Study on biodiversity financing and tracking …...Study on biodiversity financing and tracking biodiversity-related expenditures in the EU budget LEGAL NOTICE This document has been

June 2017

Study on biodiversity financing and tracking

biodiversity-related

expenditures in

the EU budget

Final Report

Study on biodiversity financing and tracking biodiversity-related expenditures in the EU budget

LEGAL NOTICE

This document has been prepared for the European Commission however it reflects the views only of the authors, and the Commission cannot be held responsible for any use which may be made of the information contained therein.

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Study on biodiversity financing and tracking biodiversity-related expenditures in the EU budget Project number: ENV.B.2/ETU/2014/0031

Final Report June 2017

EC - STUDY ON B IODIVE RS IT Y F INA NCING

A ND T RA CK ING B IODIV E RS ITY -RE LATE D E XP E NDITURE S IN T HE EU B UDGET

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© 2017 Ernst & Young – All rights reserved

LEGAL NOTICE

The information and views set out in this report are those of the authors and do not necessarily reflect

the official opinion of the Commission. The Commission does not guarantee the accuracy of the data

included in this study. Neither the Commission nor any person acting on the Commission’s behalf may

be held responsible for the use, which may be made of the information contained therein. More

information on the European Union is available at http://www.europa.eu.



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Table of contents

Executive summary ........................................................................................ 9 1. Introduction and general approach to the study .................................... 13

1.1 Context of the study 13

1.2 Objectives and general approach 15

1.3 Methodology 16

1.4 Limitations 17

2. Tracking biodiversity-related expenditure in the EU budget ................... 18 2.1 Introduction 18

2.2 Funding instruments under shared management 23

2.2.1 Partnership agreements .................................................................................................... 23

2.2.2 ERDF / CF / ESF biodiversity expenditure tracking ............................................................... 34

2.2.3 EMFF biodiversity expenditure tracking ............................................................................... 44

2.3 Funding instruments under central management 47

2.3.1 Biodiversity tracking under centrally managed instruments (excluding EAGF) ......................... 47

2.4 Funding instruments for the Common Agricultural Policy 59

2.4.1 EAGF biodiversity expenditure tracking ............................................................................... 61

2.4.2 EAFRD biodiversity expenditure tracking ............................................................................. 75

3. Absorption of EU funds for biodiversity – biodiversity funding in MFF 2007-2013 90

3.1 Biodiversity funding in MFF 2007-2013 (ex post analysis at EU level) 91

3.2 Absorption of EU funds for biodiversity – biodiversity funding in MFF 2007-2013 in selected Member States 99

3.3 Discussion: Challenges and obstacles for absorption of funds for biodiversity and options for increased funding uptake 117

4. Private financing ................................................................................ 120

4.1 Introduction 120

4.2 Methods 137

4.3 Results 138

4.4 Conclusions 187

5. Annex ................................................................................................. 194 5.1 Current tracking approaches in the EU budget (Draft Budget 2017) and share of biodiversity contributions per fund 194

5.2 Annex to section ERDF / CF / ESF biodiversity expenditure tracking 200

5.3 Annex to section Programme for the Environment and Climate Action (LIFE) 203

5.1 Detailed analysis of partnership agreements 205

5.2 Annex to section EAGF biodiversity expenditure tracking 207

5.3 Detailed tables for EAGF analysis 210

5.4 Detailed tables for EAFRD analysis 216

5.5 Annex to section on absorption capacity 221

5.6 Annex to section on private financing 224



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Table of figures

Figure 1 - Biodiversity-related expenditures in 2016 EU budget (M€) ............................................................... 9

Figure 2 - Biodiversity-related expenditures in Draft Budget 2017 (M€) .......................................................... 22

Figure 3 - Funding allocations (M€) ............................................................................................................ 25

Figure 4 - Fraction of the total ESI fund amount for 2014-2020 allocated to TO6 for each Member State ........... 25

Figure 5 - ESI funds allocations to TO6 per Member State over the 2014-2020 budget period .......................... 26

Figure 6 - Share of the total ESI fund for TO6 allocation in relation to Member States’ main land area (in km2) .. 27

Figure 7 - Number of occurrences of biodiversity-related notions at fund-level ................................................ 29

Figure 8 - TO6 allocations including biodiversity and biodiversity-related notions ............................................ 31

Figure 9 - Funding allocation for Thematic Objectives under biodiversity-relevant intervention fields .............

Figure 10 - Biodiversity-relevant expenditure of centralised direct management instruments in 2015 and 2016

(estimates) ............................................................................................................................................... 48

Figure 11 - Environmental instruments under the Common Agricultural Policy ................................................ 60

Figure 12 - Simplified scheme of the biodiversity tracking for EAGF starting from 2015 (EY) ............................ 62

Figure 13 - Proposed approach to refine tracking for biodiversity expenditures under the greening payments

illustrated on the example of ex post estimate for 2015 (detailed explanation in the text) ................................. 71

Figure 14 - Proposed refined tracking of biodiversity-relevant expenditure under green direct payments (EY) .... 74

Figure 15 - Contribution of focus areas to biodiversity-related expenditures under current tracking approach and #5

tracking level, and the gap analysis ............................................................................................................ 83

Figure 16 - Priority 4 analysis: contribution of each sampled RDP to the gap (left) and the gap per each sampled

RDP expressed as % of the current tracking approach estimate (right) .......................................................... 84

Figure 17 - Gap analysis: isolated effect of ANC measure vs. all other measures for P4 .................................. 85

Figure 18 - Effect of each measure (except M13) on the analysed gap for P4 ................................................ 86

Figure 19 - Distribution of measures’ contribution to the P4 biodiversity budget according to the current tracking

approach ................................................................................................................................................. 86

Figure 20 – EY proposition for enhancing ex-ante tracking approach for biodiversity-relevant expenditures under

the EAFRD 2014-2020 (illustrated scenario with M13 included) ..................................................................... 89

Figure 21: Contribution of ERDF and CF to biodiversity in MFF 2007-2013 by intervention field (left) with indicated

absorption rates (right) .............................................................................................................................. 92

Figure 22: Direct contribution of EAFRD to biodiversity in MFF 2007-2013 by measure (left) with indicated

absorption rates (right) .............................................................................................................................. 95

Figure 23: Indirect contribution of EAFRD to biodiversity in MFF 2007-2013 by measure ................................. 96

Figure 24: Direct (left) and indirect (right) contribution of EFF to biodiversity in MFF 2007-2013 by measure/action

............................................................................................................................................................... 98

Figure 25: Contribution of EFF to biodiversity in MFF 2007-2013 by axis (left) with indicated absorption rates (right)

............................................................................................................................................................... 99

Figure 26: Contribution of EAFRD to biodiversity in MFF 2007-2013 in Poland by measure (left) with indicated

absorption rates (right) ............................................................................................................................ 102

Figure 27: Contribution of EAFRD to biodiversity in MFF 2007-2013 In Greece by measure (left) with indicated


Figure 28: Contribution of EAFRD to biodiversity in MFF 2007-2013 in Romania by measure (left) with indicated


Figure 29: Contribution of EAFRD to biodiversity in MFF 2007-2013 in Denmark by measure (left) with indicated


Figure 30 - General framework of PES programme .................................................................................... 125



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Figure 31 - General cartography of public political instruments for environment, position of PES and their variations

(adapted from (Laurans, Lemenager, and Aoubid 2011).............................................................................. 127

Figure 32 - The scope of payment for environmental services ..................................................................... 129

Figure 33 - The choice of publicly funded or privately funded PES ............................................................... 131

Figure 34 - Overview of Financing Natures of PES Projects in EU ............................................................... 138

Figure 35 - PES projects by EU Member States......................................................................................... 139

Figure 36 - Overview of the Geographic Scale of PES Project in the EU ...................................................... 139

Figure 37 - Overview of Development Stages of PES Project in EU ............................................................. 140

Figure 38 - PES Projects Distribution on Basis of Main EcoS Targeted......................................................... 140

Figure 39 - Overview of the Methodologies Used to Evaluate the Amount Disbursed in PES Projects in EU .... 141

Figure 40. Disbursement Mechanisms of PES Projects in EU .................................................................... 141

Figure 41 - Economic Sectors Involved in PES Projects ............................................................................. 142

Figure 42 - Success levels of PES Projects in EU ...................................................................................... 142

Figure 43 -Relations between Main EcoS Targeted by PES Projects and their Development Stage ................ 143

Figure 44 - Framework of the Vittel PES Programme ................................................................................. 144

Figure 45 - Framework of the Evian PES case........................................................................................... 145

Figure 46 - Field edge adopters visiting their adopted lands ..........................................................................

