EU's recovery: a digital turn within an environmental frame?
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Norman Vander Putten
Author
Although the EU’s Recovery and Resilience Facility (RRF) aims to relaunch the economy and build resilience, It could have decisive consequences on how digitalisation is understood with respect to environmental protection.
The Recovery and Resilience Facility
In light of the Covid-19 crisis and after heavy debates, the EU adopted a Regulation establishing the Recovery and Resilience Facility (RRF) in February 2021. As its name suggests, it aims at relaunching the economy after the adverse effects of the pandemic, while improving the EU’s crisis preparedness. It has, however, significant consequences on the digitalisation of the EU and on how digitalisation is understood with respect to environmental protection.
The RRF is a one-of-a-kind spending instrument. The Regulation provides for the distribution of approximately 750 billion euros (in 2018 prices) borrowed on the financial markets by the EU. They are allocated either through grants (360 billion) or loans (390 billion) to support nationally determined resilience and recovery plans (NRRPs) which may themselves form part of the recovery responses of Member States. The reforms and investments funded by the RRF should serve its six pillars: green transition; digital transformation; smart, sustainable and inclusive growth; social and territorial cohesion; health and economic, social and institutional resilience; and children and youth-oriented policies such as education. In Leino-Sandberg and Ruffert’s words: “RRF is a large-scale redistributive programme designed to advance various broad political goals”.
The combination of both the scale and the institutional architecture of the RRF make it a decisive instrument for the future of the EU (see, for instance Cafaro, 2022). Many observers have started to investigate the institutional and economic impacts of it. We briefly explain on our part how this spending instrument seeks to foster digitalisation within Member States. We then comment on this “digital dimension” by looking at its articulation with another key objective of the instrument: the green transition.
RRF and the Digital Transformation
Two of the six aforementioned pillars have a special treatment in that they enjoy a specific form of guarantee: the RRF provides that national plans should at least allocate 37% of their funds to “green transition” investments and reforms, and 20% to “digital transformation” ones. The establishment of such targets is a type of “conditionality”, i.e. it attaches the obtainment of EU benefits to certain requirements which go beyond the primary goal of spending (in this case, recover from Covid-19, see De Witte, 2021). This indirect way of regulating has been often used before, although in other ways, within the EU.
To ensure that the meaning of those pillars does not depend upon each State’s definition of it (in other words, to avoid green or digital washing), the EU provides for binding “green” and “digital” tagging methodologies. More precisely, a table indicates the investments or reforms that are to be considered to contribute 0, 40 or 100% to the green or digital objective. For instance, “support for the development of digital skills” and improvements in “mobile data connectivity” or in the “high-capacity broadband network” are tagged as “100%” digital, while “smart energy systems” or specific support for “youth employment and socio-economic integration of young people” are tagged as “40%”. It should be added that NRRPs are also closely monitored: they must include envisaged milestones, targets and an indicative timetable for the implementation of the proposed reforms, and investments, which are and will be scrutinised. Taken together, those elements allow to conclude that the digital turn is now being led seriously at the EU level. The recent Commission’s proposal to amend the RRF Regulation following the energy crisis should not affect this state of affairs.
On its website, the Commission estimates that the bulk of the digital projects being financed (amounting, in the end, for more than a quarter of the RRF) are e-government and public services (36%), human capital (20%) or business digitalisation (19 %) investments and/or reforms. Connectivity, digital capacities and R&D form only 25% of the digitally tagged measures. The question may therefore be raised whether the instrument really aims at “transforming” the economy by developing new technologies, or whether it seeks to fill a gap by adopting basic digitalisation mechanisms in sectors that were underfunded until now. In Belgium, for instance, it is through the national resilience and recovery plan that some aspects of the judicial system such as the online filing of documents (a progress that may sound evident to the reader) is being put in place. Data management processes for criminal matters, or the teaching of digital skills in prisons are other projects supported by the EU.
Digital Transformation in the European Green Deal Era
We have highlighted above that both the “green” and the “digital” transition have in common that they benefit from conditionality mechanisms backed by hard spending targets. The interlinkages between those two pillars are of particular importance, especially since the European Green Deal adopted in 2019 contains strong commitments towards a “new growth strategy that aims to transform the EU into a fair and prosperous society, with a modern, resource-efficient and competitive economy where there are no net emissions of greenhouse gases in 2050 and where economic growth is decoupled from resource use”. Edoardo Chiti, for instance, argues that through this strategy, the Commission aims at managing the transition from the current phase of European integration towards a European Union with a “genuinely new objective of sustainability of ecosystems, instead of growth and market”.
Two complementary ties may be distinguished to that regard. The first one concerns the hierarchy of those objectives: the digital transformation must happen within an environmental frame. The RRF Regulation provides, for instance, that only measures which do not “significantly harm” the environment may be accepted. They should not be “supporting or carrying out economic activities that do significant harm to any environmental objective” such as climate change mitigation and adaptation, sustainable use and protection of resources, pollution reduction and biodiversity protection. The commission made systematic assessments to that regard.
The second relates to whether green and digital transitions are perceived as mutually beneficial or, on the opposite, mutually detrimental. While covering this question in depth falls evidently outside of this post’s scope (for reviews, see Feroz, Zo and Chiravuri, 2021, or Liu et al., 2019), it seems that the RRF Regulation does not anchor a “naïve” techno-optimistic vision on the matter. Indeed, on the one hand, it acknowledges that, in some cases, green and digital are mutually profitable. There are investments and reforms which are (partially) tagged both as “green” and “digital”, such as “Digitalising SMEs or large enterprises (including e-commerce, e-business and networked business processes, digital innovation hubs, living labs, web entrepreneurs and ICT start-ups, B2B)”, or “government ICT solutions, e-services, applications”. On the other hand, however, it is striking, if we focus on those two examples, that the Regulation tags them as “green” only if “the objective of the measure is that the activity has to process or collect data to enable GHG emission reductions that result in demonstrated substantial life-cycle GHG emissions savings”, which may be proven by complying with the “European Code of Conduct on Data Centre Energy Efficiency”.
In short, and while these two intuitions certainly deserve to be further investigated, the RRF is probably one of the first large-scale financial instruments that apprehends “the economy” as a system operating within planetary boundaries. It impulses a massive digital turn within the EU, but ensures (on paper, at least) that this happens in an environmental frame. The mechanism is innovative in that it backs this vision not only with words, but also by setting hard targets, classifications and methodologies.
Time and scrutiny will tell if these promises will be kept: All reforms and investments should be completed by September 2026. Until then, the Commission’s Recovery and resilience scoreboard allows citizens to track the state of play of RRF plans both at the EU and national levels. In any case, the legal framework behind the Recovery and Resilience facility is a great opportunity to highlight that the digital transformation should be understood as a means to higher ends. If in an ever increasingly global and competitive world, it seems hard not to hop on every speedy train passing by, one should always remain aware that a digitalised society makes no sense in a dreadful environment.