EU economics: boost the economy by using today's money to pay for white elephants in five years' time

Attention focused on the renewables component of Obama's stimulus plan today. But the Americans aren't the only ones using the credit crunch as an excuse to plough vast sums of public money into their pet projects.

The European Commission today issued a revised draft list of white elephants projects to be supported under its proposal for a Regulation "establishing a programme to aid economic recovery by granting Community financial assistance to projects in the field of energy". The programme is to cost €3.5bn. The money is to be drawn from the Common Agricultural Policy, which is obviously swimming in so much cash that several billion can be siphoned out at short notice without affecting its intended recipients.

In the  Explanatory Memorandum at the start of the Commission Communication accompanying the proposal, the budgetary implication (p.4) is described in the following words:

A financial envelope of €3,500 million is foreseen in total for the three sub-programmes, consisting of €1,500 million for 2009 and €2,000 million for 2010.

The main volume of payments will be made between 2009 and 2012 with the last payments, notably for carbon capture and storage projects, foreseen for 2014/2015.

So this is a package "to aid economic recovery" in which some of the payments will be made in 2014/15. And if we look at the draft list, we see that the share for carbon capture and storage (the money to be spent at that late date) is €1,150m, one-third of the total.

The text is a little obtuse, with the budget envelope being assigned to 2009 and 2010, but the spending parcelled out over a number of years upto 2015. The only sense I can make of that is that the money will be drawn from the 2009 and 2010 budgets, but spent over a wider number of years. So, in the name of aiding economic recovery, we are drawing money out of current budgets in order to spend them on white elephants in the future, one-third of it a full five years later. How exactly is that supposed to help ameliorate the current economic difficulties?

There may be an argument for some of these projects, particularly some of the Eastern European infrastructure projects. But why are they justified in the name of economic recovery rather than energy security? Is it because it would have been impossible to justify tacking on the CCS white elephants for Western European governments' favourite oligopolists (EDF, RWE, Eon, Centrica, Enel, & co)?

How much assessment was carried out on whether these particular projects provided the best stimulus effect or the best value for energy security and carbon reductions? If we have €1.15bn available to stimulate the economy by spending tax to reduce our carbon emissions (which is the only point of CCS), there are many other options that could be delivered sooner and would provide a better bang for the buck.

Or better still, we could return this money to taxpayers, create rational incentives that value carbon fairly and appropriately, break up the vertically-integrated utilities to create a genuinely competitive and liquid market, and leave it to the economy to work out where the money can be most effective. The market certainly wouldn't pick CCS, which is why it takes a political behemoth manned by apparatchiks whose only understanding of energy and environment comes from what they are spoon-fed by the oligopolists to blow this much money to such negative effect, at a time when we can least afford it.