Figure 47 - Ecologist explaining the role of the edges ...................................................................................

Figure 48 - Framework of Adopt a Field Edge programme .......................................................................... 159

Figure 49. Slovensky Raj National Park .......................................................................................................

Figure 50 - Slovensky Raj National Park .......................................................................................................

Figure 51 - Framework of Slovensky Raj National Park PES concept .......................................................... 163

Figure 52 - Mature forests in Spain ..............................................................................................................

Figure 53 - Mature forests in Spain ..............................................................................................................

Figure 54 - Framework of Mature Forest Reserves PES programme ........................................................... 168

Figure 55 - Flood risk map in Hull City ..........................................................................................................

Figure 56 - Design of a small scale street level PES scheme ..........................................................................

Figure 57 - Framework of Hull Flood Risk PES concept .............................................................................. 172

Figure 58 - HNV landscape in Mara-Cosau-Creasta Cocosului area .................................................................

Figure 59 - PA Rooster's Crest and Morarenilor Lake ....................................................................................

Figure 60 - Cheese-making at a traditional sheepfold ....................................................................................

Figure 61 - Framework of Danube PES - Maramures Heritage Trail Scheme ................................................ 178



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List of tables

Table 1 - Funding allocated to biodiversity in the EU budget for 2015, 2016 and 2017. .................................... 20

Table 2 - Thematic Objectives set in the Common Strategic Framework and associated potential relevance to

biodiversity ............................................................................................................................................... 24

Table 3 - ESI funds contribution to biodiversity (2016 Budget) ....................................................................... 32

Table 4 - TO6 allocations for MFF 2014-2020 by ESI fund and Partnership Agreement .................................... 33

Table 5 - Intervention field with a Rio marker 2............................................................................................. 34

Table 6 - Intervention field with a Rio marker 1 ............................................................................................ 35

Table 7 - Examples of Intervention fields where application of Rio markers is challenging ................................ 35

Table 8 – Allocated budget by Member States to biodiversity-relevant intervention fields in the OPs ................. 36

Table 9 – Comparison of funding allocations under biodiversity-relevant intervention fields between regional OPs

and ETC programmes ............................................................................................................................... 37

Table 10 - Funding allocations (biodiversity relevant intervention fields 22, 85, 86, 87 and 91) under different TOs

(in EUR million) ........................................................................................................................................ 38

Table 11 - Target values for indicator CO23 (Nature and biodiversity: Surface area of habitats supported to attain a

better conservation status), in hectares, in each Member State ..................................................................... 41

Table 12 - Planned ESF expenditures under the secondary theme ‘Supporting the shift to a low-carbon, resource

efficient economy’ ..................................................................................................................................... 42

Table 13 - Estimation of contribution of ERDF and CF to financing biodiversity (2014-2020)............................. 42

Table 14 - Contribution of ERDF and CF to financing biodiversity in DB 2016 ................................................. 43

Table 15 - EMFF measures contributing to biodiversity and proposed associated Rio marker ........................... 45

Table 16 - EAGF Biodiversity budget for 2015-2016, and share of EAGF biodiversity budget in total EU biodiversity

budget and in total EU budget .................................................................................................................... 62

Table 17 - Cross compliance requirements and their relevance to biodiversity ................................................ 64

Table 18 – EAGF biodiversity expenditures related to green direct payments – comparison of various approaches

(MFF 2014-2020) ..................................................................................................................................... 72

Table 19 - Possible levels of analysis for tracking biodiversity-related ex ante expenditures in the 2014-2020 EAFRD

budget ..................................................................................................................................................... 76

Table 20 - Potential relevance for biodiversity of each focus area .................................................................. 77

Table 21 - Sample of RDPs for detailed analysis, including EU commitments and sample coverage rates (September

2015)....................................................................................................................................................... 79

Table 22 – Allocation of Rio markers to {focus area ; measure} pairs for Priority 4 and focus areas 5E and 5D, based

on the sample of RDPs (EY) ...................................................................................................................... 81

Table 23 - Outcome of the RDP sample analysis at different levels, including extrapolation to EU-28 level for #2 and

#5 tracking levels ...................................................................................................................................... 82

Table 24 – Difference between EY proposal (two scenarios) and the current tracking approach ........................ 88

Table 25 - Types of absorption capacity, adapted from P. Wostner (2008) ....................................................... 90

Table 26: Biodiversity-relevant intervention fields under ERDF and CF in MFF 2007-2013 ............................... 91

Table 27: Biodiversity financing under ERDF and CF in MFF 2007-2013 (EUR billion) ..................................... 93

Table 28: Biodiversity-relevant measures under EAFRD in MFF 2007-201392 ................................................. 94

Table 29: Biodiversity-relevant measures/actions under EFF in MFF 2007-201392 ........................................... 96

Table 30 : Biodiversity financing under ERDF and CF in Poland in MFF 2007-2013 (EUR million) .................. 102

Table 31 : Biodiversity financing under ERDF and CF in MFF 2007-2013 in Greece (EUR million) .................. 107

Table 32 : Biodiversity financing under ERDF and CF in MFF 2007-2013 in Romania (EUR million) ............... 110



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Table 33 : Biodiversity financing under ERDF and CF in MFF 2007-2013 in Denmark (EUR million) ............... 115

Table 34: Overview of biodiversity financing under ERDF, CF, EAFRD and EFF in MFF 2007-2013 ................ 117

Table 35 - Classification of Project Category .............................................................................................. 124

Table 36 - Example of analysis of the relevance of private PES to solve ecosystem mismanagement for water quality

............................................................................................................................................................. 132

Table 37 - The five PES case-studies analysed in-depth ............................................................................. 156

Table 38 - Analysis of the relevance of PES for each of the 5 in-depth case studies ...................................... 182

Table 39 - Current methodological options in the EU budget (Draft Budget 2017) and share of biodiversity

contributions per fund.............................................................................................................................. 195

Table 40 - Rio markers applied on Intervention field ................................................................................... 200

Table 41 - Detailed set of gathered data - presence of explicit biodiversity related objectives within PA fund-specific

objectives .............................................................................................................................................. 206

Table 42 - Greening payments studied ..................................................................................................... 207

Table 43 - Estimation of land share impacted by the greening payments ...................................................... 208

Table 44 - Estimation of implementation cost of the greening payments ....................................................... 209

Table 45 - Application arrangements on greening payments at MS level ....................................................... 210

Table 46 - Application arrangements on Ecological focus area at MS level ................................................... 211

Table 47 - Application arrangements on Ecological focus area at MS level ................................................... 213

Table 48 - Selection criteria for the sample of Member States to investigate absorption issues (EY)................ 221



