STRENGTHENING THE DEMOCRATIC LEGITIMACY OF THE EUROPEAN SEMESTER

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1 Enhancing the Implementation of Environmental Fiscal Reform at EU and National Level through the European Semester 25 September th GCET Copenhagen Dr. Constanze Adolf Director Brussels Office Green Budget Europe STRENGTHENING THE DEMOCRATIC LEGITIMACY OF THE EUROPEAN SEMESTER

2 Outline 1. What is the European Semester? 2. How does it work? 3. Hook or much ado about nothing? A critical analysis of 3 Semester cycles 4. Recommendations

3 1. What is the European Semester?

4 What is the European Semester? = Annual cycle of economic and fiscal coordination environmental dimension to economic reforms key policy tool to implement Europe 2020 Strategy: - Environmental Fiscal Reform and subsidies - Resource efficiency policies

5 Europe 2020 key priorities, EU overall headline targets & flagship initiatives

6 Europe 2020 strategy & Fiscal Policies Europe 2020 five headline targets Europe 2020 Integrated Guidelines (IG) Stability and Growth Pact Macro-economic surveillance Thematic surveillance Fiscal surveillance National level National Reform Programmes Stability and Convergence Programmes EU level Commission s Annual Growth Survey EU annual policy guidance and recommendations EU flagship initiatives and levers

7 The EU should should take the lead: For a 10% tax shift from labour to environment and resource use Member States should develop a concrete strategy by 2015 on how to phase out Environmental Harmful Subsidies by 2020

8 Environmental taxes (on total tax revenues and social contributions) 2002 and 2012 Source: Eurostat

9 Environmental Tax revenue in % of GDP Source: Eurostat 2013 STRENGTHENING THE DEMOCRATIC LEGITIMACY OF THE EUROPEAN SEMESTER

10 Environmental Tax revenue in % of GDP Denmark: 4,1 % The Netherlands: 3,5 % Slovenia: 3,4 % Italy: 2,8 % Spain, France, Lithuania, Romania and Slovakia: below 2 % Source: Eurostat 2013 STRENGTHENING THE DEMOCRATIC LEGITIMACY OF THE EUROPEAN SEMESTER

11 2. How does it work?

12 The European Semester in short

13 Annual Growth Survey Pursuing differentiated, growth-friendly fiscal consolidation 2. Restoring bank lending to the economy 3. Promoting growth and competitiveness for today and tomorrow 4. Tackling unemployment and the social consequences of the crisis 5. Modernising public administration

14 Annual Growth Survey Pursuing differentiated, growth-friendly fiscal consolidation Tax should be designed to be more growth-friendly, for instance by shifting the tax burden away from labour on to tax bases linked to consumption, property, and combatting pollution (EC/2013/800, p. 7) Environmentally harmful subsidies should be reduced (EC/2013/800, p. 7) Member States should ensure longer-term investment inter alia in energy and climate action

15 Annual Growth Survey Promoting growth and competitiveness for today and tomorrow Full implementation of the third energy package in 2014, and improving the cost effectiveness of support schemes for renewable energy. Promoting resource efficiency by improving waste and water management, recycling and energy efficiency. (EC/2013/800, p. 7)

16 Annual Growth Survey Tackling unemployment and the social consequences of the crisis Job opportunities through greening the economy

17 Source: European Commission

18 3. Hook or much ado about nothing? A critical assessment of 3 Semester cycles

19 CSR assessment Tax Shift / implement green taxes Environmentally harmful subsidies CZ, ES, IE, HU, IT, LI, LU, LV BE, FR, IT Energy 8 17 Source: European Commission and Green Budget Europe

20 Yes but Clear focus on consolidating budgets (fine) and creating growth (STOP: what kind of growth?), rather than on the wider goals set out in the Europe 2020 stragegy No full account taken of the growth-stimulation potential of EFR or other environmental policies such as improved resource efficiency EFR not seen as part of the solution (mainstreaming) but as a «nice to have» 20

21 Yes but II Mainstreaming of environmental / climate issues limited so far (no implementation of 7 EAP) No logic coherence of recommendations (i.e. green economy) Where recommendations are not repeated, reasons remain unclear Who is behind the decisions? Where is the power? What role for the Semester in the new Commission? 21

