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Financial Instruments

The EU’s financial mechanisms with direct or indirect impact on the protection of the environment can be divided into two groups:

  • • European structural and investment funds (ESI Funds), whose main objective is the structural adjustment of the EU’s least developed regions, rural areas, areas affected by industrial transition, and regions which suffer from severe and permanent natural or demographic handicaps (Art 174 TFEU);
  • • mechanisms specifically addressing environmental protection.

The first category consists of the European Regional Development Fund (ERDF), the European Social Fund (ESF), the Cohesion Fund (CF), the European Agricultural Fund for Rural Development (EAFRD), and the European Maritime and Fisheries Fund (EMFF). The purpose and activities of these funds are regulated in a common regulation.m It lays down, among other things, objectives and general principles governing the Union’s support through the ESI Funds to Member States by co-financing multi-annual programmes for increasing economic, territorial and social cohesion. In order for a Member State to receive financial support from the Funds, it shall first organise a partnership with regional or local authorities including, among others, economic and social partners, environmental partners, and non-governmental organisations (Art 5). For this purpose, Partnership Agreements shall be concluded. The Operational Programme that is drawn up by a Member State and in cooperation with its partners shall be adopted by the Commission (Art 26). The Regulation contains detailed provisions relating to the implementation and evaluation of the Programmes.[1]

The ESI Funds shall focus their support on a limited number of common thematic objectives. Article 9 of the Regulation lists 11 such objectives, four of which are directly relevant to the environment. They are

  • • the shift towards a low-carbon economy in all sectors;
  • • climate change adaptation, risk prevention, and management;
  • • preserving and protecting the environment and promoting resource efficiency;
  • • promoting sustainable transport and removing bottlenecks in key network infrastructures.

More importantly, Article 8 of the Regulation deals under the title of sustainable development with more specific environmental dimensions of the act. The Article provides that ‘[t]he objectives of the ESI Funds shall be pursued in line with the principle of sustainable development and with the Union’s promotion of the aim of preserving, protecting and improving the quality of the environment, as set out in Article 11 and Article 191(1) TFEU, taking into account the polluter pays principle’. It further underlines that in preparing and implementing Partnership Agreements and programmes, the Member States and the Commission ‘shall ensure that environmental protection requirements, resource efficiency, climate change mitigation and adaptation, biodiversity, disaster resilience, and risk prevention and management are promoted’.

Climate change objectives take a special place in this context. Article 8 sets out that Member States requesting financial aid from the Funds shall provide information on the possible contribution of the support to achieving climate change objectives.

The Funds provide more than €44 billion to Member States every year within the framework of the Operational Programmes. These are presented by individual Member States and adopted by the Commission. The programme documents set out a number of development strategies with a coherent set of priorities to be implemented with assistance from a fund.

Compared to previous fund organisation, Member States have in recent years been given greater freedom to allocate the funds provided. This has given them greater opportunity to upgrade or downscale environmental issues, depending on the political considerations in individual States.

The EU has been unwilling to establish special funds for the protection of the environment. However, several financial instruments with the main objective of environmental protection have been created since the early 1980s. The most significant of these is LIFE. LIFE was established through Regulation 1973/92,[2] [3] which has been replaced by several other regulations, the latest being Regulation 1293/2013 establishing the LIFE Programme.^8 The Regulation defines the LIFE Programme and divides it into two sub-programmes, one for environment and the other for climate action. The Sub-programme for Environment has three priority areas, namely environment and resource efficiency, nature and biodiversity, and environment governance and information (Art 9). The specific objectives of these priority areas are defined in Articles 10—12 of the Regulation. The Sub-programme for Climate Action also has three priority areas, namely climate change mitigation, climate change adaption, and climate governance and information (Art 13).

The objective of LIFE is to contribute to the shift towards a resource-efficient, low-carbon, and climate-resilient economy, to the protection and improvement of the quality of the environment, and to halting and reversing biodiversity loss. This includes support of the Natura 2000 network and tackling ecosystem degradation. It further aims at supporting implementation of the Seventh Environment Action Programme (Art 3). The LIFE Programme has a budget of €3.4 billion for the period 2014-20.

Further Reading

P G G Davis European Union Environmental Law, An Introduction to Key Selected Issues (Routledge, 2004)

A Epineg ‘EU Environmental Law: Sources, Instruments and Enforcement—Reflections on Major Developments over the Past 20 Years’ (2013) 20 Maastricht Journal of European and Comparative Law 403-22

A Jordan and C Adelle (eds) Environmental Policy in the EU: Actors, Institutions and Processes (3rd edn, Earthscan, 2013)

S Kingston (ed) European Perspectives on Environmental Law and Governance (Routledge, 2014)

J Scott (ed) Environmental Protection, European Law and Governance (Oxford University Press, 2009)

  • [1] According to Arts 47—51, the Member State establishes a monitoring committee, which submitsannual implementation reports to the Commission. Ex ante evaluation shall be carried out by theMember States whereas ex post evaluation shall be done either by the Commission or by the MemberStates in close cooperation with the Commission. See Arts 55 and 57.
  • [2] Council Regulation (EC) No 1404/96 amending Regulation (EEC) No 1973/92 establishing afinancial instrument for the environment (Life) [1996] OJ L 181/1.
  • [3] Regulation (EU) No 1293/2013 of the European Parliament and of the Council on the establishment of a Programme for the Environment and Climate Action (LIFE) and repealing Regulation (EC) No 614/2007 [2013] OJ L 347/185.
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