Environmental balance sheet: an alternative option for EU

Poul Woodall, DFDS, suggests an alternative way for EU to allocate funds to projects, such as TEN-T and CEF, based on assessment of their environmental performance rather than their financial expenditure. Mr Woodall calls it ‘environmental balance sheet’ and supports that it could be a major incentive for the partners of these projects to make them more efficient and valuable to society.

Over the past 4-5 years I have been involved with a dozen or so project application, seeking co-financing from the EU’s TEN-T and later CEF programs. With a success rate of about 50% one cannot really complain about the achieved results. All the projects have had environmental improvement as the main objective. Yet one has to ask oneself “Are such EU funds really been allocated to project in the best possible way?”

If environment (and here I include climate) improvement is the main objective, why is it that EU allocate co-financing based on the financial expenditure of a project and not on its environmental impact? The answer is probably, that money is easier measure and it is simpler to verify, it is something we all understand.

The current system has the inherent risk that we do not maximize the environmental impact for the resources the community extends to such projects.  In a simplified way, let’s take two projects that each aim at saving 100ts of NOx p.a.  Project A has a budget of € 10 million, whereas project B has a budget of € 1 million. Should both projects make it to the “finals” and be approved under a CEF call, they would be getting the same percentage share of the budget in co-financing. Yet saving 100ts of NOx under project A is 10 times more costly to society than in project B. Hardly the best allocating of common resources.

So is there an alternative?

This is where the environmental balance sheet comes in to play. Rather than allocating co-financing on a financial figure, this should be done based on the environmental impact.

If the EU established a socioeconomic value for each of the pollutants/emissions such as GHG, SOx, NOx, PM , black carbon etc. as far as air emissions are concerned and add to this other elements being it noise and congestion  and then evaluated a project based on the total effect of these, the result would provide better value for society. Some of these “emission” values are already included the “External Costs Handbook  published by the EU Commission.

I call it a “balance sheet”, as we know that e.g. some actions on SOx reduction, caused an increase in GHG, so one needs to take in to account the positive and negative consequences of the proposed action when evaluating the total impact over the project period. The bottom line for this environmental balance sheet should then form the basis on which EU co-financing support is granted.

I appreciate that documentation for such a process may require some additional resources, but funds would go where they are most useful for society.

Establishing the true socioeconomic values for the various pollutants would require some work, however a number of institutions have already established such score sheets. The politicians could take these as a basis and add a “political factor” based on the ambitions in this area. With SOx now being globally reduced in 2020, perhaps this is an area of less importance where as local air pollution in cities needs increased focus and thus the values for NOX and PM 2.5could be adjusted upwards.

If such a system found its way to implementation, the final funding from society for projects would be based entirely on the proved change to pollution emissions over the project period as seen from the society point of view.  It should also encourage companies seeking such financial incentives to make their project as efficient as possible rather that as expensive as possible.