Greece gambles on greening to get out of crisis

Since the crisis of the years 2010-2015, we haven’t really heard much about Greece. During those years, the country was hit by a currency crisis, which almost resulted in Athens pulling out of the Eurozone. Greeks call that period the ‘Great Crisis’, and they are still feeling the aftermath.

Last month (April 2022), it was announced that Greece had paid off its €32 billion debt to the International Monetary Fund ahead of schedule. Apparently, things are heading in the right direction. Nevertheless, Greece still has EU loans amounting to almost 53 billion euros are still outstanding. The national debt of around 200 percent also tells it like it is. During Innovation Origins’ visit to Athens, we were struck by the level of poverty: widespread homelessness, poor infrastructure, run-down housing. 

Loan components

More important than this subjective vision of today are the plans for the future. The Greek corona Recovery and Resilience Plan (RRP) has received the approval of the European Commission. In July 2021, the council gave the green light to the plan, which totals over 30 billion euros. A month later, Athens received 4 billion euros in pre-financing. 

Notable is the fact that while Greece is receiving 17.8 billion in subsidies from the corona recovery fund, it is also receiving 12.7 billion in loans. Quite a few countries are opting out of the loan component of the RRP. Greece, however, is not, as it sees it as a favorable means of financing from the private sector. In relative terms (as measured by Gross Domestic Product), Greece is the largest recipient of corona recovery funds within the European Union.

Climate change agenda

The fund is coming at just the right time. “Until recently, the political debate has been dominated by economic and social issues stemming from Greece’s ‘Great Crisis,'” says Victoria Tsitsoni, Economic Policy Analyst at the World Wildlife Fund (WWF). The Greek division of the WWF is monitoring the Greek efforts critically. In December 2019, shortly before the pandemic outbreak, the government released its first national energy and climate plan. In it, a climate change agenda was adopted to act as a catalyst for new investment and the creation of jobs. 

The first results are already evident. For example, the sun-rich country is generating solar power at an accelerated rate. The increase in installed capacity went from 2.3 GW to 3.6 GW (December 2021) in less than two years. However, heavy overloading of the electricity grid is a problem. Future grid infrastructure needs to lead to more development of sustainable energy sources.

Greece is continuing on the path it has taken in its application for European corona funds. More than one-third of the fund (38 percent) can be traced back to measures that support climate targets. These include investments in the modernization of the electricity grid and the bolstering of the support scheme for producers of renewable energy sources. Furthermore, the plan supports municipalities that want to strengthen the climate resilience of urban areas. 

Other measures include support for a national reforestation program and a comprehensive strategy to mitigate flooding, among other things. 

Greek housing stock

Like so many Mediterranean countries, such as Italy and Cyprus, Greece is primarily deploying its corona funds to make homes more energy efficient and expand mobile transport infrastructure. The RRP will be used to finance renovations of more than 100,000 buildings which will reduce their energy consumption by at least 30 percent by 2025. That’s equivalent to about 20 percent of Greece’s housing stock. Perhaps that could be made more comprehensive.

In addition, the Greek government has adopted a sweeping regulatory framework to promote the installation and operation of electric vehicle charging stations throughout Greece, putting the country on track to meet its goal of having a 30 percent proportion of electric vehicles in the domestic market by 2030. Today, Greece is still largely unplugged.

Do No Significant Harm

Greece’s WWF is very critical on one issue when it comes to whether RRP investments are actually all that ‘green’. The organization sees a problem that is common across the European Union. “We are concerned that investments and projects funded from the RRP may be falsely labelled as ‘green’ or may harm the EU’s environmental targets,” says Tsitsoni. “This is due to a lack of clear and strict rules of good governance and verifiable systems for monitoring compliance with the sustainability targets.”

The Greek WWF, along with other environmental organizations, has consequently been pressing Brussels to enforce the rules since 2021. According to the Greeks, the principle of ‘Do No Significant Harm'(aka DNSH) is the root of the problem. What is meant by that principle is that investments within the framework of the RRF (and other funds) should not cause significant harm to the environment.

“How this principle is applied in practice is missing the point of the recovery fund.” An example is the investments being made in gas infrastructure, which Greece is also planning to make. “These are investments that are not in line with the Paris Climate Agreement (2015, ed.). Yet such investments are still eligible for a loan within the RRF. This is a flawed approach, as a new gas infrastructure could put the Greek energy system on a high carbon intensity path for many decade to come,” Tsitsoni says.

Photos: Children during the annual parade on the Greek National Day (first image), street scene in Athens, Victoria Tsitsoni of the WWF, trolley bus in Athens, poster with EU logo on the Acropolis.