (PCI) for energy interconnections where EU funds could make the difference and provide a real European added value. Unfortunately, this PCI list is too focused on increasing the volume of gas infrastructure, leading to overspending in high-carbon gas. The current logic behind the MFF is therefore offsetting progress in some crucial files with counterproductive investments in other areas.  To avoid this, the new Multiannual Financial Framework must be coherent with the EU’s domestic and international commitments. Phasing out fossil-fuel subsidies would be an important first step in the right direction, responding to investor concerns, making the EU a world leader in the matter and setting a precedent for others in the G20 to follow its example.

For the post-2020 MFF to be an effective instrument, it also needs roadmaps to guide its implementation in the long-term. On November 30th 2016, the European Commission tabled a series of proposals to overhaul the EU’s energy system, making it fit for a greater share of renewables and adapting it to the climate commitments reached under the Paris Agreement in November 2015. The Regulation on the Governance of the Energy Union is an essential element of the so-called Clean Energy package, for it provides a clear set of rules for planning, reporting and assessing progress made by EU Member States to meet their collective targets for renewables, greenhouse gases emissions and energy efficiency. The proposal attempts to streamline and simplify all reporting obligations for EU Member States through the submission of National Energy and Climate Plans (NECPs) drafted according to a common template provided in the Regulation itself. This would help the European Commission monitor progress towards meeting their 2030 targets and their nationally intended contributions under the Paris Agreement.   These National Energy and Climate Plans could be the stepping stone in the process of bringing the EU budget in line with the energy transition. EU Member States will submit their initial plans in 2018, right when the European Commission will be considering its first proposal for the Multiannual Financial Framework. This is a golden opportunity to encourage Member States to use their NECPs as a detailed, coherent investment plan, complemented with adequate financing strategies at EU, national, regional and local level. This will generate certainty for financiers to put their money into clean investments. The post-2020 MFF could potentially complement these plans by offering investors the necessary financial backing to invest in projects and regions that are currently too risky for them to go alone. On the other hand, the MFF could be an instrument to ensure compliance with NECPs, linking the allocation of EU funds to the ambition that EU Member States pledge, in line with the provisions in the Governance Regulation that allow the European Commission to take measures to avoid delivery gaps.

The post-2020 budget needs to be mission-oriented, univocally supporting a more sustainable, stronger, low-carbon economy. Living up to its climate and energy commitments is the best way for the European Union to address most of its societal and economic challenges in a comprehensive and holistic way.