BriefingOctober 2016

EPRS | European Parliamentary Research ServiceAuthor: Vivienne HalleuxMembers' Research Service

ENPE 589.816

Sustainability and EU cohesion policy

SUMMARY

Working for Europe's sustainable development by protecting and improving thequality of the environment, for instance, is one of the core missions entrusted to theEuropean Union by the Treaties. As the EU's main investment policy, accounting foralmost a third of the total EU budget in the 2014-2020 period, cohesion policy has thepotential to contribute significantly to achieving this ambition.

Provisions are in place to mainstream environmental concerns and protectionrequirements into the preparation and implementation of cohesion policy supportedprogrammes and projects. Significantly, approval for financial assistance is subject tocompliance with the directives on environmental assessment. The cohesion policyfunds make considerable support available for investment in areas of particularrelevance to sustainable development, such as environmental protection andresource efficiency (over €35 billion); the low-carbon economy (almost €40 billion)and climate change adaptation. Through this funding, cohesion policy is expected toplay a significant role in advancing the implementation of EU environmental policiesand in helping the EU achieve its objectives for energy, climate, and the circulareconomy.

Initial insight into cohesion policy's environmental performance can be gained fromrecent reports on the ex-post evaluation of cohesion policy programmes in the 2007-2013 period regarding waste management and water; the impact of EU policies onland; and the use of EU funds to support the clean energy transition in central andeastern Europe.

In this briefing: Background EU cohesion policy's role and framework Environmental integration within current

cohesion policy Funding The environmental performance of EU

cohesion policy European Parliament's contribution Further reading

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BackgroundSustainable development is a fundamental objective of the European Union (EU), anchoredin its treaties and policies. Article 3(3) of the Treaty on European Union (TEU) states that theEU shall work for the sustainable development of Europe based on, among other things, ahigh level of protection and improvement of the quality of the environment. Article 11 of theTreaty on the Functioning of the European Union (TFEU) further provides that in order topromote sustainable development, environmental protection requirements must beintegrated into the definition and implementation of the Union's policies and activities.

Environmental integration, which is essential for reducing the pressures on the environmentresulting from the policies and activities of other sectors, and for meeting EU environmentaland climate-relatedtargets,1 has been aTreaty requirementsince 1997.2 However, asthe latest five-yearlyassessment of theEuropean EnvironmentAgency (EEA)demonstrates, the stateof Europe's environmentindicates that theprogress achieved so far,while noteworthy insome areas, has notbeen sufficient toreverse all negativetrends (see Table 1).Biodiversity, forinstance, continues to beeroded, and climatechange remains a majorthreat. The EEA's reportpoints out that there isstill a long way to go toachieve the EU's 2050vision of 'living wellwithin the limits of theplanet', outlined in the7th Environment ActionProgramme, which willguide EU environmentpolicy until 2020. In particular, it warns that the level of ambition of existing environmentalpolicies may not enable the EU to achieve its long-term environmental goals, notably its 2050target of reducing greenhouse gas emissions by 80% to 95%.

As highlighted in the case of biodiversity,3 many environmental pressures are affected byfinancial support and capital investments. Building environmental concerns into EU sectoralfunding policies is therefore an issue of great importance. Measures to further supportenvironmental integration and sustainability have been introduced, among others, in thecommon agricultural policy and cohesion policy reforms.

Table 1 – Indicative summary of environmental trends

Data source: European Environment Agency, 2015.

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EU cohesion policy's role and frameworkThe primary aim of cohesion policy is to reduce disparities between EU regions by fundinginvestment in key sectors. It is implemented through three dedicated EU funds: the EuropeanRegional Development Fund (ERDF), the Cohesion Fund (CF)4 and the European Social Fund(ESF). Endowed, for the 2014-2020 funding period, with a budget of €351.8 billion (almost athird of the total EU budget), it is the EU's main investment policy, and, as such, has thepotential to move Europe further along the path of sustainable development.

