Facing a sharp decline in financial support from the next European budget, countries of Central Europe have found new opportunities in the "formerly-hostile" environmental policies.

Comedy has a way of shining a light, sometimes uncomfortably, on the internal motivations and psychology of a society, even elucidating how seriously (or not) they consider an issue. This was certainly the case when Viktor Orbán’s communication minister, Antal Rogán, quipped last year that “Greens are like watermelons: green outside, but red inside.”

The reason for this “against the tide” position stemmed from the viewpoint that climate change – in fact any green – initiatives were seen as obstacles to the economic and industrial development of Hungary. The rest of the V4 choose not to champion the green cause either – until, that is, they discovered that there was money available.

The Green-eyed Monsters

Since European Commission President Ursula von der Leyen announced the European Green Deal with its massive funding, the questions resonating across the region are: how much can we get?  And would it come at the expense of the – apparently, shrinking – cohesion funds or the common agriculture policy (CAP)?

Ursula von der Leyen

The stakes are high. According to the Commission’s early estimates, Poland could be the largest beneficiary of the mechanism, getting around 27 billion euros, including 2 billion from the Just Transition Fund (JTF). Germany could count on 13.4 billion euros; Romania potentially could receive 10.1 billion euros, and the Czech Republic could eek out 7.8 billion euros.

While these sums are encouraging, the European budget summit this month revealed how deep the divisions really are; not only between the so-called Frugal Four and the Friends of Cohesion, but also when it comes to the future priorities of the EU27.

Polish Prime Minister Mateusz Morawiecki called the negotiations “the most difficult in history”: partly, due to the funding gap left by Brexit, but also because some countries “push for new goals, they want to have a new structure of this budget.”

All new areas, like Horizon Europe, migration policy, defence policy, innovation are “important but they cannot be realised at the cost of the cohesion policy and the CAP,” Morawiecki continued.

But as the summit ended with no compromise on the central question (the size of the 2021-2027 budget), bickering over the remaining issues – like restructuring the budget and the exact money allocated for fight climate change – has been postponed to a later date.

A Popular Cause

But behind the scenes, the bargaining has already begun. The 1-trillion-euro Green Deal Investment Plan was an instant hit back last November when it was announced, but enthusiasm somewhat waned when it turned out that only a small portion of the huge package will actually be fresh money.

Meanwhile, concerns have grown in Central Europe that the Green Deal means a shifting of priorities of the European Commission, and an attempt to pump out money from the cohesion and regional funds, defended ferociously by net beneficiaries.

Although it is still unclear how exactly the 1 trillion will be accumulated, it looks certain that around half of the money should come from the EU budget and already existing programmes (CAP, Regional Development Fund, Cohesion Fund, Horizon Europe, Life programme).

This is where the V4 become wary of the Green Deal. At the current point of the MFF negotiations, Hungary and the Czech Republic are seen as the biggest losers, being stripped of up to 24 per cent of their cohesion funds for the next 7 years.

Part of the loss is legitimate, as many regions have developed significantly during the last 7 years (Prague is the seventh wealthiest region in the EU). But Central Europeans are concerned that another part of the funds could be taken away and rechannelled towards environmentally friendly developments, even outside the region, if they cannot come up with suitable projects.

Uneven Opportunities

The only fresh money in the budget would be the 7.5-billion-euro Just Transition Fund, which would help restructure regions heavily dependent on coal and coal-based energy.

Polish Prime Minister Mateusz Morawiecki

The trick is that member states have to identify eligible territories, match each euro from the Just Transition Fund with 1.5-3 euros from the European Regional Development Fund and the European Social Fund, and provide additional co-financing from the national budget.

This seems like a complex task; therefore, the Commission would provide technical assistance, which may entail stricter, more direct control from Brussels. Surely no V4 government would be happy to see increased “guidance” from Brussels.

V4 countries could benefit to a largely different degree from the JTF. Poland, whose electricity depends on coal for 80 per cent, would require massive investment and could count on major job losses if it decided to phase out coal. However, Warsaw could be locked out of the green funds if it did not commit itself to the 2050 carbon neutrality targets.

Environmental activists already called for restricting Poland’s access to the Just Transition Fund, and European Council President Michel proposed limiting Poland’s national allocation to 50 per cent, with the other half being made available only after the 2050 deadline was agreed. The Polish government indicated that it was not ready to resume talks about the 2050 goal, and needed more time to figure out its investment needs and energy mix.

However, the Czech Republic, where 47 per cent of electricity production is based on coal, would be a clear beneficiary of the Just Transition Fund.  Hungary, on the other hand, would not gain too much, as only 15 per cent of the electricity production is based on coal (lignite), and the plans to convert the power plant into a gas-fuelled one have not been welcomed by the Commission.