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List of acronyms

AAP Annual Action Programme GHG Greenhouse gas

ANC Area of Natural Constraints IMP Integrated Maritime Policy

BPS Basic Payment Scheme M Measure

CAP Common Agricultural Policy MAWP Multiannual Work Programme

CF Cohesion Fund MEA Millennium Ecosystem Assessment

CFP Common Fisheries Policy MFF Multi-annual Financial Framework

CRIS Common Relex Information System MIP Multi-annual Indicative Programme

CSDF Conservation and Sustainable Development Fund NGO Non-governmental Organisation

DCI Development Cooperation Instrument OECD Organisation for Economic Co-operation and Development

DG R&I Directorate general for Research and Innovation OP Operational Programme

DG REGIO Directorate general for Regional policy P Priority

EC European Commission PA Partnership Agreement

EAGF European Agricultural Guarantee Fund PAF Prioritised Action Framework

EAFRD European Agricultural Fund for Rural Development PES Payment for Ecosystem services

EcoS Ecosystem Services PI Partnership Instrument

EFA Ecological Focus Area PSF Policy Support Facility

EFF European Fisheries Fund RDP Rural Development Programme

EMFF European Maritime and Fisheries Fund SAPS Single Area Payment Scheme

ENM Engineered Nanomaterial SFS Small Farmer Scheme

ERDF European Regional Development Fund SMEs Small and medium-sized enterprises

ES Environmental services service SMRs Statutory Management Requirements

ESF European Social Fund TO Thematic Objective

ESIF European Structural and Investment Funds VCS Voluntary Coupled Support

ETC European Territorial Cooperation

EU European Union

FA Focus areas of the EAFRD

FSC Forest Stewardship Council

GAEC Good agricultural and environmental conditions



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Executive summary

Context and objectives of the study

A lack of financing was identified as one of the major sources of failure to reach the 2010 EU biodiversity objectives.

The EU approach to finance biodiversity related priorities is mainstreaming biodiversity objectives throughout the

EU budget. Alongside increased and more effective funding from the public sector, financing from the private sector

may contribute to the fulfilment of these needs. Tracking biodiversity-related expenditures is essential to ensure

that spending can be related to policy outcomes in order to improve the effectiveness of EU and national funding,

and to fulfil the EU and Member State reporting commitments under the Convention on Biological Diversity (CBD).

The objectives of the study were to look at lessons learnt on biodiversity financing and tracking in the initial period

of the 2014-2020 budget, and to make recommendations for improvements in the coming period. Four aspects of

the financing of biodiversity were analysed in the study: (i) ex post analysis of opportunities for biodiversity funding

in the EU budget; (ii) opportunities for the private sector to finance biodiversity; (iii) first experiences of biodiversity

tracking in the main EU funding instruments (iv Organise a workshop to collect feedback from Commission services,

Member States and stakeholders on past experience and on suggestions for improvement, with a focus on the EU

budget.

Tracking biodiversity-relevant expenditure in the EU budget

The methodology chosen by the European Commission (EC) to track biodiversity-relevant expenditure in the EU

budget, as well as climate change-relevant expenditure, is to apply OECD Rio-markers to assess the share of any

given budget line, project budget, etc. dedicated to biodiversity. Rio marker 2, 1, or 0 is applied to the budget line,

based on whether the action targets biodiversity as a principal objective, significant objective or doesn't target it at

all (respectively). The relative attributions of 100%, 40% or 0% of the total budget are then used respectively to

generate amounts attributed to biodiversity based on the chosen marker. In the 2016 budget, the estimate for EU

biodiversity-related expenditure amounted to EUR 13,660 million, i.e. 9% of the total EU budget. The

implementation of the ex-ante tracking methodology is ongoing. It covers different levels – Programme Statements,

Work programme, project - of tracking and follows the recommendations of the Study on Tracking Biodiversity

Expenditure in the EU Budget (Medarova-Bergstrom et al. 2015).

Figure 1 - Biodiversity-related expenditures in 2016 EU budget (M€)

Source: EY, based on Draft Budget 2017

The current tracking methodology for centralised management funds requires further improvements

The following centralised management funds (excluding EAGF) include, to a certain extent, activities that can

contribute to the preservation of biodiversity as a principal or significant objective and represent 5% of the EU

biodiversity expenditures: European Earth Observation Programme (Copernicus), The Framework Programme for



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Research and Innovation (Horizon 2020), European Neighbourhood Instrument (ЕNI), Development Cooperation

Instrument (DCI), Partnership instrument for cooperation with third countries (PI), Programme for the Environment

and Climate Action (LIFE). The analysis of the current tracking methodology reveals that the current three levels of

biodiversity Rio markers may sometimes lead to over- or under-estimation and more nuanced application of the

markers would help to refine the process. The biodiversity tracking process is still relatively new and ensuring the

low administrative burden remains highly important, calling for synergies and exchange of knowledge in its

implementation. One potential approach to enhance its accuracy could be the application of markers at project level

through existing IT systems.

For shared management funds, the use of additional information could increase the accuracy of the tracking approach

As regards shared management funds, the European Structural and Investment Funds rely on five instruments:

the European Regional Development Fund (ERDF), the Cohesion Fund (CF), the European Social Fund (ESF) and

the European Maritime and Fisheries Fund (EMFF) and the European Agricultural Fund for Rural Development

(EAFRD). ESIF follow eleven thematic objectives (TO) for the three funds, three of which are strongly related to

biodiversity issues: TO6 (Protecting the environment and promoting resource efficiency), TO4 (Supporting the shift

towards a low-carbon economy) and TO5 (Promoting climate change adaptation, risk prevention and management).

For cohesion policy (ERDF, ESF and CF), biodiversity expenditures are followed at intervention field level which

correspond to specific actions that can be implemented through OPs. Rio markers are applied at Intervention field

level. However, given the diversity of eligible operations, the validity of the marker application for some intervention

fields will be only possible to assess ex-post. In the meantime, the current methodology could take stock of

additional existing information (contribution of the intervention field to the relevant TOs) or the targeted value for

CO23 indicator (Surface area of habitats supported in order to attain a better conservation status).

The analysis of the implementation data indicates a need for a more conservative approach in tracking biodiversity expenditures under the CAP

The contribution of the Common Agricultural Policy (EUR 11.6 billion) accounts for 83% of the total biodiversity

budget. In 2016, the EAGF (direct payments and market measures) contribution to the EU biodiversity budget

amounted to 44%, based on the inclusion of green direct payments and a 10% share of other direct payments.

Based on existing literature and discussions with relevant stakeholders, an alternative tracking approach was

proposed that relies on the land area impacted by the measures that are beneficial to biodiversity. For greening

payments, implementation data show the proportion of arable land and permanent grassland covered by measures

directly relevant to biodiversity, Ecological Focus Areas (EFA) after applying weighting factors and permanent

grassland declared as environmentally sensitive permanent grassland (ESPG), to which Rio marker 2 would apply.

This would results in a more refined, but also more conservative estimate: 2.6% of green direct payments would be

counted as biodiversity-relevant compared to 12% under the current tracking approach (based on current greening

implementation data).. Due to the lack of comprehensive insights into the effects of cross-compliance on biodiversity

and how to account for them, a conservative approach is recommended (Rio marker 0) until adequate information

and evidence necessary to develop a robust quantitative approach becomes available. For EAFRD, an analysis of

a sample of RDPs suggests that, the current tracking approach overestimates the priority 4 contribution. More

accuracy can be obtained by applying different Rio markers to measures, depending on the corresponding focus

area. Based on this refined approach, the EAFRD contribution to EU biodiversity expenditures is 38% lower in

comparison to the current approach.