Cohesion policy's intervention areas for the 2014-2020 period are closely aligned with theobjectives of Europe 2020, the European Union's 10-year strategy for smart, sustainable andinclusive growth. Under its sustainable growth pillar, Europe 2020 targets a shift to a low-carbon, resource-efficient and climate resilient economy. Accordingly, it sets a threefoldobjective for climate and energy sustainability: reducing greenhouse gas emissions by 20 %(30 % if the conditions are right) compared with 1990 levels; meeting 20 % of energy needsfrom renewable sources, and increasing energy efficiency by 20 %.

Investments under the cohesion policy funds support 11 thematic objectives (TOs) derivedstraight from the Europe 2020 goals (see Table 2). Defined in the 2013 Common ProvisionsRegulation (CPR), which governs the implementation of the five European Structural andInvestment Funds (ERDF, CF and ESF, plus the European Agricultural Fund for RuralDevelopment and the European Maritime and Fisheries Fund), these TOs are broken downinto corresponding investment priorities in the fund-specific regulations.

Table 2 – The Europe 2020 goals and corresponding TOs

Data source: European Commission, 2015

Under what is referred to as the 'thematic concentration' principle (concentration of fundson a limited number of priority areas), the ERDF focuses its investments on the first four ofthese TOs. Moreover, some ERDF resources must be channelled specifically towards TO 4.The mandatory minimum spending required from Member States for low-carbon economyprojects varies between 12 % and 20 % of national ERDF resources, depending on the region'slevel of development. The main priorities for the ESF are objectives 8 to 11. The CF supportsthematic objectives 4 to 7 and 11.

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The approach taken by Member States for using the funds, including the thematic objectivesand investment priorities selected, is set out in the partnership agreements (PAs), negotiatedbetween the European Commission and each Member State, and further detailed inoperational programmes (OPs), drawn up by Member State authorities at a national orregional level. OPs break down the priorities and objectives of the PAs into concrete actions,outlining how money from the funds will be spent.

Environmental integration within current cohesion policyThe principleArticle 8 of the CPR states that the objectives ofthe funds shall be pursued in line with theprinciple of sustainable development and withthe EU's promotion of the aim of preserving,protecting and improving the quality of theenvironment. It requires Member States toensure that environmental protectionrequirements, resource efficiency, climatechange mitigation and adaptation, biodiversity,disaster resilience, and risk prevention andmanagement are promoted in the preparationand implementation of partnership agreementsand programmes. More detail on thesustainable development requirements is setout in Annex I, Section 5.2 of the CPR (see box).

Ex-ante conditionalitiesOne of the innovations brought in by the 2013EU cohesion policy reform is the introduction ofex-ante conditionalities (specific conditions thathave to be fulfilled before funds can bechannelled) with a view to strengthening theefficiency of investments, and ensuring that thenecessary framework conditions5 for effectiveuse of EU support are in place. There are twokinds of ex ante conditionality: thematic, which are specific to a sector or policy; and general,which by their nature can apply to all sectors and policies. The conditionalities must be metby 31 December 2016.

The conditionalities relating to sustainable development6 include, in particular, thematicconditionalities for risk prevention and management (existence of national or regional riskassessments for disaster management, taking into account climate change adaptation); forthe water sector (existence of a water pricing policy and a river basin management plan) andfor the waste sector (existence of a waste management plan and a waste preventionprogramme, among other criteria); as well as the general ex-ante conditionality onenvironmental legislation, requiring compliance with the Environmental Impact Assessment(EIA) and the Strategic Environmental Assessment (SEA) Directives.

