Romania’s Post COVID-19 Recovery – Enabling a Green Transformation of the Economy

The COVID-19 pandemic and the restrictions imposed by governments throughout the world caused one of the greatest economic crises ever experienced given its magnitude and new nature.

To assist countries to recover from the crisis and set their economies on a path towards resilient economic recovery, the EU agreed on a comprehensive financial package of €672.5 billion to be made available in the form of low interest loans and grants through the Recovery and Resilience Facility (RRF).

To access these funds, member states must elaborate National Recovery and Resilience Plans (NRRPs), with investments and reforms in line with the broader EU objectives, including the green and digital transitions. The NRRPs must allocate at least 37% of expenditure to climate action and progress towards other environmental objectives of the European Green Deal.

The remaining spending should follow the ‘do no significant harm’ principle and therefore not lead to significant greenhouse gas emissions. The challenge for member states is to elaborate recovery strategies that reconcile economic growth and employment goals with low-carbon and climate-resilient development agendas.

A green recovery should ensure that the slow-down in economic activity is followed by stimulus-driven growth enabling the implementation of otherwise costly public goods that mitigate the impact of a slower to unfold, yet more dangerous crisis – climate change. While it is not clear if all green policies and investments are optimal responses to the immediate effects of the crisis, the NRRP projects could still be prioritised based on their local economic impact.

Some green investments are more labour-intensive than others and can generate higher value added in the medium term. For instance, energy efficiency and forest management measures have significant local employment impact. The recovery will likely play out differently in Romania than in the more developed members states.

The country is still in the middle of the economic convergence process towards the EU average and faces a specific set of challenges. Basic infrastructure such as roads, water and sewerage networks, waste management, schools and hospitals are in dire need of investment, while poverty, inequality and emigration are still high. The needed shorter-term interventions must occur through targeted reforms based on the country-specific recommendations on labour market support, crowding-in of private investment, and infrastructure. Combining such shorter-term interventions with a green recovery can simultaneously ensure the positive economy impact of the NRRP and the shift to greener industries and value chains.

To evaluate the ability of the Romanian NRRP to deliver this, a methodology was developed in this study based on two main indicators: economic and climatic.

The economic indicator is designed to determine whether a specific measure merely aims at increasing the convergence level with other member states or whether it seeks transformational changes towards competitiveness in the future European economy. If the measure is neither, it is labelled ineffective.

The climate indicator assesses whether a measure helps attain a decrease of GHG emissions at the sectorial level and if it is compliant with the GHG emission targets for 2030 and 2050. This indicator labels measures as either green, colourless, or grey. The analysis was carried out on the latest version of the NRRP, made public on September 27, which represents the annex presented by the Commission for approval by the Council.

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