The way in which the EU allocates its upcoming structural and cohesion funding will be a significant test of whether policy makers are in touch with environmental realities.

To listen to all the EU talk about the Kyoto goals and climate change prevention, you would think that the billions of euros spent on the EU's regional aid must be putting the beneficiary regions on a low-carbon development path. Yet the opposite is true. Up to now the climate change impact of the EU's structural and cohesion funds - totalling EUR 42 billion in 2005 - can only be described negatively. The four countries which have so far benefited the most from the EU funds - Greece, Ireland, Portugal and Spain - have witnessed by far the greatest increases in greenhouse gas emissions across the EU.

Of course not all the emission increases can be pinned on the EU funds. But the funds and the policies linked with them do fundamentally shape the long-term development of the beneficiary countries. And as the Commission likes to receive the applause for all the economic growth in the countries benefiting from the EU funds - to justify the expenditure to taxpayers - it should also accept a great deal of the responsibility for the resultant GHG emissions. If EU policy-makers are serious about meeting the Kyoto goals, then the EU's regional policy needs some basic reformulation.

Regional policy reform is indeed underway in Brussels as part of the negotiations on the financial perspectives for the period 2007-2013. A set of new regulations will define the rules for EU funds, while new strategic guidelines will define the funding priorities for the 2007-2013. The Parliament, which has an important role to play in the reform, is discussing the regulations right now (a plenary vote is expected in July) and the strategic guidelines should be discussed this autumn. At the national level, the programming process is already underway: member states and regions are planning how they will use the scheduled EU funds, expected to amount to as much as EUR 336 billion.

The reform process provides an historic opportunity to make the EU's regional funding environmentally sustainable. True commitment to climate change mitigation can not be realised if the go-ahead is given to extensive road development investments and, at the same time, there is no serious undertaking to reduce the EU's fossil fuel dependency.

Yet Poland for one is proposing to spend at least EUR 15.3 billion on transport, (with two thirds of this total going to roads) and only EUR 5.3 billion on the environment out of the Cohesion Fund. Such a proposal nakedly benefits road construction lobbies, positioning themselves to cash in on the EU's billions and comes at a time when Poland is closing some of its railway lines due to a lack of funds for rehabilitation and modernisation. It remains an open question how Poland plans to fulfill its Kyoto commitments when at the same time it is aiming to invest massively in a sector which contributes so heavily to climate change.

In short, in the new regulations and strategic guidelines for EU funds, the Council and the Parliament will decide on whether to allow its taxpayers' resources to blatantly violate the EU's commonly agreed goals. Rather than paving the way for the building of new highways and expressways in the new member states why not support the upgrading of existing railway networks, the rehabilitation of regional roads and improvements to urban public transport?

The same goes for the energy sector where the funds could support initiatives such as the rolling replacement of fossil fuels and nuclear power with renewable energy, a drastic increase in energy efficiency measures across all sectors and the introduction of a bridging strategy to replace coal and oil with natural gas. The creation of the knowledge-based economy that the EU officially wants will also require investments in human brains rather than tarmac - again, funding for new roads is no substitute for spending on education and training.

As things stand, however, unless a miracle happens in the Council or the Parliament, it appears unlikely that the cohesion policy will move in a desirable direction.

The draft strategic guidelines are wholly geared to the EU's 'Growth and Jobs' strategy (the 'Lisbon II' agenda), which sidelines environmental and social imperatives, with the EU's Sustainable Development Strategy (the Gotheburg agenda) completely bypassed. This despite Commission President Jose Manuel Barosso's promise at an April forum in Brussels that he, "will work hard to move the [Sustainable Development] Strategy from words to deeds." Whether Barosso was paying lip service to the European environmental movement or if he intends to deliver remains to be seen.

European citizens, though, have made their preferences clear when it comes to environmental issues. A recent Eurobarometer poll revealed that 85 percent of people from across the EU 25 want policy-makers to consider environment policy as equal in importance to economic and social policies. That such a wellspring of popular feeling is in danger of being overlooked in the financial perspectives and in the structural and cohesion regulations and guidelines is alarming. Will EU politicians listen to their citizens this time? What is certain is that the EU Funds allocations for 2007-13 will be an acute and highly significant test of whether or not EU policy makers are in touch with EU citizens and with the environmental realities that are a threat to us all.

Magda Stoczkiewicz, Policy Coordinator
CEE Bankwatch Network