€60bn earmarked for Europe’s Covid recovery could go to fossil fuel projects


Billions of euros ringfenced for Europe’s post-Covid recovery could be diverted into a raft of new fossil fuel infrastructure projects, deals which may lock Europe into contracts for the next 20 years and risk undermining its green transition efforts.

After hours of heated discussions, in the early morning of 15 December, negotiators reforming the Recovery and Resilience Facility (RRF) regulation, the financial leg of the EU’s €750 billion post-Covid fund, came to a conclusion. The European Parliament, Commission and Council, the so-called “trilogue”, agreed that recovery funds could be used for Repower EU initiatives. Unveiled in March in response to Russia’s invasion of Ukraine and ensuing energy supply fears, Repower EU aims to “rapidly reduce dependence on Russian fossil fuels and accelerate the ecological transition, while strengthening the resilience of the energy system at EU level”.

At a November vote on amending the RRF regulation, the European Parliament agreed to temporarily set aside the ‘Do No Significant Harm’ principle that ensures funded projects cause no environmental damage. In doing so, dozens of fossil fuel infrastructure projects proposed across Europe are now eligible for money originally set aside for post-Covid recovery initiatives.

“We are facing a European energy crisis and the solutions must be European,” said Siegfried Muresan, Romanian rapporteur for the centre-right EEP group in the European Parliament. “Member states shall address as a matter of priority the existing bottlenecks in terms of energy transmission through cross-border and multi-country projects. Repower EU can bring real added value and support us through this crisis.”

The Commission and Council wanted to go even further, removing the cap on the amounts that could be mobilised for oil and gas, and including oil in new infrastructure projects. In the end all grants from recovery plans, regional funds and the Innovation Fund were excluded from the reforms and can not be used for Repower energy projects .

However, up to 30% of the super-subsidised loans provided by the recovery plans, around €67.5 billion out of the €225 billion of available loans, would still be allowed to finance urgent projects related to the energy crisis. Investigate Europe has identified plans for at least 41 liquefied natural gas (LNG) terminal or gas pipeline developments, many of which could now partly be funded with the diverted Covid money.

Olivier Vardakoulias of Climate Action Network (CAN) Europe says the reforms are “a disastrous decision climate wise and unnecessary energy security wise.” He added: “Instead of genuinely repowering the EU, the financial leg of Repower EU is fueling the permanence of the EU’s dependence on imported fossil fuels, which led us to the current crisis.”

There are plans for at least 34 liquefied natural gas developments and seven gas pipeline projects across Europe.

The need for an alternative to Russian gas justifies Europe’s new fossil fuel investments, according to the Czech Republic’s finance minister Zbyněk Stanjura. “The Czech Presidency is now delivering on one of our key promises: ending the EU’s dependence on Russia’s fossil fuels and paving the way for a radical overhaul of the Union’s energy sector. Repower EU is going to enable us to finance the necessary investments and reforms.”

When influential lobby group Eurogas held its annual conference in December, president Didier Holleaux, who is also vice president of French giant Engie, called for more EU support: “We hope the European Commission will help us solve this energy supply crisis.”

EU governments have until March to send Brussels new proposals for their National Recovery Plan, including the gas projects they want funding for. Supported projects have to be operational by 2026 under the terms of the Repower EU scheme.

According to the Global Energy Monitor database, since the beginning of the war in Ukraine, plans for at least 34 liquefied natural gas developments and seven gas pipeline projects have been announced in Europe. The projects, which include new builds, as well as expansions of existing sites and multiple projects at specific terminals, are planned in 10 countries. They include 26 offshore or floating bases (FSRU and FSU) and eight onshore terminal projects. It is estimated the projects would costs tens of billions of euros.

The recently opened floating LNG terminal in Eemshaven, the Netherlands. 

Germany is involved in 11 projects, five of which are fixed terminals and six floating terminals. A rush for gas, recently sanctioned by its ministry of economics, which admitted in an internal report that the planned LNG terminals in Germany “will lead to overcapacity”.

