The President of the European Commission Ursula Von der Leyen addresses her first state of the union speech.
JOHN THYS | AFP | Getty Images
The EU will be tapping the markets at an unprecedented scale next year and 30% of the funds should be raised through green bonds, European Commission President Ursula von der Leyen said at a landmark speech on Wednesday.
The 27 EU capitals agreed in July to borrow 750 billion euros ($891 billion) from public markets starting in 2021. The idea is to use those funds to invest in different sectors across the EU and thus help them to recover from the coronavirus crisis.
“We are world leaders in green finance and the largest issuer of green bonds worldwide,” von der Leyen told lawmakers in Brussels.
“And I can today announce that we will set a target of 30% of NextGenerationEU’s 750 billion euro to be raised through green bonds,” she said.
Green bonds are a financial instrument that are earmarked, specifically, to raise money for projects related to climate change or the environment.
Onlookers were quick to respond to the announcement with Karel Lannoo, the chief executive officer of the Brussels-based think tank CEPS, telling CNBC he thought the idea was weak, “because we do not have a standard on what is green.”
This means that some projects might be earmarked as “green” but ultimately end up supporting railways and energy networks, he said.
Wednesday’s announcement was part of wider and bolder commitments to make the EU more sustainable in the longer term.
Von der Leyen also announced that the EU should cut its carbon emissions by “at least 55%” before 2030, rather than by 40% as previously targeted.
“I recognize 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 manage this,” the former German defense minister said.
Analysts have doubts on whether the EU can achieve that.
“I haven’t heard much from the Commission president today on that,” Guntram Wolff, director of the Brussels based think tank Bruegel, told CNBC’s “Street Signs Europe.”
He explained that the industries that could more easily transition to a more sustainable path have done it, but the “tough part” comes now by asking the transport, industrial and airline sectors to reduce their emissions.
“In all those areas the technology is starting to be there, but it is not yet fully competitive. If you want to make it competitive, you have to price very heavily emissions and that’s gonna be a drag on economic growth,” Wolff said.