FASI: Funding Aid Strategies Investments

REPowerEU’s implementation through the RRF will be difficult in practice, Auditors say

Photo credit: European Commission, 2022With Russia's invasion of Ukraine and the RepowerEU proposal, the EU now has a roadmap aiming to a more resilient energy system by ending the EU's dependence on fossil fuels and a clean energy transition. More than two months after the submission of the proposal, the European Court of Auditors (ECA) notes that the proposal can be challenging.

Through the RepowerEU Plan the European Commission is poposing to amend a package of EU laws introducing some specific chapters for example in the Recovery and Resilience Facility regulation, or in the directive putting in place the Emission Trading System (ETS) and its amending directive creating a market stability reserve for ETS.

REPowerEU's flaws it relation to RRF objectives

According to a European Court of Auditors opinion the RepowerEU Plan contains some internal contradictions which extend to its impact within the context of the Recovery and Resilience Facility. Auditors statet that the strengthening of energy infrastructure and facility aimed at “meeting immediate security of supply needs for oil and gas” crawls with the longer-term REPowerEU objective of reducing dependence on fossil fuels, or with the RRF’s strong focus on the green transition, which has been allocated with 37% of the RRF funds.

Moreover the RepowerEU sets the objective to achieve the “diversification of energy supply or the reduction of dependence on fossil fuels” before 2030. Its timeframe does not match the final date for the full implementation of the RFF, whose funds are to be disbursed within 2026. As a consequence, RepowerEU objectives have to be achieved through the RFF, but they will hardly be fulfilled given the limited timeframe. Auditors remark, furthermore, that the RepowerEU’s amended operational arrangements are unlikely to be signed before mid-2023 and that shortens even more the timeframe for the implementation of the Plan policies financed through the RRF.

In addition, whilst REPowerEU targets the EU as a whole, the RRF is implemented through measures put forward by Member States. This may distract attention to the priorities of individual Member States rather than those of the Union as a whole.

Lacks in funding

Auditors notes that the sources considered for the funding of the RepowerEU are outside the EU Commission’s control except the ETS allowances. ECA assessment focuses in particular on the possibility to use the 220 billion of the remaining RRF loans to be redirected for the Plan. They cover a big part of the 274 billion euros of maximum available funding estimated by the Commission. EU Commission estimated the EU needs 210 billion euros to complete the phasing-out of Russian fossil fuel imports by 2027. Of the 385.8 billion euros made available for loans under the RRF, Member States have so far requested 165 billion euros. They can request a loan until 31 August 2023, but until then the amended text under RepowerEU could not be yet adopted.

“The application for this loans is voluntary, and in general, Member States with more favourable borrowing conditions than the EU can offer are unlikely to use them”, the report reads. Funds supporting the Plan (which includes 29.9 billion euros from voluntary transfer from cohesion funds and 7.5 billion euros from voluntary transfer from rural development funds) would be distributed in proportions based on those used initially for the RRF. Auditors see this method would reflect neither the current challenges and objectives of REPowerEU nor the specific needs of Member States. As a consequence it's unclear whether these funds will correspond investment needs.

A dangerous exception

They also raise concerns on the exception on the principle of “do no significant harm” to include in the national Recovery and Resilience Plans. Introducing an exemption from this principle justified by the need to grant “immediate security of supplies needs” may jeopardise one of its core values. “It may be useful at least to have an indication of the impact of potentially harmful measures so as to select those which represent an acceptable level of environmental and climate impact compared to the value added they are expected to bring to the REPowerEU objectives”, Auditors state.

Unsuitable performance indicators

Finally, indicators proposed to track progress and achievement in relation to RepowerEU are not suitable to measure the Plan’s performance. The number of measures in the REPowerEU chapter implemented is an indicator only indirectly linked to the objectives. Measuring the real contribution to REPowerEU objectives, and in particular towards phasing out the EU’s dependency on Russian gas only indirectly linked to the objectives would be challenging to assess, the Auditors remark.

ECA report on the implementation of REPowerEU Plan