EIA and SEA, the environmental safeguardsIn force since 2001, the Strategic Environmental Assessment Directive applies to a broadrange of public plans and programmes. The SEA is mandatory for plans/programmes relatingto certain sectors (agriculture, forestry, fisheries, energy, industry, transport, wastemanagement, water management, telecommunications, tourism, town and countryplanning, land use) and that set out the framework for the future development consent of

Common Provisions Regulation, Annex I

'5.2 Sustainable development

1. [...] Managing authorities shallundertake actions throughout theprogramme lifecycle, to avoid or reduceenvironmentally harmful effects ofinterventions and ensure results in netsocial, environmental and climatebenefits. Actions to be undertaken mayinclude the following:(a) Directing investments towards themost resource-efficient and sustainableoptions;(b) Avoiding investments that may have asignificant negative environmental orclimate impact, and supporting actions tomitigate any remaining impacts;(c) Taking a long-term perspective when'life-cycle' costs of alternative options forinvestment are compared;(d) Increasing the use of green publicprocurement. [...]'

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projects listed in the EIA Directive or require an assessment under the Habitats Directive. TheSEA Directive requires that an environmental assessment be carried out during thepreparation and before the adoption of plans and programmes. The SEA procedure involvespreparing an environmental report to identify the likely significant effects of the proposedplan or programme on the environment and reasonable alternatives. It also includes a publicconsultation with the public, environmental authorities and, in case of transboundaryimpacts, with other Member States. The significant environmental effects of plans orprogrammes have to be monitored in order to identify unforeseen adverse effects at an earlystage, and to allow appropriate remedial action to be taken. Some consider the SEA to be oneof the best-established tools for greening and environmentally proofing regionaldevelopment programmes.7

The Environmental Impact Assessment Directive applies to defined8 public and privateprojects. The text, last amended in 2014, provides that Member States shall adopt allmeasures necessary to ensure that, before consent is given, those projects likely to havesignificant effects on the environment by virtue, inter alia, of their nature, size or location aremade subject to a development consent requirement and an assessment with regard to theireffects on the environment. In particular, the EIA must identify, describe and assess the directand indirect effects of the project concerned on population and human health; biodiversity;land, soil, water, air and climate; material assets, cultural heritage and the landscape; and theinteractions between all these factors.

Specific support structureThe European Network of Environmental Authorities for Cohesion Policy (ENEA) was set upin 2004 with the aim of contributing to the integration of environment issues and sustainabledevelopment within cohesion policy programmes and projects. The network's membershipwas extended to managing authorities in 2009, and its name changed accordingly to theEuropean Network of Environmental Authorities – Managing Authorities (ENEA-MA). One ofits working groups is tasked specifically with assisting the members in mainstreamingenvironment within the 2014-2020 programming period. The group is expected to deliver areport on this matter by the end of the year. It will include, inter alia, a review of the 2007-2013 implementation experience and an analysis of environmental integration at differentstages of the 2014-2020 programming and implementation process (operational programmelevel; project stage; monitoring and evaluation stage). On this basis, specificrecommendations will be formulated.

FundingIn the 2007-2013 period, around €105 billion9 – 30 % of cohesion policy funding available atthe time – was invested, directly and indirectly, in environment-related projects. Of this,€54 billion was allocated to environmental services such as waste and water management,nature protection and risk protection. Some €3 billion went to eco-innovation in SMEs. Afurther €48 billion was dedicated to low carbon action, such as clean transport, energyefficiency and renewables. In the field of energy efficiency, about €10 billion was invested, ofwhich €4.9 billion for renewable energy sources.

In the 2014-2020 period, environmental and sustainable development interventions arecovered by several thematic objectives. While over €35 billion are specifically earmarked forenvironment protection and resource efficiency under TO 610 (see Figure 1), support for alow-carbon economy (TO 4, close to €40 billion) and for adaptation to climate change (TO 5,almost €8 billion) also contributes to promoting environmental objectives.

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Cohesion policy is expected to play a significant role in advancing the implementation of EUenvironmental policies in areas such as water and waste management or biodiversity, and inhelping achieve EU objectives related to energy, climate, and the circular economy.