“The development of FSRUS LNG infrastructure and FSRUS leasing are essential for energy security,” a German government spokesperson told IE. “In particular, the reduction and then elimination of Russian gas supplies make them imperative.” The spokesperson added that the construction period would last until 2038 with an estimated cost of  €9.7 billion.

Italy is next with six projects planned, followed by Greece with five and two each in Estonia, Latvia and the Netherlands.

Last May, the European Commission published a map with only 13 LNG projects likely to be financed by the Repower EU scheme. Since then, the EU executive has not updated its forecasts. “We are waiting for updated plans from the governments,” a spokesman told IE.

CAN Europe and Food & Water Action Europe collected information from the various European states involved. According to their calculations, at least 34 LNG projects could receive subsidised European loans through the Repower EU initiative. To these are added mega projects for new pipelines, such as the underwater link between Barcelona and Marseille, the so-named H2MED, as the governments of Spain, France and Portugal promise it will only transport green hydrogen. It won’t be operational until 2030 and there is no certainty that the green hydrogen market – for now accounting for only 5% of all hydrogen produced – can justify such an investment.

“The EU risks deblocking billions of euros to fund new gas pipelines and LNG terminals under the pretext of short-term energy security reasons,” says Esther Bollendorff, senior gas policy coordinator at CAN Europe. “This is sheer nonsense and will not help replace Russian gas this winter. Any short-term actions should not lock-in tens of millions of people in Europe, already facing a climate, energy and social crisis, into future fossil-fuelled crises.”

German chancellor Olaf Scholz at the opening of the Wilhelmshaven LNG terminal, December 2022.

Frida Kieninger, director of EU affairs at Food & Water Action Europe, adds: “The length of contracts, 10 to 15 years, worries me. We are sending a bad signal to producers all over the world, that they will make investments and keep up their dirty business with Europe. It’s definitely throwing a strong lifeline to frackers in the US, making export attractive in Nigeria or Qatar. What will happen then? In 10 years we will be in 2033, we should have a quite considerable reduced gas demand and we will still have these contracts with LNG companies”.

On top of the lengthy contracts, Europe will have built thousands of kilometres of pipeline, potentially partly funded with Repower EU money.

The Spanish company Enagas and Italy’s Snam are carrying on a feasibility study to build an undersea connection to transport gas (which arrives on ships as LNG) to Livorno in Italy and the rest of Europe. An expansion of the Trans-Adriatic Pipeline running from Azerbaijan through Turkey, Greece and Italy is another potential project. Repower EU funding could even stretch to Africa and finance part of the Trans-Saharan Pipeline project planned between Algeria, Niger and Nigeria.

The two NGOs calculated how much the operational costs of each LNG terminal or pipeline would be. The Greek Alexandroupolis LNG terminal project, for example, would cost €19 million per year; the Eastmed pipeline an estimated €90 million; Croatia’s Krk LNG expansion an estimated €34 million and Poland’s Baltic Sea Coast LNG project €64 million per year.
 “The European fossil gas projects are a real attack on the EU’s climate objectives,” French Green MEP Marie Toussaint says. “With a short-term vision, we are giving in to those who will benefit from the exploitation of gas, without guaranteeing in any way that this will make it possible to fight against the inflation of energy prices.”

Last May, Toussaint, together with 48 representatives of the European Parliament and the US Congress, including leading Democratic Party figures Alexandria Ocasio-Cortez and Bernie Sanders, wrote a joint letter to President Joe Biden and Ursula von der Leyen, asking for “the elaboration of a plan guaranteeing the absence of any new financing, any new exploration license or any new permit for the extraction, exportation, importation and infrastructures of coal, petroleum or gas”. No one has responded to the letter so far.

Contributing: Edward Donnelly
Editor: Chris Matthews
Graphs: Marta Portocarrero