Environmental protection expenditure (8th EAP)

The EU must increase environment- and climate-related expenditure to meet the objectives of the European Green Deal. Environmental protection expenditure (EPE) mainly includes expenditure related to the abatement of air, water, soil and noise pollution, the protection of biodiversity, the management of wastewater and waste, and environmental research and development. In real terms, the expenditure increased by 16% between 2010 and 2021 in the EU, reaching EUR 251 billion in 2021. It is very likely that it will continue to increase in the coming years, as additional funds will be made available.

Published: ‒ 25min read

Building on the European Green Deal policy objectives (EC, 2019), the Eighth Environment Action Programme (8th EAP) aims to accelerate the green transition (EU, 2022). To achieve this, environmental protection expenditure (EPE) must be increased in the Member States, and so must green expenditure beyond that directly related to environmental protection, such as expenditure on renewables, energy and resource efficiency, and the circular economy transition. EPE includes expenditure on the protection of ambient air, soil and water; wastewater and waste management; noise abatement; biodiversity protection; protection against radiation; and environmental research and development (R&D). EPE only partly captures expenditure related to the climate-related expenditure and the circular economy .

EPE includes both operating expenditure and investments. In real terms, it grew by 16% in the period 2010-2021, reaching an estimated EUR 251 billion by 2021 (2010 prices). Most EPE is spent by corporations, and this spending increased by 22% between 2010 and 2021, while the EPE of general governments and non-profit institutions serving households increased by only 4%. Most EPE was spent on waste management and wastewater treatment activities in this period .

Since 2010, the share of overall EPE in gross domestic product (GDP) has remained relatively stable, at around 2%. The increase in this share in 2020 was an anomaly caused by the decline in GDP during the COVID-19 pandemic. In absolute terms, EPE was the same in 2020 as in 2019 and dropped slightly in 2021, by about EUR 2 billion (2010 prices).

It is very likely that EPE will increase in the coming years, as additional resources have been made available. The EU’s 2021-2027 budget has earmarked additional funding for climate- and biodiversity-related activities . Moreover, grants and loans for climate-related activities are available through the 2021-2026 EU Recovery and Resilience Facility (RRF) . The RRF was created to mitigate the social and economic impacts of the COVID-19 pandemic and supports the EU’s aim to achieve a twin digital and green transition.

To achieve EU’s objectives on environmental protection, resource management and the circular economy by 2030 , the additional investments needed for the period 2021-2030 are estimated at approximately EUR 77 billion per year for environmental protection, as covered by EPE, and EUR 53 billion per year for resource management and the circular economy transition. It is uncertain if investments, for example in national EPE, EU funding and private circular economy financing, will increase at a fast enough rate to bridge the gap between current investment and total investment needed by 2030. For instance, environmental protection investments account for only a small share of total EPE, amounting to 20% in 2021, and dropped from EUR 54 billion (2010 prices) in 2010 to EUR 51 billion (2010 prices) in 2021 (EEA’s own calculations based on data from Eurostat . InvestEU and sustainable finance actions are expected to trigger additional private capital flows in Member States for sustainable investment, which would help to fill the investment gap.

EPE accounted for about 2.0% of GDP in both 2014 and 2019 at the EU level. EPE to GDP ratios varied greatly across the Member States. In Austria and Belgium EPE accounted for more than 3% of GDP, while in Romania and Ireland it accounted for less than 1%. In 10 of the 27 EU Member States, this share increased during the period 2014-2019, with the biggest increases in Poland (1 percentage point) and Austria (0.4 percentage points). In contrast, the share fell in the other EU Member States, with the biggest reductions in Bulgaria, Hungary and Ireland.

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