EU sidelines fossil-fueled cars, power projects from pandemic recovery funds

The European Union has pledged to block or limit funds from the region's Eur672.5 billion ($814 billion) COVID-19 recovery package going to fund upgrade programs for fossil-fuel-powered vehicles and power projects.

Under guidance adopted Feb.12 as part of the EU's Recovery and Resilience Facility, all car scrappage schemes replacing gasoline and diesel cars with newer versions of internal combustion engines vehicles would be assessed against lower-impact alternatives such as zero-emission electric cars, the European Commission said.

"If a scrappage scheme aims to replace inefficient cars with more efficient cars relying on internal combustion engines, the impact of the new internal combustion engine cars would be evaluated in absolute terms [such as specific emissions thresholds] as low-impact alternatives exist," according to guidance outlining the application of a "do no significant harm" principle.

The guidance forms part of the "Next Generation EU" recovery fund approved last year, the largest stimulus package in the trading bloc's history aimed at rebooting the European economy in the wake of the COVID-19 crisis.

EU governments can access the funds by submitting national Recovery and Resilience Plans to the EC showing how they would spend the money to help recover from the pandemic lockdowns.

Boosted by low-carbon mandates, green recovery funds, and new models, Europe superseded China as the global driver of electric car sales in 2020 for the first time in five years, as total EV sales jumped 43% despite the COVID-19 crisis hitting overall car sales, according to data from EV-volumes.com.

The International Energy Agency expects the global electric vehicle fleet will displace around 2.5 million b/d of oil products by 2030 under its base case scenario,

Gas-fired power exemption

The EU guidance also states that recovery projects related to power and/or heat generation using fossil fuels, including transmission and distribution infrastructure, will not be deemed compliant with the purposes of the recovery funds, given the existence of low-carbon alternatives.

It said, however, "limited exceptions" would be considered for power and/or heat generation using natural gas, as well as related transmission and distribution infrastructure on a case-by-case basis if a member state faces "significant challenges" in the transition away from carbon-intensive energy sources such as coal, lignite or oil.

Accompanying reforms and investments may be required, it added, such as installing charging stations for electric vehicles or hydrogen on roads or congestion charges to avoid future carbon "lock-in effects".

The EU wants to become climate neutral by 2050, which means decarbonizing its energy sector by investing heavily in low-carbon technologies like clean hydrogen, renewables, batteries and carbon capture and storage, as well as grids and interconnectors.

The EU has a binding 2030 target to cut its emissions by at least 40% from 1990 levels, and the EC plans to propose in September raising this ambition to a 50-55% cut.