How do national recovery solutions relate to EU regulations

Understanding the link between national recovery solutions, the EU Climate Law, and businesses’ role in building a more sustainable Europe.

Laura Voikar

by Laura Voikar

30 April 2021 marked the deadline for EU Member States to submit their national recovery solutions. Stemming from the European Green Deal, these proposed solutions are the next step in the journey to achieve climate neutrality by 2050. In them, the countries say how they plan to help get there. With the global focus fixed on these national recovery plans, below we look at what they include – and what impact companies can expect to their compliance program.

What are national recovery solutions?

National recovery solutions, or national recovery and resilience plans, outline how funds can be used to establish a more sustainable Europe. Specifically, these plans detail how Member States propose to leverage the EU’s Recovery and Resilience Facility, which offers a stimulus of €672.5 billion in loans and grants for them to pursue this new growth strategy.

At a national level, the recovery plans are meant to transform the concept of a sustainable EU into a more concrete picture – i.e., how to use the funds across 6 policy areas:

  1. The green transition,
  2. Digital transformation,
  3. Smart, sustainable, and inclusive growth and jobs;
  4. Social and territorial cohesion;
  5. Health and resilience; as well as
  6. Policies for the next generation, including education and skills.

What’s included in the national recovery solutions?

In their national recovery solutions, Member States needed to include reforms and investments to support climate change and climate transition as priorities. Therefore, these plans focus on investment needs for creating jobs and economic growth, regarding:

  1. Fixed capital, or physical assets, including infrastructures and buildings;
  2. Human capital, as in funds for health, training and developing work-related skills; and
  3. Natural capital, supporting efforts to increase renewable natural resources, protect and restore the environment, as well as mitigate climate change.

For example, Finland has outlined the general objectives for its program, including reduction of greenhouse gas emissions, growth in productivity, and gender-equality. Germany, on the other hand, proposed to invest 90% of the spending towards climate action and digital transformation. Of those investments, the country earmarked funds for expanding hydrogen research and facilitating the transition to hydrogen economy for companies. Additionally, the plan aims to take measures for promoting electric cars and renovating buildings to be more energy efficient.

How do these national recovery solutions relate to regulation?

Investment leads to initiatives. And companies will be expected to integrate them into their businesses. On the state level, each country’s national recovery solution will likely frame the focus and efforts of businesses operating there. However, the recovery plans already foreshadow the future, lining up with recent regulatory activity on the EU level: the European Climate Law.

The proposed European Climate Law aims to set in stone the EU’s 2050 climate-neutral objective, turning political commitment into a legal obligation. If adopted, the law will legally bind Member States to take the “necessary measures at EU and national level to meet the target.” As such, corporations operating in the EU could face new regulations calling for action in:

  • Investing in environmentally friendly technologies,
  • Reporting progress and tracking emission reduction,
  • Supporting industries to innovate,
  • Ensuring buildings are more energy efficient, and
  • Improving global environmental standards.

Looking into the future, national recovery and resilience plans can serve as a pulse check on the way each Member State might approach this potential legislation. And companies should already start looking at what steps they might need to take to adapt their business.

National recovery solutions: The next step toward EU climate neutrality

With the Member States’ national recovery solutions in review, the EU is one step closer to a clean and circular economy. But to make true progress in reducing the EU’s vulnerability to the effects of climate change, companies will need to ramp up their sustainability efforts even more. Corporations operating in the EU should already take a close lose at the plans of the Member States in which they operate and make a plan of their own for how to stay aligned.

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