What’s EUp? Competitiveness and clean energy top priority of the next EU long-term budget

But a territorial and place-based perspective is clearly missing

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Mélanie Bourgeois

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EU Budget

The European Commission has presented its proposal for the next EU long-term budget (MFF). The second “heading” — Competitiveness, Prosperity and Security — would represent 29.6% of the total budget. It introduces a new European Competitiveness Fund, bringing together 14 existing programmes such as LIFE and Horizon Europe.

What does this mean for cities working on climate, resilience, and the energy transition? Energy Cities takes a closer look.

What is the Competitiveness and Security pillar? Why does it matter for cities?

This heading is managed mainly by the European Commission and is made up of:

Competitiveness heading of next MFF
Breakdown of the Competitiveness, prosperity and security heading per programme. Source: European Parliament Think Tank briefing.
  • European Competitiveness Fund (€362.3 billion). A new fund focusing on clean transition and industrial decarbonisation; health and biotech; digital leadership; resilience, defence industry and space.
  • Connecting Europe Facility (€72.3 billion). Focus on investments in projects of “highest added value for the EU” and with cross-border or interoperable systems dimensions.  The energy budget increases five-fold and the transport budget doubles.
  • Erasmus+ (€36.2 billion)
  • Agora EU (€7.6 billion). Supporting civil society, culture, and media independence.

This pillar will contribute to the MFF’s Green Target of 35%.

Local authorities should be able to access most of these funds — especially the new Competitiveness Fund, which will absorb many programmes cities rely on today.

How does it work? What’s new?

The European Competitiveness Fund will be governed by one rulebook, with simplified procedures. It merges 14 programmes (including LIFE, Horizon, the Innovation Fund, InvestEU, EU4Health and several defence tools) into five programmes:

  1. Horizon Europe – €154.9 billion (+63%). Keeps its 4-pillar structure. Pillar 2 “Competitiveness and Society” includes topics such as decarbonisation, housing, circular economy, democracy and digitalisation. Funding will continue through call for proposals multi-annual work programmes.
  2. Clean Transition and Industrial Decarbonisation – €23.3 billion. Covers many sectors from circular economy and water resilience to heating and cooling solutions, energy efficiency and grids.This includes the new “LIFE activities” replacing the LIFE programme. Funding could cover up to 100% of eligible costs and 25% of indirect costs.
  3. Resilience, Security, Defence Industry and Space – €115.7 billion.
  4. Digital Leadership – €48.5 billion
  5. Health, Biotech, Agriculture and Bioeconomy – €20 billion

The Connecting Europe Facility (CEF) has 2 subprogrammes: Energy: focuses on markets, cross-border network interoperability, and joint renewable energy projects; Transport: more information available via POLIS. But we can already deeply regret that the Urban nodes are not mentioned as part of the proposed CEF. Cities are eligible but rarely main beneficiaries in the energy stream, which remains centred on large, centralised infrastructures rather than decentralised systems.

Do we like it? Energy Cities’ opinion

Defence spending takes a large share of the new budget. It remains to be seen whether part of this spending can finance the infrastructure needed for both strategic autonomy and ecological transition, particularly at the local level.  

Still, many topics essential for cities’ ecological transition are well covered in this competitiveness pillar — especially energy transition and heating decarbonisation through the Competitiveness Fund and CEF.

However:

  • No clear territorial approach is proposed within the Competitiveness Fund or Horizon Europe, even though local economic development is often a regional or local responsibility. Cities may apply to specific calls, but are not recognised as key beneficiaries, as cross-sectoral facilitators of competitiveness in a region.
  • Connecting Europe Facility lacks a place-based perspective, making it harder to finance decentralised and small-scale infrastructure critical for urban and municipal energy transition.
  • The future of the LIFE programme is worrying, as being split across national plans, the EU facility and the Competitiveness Fund could weaken it significantly. Its biodiversity and environment component is particularly at risk.

How to fix it? Our demands

  • Recognise cities and regions as key innovators and investors in the Competitiveness Fund and Horizon Europe (key beneficiaries, strengthening multilevel governance, investment in local innovation ecosystems).
  • Maintain a standalone, strengthened LIFE programme, including robust environmental and biodiversity priorities.
  • Add a place-based dimension to the Connecting Europe Facility, opening it to small-scale and local investments essential for the green transition, and reintegration urban nodes in the transport programme.

What’s next? A call for action

Read the Alliance of Local Authorities’ recommendations for more details.

Explore our articles on the overall MFF architecture, national plans, and our Q&A “Everything a city wants to know about the MFF”.

Join our recurring MFF&You webinar for the latest updates and live discussion – next one is on 11 December! (For Energy Cities members only – contact us for more information).