INFORSE-Europe Structural Funds in new EU

Structural Funds in the new Member States
Updated May, 2010

With 347 billion EUR allocated for the 2007-2013 period, the structural and cohesion funds represent more than a third of the EU's budget. Just over half of the total – 177 billion EUR – is available for the ten new member states in Central and Eastern Europe (CEE). (Accession funds ISPA, SAPARD and PHARE during the period 2000-2003). After their accession to the EU in 2004 the SF were followed with cohesion and rural development funds (approximately 30 billion EUR in 2004-2006). The main role of EU cohesion policy has been to redistribute wealth between regions and to help poorer regions to catch up with the rest. The main indicator and measure for the Cohesion policy is GDP. Following this logic, around 50% of the total funds will be allocated to the 10 CEE countries. Besides this basic objective, the funds have developed a “life of their own” and specific objectives have been developed and reviewed with each financial period.The allocation is partly based on population and need. The member states distribute the funding through the Operating Programs (OP) to eligible projects through a government department, ministries or committees at national and local level, usually a mixture of the above. There are differences between CEE EU member states policies in terms of who is eligible for funding and how the funds can be used.

Allocation of the EU funds

Source: European Commission, 2008

The current changes in the EU regulations will allow for acceleration and advance payments from EU funds to ensure the availability of financial resources during the economic crisis – although member states will still have to pay back the required co-financing at a later stage within the 2007-2013 framework. The funds can be used for all types of projects: transport infrastructure, sewage treatment plants, new technologies for enterprises, research, education, etc. The candidate countries such as Croatia and Macedonia receive much less – but still significant – pre-accession funding from the EU.
In March 2007, the European Union unilaterally committed to reducing its CO2 emissions by 20% by 2020 compared to 1990, and by 30% if other developed countries adopt comparable targets. A target of 20% renewables in the energy consumption was also adopted. This commitment was made operational through the final adoption in 2009 of a Climate and Energy legislative package by the European Parliament and Council including national mandatory targets to be reached by 2020 for GHG emissions from sources not covered by the EU ETS and for the share of energy from renewable sources.

GHG and RE mandatory targets

Report: Potential Unfulfilled, March 2010, 30p

(pdf file 460 kB) by Bankwatch Network, FoE-Europe.

Friends of the Earth Europe and CEE Bankwatch Network are monitoring plans for the use of EU Structural and Cohesion funds in the energy and transport sectors of Central and Eastern European countries over the next seven years. The analysis is being continuously updated based on changing governments' plans in collaboration with our NGO colleagues in Central and Eastern Europe.
The beginning of the implementation of the 2007-2013 EU funds coincided with the economic crisis. This situation presented an opportunity for investing in long term development, in particular by redirecting some of the EU money into sustainable energy investments. Some CEE Member States did react to the economic crisis by redefining their funding priorities and reorganising the OPs. In addition, the Russian-Ukraine gas crisis of January 2009 struck CEE countries and stressed further the need for enhanced energy security of supply. The countries most hit by the economic crisis in the CEE region first realised the possible win-win effects of energy saving measures for economic recovery and social benefits. They have placed EE/RE projects at the core of national stimulus packages, in which EU funds appear as a central fiscal instrument. The demand for EU funding is therefore increased as a preferred option for member states whose budgets are hit hard by the crisis.

Latvia
EU funding for improving heat insulation in multi-apartment residential buildings will triple to 63 million EUR and will not require additional public co-financing. The government has also increased support for the development of cogeneration power plants utilising renewable energy sources by 10 million EUR, making the available funding for this measure approximately 35 million EUR.

Lithuania
The government has placed energy savings at the core of its economic stimulation plan, and will seek to speed up the pace of implementation by absorbing 1.45 billion EUR of the EU funds instead of the planned 960 million EUR by the end of 2009. A large share of this money should go to energy savings.

Bulgaria
Energy efficiency and renewables were given higher priority following the gas crisis in January, and it was decided in particular to use the JESSICA mechanism to support sustainable investments in urban areas. In addition, 91 million EUR from the OP Regional Development were reallocated to energy efficiency and renewables measures in public schools, universities and social institutions owned by municipalities in urban areas.

Estonia
The government commissioned a study by Ernst and Young on suggested changes in its OPs. The proposed measures target, in particular, EE. The interest towards EE and RE projects as ‘smart green’ anti-crisis measures is accompanied by the growing interest among possible private or public beneficiaries of EU funds. In some countries, in spite of the slow start in EU funds absorption for EE/RE projects especially in public buildings, the interest of applicants in such measures is significantly exceeding the available funding.

