EU wants to raise 30% of funds for its ambitious stimulus plan through green bonds

The Green Transition at the heart of the EU Recovery Fund

EU wants to raise 30% of funds for its ambitious stimulus plan through green bonds

Next year, the EU will use markets on an unprecedented scale and 30% of the funds must be raised through green bonds, European Commission President Ursula von der Leyen said in a landmark speech on Wednesday.

In July, 27 EU capitals agreed to occupy public markets, starting in 2021, 750 billion euros ($ 891 billion). The idea is to use these funds to invest in various sectors of the EU and thus help them recover from the coronavirus crisis..

«We are the global leaders in green finance and the largest green bond issuer in the world», – said Ursula von der Leyen legislators in Brussels.

«And today I can announce that we will set a goal to raise 30% of the 750 billion euros of the Next Generation EU project through green bonds», – she said.

Green bonds are a financial instrument designed, in particular, to raise money for projects related to climate change or the environment.

Observers reacted quickly to this statement: Karel Lannoo, Chief Executive Officer of Brussels-based think tank CEPS, told CNBC he thinks the idea is so-so, «because we have no standard for what is green».

This means that some projects can be designated as «green», but will ultimately support railways and power grids, he said.

Wednesday’s announcement was part of a broader and bolder commitment to make the EU more resilient in the long term.

Von der Leyen also announced that the EU must cut carbon emissions «at least 55%» until 2030, rather than 40% as previously planned.

EU wants to raise 30% of funds for its ambitious stimulus plan through green bonds

«I understand that this increase from 40 to 55 is too much for some and not enough for others. But our impact assessment clearly shows that our economy and industry can handle this. », – said the former German Defense Minister.

Analysts doubt the EU can achieve this.

«Today I have heard little from the President of the Commission on this matter.», – said Guntram Wolff, Director of Brussels-based think tank Bruegel.

He explained that industries that would find it easier to go on a more sustainable path have done so, but now «tricky part», when we ask the transport, industrial and aviation sectors to reduce emissions.

«Technologies are beginning to be applied in all of these areas, but they are not yet fully competitive. If you want to make it competitive, you will have to estimate emissions very high and this will be a drag on economic growth. », – said Wolf.