Growing Disunity

Nonetheless, the perspective of funding – which might partly compensate the losses some V4 countries could suffer at the end of the budget negotiations – played a role in Hungary and the Czech Republic giving up their reservations and committing themselves to the 2050 carbon neutrality target last December. Months earlier, both countries belonged to the blocking group when the ambitious long-term goal was first voted on by EU members. Hungary’s resistance was interpreted as a sign of V4 unity and an act of solidarity with coal-dependent Poland, which found it neither politically nor economically feasible to phase out coal in the next three decades.

But the unity of the V4 (Slovakia following here a more pro-Western position, just like in the eurozone accession) quickly disintegrated at the sight of financial incentives.

Even the political narrative changed: PM Orbán, who has not given much time or thought to climate issues in the last ten years, closed down a ministry of environment and delegated it to the level of an assistant state secretary, suddenly acknowledging that climate change was a real threat. He even announced a complete climate action plan in his usually pugnacious State of the Nation address.

Viktor Orbán shaking hands with Andrej Babiš

Nevertheless, Orbán could not agree more with his Czech colleague Andrej Babiš, who warned against “turning climate change into a fanatical religion”. Both politicians are concerned about the competitiveness of their industrial sector – especially the future of the car industry – but they are also aware that young voters see the fight against climate change as a top priority. They would be politically short-sighted if they refused to take the issue seriously.

The Bottom Line

The question is who foots the bill? “According to the European Commission, the costs of reaching carbon neutrality will reach 4 per cent of GDP” – PM Andrej Babiš said in the Czech parliament last year. “For the Czech Republic, it could be four times more due to the structure of our energy and industrial systems. We want to take these facts into account when negotiating about European subsidies.”

PM Orbán is also keen to emphasise that the costs of green transition cannot be borne by the “poorer countries” and their populations, referring to the necessary investment of about 150 billion euros or 2.5 per cent of Hungary’s GDP for the next 30 years.

These statements indicate that both Central European countries (and the V4 in general) would fight hard in the next budget negotiations to get as much funding as possible under the pretext of “fighting climate change”.

Besides the perspectives of new money, the real game-changer for Prague and Budapest is the tacit acceptance of nuclear energy:  all V4 countries believe that carbon neutrality can only be reached if EU-countries can decide freely about their energy mix.

“Without nuclear energy, carbon neutrality cannot be achieved. The EU should stop discriminating against atomic energy,“ urged Hungarian Foreign Minister Péter Szijjártó recently in Prague, at the sixth Central and Eastern Europe Nuclear Industry Conference. Babiš and Slovak PM Pellegrini have made similar arguments.

The European Council in December opted for a tactical compromise:  it acknowledged that nuclear energy can play a role in the national energy mix, but EU funds should not finance nor support such projects. In this regard, it is not accidental that V4 countries are recently teaming up with France which is a “natural ally” in nuclear matters, gaining 70 per cent of its electricity from nuclear sources (although with a tendency to reduce it under 50 per cent by 2035).

Decentralising Decisions

Not only governments but municipalities – capital cities of the V4 – are eying green money. The four mayors of the V4 capitals are actively lobbying for direct EU funding, circumventing their hostile governments. “The fight against climate change will be won or lost in cities” – they wrote in a joint letter with 12 other mayors to Ursula von der Leyen in February. Gergely Karácsony, the mayor of Budapest stressed that cities do not only produce higher GDP but also emissions, and they are unable to tackle global warming on their own. Investing in clean urban transport and radically cutting emissions would be a winning ticket for anybody in Central Europe.

And last but not least, the European Horizon Program would be another source of money for green investments; however, there is considerable fear that most of these funds will be grabbed by richer, western countries.

The Commission’s objective is to commit at least 35 per cent of Horizon Europe 2021-2027 to climate research, so there is reason enough and opportunities for V4 countries to join forces once again.

 

This article is part of the #DemocraCE project.

Edit Inotai is a Senior Fellow at the Budapest-based think-tank, the Centre for Euro-Atlantic Integration and Democracy in Budapest. She is the regular moderator of the series called Euro-Atlantic/European Café, covering foreign policy and security issues.


Eastern European Futures

In 2009, the European Union and six of its Eastern neighbours launched the Eastern Partnership (EaP) with the stated aim of building a common area of shared democracy, prosperity, stability and increased cooperation. A decade on, however, progress has been mixed.

Visegrad Insight is published by the Res Publica Foundation. This special edition has been prepared in cooperation with the German Marshall Fund of the United States and supported by the International Visegrad Fund.

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