22 Weaknesses Democratic legitimation European and national Parliaments have a very weak role Consultation of CSOs, MoE, regional decision makers! Enforcement Low political priority regarding green taxes, 2030 targets Deliver robust data! CEPRiE Visibility Communication between Ministries, Services other MS? FRE-communicate! contra EU jargon Implementation Strong sectoral lobby Best practices and front runners 22

23 Implementation of CSRs

24 Green Budget Europe activities Developing alternative CSRs Lobby European Commission (Sec Gen, DG ECFIN, ENVI and CLIMATE), at Hearing (EP), Green New Deal WG (EP), Member States (EESC), ESOs EU 2020 / Semester Coalition Developing common CSRs Hearing at European Parliament and high level conference EU Semester at Member State level: 3 Pilot countries European Commission Experts Group Monthly meetings with environmental NGOs in Brussels Get involved in the National Reform Programmes

25 4. Recommendations

26 Recommendations Stop thinking in dichotomies Europe 2020 versus fiscal surveillance EFR is part of the solution! Climate and energy scoreboard and indicators deepening or broadening? Assess CSR implementation via cohesion policy Enhance process: Strong CSO s involvement

27 Questions and Answers

28 Please join us and share our vision of Europe as a pioneer of green fiscal policy, green technology and a green economy! 4 November 2014, Brussels (Belgium): Become a founding member of GBE, a unique, non-profit expert platform on environmental fiscal reform 5 November 2014, Brussels (Belgium): GBE Annual Conference: Recovery, Jobs and Sustainable Prosperity - A New Agenda for Green Fiscal Reform in Europe Including the presentation of the 2014 Environmental Fiscal Reformer of the Year award. Please visit our website for further information Rue du Trône 4 B-1000 Brussels info@green-budget.eu

29 T h a n k y o u! Don t hesitate to contace me: constanze.adolf@green-budget.eu

30 Overview: The Macroeconomic Imbalance Procedure Enhancing Source: European EFR implementation Commission, at EU and Alert national Mechanism level through Report the European on macroeconomic Semester 25/09/2014 imbalances GCET Copenhagen

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32 7. Umweltaktionsprogramm Referenz Art. 4 im UAP: Die Kommission gewährleistet, dass die Umsetzung der relevanten Elemente des 7. UAP im Rahmen des Prozesses der regulären Überwachung der Europa-2020-Strategie überwacht wird. Dieser Prozess stützt sich auf die Indikatoren der Europäischen Umweltagentur zum Zustand der Umwelt sowie auf Indikatoren, die zur Überwachung von Fortschritten bei der Verwirklichung bestehender Rechtsvorschriften auf dem Gebiet des Umwelt- und Klimaschutzes und von Zielen wie Klimaund Energieziele, Biodiversitätsziele und Ressourceneffizienz-Meilensteine verwendet werden. Derzeit noch unklar, wie Art. 4 umgesetzt werden soll: Frage an MS und EU-KOM

33 Change in GDP from baseline, % Change in employment from baseline, % 331 Energy tax reform is the least damaging of the three options considered Figure 4. Energy tax reform cap has a smaller negative impact on GDP than a direct tax Figure And no worse employment impact Energy tax Direct Indirect Energy tax Direct Indirect Source: Cambridge Econometrics E3ME model

34 Reform proposals energy tax curve the reform proposals aim for a consistent carbon price across most emissions Transport fuels are an exception as they cause further externalities Total implied tax rate, /tco Taxes (including EU ETS) 2020 Proposed Taxes Residential // Natural Gas; Residential //Coal 0 Residential // Heat, 12 Agriculture/forestry // Gas/diesel oil, 94 Road // LPG, 166 Road // diesel, 155 Commercial and public services // Electricity, 20 Residential // Electricity, 20 Road // Motor gasoline, Source: Source: Vivid Vivid Economics: Economics Emissions from energy consumption, tco 2 STRENGTHENING THE DEMOCRATIC LEGITIMACY OF THE EUROPEAN SEMESTER