Cohesion policy support for the circular economy includes, for instance, the sum of€5.5 billion for improved waste management, including €2.1 billion for the minimization,sorting and recycling of household waste. Financial resources will also be geared towardsinvestment in basic waste treatment infrastructure in less developed regions. This represents5.9 million tonnes/year of additional waste recycling capacity in Europe. €2.3 billion will beinvested in environmentally friendly production processes and resource efficiency in SMEs.The €15 billion available for investment in the water sector can be harnessed, for instance,for projects supporting water reuse.

In the field of energy and climate, for example, €13.3 billion from the ERDF and the CF will beinvested in energy efficiency in public and residential buildings. €23.7 billion from the sametwo funds will go to investment supporting the move to an energy-efficient and decarbonisedtransport sector. €6.4 billion will be allocated to preventing climate change-related risks.11

Climate action is a key priority for the European Union. Consequently, it has been agreed thatat least 20% of the overall budget for 2014-2020 should be spent on climate change-relatedaction. Climate change mitigation and adaptation benefits from considerable support fromthe ESI Funds, amounting to over €114 billion, of which about €55.3 billion from the ERDFand the CF, and €1.1 billion from the ESF.

European territorial cooperationEuropean territorial cooperation (ETC), also known as Interreg, accounts for 2.8% of the totalcohesion policy budget, i.e. €10.1 billion. It provides a framework for joint action between EUMember States, to find common solutions to shared problems. Its programmes, funded bythe ERDF, are organised around three strands: cross-border, transnational and interregional.Data from the European Commission indicate that in the 2014-2020 period sustainablegrowth is the area attracting the highest share of Interreg investment: 41 % of the totalInterreg ERDF budget will be invested in measures aimed to improve the environment andsupport joint action in the areas of water management, wastewater treatment, conservationand restoration of habitats and species, prevention of natural and man-made risks, energyefficiency, and sustainable tourism.

Figure 1 – Support from the three cohesion policy funds (ERDF, CF and ESF) for each TO

Data source: European Commission, 2016

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The environmental performance of EU cohesion policyAs EU's main investment tool, cohesion policy has the potential to have a major impact onEurope's environment. On the one hand, it represents an important source of finance forenvironmental infrastructure projects, thereby contributing to the achievement ofcompliance with EU legislation. For example, the ex-post evaluation of cohesion policyprogrammes 2007-2013 in relation to waste management and water indicates12 that overall,for both areas, cohesion policy spending has provided crucial financing to meet EUrequirements and targets, in particular in the EU-13 (i.e. the 13 countries that joined the EUin 2004 or later) and in southern European Member States.

On the other hand, cohesion policy-funded investments may have detrimental effects on theenvironment, such as landscape fragmentation or CO2 emissions. A recent report by theEuropean Environmental Agency, analysing the direct and indirect impacts of EU policies onland,13 shows, for instance, that in the cases of Andalusia (Spain) and Poland, cohesion policyspending on roads has fuelled urban sprawl and land take.14

In a 2016 report15 analysing the spending plans and programmes of the EU funds in ninecentral and eastern European Member States, Friends of the Earth Europe and CEEBankwatch Network argue that the potential of the EU funds to catalyse the clean energytransition in central and eastern Europe in the 2014-2020 period remains largely untapped.Their research reveals in particular that investment in energy efficiency, renewables andsmart grids will receive only 7% of all cohesion policy funding, and that the integration ofclimate considerations into all plans and projects remains superficial. The authors warnagainst an investment approach sustaining a fossil fuel-based, energy-intensive economy.This report prompted questions from Members of the European Parliament regarding theway the ESI Funds promote the EU's energy and climate targets.

European Parliament's contributionThe European Parliament (EP) has repeatedly underlined the importance of integratingenvironmental concerns in all relevant EU policies, and has been active on several fronts. TheEP was behind the inclusion of environment preservation in the thematic objectivessupported by cohesion policy in 2014-2020.Parliament's input to the updating of theenvironmental impact assessment directiveconsisted notably of clarifying the text byincluding biodiversity and climate change, andensuring that project authorisations are notsubject to conflicts of interest. In its 2015resolution on cohesion policy and the review ofthe Europe 2020 strategy, the EP recalled theimportance of maintaining a coherent approachbetween EU initiatives for growth and jobs, andenvironment and climate protection. In itsresolution of July 2016 on the preparation of thepost-electoral revision of the 2014-2020 MFF, the EP, following the COP-21 climateagreement reached in Paris in 2015, underlined the significant need to finance climate action,biodiversity protection and the sustainable use of natural resources, and expressed concernsthat the goal of spending at least 20% of the EU budget (under the current MFF) on climatechange related action had not been reached.

