Towards a climate neutral EU:
efficient allocation of EU funds

Narrative

In 2018, the European Investment Bank (EIB) committed EUR 200 million to help finance the development of the Budapest Airport, 16 km from the centre of Budapest. The project comprised a number of measures to alleviate current congestion, accommodate future growth in passenger and cargo traffic, and improve airport safety and security. The project was expected to expand the capacity of the airport from the current 15 million to 21 million passengers per year, assuming a 50% increase in air traffic by 2030. Works included the construction of a new pier at Terminal 2 and a new Terminal 3, the construction of a new 'Cargo City', renewal of the airfield ground lighting and a range of other landside and airside enhancements, as well as an upgraded baggage-handling system. In addition, further projects - such as railway construction and another cargo facility - were planned to accommodate traffic growth. Despite the size of the project, and the estimated significant growth in air traffic, no environmental impact assessment (EIA) was conducted. As a result, no mitigation and compensation measures were proposed regarding the estimated increase in greenhouse gas (GHG) emissions. The impact on air pollution, noise pollution, and on the market value of neighbouring homes were never addressed. This was only possible because the project director divided the development into several smaller projects and disregarded their cumulative impact.

The project components did not require a screening decision from the competent authority, as their construction was approved in advance. During the screening procedure, the EIB did not identify any issue of non-compliance, concluding that the environmental and social impacts of the project were likely negligible.

Based on a complaint in March 2020 from two Hungarian non-governmental organisations (NGOs), the EIB Group Complaints Mechanism (EIB-CM) carried out a compliance review and confirmed several well-founded allegations of misconduct, namely:

• failure to assess and mitigate the climate impact of the project through an environmental impact assessment, and non-compliance with the EIB’s climate-related standards;
• failure to assess the impact on air quality of a 50% increase in air traffic and land transport;
• failure to assess and mitigate noise pollution and negative social impacts on people affected by project activities; and
• lack of public consultation on the project and failure to involve local stakeholders from civil society.

The EIB issued recommendations and suggestion for improvements, but by that time the EIB had already disbursed EUR 124 million to the project promoter.

Financial data

Total estimated cost: EUR 463 million

Esimated amount of proposed EIB financing: EUR 200 mln (43%)

Recommendations

In general, to fight the climate crisis and fast-spreading of diseases across the globe, all stakeholders – including business, political decision makers and residents – should take a more responsible approach to air transport. The convenience of mobility must not overwrite basic human rights to a healthy environment and normal conditions for life.

The external costs of air transport are enormous. No EU institution should provide financing for project that fails to implement the 'polluter pays principle', which is enshrined in the EU Treaty.

The European Investment Bank’s current environmental and social policy does not sufficiently guarantee compliance with EU laws. The EIB (and other EU financing institutions) should ensure that EU environmental and social norms are completely fulfilled prior to the approval of funding. These institutions should require that the project owner always provides information about the environmental and social impacts, and should check whether the decision of exempting a project from environmental and social assessments complies with EU standards. Financing institutions should retain the right to require an environmental impact assessment (EIA) even if authorities decide not to require one; they should also ensure an adequate assessment of the project's cumulative impacts.

EU financing institutions should not allow the division of a de facto huge project into smaller ones in order to avoid carrying out an EIA. If a project is bound to impact a large number of citizens (such as the development of Budapest Airport), the EIB should require public consultations to be held at an early stage of the project, while leaving sufficient time for the public to influence project development.

Information sources

Other info

About programme duration: Project-related works started in 2017 EIB loan signature: 12/2018 Expected end: 2022