European governments approved the most ambitious climate change plan to date, agreeing to pour more than €500 billion into everything from electric cars to renewable energy and agriculture. 

At a marathon five-day summit in Brussels, heads of government reached a deal on an unprecedented economic rescue plan and seven-year budget for the region worth €1.8 billion (US$2 billion). Almost a third of that is earmarked for climate action, offering the bloc’s 27 nations a chance to develop clean energy resources, stimulate the market for emissions-free cars, invest in budding technologies, and promote energy efficiency.

“There is no doubt this is the world’s greenest stimulus plan,” said Simone Tagliapietra, researcher at Bruegel, a Brussels-based economic think tank. “Member states should now put forward sensible green national recovery plans, prioritizing those policies that have a triple dividend: economic growth, greening, equity.”

The bid to become the world’s first climate-neutral continent puts Europe ahead of other major emitters such as the U.S., China, and India in the fight against global warming. The extensive recovery package was constructed in sync with the EU’s ambitious Green Deal strategy to zero-out greenhouse gas emissions by the middle of the century, a project that will require hundreds of billion of euros of annual investment.

The environmental clean-up is already under way. The European Commission, the EU’s executive arm, is considering raising the bloc’s 2030 emissions-reduction target to as much as 55 per cent from its current 40 per cent, a move that would affect every sector of the economy from energy to agriculture and trade. Under the deal struck early Tuesday morning, the objective will be revised by the end of this year.

Other green provisions of the EU stimulus deal include:

• The rescue fund and the 2021-2027 budget must comply with the EU goal of climate neutrality and contribute to the new 2030 emissions target
• The European Investment Bank will become the EU’s climate bank; its board will review a capital increase by the end of this year
• In order to make farming more sustainable, 40 per cent of the EU’s agriculture budget will be dedicated to climate
• The Commission will develop a methodology for monitoring climate spending to detect and prevent greenwashing, and will report annually on green expenditure

The deal didn’t come easy, and talks came close to collapse at several points because of clashing national interests. In a final compromise, the €750 billion (US$858 billion) rescue fund contained fewer grants and more low-interest loans. That impacted the size of some investment programs in areas such as health and climate, triggering criticism from some lawmakers and green activists.

One loss was the Just Transition Fund, a tool to help the most affected regions bear the costs of transitioning toward eliminating emissions. Its value was slashed to €17.5 billion from €40 billion (US$46 billion). The aid can be used to retrain workers or put small and medium-sized companies on a more sustainable track.

“This agreement is at the expense of the climate,” said Michael Bloss, a German member of the Greens group in the European Parliament.