Committee of the Regions (CoR)The CoR is currently working on anopinion 'Towards a new EU climatechange adaptation strategy – taking anintegrated approach'. Particularconsideration will be given to the issue ofaccessing financing to implement localclimate action measures, which appearsas one of the major challengesencountered by regions and cities,including the signatories of the Covenantof Mayors for Climate and Energy.

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Further readingEuropean Environmental Agency, The European environment — state and outlook 2015

EPRS note on EU environmental policies [What Think Tanks are Thinking], September 2016

Endnotes1 More than 130 environmental targets and objectives have been set out in EU environmental policy and legislation

for the period 2010-2050. A detailed overview is available in the EEA's dedicated report from 2013.2 Article 6 of the Treaty of Amsterdam.3 Medarova-Bergstrom, K., Kettunen, M., Rayment, M., Skinner, I. and Tucker, G. (2014), Common Framework for

Biodiversity-Proofing of the EU Budget: General guidance, Institute for European Environmental Policy, London, p. 8.4 The Cohesion Fund is aimed at EU Member States whose gross national income (GNI) per inhabitant is less than

90 % of the EU average. For the 2014-2020 period, it concerns Bulgaria, Croatia, Cyprus, the Czech Republic, Estonia,Greece, Hungary, Latvia, Lithuania, Malta, Poland, Portugal, Romania, Slovakia and Slovenia.

5 Appropriate regulatory framework; policies/strategies with clear policy objectives; sufficientadministrative/institutional capacity.

6 For more details, see European Commission, Guidance on Ex ante Conditionalities for the European Structural andInvestment Funds, Part II, 2014, p. 74 (risk prevention and management); p. 87 (water); p. 99 (waste); and p. 387(EIA/SEA); and European Commission, FAQ on ex-ante conditionalities relating to sustainable development, 2014.

7 Institute for European Environmental Policy (IEEP) et al, Cohesion policy and sustainable development, SupportingPaper 5, Tools for Sustainable Development, February 2011, p.18.

8 Projects for which an EIA is mandatory are listed in Annex I, while projects needing a screening by competentauthorities to decide whether or not an EIA is required are listed in Annex II.

9 European Commission, Panorama Magazine No 47, autumn 2013, p.8.10 Interestingly, an EP study from November 2015 reviewing the 28 adopted partnership agreements reveals that TO 6

accounts for 15% of the total budget allocated to all TOs (EU-28) in the PAs, which makes it the thematic objectivewith the highest percentage of overall funding.

11 For a more complete overview, see European Commission, Cohesion policy support for the circular economy, June2016, and Contribution of the ESI Funds to the 10 Commission priorities, Energy and Climate, December 2015.

12 European Commission, Ex-post evaluation of Cohesion Policy Programmes 2007-2013, focusing on the EuropeanRegional Development Fund (ERDF) and the Cohesion Fund (CF), Work Package 6, Environment, March 2016.

13 European Environment Agency, The direct and indirect impacts of EU policies on land, EEA Report No 8/2016, p.38.14 Change in the amount of agricultural, forest and other semi-natural and natural land taken by urban and other

artificial land development. Land take by urban and infrastructure is generally irreversible and results in soil sealing(the loss of soil resources due to the covering of land for housing, roads or other construction work). Source: EEA.

15 Friends of the Earth Europe & CEE Bankwatch Network, Climate's enfants terribles: how new Member States'misguided use of EU funds is holding back Europe's clean energy transition, January 2016.

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© European Union, 2016.

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