Absorption and take up capacities within Member States

Funding instruments under the EU budget provide many opportunities for funding biodiversity-related projects and

the actual take-up of funding for biodiversity in each Member State depends on its real, financial,

programming/project and administrative absorption capacity1.

Increasing the current uptake rate of funding for biodiversity-related projects in the EU could increase the

funding available to achieve the EU biodiversity strategy. Evidence from the ERDF demonstrates that

1 P. Wostner (2008), The Micro-efficiency of EU Cohesion Policy, European Policy Research Paper Number 64, European Policies Research Center,

University of Strathclyde, ISBN: 1-871130-70-0, June 2008



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financing opportunities have not been exploited to their full potential by the Member States2. In order to

further investigate the potential for increased take-up across all EU financial instruments, an in-depth analysis was

conducted for four Member States with various absorption profiles. Denmark provided insights from a Member State

with relatively strong absorption capacity for biodiversity. Poland has robust co-financing and administrative capacity

but shows some potential to improve programming. Greece lacks co-financing capacity, while Romania faces

significant challenges particularly regarding administrative capacity.

The analysis highlighted the following five key challenges for absorption of funds for biodiversity in the Member

States and suggested options for increase take up. (1) The lack of preparatory actions (designation of Natura

2000 sites, preparation and adoption of management plans, basic research on the status and threats to biodiversity,

etc.) can limit the absorption of EU funds. Member States who have not yet completed preparatory actions should

step up their efforts and potentially conduct reviews of Natura 2000 sites to tackle inadequate designations, and if

necessary implement legal and governance changes (e.g. to reinforce the legal enforceability of management plans

of protected areas). (2) ESIF was judged broadly adequate for financing biodiversity if properly implemented.

Biodiversity-related projects may however require more flexible administrative management of projects (due to the

constraints of living organism: weather, seasons, etc.) and more open and flexible OPs (including in the formulation

of their objectives) to allow non-conventional biodiversity projects. (3) Biodiversity projects require adjustments

from managing authorities to promote integrated solutions and adapt to the (small) scale of projects. (4)

Communication between departments (ministries, agencies, managing authorities, protected areas

management) is essential to ensure coordination between the real needs of biodiversity conservation and EU

funds’ national or regional programming. Creating intermediate bodies and stepping up communication with national

and stakeholders can improve such communication. (5) The capacity of some beneficiaries, mostly at local and

regional level, needs to be reinforced. Such capacity building could include training activities (including outside

the planning stage of programmes), promotional activities focused on NGOs and SMEs and external application

support cost.

Private financing

Private financing for biodiversity is now contributing to the achievement of the EU targets

The EU and Member States contribute significant financial resources to the conservation of biodiversity. Private

funding for conservation could also contribute to the achievement of the targets of the EU Biodiversity

Strategy to 2020. Recent studies have concluded that nascent business areas beneficial to biodiversity face

considerable implementation and financing barriers3. Financing instruments that can engage private sector

financing include payment for ecosystem services (PES)4, private equities, green bonds, environmental certification,

biodiversity offsets and compensatory measures, licensing rights, sponsorship, etc. PES are being used in many

Member States as well as numerous third countries globally with a good degree of success. PES allow

beneficiaries of ecosystem services to remunerate providers of these services and are a rapidly expanding

approach for some complex environmental issues.

The interest for payment for ecosystem services (PES) is growing in the EU and many new concepts or pilots were identified

The analysis of PES in the EU revealed that public funding is still currently the main financial source for most

PES projects (by number of PES schemes5, 38% involved private funding). Conversely, private businesses and

individuals are the main service providers. Most PES occur at a municipality level (local) or water catchment level

that involves several municipalities (regional), with the number of national level PES schemes limited. The interest

for PES is growing in the EU and many new concepts or pilots were identified (44% of schemes identified are

between the concept and operational stage). PES in Europe tend to focus on water quality, habitats (or other

support services) or target several ecosystem services and the economic sectors involved are those relying

heavily on natural capital: Agriculture and livestock, Forestry, Water utilities, Natural area management and Tourism

and leisure.

2 European Court of Auditors (2014), Is the ERDF effective in funding projects that directly promote biodiversity under the EU biodiversity strategy

to 2020? 3 Dickie et al. (2012), Innovative use of financial instruments and approaches to enhance private sector finance of biodiversity

4 “Payments for Ecosystem Services” are also known as “Payments for Environmental Services”.

5 Data on financial flows were not available for a sufficient number of PES.



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PES can be very efficient tools for biodiversity management provided certain conditions are fulfilled

PES can be very efficient tools to solve ecosystem management issues, for instance to improve water

purification through better watershed management (as illustrated by the Evian and Vittel cases in France).

However, they require several pre-conditions such as an enabling regulatory environment, adequate

capacity to manage the target ecosystem from relevant stakeholders and the existence of demand and

willingness to pay for the ecosystem services at the intended location.

When these pre-conditions are met, a clear business case for the private sector exists when the private

company is dependent on the ecosystem service for its business model. One or a few private companies receive

a significant share of the total ecosystem service benefit decreasing the incentive for others to free ride and

ensuring that transaction costs are manageable.

Several recommendations can be made to enhance the effectiveness of PES on biodiversity and account for their contribution to the biodiversity related expenditures tracking

Several recommendations were formulated by the study. Among them, three of the key recommendations were: (1)

Consider the possibility of establishing quantified EU targets to cover “non-water” ecosystem services in

a manner similar to the Water Framework Directive targets for good ecological status of water bodies. (2) Consider

a refinement or revision of existing instruments of the EU (e.g. the Green Direct Payments in the next reform

of the CAP) to increase their effectiveness to provide specific agricultural related ecosystem services such as

watershed management, pollination, etc. (3) Track ongoing PES programmes at local / regional / national level

and consider developing a database to assess their effectiveness and identify best practices.



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1. Introduction and general approach to the study

1.1 Context of the study

Introduction to Biodiversity financing

Though difficult to assess precisely, the cost of no action to prevent the loss of biodiversity and associated

ecosystem services provides a strong rationale for policy makers to act to prevent this loss. In 2008, the global cost

of policy inaction was estimated at 14 trillion Euros by 20506. In addition, numerous assessments7 indicate that the

benefits of biodiversity actions exceed by far their costs. These facts show the necessity of ensuring adequate and

effective funding for biodiversity conservation and restoration.

A failure to reach 2010 objectives to the 2020 Biodiversity Strategy

The 2006 EU Biodiversity Action plan, organised around 10 main objectives, led to the implementation of

successful actions, with long term achievements and consequences – such as an improvement towards the

completion of the Natura 2000 network and the broadening of the LIFE + Nature & Biodiversity component.

However, the plan was not entirely fulfilled and hence the target of halting the loss of biodiversity by 2010 was not

reached. One of the identified major reasons for not reaching the overall target was a lack of financing. The 2010

Assessment of implementing the EU Biodiversity Action Plan called therefore for more progress to be made on

making available the necessary funding8.

Eventually, missing the 2010 objectives allowed the

European Union to build the starting point for a

stronger, wider set of objectives for 2020,

capitalising on the lessons learnt from the

implementation of the 2006 Biodiversity Action Plan.

The EU 2010 biodiversity baseline will henceforth

act as a reference point for subsequent actions on

strategic plans, providing for measuring and

monitoring progress achieved on the road towards

reaching the targets of the EU 2020 Biodiversity

strategy. The latter is defined through six priority

targets declined in 20 actions.