Czech Republic
Despite a late start, the OP Environment is now being rapidly implemented. It is expected that all the available allocations for energy savings in this OP will be exhausted by 2010.

Slovakia
According to the Ministry of Environment, the number of applications exceeds the available amount of financial means for the operational goal “Protection of the environment and mitigation of climate changes”. For a call aimed at making public lighting more efficient, the number of project applications far outreached the expected amount (400 applications compared to the expected 200). EU funding for RES/EE in Slovakia is very important as the state’s support for such measures is very low.

Hungary
The Environment and Energy Operative Programme, who is dealing with the energy projects, gets 4.9 billion EUR from the Structural Funds in this period. The renewable energy (RE) partition of the budget is 5.15 % which is 253 million EUR and the energy efficiency (EE) partition is 3.14 % which is 154 million EUR for the whole period. The total amount of subsidy so far in 2009-2010 is 60% more than the whole amount of subsidy in 2007-2008 which means that the demand for the subsidy is on the rise.

Poland
The requested EU funding in the first round under the measure “Energy efficient refurbishment of public buildings” exceeded the available allocation more than ten times.

Yet, Little has been Spent

While interest and demand in EU funding for EE and RE measures is on the rise, the research findings show one major trend across all countries subject to this study - EU funds available for EE and RE projects are being contracted and spent very slowly. Nearly three years into the 2007-2013 programming period, the number of contracted projects is still low and very little actual spending has been done.

The following graphs compare the contracted EU financed projects aimed at reducing energy use and increasing the use of renewable energy against the total available EU funds for the 2007- 2013 programming period for such measures. Hence, the graphs demonstrate the low rate of absorption at a country level. They also compare the use of EU funds for such measures across selected CEE countries and show the similarity in the trend for slow absorption.

Report: Potential Unfulfilled, March 2010, 30p (pdf file 460 kB) by Bankwatch Network, FoE-Europe.

“Total allocations” is the total EU funds that were made available respectively for EE and RE in the Operational Programmes in each country for the entire 2007-2013 programming period. The figures are taken from the official statistics published by DG Regional policy. In some countries, these allocations have changed as sums of money have been reallocated or switched between OPs as a response to the economic crisis. The graphs take into account the latest available figures (Latvia).

“Contracted projects” corresponds to the total EU funding for EE or RE projects which were contracted by September 2009. The figures are based on the field research conducted by Bankwatch and Friends of the Earth Europe national groups in the selected new Member States. It should be noted that due to lack of available data in Slovakia, the figures under “contracted projects” show the EU funds support for all ‘approved’ EE and RE projects in the open competitions, which is higher than the actual contracted projects. In Latvia, the available data for RE projects was also limited to the EU funds contribution for ‘approved’ projects so this value was used in the analysis. Therefore, by September 2009, the actual spending in these two countries should be considered even lower.

It must be also noted that although research was conducted in Bulgaria, data is not included in the quantitative analysis because there was no clearly discernible available data on the spending of EU funds specifically for EE and RE measures. Therefore, the data presents findings on the absorption rate of EU funds in Czech Republic, Hungary, Estonia, Latvia, Lithuania, Poland and Slovakia.

The total EU funds allocations for EE measures between 2007 and 2013 in all seven countries where the field research took place amounts to 1796 million EUR, whereas the total amount of EU funds for contracts signed is only 292.43 million EUR. This amounts to roughly 16.3% absorbed funding. Only in the Czech Republic, despite the slow start with the implementation of the OPs supporting such measures, has spending been quickly advancing. The rest of the countries have experienced very slow absorption compared to their total allocations.

In the field of RE the situation is even more striking. From the total RE allocations, which account for 1751 million EUR, merely 99.72 million EUR EU funding was contracted. This shows that only 5.7% of the EU funds for RE measures had been absorbed by September 2009. In Poland, which is the biggest recipient of EU funding for RE measures, only a couple of small scale projects have been contracted in the countryside whereas most investments have not been contracted so far. The Czech Republic does not perform as well compared to the absorption of EE projects showed in the previous graph.

The analysis, therefore, so far shows two major trends regarding the use of EU funds in renewable energy and energy saving projects in selected CEE countries. It showed that the demand for funding from the EU is on the rise for such measures. However, at the same time, these same countries struggle to absorb the available funding.

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