The EU budget and external climate financing: The state of play

Summary

Although the European Green Deal is primarily a domestic transition plan, its success very much depends on green transitions elsewhere. The EU’s success as a global climate actor and partner rests also on the way it will use its external financing, both under the new Neighbourhood, Development and International Cooperation Instrument – Global Europe (NDICI) and through the European financial institutions for development. The latter will become more prominent due to their financial scale.

This note outlines the challenges and opportunities for mobilising the EU’s resources to support its climate ambitions. While the political leadership has undeniably prioritised climate change, the next 18 months will be crucial to ensure that the EU translates its broad commitments into tangible actions through the programming of its external resources. To achieve its ambitions, the EU would need to take some steps, including adopting a climate justice perspective into EU climate action, credibly implementing the ‘do no harm’ principle and the commitment to align to the Paris Agreement, and exploiting the enhanced coordination envisioned by Team Europe.

European public financial institutions have made several commitments towards more and better climate finance. Moving forward, they could use their finances to better target low-income countries, strengthen the gender perspective of green investments, balance and use more synergically mitigation and adaptation funds, and improve coordination and risk sharing between them.

This note is one of a three-part series produced in collaboration with the Open Society European Policy Institute. The series unpacks the evolving EU financial and policy framework for addressing climate and green transition in its external relations, focusing specifically on the (in)direct external effects of the European Green Deal, EU climate finance and international cooperation and the role of climate in the EU-Africa partnership.

Other notes in the series:

• The Green Deal in EU foreign and development policy
• AU-EU cooperation on climate and energy: In search of a common narrative