Target 2 of the strategy requires that 'by 2020,

ecosystems and their services are maintained and

enhanced by establishing green infrastructure and

restoring at least 15% of degraded ecosystems' and

includes actions to implement an EU Green

Infrastructure Strategy and an initiative to achieve no net loss of biodiversity and ecosystem services. Other targets

require full implementation of the EU Birds and Habitats Directives (Target 1), increasing the contribution of

agriculture and forestry to maintaining and enhancing biodiversity (Target 3), ensuring sustainable fisheries (Target

4) and combating invasive alien species (Target 5). In addition, the EU committed to double the international

6 EC report (2008). ‘The Cost of Policy Inaction (COPI): The case of not meeting the 2010 biodiversity target’

7 See analyses and syntheses performed by The Economics of Ecosystems and Biodiversity (TEEB)

8 Report from the Commission to the Council and the European Parliament (2010): ‘The 2010 assessment of implementing the

EU Biodiversity Action Plan’



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resource flows to developing countries allocated to halting the loss of biodiversity, which requires sufficient

resources for EU external instruments (Target 6).

All of these targets, and the actions within them, are dependent on securing resources for natural capital

investments. One of the barriers to halting the loss of biodiversity and ecosystem services is however a shortage

of finance for investment in natural capital.

EU finance for natural capital investment has focused in the past on grant funding, through the LIFE programme

and other funds such as the CAP and European Structural and Investment Funds. However, closing the funding

gap depends on attracting new sources of finance, including private sector finance, through means such as

Payments for Ecosystem Services and finance for business models that enhance biodiversity and ecosystem

services. In this sense, the conclusions of the European Council of October 14th, 20109 recalled that the

implementation of the post-2010 policy framework will require increased resources including ‘the use of innovative

financial mechanisms both for public and private funding such as the reform, elimination and reorientation of those

subsidies harmful to biodiversity, payments for ecosystem services, […]’. In this context, a study was lead in 2012

proposing a set of possible policy interventions on the EU scale to lower market barriers that make financing

biodiversity and ecosystem services poorly attractive for private investors. It explored innovative financing

instruments in cooperation with other institutions such as the European Investment Bank (EIB). The establishment

of the Natural Capital Financing Facility (NCFF) by the EIB and the EC came in response to these previous

analyses, addressing the barriers to the uptake of natural capital projects by demonstrating how biodiversity

preservation can generate revenues or cost reductions.

How to use the EU budget for biodiversity in the most efficient manner – the importance of tracking public expenditures

In addition to the provision of increased resources, another necessary condition to achieve the 2020 Biodiversity

Strategy goals is the efficient and effective use of these resources, be it via the main funding instruments or through

external action funding. Evaluating the effectiveness of the current state of biodiversity expenditures (such as the

level of absorption of a fund) is a prerequisite for determining where changes and improvements are needed in

terms of additional spending (including private), different frameworks and increased take-up in other policies. As

shown in previous studies based on the 2007-2013 budget period10, there is a need to improve the effectiveness of

the EU funding model, in particular the uptake of the existing possibilities at the Member State level show potential

for improvement.

Indeed, in a vital need of getting the most for biodiversity out of each euro, tracking how much is spent is necessary

in order to evaluate the effectiveness of spending and correctly prioritize future expenditures.

Policy makers are widely used by organizations and countries in order to track specific policy elements and the

related expenditures and help fulfil international reporting requirements. An example for policy makers are the ‘Rio

markers’, used by the OECD to track aid targeting the Rio conventions. Making a tracking system operational for

the EU Budget is a matter discussed also for other policy areas. The current European Commission's tracking

approach is based on a modified version of the OECD Rio markers methodology. The 2014 study supporting DG

CLIMA in further developing the methodology for tracking climate change related expenditure11 underlines a set of

important issues to be taken into account while creating an appropriate methodology, compatible with stakes,

external financing and the level of information and control expected to reach. With other DGs working on the same

methodology and obtaining experiences of tracking, the sharing of good practice, limitations and desirable evolution

will allow the tracking method for biodiversity-related expense to quickly grow in accuracy and relevance. The

quoted study stresses the potential difficulty to implement an ex-post system able to capture the actual effects of

9 Council of the European Union (2010): ‘Preparation of the tenth meeting of the Conference of the Parties to the Convention on

Biological Diversity (Nagoya, Japan, 18-29 October 2010) – Council conclusions’ 10

Examples: IEEP for the WWF (2009): ‘Biodiversity & the EU Budget – making the case for conserving biodiversity in the context of the EU Budget Review’. ENEA-MA Working Group on Biodiversity and Cohesion Policy – Final Reporting, Presentation Budapest April 2011.

11 IEEP et al. for the European Commission, DG CLIMA (2014): ‘Tracking system for climate expenditure in the post-2013 EU

budget: Making it operational’



15


the activities and projects funded, by linking financial data and relevant environmental indicators. A strong expertise

allying private finance, public expenditures and environmental management knowledge then appears inevitable in

order to capture the complexity of the problem examined. The fact that different DGs are currently implementing

tracking methods for their expenditures implies a need for common rules on how to track different issues-related

expenditures, so that the tracking tool is compatible with shared-management funds' issues. Hence the construction

and evolution of the tracking systems is a central challenge towards better biodiversity financing.

1.2 Objectives and general approach

Objective of the study

The objectives of the study is twofold:

to look at lessons learnt on biodiversity financing and tracking in the first months of the 2014-2020 budget,

and

to make recommendations for improvement in the coming period.

This assignment follows up the 2014 study12 which outlined an approach for tracking the biodiversity related

expenditure in the EU budget across different EU funding instruments. This complementary study evaluates

experience of tracking so far. It looks at the first results of the tracking approach in the MFF 2014-2020, based on

the available data regarding the programmes' implementation. It also looks back at the MFF 2007-2013 and takes

stock on biodiversity financing and analyses the absorption of available funding streams, where the availability of

data permitted. Finally, the study also investigates the potential of private financing for biodiversity.

The expected result is to propose potential avenues to improve and refine the current tracking approach for the

coming years.

If the general objective is to improve the tracking of biodiversity expenditures in the EU budget and enhance

understanding biodiversity financing opportunities, three aspects of the objective were investigated during the

study:

Track biodiversity related expenditures in the EU budget: the study lists the EU opportunities to finance

actions with benefits to biodiversity and analyses the accuracy of the current approach to track biodiversity

(chapter 2);

Funding opportunities for biodiversity in the EU budget and avenues for an increased uptake in Member

States and their absorption capacity: although opportunities to finance biodiversity exist in the EU

budget, Member States’ capacity to seize them depend on many factors (section 2.5 of chapter 2

“Absorption of funds for biodiversity and take up in the Member States”).First, a general overview of the

funding uptake is provided at the EU level for biodiversity-relevant shared-management funds (ESIF) in

MFF 2007-2013 followed by an analysis for selected Member States to look more deeply at absorption

and potential avenues for increased uptake.

Identify opportunities in the private sector to finance biodiversity: alongside public funding

opportunities, the study explores the potential of private sector regarding payments for ecosystem services

(chapter 4).

Structure of the report

Chapter 2 explores biodiversity expenditures for each funding instrument of the EU budget. A section of

this chapter is dedicated to the CAP;

Chapter 3 focuses on absorption and take up of biodiversity funding in the Member States.

Chapter 4 investigates opportunities from the private sector to finance biodiversity.

12

a. Kettunen, M., Illes, A., Hart, K., Baldock, D., Newman, S., Rayment, M., Sobey M. and Medarova-Bergstrom, K. (2014) Tracking Biodiversity Expenditure in the EU Budget, Final Report for the European Commission – DG ENV, Institute for European Environmental Policy, London/Brussels



16


Annexes of the document present the detailed analyses for each section.

1.3 Methodology The study was based on a variety of tools to feed the analysis:

- An in-depth literature review;

- Data mining based on ESIF data;

- Interviews with EU services responsible for tracking biodiversity;

- A workshop on private biodiversity financing collecting information from stakeholders and discuss the

preliminary results (29 participants from private sector and civil society organisations);

- A general workshop presenting preliminary study results to wide range of stakeholders (80 participants

from public administration, academia and civil society organisations).

