What about those EU funds? FEnIKS is crucial for the green transformation, but it needs to be improved

European funds have not left the headlines in recent months. However, this is not the kind of press for EU funds that decision-makers in Warsaw and Brussels would like. “There will be no money from KPO!”, “EU funds will bypass Poland!” We’re slowly getting used to these headlines.

Suspension of funds

Not only politicians, journalists and local government officials talk about them. Many Polish women and many Poles who want to apply for co-financing of their planned activities or are impatiently waiting for the implementation of investments in their neighborhood are concerned. The conflict between the Polish government and EU institutions over Warsaw’s violation of the rule of law is to blame for everything. There are many theories about its consequences for EU payments.

How is it actually? Is the flagship program to support the energy transformation, the so-called “FENIKS” (European Funds for Infrastructure, Climate, Environment) like its mythical namesake will rise from the ashes?

What it really looks like

By introducing judicial reforms after 2015, Poland, in the opinion of the European Commission and EU tribunals, violated the independence of the courts and thus the EU treaties to which it is obliged to comply. This has significant consequences not only in the context of penalties that we have to pay for each day of delay in implementing the CJEU judgments (this is over PLN 1.8 billion, which could buy over half a million tons of coal at the price of PLN 3,000 per ton or almost 100 new windmills producing electricity). Independent courts are crucial from the perspective of investment protection and competitiveness. Their independence is also necessary to ensure control over the correct spending of EU funds. Only the National Reconstruction Plan and structural funds (cohesion policy) amount to almost EUR 110 billion.

Money likes peace, and shocks in the Polish judiciary do not provide it. That is why the European Commission delayed approving the KPO, and then, through the mouth of President Ursula von der Leyen, she assured the concerned European Parliament that no funds from the reconstruction fund would flow to the Vistula River until the so-called rule of law milestones will not be properly completed. In early October, Marc Lemaitre, Director General for Regional Policy at the European Commission, announced that funds from the cohesion policy could not be paid to Poland either. Reason: non-compliance with the horizontal basic condition regarding the effective application and implementation of the Charter of Fundamental Rights, which Poland itself notified to the Commission. This is an unprecedented situation in the history of Polish membership in the EU.

This does not mean, however, that the funds allocated to Poland have been irretrievably lost, nor that the planned investments must be thrown away. Both KPO and the EU budget rely on refinancing already completed investments. The beneficiaries conclude agreements with the Polish government, with which they settle the costs incurred and receive transfers. The government then applies to the EC to reimburse these expenses, with the exception of small advances, amounting to about 1% of GDP. values ​​for each program. Poland has already received a fraction of the funds that will be allocated, among others, to for fund administration and technical assistance.

The government, through Grzegorz Puda, Minister of Development Funds and Regional Policy, assured that work on meeting the basic conditions is underway and the matter will be settled quickly.

Taking into account the rules of settling expenses from EU funds and the government’s assurances, alarmist voices saying that these funds have already been lost should be considered exaggerated. All formal steps related to the implementation of the programs should now be carried out, including – above all – monitoring committees should be appointed in accordance with the partnership principle. They should include representatives of independent non-governmental organizations. And these committees should prepare the first calls for proposals in the near future so that in 2023 the implementation of investments financed from the EU budget for 2021-2027 will start on a full scale. The delay is already huge, and it results from the protracted negotiations and the COVID-19 pandemic, which for some time diverted the attention of officials from the EU budget to the KPO.

Does that mean there is no risk?

While the implementation of already approved programs should start as soon as possible, the messages from the European Commission about the impossibility of settlement should in no way be underestimated.

Firstly, because the trajectory of reforms in the Polish judiciary indicates the risk of failure to meet the basic conditions also in the coming years. The government’s actions in recent days give hope that violations of the rule of law will be at least partially removed. However, the issue of non-compliance with the condition of applying the Charter of Fundamental Rights is broader and goes beyond the issues of the judiciary (it concerns, among others, the observance of minority rights), and the friction in the United Right camp does not allow us to assume in advance that new bills will be adopted and the crisis averted. If the changes fail to be introduced, the expenditure already incurred from the cohesion policy programs and the NIP may remain unsettled. So who will pay if not the EU? The state budget, that is, all of us.

Secondly, there is a “chilling effect” among potential beneficiaries. Confidence in the stability and predictability of EU funding has been undermined. Some entities that would like to implement projects with the participation of EU funds may withdraw from these plans for fear that it will not be possible to settle the incurred expenses. It is also not known how financial institutions providing cheap bridging loans for investors will behave.

Thirdly, monopolizing the public debate around European funds by asking “will there be funds?” takes our attention away from the no less important question “what will they be like?”. What will we spend EUR 110 billion on?

What are we losing – what are the funds

From the very beginning, we were involved in the preparation of the FEnIKS program, which is key to the success of Poland’s green transformation, and is worth EUR 24.2 billion. The first drafts of the program raised a lot of doubts: pro-transformation ambitions were low, the business as usual approach prevailed (spend quickly and a lot, preferably on large infrastructural projects). FEnIKS assumed huge expenses for highways and investments in natural gas, and microscopic ones for the protection of biodiversity.

However, the program has been significantly improved, also thanks to the involvement of civil society partners. Only the joint actions of the Polish Green Network and the Youth Climate Strike led to the submission of almost 50 comments to FEnIKS as part of official public consultations and dozens more in the course of the work of the working group or submitted directly to MFiPR or the EC. It has managed to bring to double the planned spending on biodiversity protection, to include support for energy communities and to include educational activities in the implementation of projects.

In the latest version of FEnIKS adopted by the European Commission, over two billion euros have been allocated to increasing energy efficiency, mostly through the flagship program “Clean Air”, almost 540 million for renewable energy sources, 310 million for the protection of biodiversity. Further billions for the green transformation have been reserved in 16 regional programs prepared by provincial governments.

What needs to be improved

However, the FENIX program and other cohesion policy programs need to be improved. Support for any investments that worsen the condition of the climate and the environment should be completely abandoned. These include e.g. regulating rivers (up to EUR 200 million) or gasification of the energy sector, district heating and individual heating (over EUR 900 million for gas investments).

Indicators also need improvement, as those currently included in the program do not allow for a clear answer to the question of the impact of the European Funds program on the climate.

We need to make the most of the billions of euros in the EU’s probably last generous budget. The challenges related to the deepening climate crisis and the energy crisis require a change in the way of thinking about public investment priorities.

Poland desperately needs EU money. Without reducing the demand for energy in homes, installing new capacity of renewable energy sources, as well as climate education activities “sewn in” in FEnIKS projects, the distance between Poland and Western Europe will increase instead of decrease. And huge emissions of greenhouse gases will deepen the climate crisis, make us a pariah among developed countries, and for Poles they will mean horrendous energy bills.

Therefore, we must not only do everything to ensure that EU funds flow to Poland, but also that they are well spent. It is a difficult but not impossible task.

We write more about what cohesion policy programs are in our report

Author: Krzysztof Mrozek, Manager of the European Funds for Climate Programme

A political scientist by education and experience. Author and co-author of publications in the field of eastern, visa and environmental policy. Previously, he worked at the Embassy of the Republic of Poland in Minsk, Stefan Batory Foundation, VISIO think tank (Finland). Member of the CEE Bankwatch Network energy transformation team. He represents PZS in the Partnership Development Subcommittee of the Partnership Agreement Committee and in the European Forum of Partnership Practitioners (ECoPP).