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Paul van den Noord, a researcher with the Macro & International Economics section, recently gave a briefing to the European Parliament. The purpose of the briefing was to assess whether the European Commission’s budget proposal was suitable for financing energy transition.

The briefing’s main conclusion is that the budget proposal does not provide enough of a margin to finance the energy transition. Van den Noord explains: ‘Thanks to the European recovery fund, we won’t see an immediate financing problem in the short-term. That fund was set up as a response to the COVID-19 pandemic and it still contains €750 billion euro. But around 5 years from now, when this fund exhausted, we’re going to face a problem because the energy transition will probably still be high on the agenda.’


In this context, a key recommendation of the briefing is to make the European recovery fund permanent and use it for the energy transition (and possibly for other EU strategic goals such as digitisation and strengthening Europe's defense capabilities).

A brief look at the European Commission’s proposal

The Commission presented its proposal in November 2022. The proposal allows for the possibility of member states to incur addition debt for the purpose of financing the energy transition. The proposal also states that it will no longer be mandatory to reduce debts within 20 years in the event these debts exceed the norm of 60% of the GDP.