Tracking biodiversity related expenditures in the EU budget

The analysis of the current tracking approach strongly depended on the availability of data. Three categories of

instruments were analysed:

The EU centralized managed instruments: the study explored the current tracking approach and performed

an in-depth review of existing literature for each instrument in order to identify potential risks of over- or

underestimation in the current approach.

The EU shared managed instruments (ESIF): the study took stock of the partnership agreements, OPs

and SFC data to perform quantitative analysis on the contribution of each programme to biodiversity and

identify ways to improve the accuracy of current tracking approach.

A dedicated analysis was performed on CAP funding instruments (EAGF and EAFRD): an in-depth review

of existing literature resulted in proposing potential avenues to improve current tracking approach,

including through an in-depth analysis of a sample of 17 RDPs.

Absorption and take up capacities within Member States

The EU budget provides many opportunities for funding biodiversity-related projects in Member States and the

actual take-up of funding for biodiversity in each of them depend on their absorption capacity. Wostner provided a

useful classification of different level of absorption capacities which was used in this study13. This classification

distinguishes the real absorption capacity (real needs and availability of the production factors), the financial

absorption capacity (capacity of co-financing by the beneficiaries of the funds and the Member States), the

programming/project absorption capacity (relevance of the strategy and programme, preparation of project

documentation) and the administrative absorption capacity (administrative capacity of the public administration

and the applicants to prepare, manage, supervise and implement projects).

A screening of all Member States was conducted in order to select four of them for further investigation. The analysis

aimed to screen Member States interesting in terms of absorption of EU funds to support biodiversity conservation

but very few indicators directly related to take-up of funds for biodiversity were available so proxies were

used. These proxies included the absorption rate of adopted OPs for Cohesion Policy in 2013 and 2015, for 2007-

2013 budget period, the EU Co-financing rates for ERDF and Cohesion Fund in 2007 and in 2013, the share of

environmental expenditure in the expenditure of several instruments, etc.

This preliminary screening was completed with additional criteria to ensure the four Member States selected

would provide a balanced picture in terms of geographical representation across the EU (EU 13 / EU 15), size

of Member State and management types of operational programmes (centralised / regionalised). The choice of

Denmark, Greece, Poland and Romania balanced these criteria and included both Member States with high

absorption rates and lower absorption rates.

13

P. Wostner (2008), The Micro-efficiency of EU Cohesion Policy, European Policy Research Paper Number 64, European Policies Research Center, University of Strathclyde, ISBN: 1-871130-70-0, June 2008



17


For each of the four selected Member States, an in-depth literature review was completed by interviews with

key stakeholders among central and local authorities in charge of the programming and administration of EU funds

in their country as well as beneficiaries of such funds (e.g. nature conservation NGOs).

Private financing

An extensive scientific and grey literature review was conducted to produce a “PES database” for the

project: it lists 154 potential PES projects in the EU. Among them, 131 PES and PES-like cases were identified and

kept for the rest of the analysis.

A first screening phase led to the collection of key information for all the identified projects based on the last

publicly available reports identified. The results of this overview provide macro-trends (e.g. rough percentages

should be relatively accurate) but cannot be used for a precise analysis due to data limitations.

Additional data were then collected for a shortlist of projects, based on the following criteria: “Privately

financed” and “Public Private Partnership” projects, economic sectors involved, ecosystems involved and Member

States. Well-known cases such as Vittel and Evian were excluded from the shortlist, although secondary data was

also collected for these projects.

Five projects were selected among this shortlist, in Romania, the Netherlands, Spain, Slovakia and the United

Kingdom. Additional data was collected (including through interviews) to produce five in-depth case

studies.

To further refine the analysis, a workshop on private finance for biodiversity conservation and PES was

organized in the context of this study.

1.4 Limitations The initial aim of the study was to look at first results of the tracking application and to see how closely the current

approach reflects real expenditure on the ground. However due to delayed implementation of programmes, and

therefore lack of ex-post data, the focus was redirected towards fine assessment of ex ante tracking approaches

under certain instruments, based on available programming information at the time of the analysis..



18


2. Tracking biodiversity-related expenditure in the EU budget

2.1 Introduction The analysis performed in this chapter addresses the following questions:

a. What have the Member States and the EC planned for biodiversity within the various programmes

(instruments under shared and centralized management)?

b. How are these planned efforts translated into concrete actions by the Member States or regions (e.g. within

the operational programmes for instruments under shared management)?

A preliminary assessment of the funds allows to select most relevant programmes with regard to their potential

effect on biodiversity.

Overview of the current tracking methodology

The European Commission uses Rio markers to assess its biodiversity and climate-relevant spending and provide

statistical reports to the OECD-DAC, like many other donors. The figure below illustrates the Rio-marking procedure

and how to account for the amount of funding allocated to the environmental themes.

The methodology chosen by the European Commission (EC) to track biodiversity-relevant expenditure in the EU

budget, as well as climate change-relevant expenditure, is to apply OECD Rio-markers to assess the share of any

given budget line, project budget, etc. dedicated to biodiversity. Rio Marker 2, 1, or 0 is applied based on whether

the action targets biodiversity as a principal objective, significant objective or does not target it at all (respectively).

The relative attributions of 100%, 40% or 0% of the total budget are used to generate the reported amount attributed

to biodiversity based on the three Biodiversity Rio Markers (respectively).

Ex ante tracking consists of assigning a Rio market 0, 1 or 2 to a given line in the EU budget to calculate the

potential contribution to biodiversity based on its objectives, whereas ex-post tracking take stock of the implemented

projects and policies to adjust the effective contribution of each budget line to biodiversity. Further information on

this methodology can be found in the 2014 report “Tracking Biodiversity Expenditure in the EU Budget” of Institute

for European Environmental Policy14.

14

a. Kettunen, M., Illes, A., Hart, K., Baldock, D., Newman, S., Rayment, M., Sobey M. and Medarova-Bergstrom, K. (2014) Tracking Biodiversity Expenditure in the EU Budget, Final Report for the European Commission – DG ENV, Institute for European Environmental Policy, London/Brussels



19


Table 1 summarises the latest figures for fund contribution to the biodiversity budget (columns (A)) for financial

years 2015, 2016 and 2017 (draft budget) based on methodologies which are currently adopted by the European

Commission (current tracking methodology). For a considered financial year, Columns (B) and (C) respectively

show the share of each fund in the total biodiversity budget and the total EU budget.

Historic development of European use of “Rio markers”

Following the Rio Earth summit in 1992 and the establishment of Rio conventions, the

OECD-DAC (Development Assistance Committee) in close collaboration with the

Secretariat of the United Nations Framework Convention on Climate Change

(UNFCCC) introduced “Rio markers” to measure and monitor support to developing

countries to implement the objectives of the Rio conventions: climate change

adaptation, climate change mitigation, biodiversity and desertification. A scoring system

of three values has been designed, in which development co-operation activities are

“marked” as targeting the environment or the Rio Conventions:

- as the “principal" objective (Rio marker 2);

- or a “significant" objective (Rio marker 1),

- or as not targeting the objective.

They indicate donors’ policy objectives in relation to each aid activity.

“Rio-markers” were defined to be descriptive rather than quantitative, however they are

currently used to give an approximation of financial contribution to Rio convention’s

objectives. The European Commission uses the Rio-markers’ methodology to assess

its biodiversity contribution. The following percentages have been assigned to each “Rio

marker”:

A percentage of 100% is used for activity with a Rio marker score of 2



The European Commission uses the following definition to describe “principal” and

“significant” objectives:

A “principal” objective “must be explicitly stated as fundamental in the design of, or the motivation for, the action. Promoting the objective will thus be stated in the

activity documentation to be one of the principal reasons for undertaking the action.

