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A crisis like the corona pandemic calls for decisive measures. The EU has freed up €723.8 billion in an effort to use the Recovery and Resilience Facility (RRF) to pull the European economy out of the recession caused by corona. In order to qualify for a share of this large bag of money, member states must submit a plan to the European Commission. In the series Decarbonizing Europe, we put those plans under a magnifying glass.

The Portuguese recovery plan – ‘Recuperar Portugal, Construindo o futuro’ (Restoring Portugal, building on a future) – was the first plan that appeared before the European Commission. On 16 June 2021, the plan was given the green light: €13.9 billion in subsidies and €2.7 billion in loans will be released. The Portuguese plan, which runs to more than 300 pages, is designed around three pillars: economic, social, and territorial resilience, the climate transition, and the digital transition.

Accounting for almost half (45%) of the total budget, the focus lies on investments that increase economic, territorial, and social resilience. Another 16 percent is reserved for the digital transition, and 38 percent of the total budget is allocated to the climate transition. A percentage with which the country barely meets the EU requirement of 37 percent.

Sofia Simões, head of the Resource Economics Unit at LNEG
Sofia Simões, head of the Resource Economics Unit at LNEG

Climate transition

In the recovery plan, the government focuses on investments in sustainable mobility and energy, hydrogen, decarbonization of industry, and energy efficiency of buildings. The measures should contribute to meeting 55 percent of the required CO2 emission reduction by 2030, but the plan does not specify the total amount of reduction in CO2 these particular investments should lead to.

Climate is an important issue in Portugal, both on a social and political level, Sofia Simões states. Simões is head of the resource economics unit at LNEG: the National Laboratory of Energy and Geology. “We are vulnerable to climate change, we are already experiencing its effects. That makes it an urgent issue.”

Inequality

In Portugal, the effects of climate change are knocking on the door harder and harder. According to the recently published IPCC-rapport, Portugal is among the European countries that are most vulnerable to climate change.

The country is experiencing unprecedented drought, it almost hasn’t brained since October. On February 15, the Portuguese Institute of Meteorology (IPMA) noted that ninety percent of the territory was in a state of severe or extreme drought. Simões sees that the effects of climate change are creating inequality. “I’m afraid that people who live in rural areas will be the ones to suffer most. They derive their income from agriculture, but our water supply is running out.”

Water shortage is problematic for drinking water and agriculture, but Portugal also derives much of its renewable energy from water. The country has sixty hydropower plants, which together produce 30 percent of its annual energy demand. Due to the drought, the government has had to temporarily shut down some of these plants.

“I’m afraid that people who live in rural areas will be the ones to suffer most. They derive their income from agriculture, but our water supply is running out.”

Sofia Simões

Forest fires

Climate change is also causing the country to struggle with forest fires. These fires destroy entire ecosystems and lives. In the summer of 2017, a series of forest fires in central Portugal caused a disaster that left 64 dead and 204 injured. The problem is aggravated by the fact that much of the land is privately owned, Simões explains. “Many of the owners live in the city and no longer take the time to have a good look at the piece of land that they inherited from their grandparents. That makes it difficult to address the problem properly.”

“I’m afraid it’s going to escalate,” the climate scientist continues. “We have people in the city who drive electric cars and are conscious about climate change. And then we have people that live in rural areas, they are suffering the most from the effects of climate change. That disparity seems to be getting worse. We need to be mindful of that.”

Energy-dependent

Portugal needs to free up money to fight the effects of climate change and make the country more resilient – measures that do not directly fall under the green transition aspect but rather that of the resilience dimension of the recovery plan. For example, €615 million has been set aside to protect forests from fires, and €390 million is reserved for better water management.

NextGenerationEU

The corona crisis is one of the biggest challenges of our time. The European Union, through NextGenerationEU – the largest recovery plan ever at €806.9 billion – aims to help its member states emerge stronger from the crisis. The Recovery and Resilience Facility (RRF) is at the heart of this plan (€723.8 billion).

The RRF has two goals: first, to pull the European economy out of the recession caused by the corona pandemic. At the same time, it is designed to give an impetus to important investments for the future and measures for rolling out reforms.

The original deadline for submitting a plan was April 30, 2021, but that deadline has since been pushed up to June 2022. Currently, 26 of the 27 countries have submitted a plan. The plans require member states to spend at least 37 percent of their budgets on climate action and 20 percent on digitalization.

In 2019, fossil fuels accounted for 75 percent of the primary energy supply. Portugal has to import all its fossil fuels, so a major focus of climate policy also lies in energy independence. By 2050, the government wants to be dependent on imports for no more than 19 percent.

The country is making progress in increasing the proportion of renewable energy sources in its energy supply, particularly in terms of electricity. Thanks to hydropower and wind power, 54% of Portugal’s electricity generation was renewable in 2019. The recovery plan has earmarked €370 million for investments in green hydrogen and renewable energy.

Energy efficiency, decarbonizing the industry and sustainable mobility

One sector that is exceptionally dependent on energy imports is public transport. In 2019, 94 percent of the energy demand in this sector was covered by oil. Sustainable mobility is, therefore, the largest component of the investment in the climate transition at a sum of €967 million. Investments in the Lisbon and Porto metro networks are the biggest cost drivers.

With €715 million, decarbonizing the industry is the second-largest cost item where climate investment is concerned. Despite this huge sum, the plan does not get much more specific than “investments aimed at decarbonizing the industrial and business sectors.”

The government is allocating €610 million for making buildings energy efficient. Half of this budget is earmarked for making private homes energy efficient, with the rest of the amount going to government buildings. An important topic, because Portugal scores high on the European Energy Poverty Index: 64 percent of households cannot keep their homes warm in winter. To put that in context: in the Netherlands, that percentage is seven percent. “The people with higher incomes who turn on the heating are also a problem,” says Simões. “The buildings are so poorly insulated that a lot of electricity is needed to make and keep them warm which in turn causes high CO2 emissions.”

Social resilience

The focus of the recovery plan – no matter how hard climate change impacts are knocking on the door – is on investments that increase the social resilience of Portuguese society. For example, the country is faced with a housing problem. Over 20 percent of Portuguese with an average income complain of leaking roofs, not much sunlight, and mold in their homes. As a result, the largest bag of money (€2,733 million) is going towards reforming the housing system through a national housing plan. The goal of the reforms is to develop a law and regulations around housing, create social rental housing and student accommodation, and help 26,000 families find decent homes.

You can read all other stories in the Decarbonizing Europe series here.

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