In other words, the activity would not have been funded (or designed that way) but

for that objective”.

A “significant” objective “must also be explicitly stated, but is not the fundamental driver or motivation for undertaking and designing the activity. The activity has other

prime objectives but has been formulated or adjusted to help meet the relevant

environmental concerns”.

Source: DG International cooperation and development

http://capacity4dev.ec.europa.eu/public-environment-climate/minisite/2-tools-and-

methods/short-guide-use-rio-markers

http://capacity4dev.ec.europa.eu/public-environment-climate/minisite/2-tools-and-methods/short-guide-use-rio-markershttp://capacity4dev.ec.europa.eu/public-environment-climate/minisite/2-tools-and-methods/short-guide-use-rio-markers



20


Table 1 - Funding allocated to biodiversity in the EU budget for 2015, 2016 and 2017.15

Fund

DB2017 DB2017 DB2017 2016 2016 2016 2015 2015 2015

M€ %

biodiversity

% total

M€ %

biodiversity

% total

M€ %

biodiversity

% total

(A) (B) (C) (A) (B) (C) (A) (B) (C)

European Earth Observation and Monitoring Programme (Copernicus)

107,8 0,9% 0,1% 103,7 0,7% 0,1% 8,1 0,1% 0,0%

Horizon 2020 - The Framework Programme for Research and Innovation

51,9 0,4% 0,0% 200,8 1,4% 0,1% 138,4 1,2% 0,1%

HEADING 1a — COMPETITIVENESS FOR GROWTH AND JOB

159,7 1,3% 0,1% 304,5 2,2% 0,2% 146,5 1,3% 0,1%

European Regional Development Fund (ERDF)

861,1 6,8% 0,6% 808,6 5,8% 0,5% 934,9 8,4% 0,6%

Cohesion Fund (CF) 682,2 5,4% 0,4% 660,2 4,7% 0,4% 766,1 6,9% 0,5%

HEADING 1b — COHESION POLICY

1 547,3 12,2% 1,0% 1 468,8 10,5% 1,0% 1 701,0 15,3% 1,1%

European Agriculture Guarantee Fund (EAGF)

6 063,8 48,0% 3,9% 6 030,1 43,2% 4,0% 3 272,7 29,5% 2,1%

European Agricultural Fund for Rural Development (EAFRD)

4251,0 33,6% 2,8% 5 529,0 39,6% 3,7% 5 332,8 48,1% 3,4%

European Maritime and Fisheries Fund (EMFF)

136,0 1,1% 0,1% 134,0 1,0% 0,1% 199,0 1,8% 0,1%

Programme for the Environment and Climate Action (LIFE)

248,2 2,0% 0,2% 236,9 1,7% 0,2% 221,7 2,0% 0,1%

HEADING 2 — SUSTAINABLE GROWTH: NATURAL RESOURCES

10 669,0

84,6% 7,0% 11

930,0 85,5% 7,9% 9 026,2 81,3% 5,7%

European Neighbourhood Instrument (ЕNI)

60,7 0,5% 0,0% 76,2 0,5% 0,1% 51,3 0,5% 0,0%

Development Cooperation Instrument (DCI)

174,3 1,4% 0,1% 177,2 1,3% 0,1% 165,8 1,5% 0,1%

Partnership Instrument for cooperation with third countries (PI)

3,5 0,0% 0,0% 3,4 0,0% 0,0% 7,0 0,1% 0,0%

15

European Commission (2015), Draft General Budget of the European Union for the financial year 2016, COM(2015) 300 available at: http://ec.europa.eu/budget/library/biblio/documents/2016/DB/DB2016_WDIB_en.pdf and European Commission (2016), Draft General Budget of the European Union for the financial year 2017, available at: http://ec.europa.eu/budget/library/biblio/documents/2017/DB2017_WD01_en.pdf

http://ec.europa.eu/budget/library/biblio/documents/2016/DB/DB2016_WDIB_en.pdfhttp://ec.europa.eu/budget/library/biblio/documents/2017/DB2017_WD01_en.pdf



21


HEADING 4 — GLOBAL EUROPE

238,5 1,9% 0,2% 256,8 1,8% 0,2% 224,1 2,0% 0,1%

Total 12 644

,5 100,0

% 8,2%

13 960,1

100,0%

9,2% 11

097,8 100,0

% 7,0%

Given total commitments

153 752,8

151

241,6 158

276,0

(A) Funding allocated to biodiversity, in million euros, (B) Fraction of total funding allocated to

biodiversity, in percent, (C) Fraction of total annual commitments, in percent

Budget figures (i.e. ex-ante figures) show a high heterogeneity between instrument contributions compared to the

total biodiversity budget. For instance, the biodiversity-budget of the European Structural and Investment Funds

(ESIF; €13 billion in Draft Budget 2016), and in particular the instruments of the Common Agricultural Policy (EUR

11.4 billion, or 83% of the total biodiversity budget) weigh significantly more than EU centrally-managed instruments,

including the Programme for the Environment and Climate Action (LIFE; EUR 0.2 billion in Draft Budget 2016).

In accordance with the study by Medarova-Bergstrom et al. (2014)16, the methodology for biodiversity-related

budget tracking relies heavily on the use of Rio markers (as defined by the OECD17). Figure 2 provides a summary

of the use of Rio markers in the currently agreed upon methodology used in Draft Budget 2016). A full description

of the current methodologies, as well as a summary of the share each fund has allocated to biodiversity, is provided

in Table 39 the annex.

In-depth assessment of funding instruments’ contribution to biodiversity

The 2017 draft EU budget shows a high heterogeneity between different instruments' contributions to the total

biodiversity budget: the biodiversity-budget of the Common Agricultural Policy (EUR 11.6 billion) accounts for

around 83% of the total biodiversity budget, vs. 11% for the cohesion policy (ERDF and CF). Thus the study zoomed

specifically into tracking approaches under EAGF and EAFRD to provide additional insights into its accuracy and

potential avenues for improvement.

16

Medarova-Bergstrom et al..(2014) Tracking Biodiversity Expenditure in the EU Budget, Part I – Guidance on definition and criteria for biodiversity expenditure in the EU budget, Final Report for the European Commission – DG ENV, Institute for European Environmental Policy, London/Brussels

17 OECD (2009) Measuring and targeting the objectives of the Rio Conventions.



22


Figure 2 - Biodiversity-related expenditures in Draft Budget 2017 (M€)

Source: EY, based on Draft Budget 2017



23


2.2 Funding instruments under shared management

2.2.1 Partnership agreements

Regulatory context

The European Structural and Investment funds (ESI funds) are governed by a Common Strategic Framework setting

a common approach for the European Regional Development Fund (ERDF), the European Social Fund (ESF), the

Cohesion Fund, the European Maritime and Fisheries Fund (EMFF) and the European Agricultural Fund for Rural

Development (EAFRD)18.

Aside from fund-specific requirements set for the 2014-2020 budget period19, the Common Strategic Framework

required National Authorities to prepare Partnership Agreements (PAs) consisting of strategic plans with investment

priorities covering these five ESI funds, to be submitted before 22 April 201420. Before being negotiated with the

European Commission, the PA shall be the result of consultation at various levels of governance, representatives

from interest groups, civil society and local and regional representatives. The goal is to ensure a more strategic and

complementary use of different sources of EU funding, and to combine and simplify their use for a better impact on

growth and jobs.

The planning schedule however set a submission deadline so early that ESI fund-specific budgets could not be

submitted nor adopted at the time of PA submission.

Eleven thematic objectives were defined21, for which Partnership Agreements were required to disclose the following

information, inter alia:

A summary of the main results expected for each of the ESI Funds for each of the selected thematic

objectives;

The indicative allocation of support by the Union at national level for each of the ESI Funds by thematic

objective, as well as the total indicative amount of support envisaged for climate change objectives22.

Limitations for biodiversity-related expenditure analysis at TO level

These requirements involve a quantitative breakdown of Thematic Objectives allocations (TO)

per fund, as well as qualitative information on the expected results for each of the ESI funds. Consequently,

qualitative information is in general insufficiently detailed to consider setting Rio markers at TO level.

A summary of TOs is provided in Table 2. Potential contribution of TO to biodiversity is highly variable: while TO6

“Preserving and protecting the environment and promoting resource efficiency” is directly related to biodiversity, a

number of other TOs (in particular TO4 and TO5, and to a lesser extent TO1, TO3, TO8, TO9) are likely to include

biodiversity measures that would require further examination at an investment priority level (based on Medarova-

Bergstrom et al. - 201523).

The two previous paragraphs imply that based on PA analysis, information on biodiversity-related expenditures can

only be considered with a satisfactory level of confidence from TO6 allocation per Member State for the 2014-2020

budget period. In addition, a comparison between 2007-2013 and 2014-2020 figures would not provide consistent

conclusions, since the breakdown for the ESI fund allocation into TOs evolved from former priority themes (defined

in Regulation No 1826/200624) in the 2007-2013 budget to the eleven TOs in the 2014-2020 budget.

18

Regulation (EU) No 1303/2013; article 10 19

In particular Cohesion Fund: Regulation (EU) No 1300/2013; European Fund for Regional Development: Regulation (EU) No 1301/2013; European Social Fund: Regulation (EU) No 1304/2013; European Agricultural Fund for Rural Development: Regulation (EU) No 1305/2013

20 Regulation (EU) No 1303/2013; article 14

21 Ibid; Article 9

22 Ibid, Article 15.

23 Medarova-Bergstrom et al. (2015) Tracking Biodiversity Expenditure in the EU Budget, Part II – Fund specific guidance documents, Final Report

for the European Commission – DG ENV, Institute for European Environmental Policy, London/Brussels 24

Regulation (EC) No 1828/2006



24


Table 2 - Thematic Objectives set in the Common Strategic Framework and associated potential relevance

to biodiversity

Thematic Objective a Potential relation to

biodiversity b c Level of identification

TO1 Strengthening research, technological development and innovation Indirect – Lower probability Investment priorities

TO2 Enhancing access to, and use and quality of, ICT; - -

TO3 Enhancing the competitiveness of SMEs, of the agricultural sector (for

the EAFRD) and of the fishery and aquaculture sector (for the EMFF);

Indirect - Lower probability Investment priorities

TO4 Supporting the shift towards a low-carbon economy in all sectors; Indirect – Higher probability Investment priorities

TO5 Promoting climate change adaptation, risk prevention and

management;

Indirect – Higher probability Investment priorities

TO6 Preserving and protecting the environment and promoting resource

efficiency;

Direct TO

TO7 Promoting sustainable transport and removing bottlenecks in key

network infrastructures;

Indirect – Lower probability -

TO8 Promoting sustainable and quality employment and supporting

labour mobility;

Indirect - Lower probability Investment priorities

TO9 Promoting social inclusion, combating poverty and any discrimination; Indirect - Lower probability Investment priorities

TO10 Investing in education, training and vocational training for skills and

lifelong learning;


TO11 Enhancing institutional capacity of public authorities and stakeholders

and efficient public administration


a Regulation (EU) No 1303/2013 of 17 December 2013; Article 9

b Medarova-Bergstrom et al. (2015) Tracking Biodiversity Expenditure in the EU Budget, Part II – Fund specific guidance documents, Final Report for

the European Commission – DG ENV, Institute for European Environmental Policy, London/Brussels

c “Direct”: TO directly related to biodiversity; “Indirect”: Through Investments priorities, either associated with “higher likeliness“ of identifying biodiversity-

related expenditures in the investments priorities, or with “lower likeliness” ; “-“: low likeliness of identifying biodiversity-related expenditures both through

the TO and associated investment priorities.

Preliminary assessment of partnership agreements

Comparison of contributions of ESI funds to TO6: a strong contribution from EAFRD and CF

Figure 3 provides a comparison between the share of the contribution of each ESI fund to the TO6 allocation and

total allocations for the 2014-2020 budget period. As expected, it highlights important differences in contribution to

TO6 between funds; main results include:

While being a major contributor to the total ESI fund allocation (EUR 83 919 million, i.e. 20%), the

European Social Fund is not associated with any TO6 allocation

The European Agricultural Fund for Rural Development and the Cohesion Fund significantly contribute to

the TO6 (44% and 28% respectively ) in comparison with their overall share in the total ESI allocation (22%

and 14% respectively)

The European Regional Development Fund contributes significantly less to the TO6 allocation (25%) than

to the total ESI allocation (43%)



25


The European Maritime and Fisheries Fund is associated with lower contributions; it contributes a share

of 3% to the TO6 and 1% of total ESI funds.

Figure 3 - Funding allocations (M€)

Source: Partnership agreements

Comparison of MS-level allocations to the TO6: the average allocation of budget to the TO6 in partnership agreements amounts to 14%

Figure 4 below displays the fraction of the total ESI fund amount allocated to the TO6 for each Member State in the

2014-2020 Partnership Agreements. Main features include:

TO6 fractions span a wide range of values from 9% (Estonia) to 43% (Finland)

Only two Member States are associated with values above 30% (Malta: 30% and Finland: 43%); the

average EU-28 value amounts to 14%.

Figure 4 - Fraction of the total ESI fund amount for 2014-2020 allocated to TO6 for each Member State

Source: EY based on data collected from Partnership Agreements presented in Table 4 (European Commission DG REGIO website – June 2015)

15 416

184 665

26 723

95 927

083 919

17 064

61 500

1 594 4 256

0%

20%

40%

60%

80%

100%

TO6 Total

EMFF

CF

ESF

EAFRD

ERDF



26


Figure 5 shows the absolute amount allocated to the TO6 by each Member State and for each ESI fund in its

Partnership Agreement. It must be underlined that the major contributors do not necessarily have the highest share

of the total ESI budget allocated to TO6 (e.g. on one hand, Romania and France rank second and third respectively

in the EU-28 share, but allocate only slightly less than 20% of their total ESI funds allocation to the TO6; on the

other hand, Poland, Italy and Spain allocate below the EU-28 average and rank first, fourth and fifth respectively

with regards to the total TO6 budget).

While it must be noted that the five first contributors to the TO6 also rank among the largest EU-28 MS, there is no

correlation between the main land area and the share of the TO6 budget among the total ESI fund allocation (cf.

Figure 6).

As a consequence, the underlying factors impacting the share of the total ESI fund allocation dedicated to the TO6

budget likely stem from qualitative reasons, i.e. country-specific context.

This observation supports a call for Member State case studies, allowing examination of each Member States’

strategies within the Common Strategic Framework for ESI funds. These case studies will also allow analysis of the

actual programme definition, implementation and subsequent absorption of available EU funds. Such an approach

would enable identification and weighing of risks and opportunities that Member States are confronted with when

establishing and discussing their ESI fund budget with the EU.

Figure 5 - ESI funds allocations to TO6 per Member State over the 2014-2020 budget period

Source: EY, based on data collected from Partnership Agreements presented in Table 4


A ND T RA CK ING B IODIV E RS ITY -RE L

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