The European Commission this week did not so much deliver a plan for the European Green Deal, so much as offer up a plan by which it will make a plan by March of next year. But this time the plan will be a no bullshit, uncompromising soup to nuts industrial strategy that will be fearlessly enforced if the tone of this document is anything to go by.
We have to say this is a plan that has been put together by people who understand climate change, and how tricky it is to achieve decarbonization. It is not the eye-watering amount of money that it will take which is the most impressive detail (€220 billion), but the level of joined up thinking that has gone into this.
The Commission plans to stimulate and manage an open market in Hydrogen and other carbon free gases, to decarbonize all the key industrial ingredients, such as steel and cement making, and it wants a European electricity network for swapping electricity between states, and has plans to entirely eliminate pollution in cities. The Emissions Trading System will be tweaked so it becomes fit for purpose.
It will become mandatory to use “shore” electricity for ships when in dock, and to switch off their polluting engines; aviation will get its first carbon check-up, and the European Commission is not being frightened of internal conflict here – fossil fuel subsidies will be eliminated, and all buildings residential or industrial will get subsidies to undergo some kind of efficiency upgrade. EV infrastructure will be set targets, and EV shipments internally will be financially encouraged.
When President Macron of France tried to reduce fuel subsidies, his country was brought to a standstill. But the European Commission is once removed from the ire of the Yellow Jackets – it can play the bad cop on the issue of subsidies and let country governments play the good cop. There will be tension, there will be protest and we expect backlash, but it is fundamentally more acceptable for the Commission to take the flak, than the French or any other government and this is a plan written with green thinking people in mind, and it looks like it won’t be up for renegotiation.
So the European Green Deal document has been published and press released, and as we say the 24 pages of detail do not represent an actual plan, more a list of jobs, and a date by which time Europe will have a plan and complete each stage. It is a roadmap of actions and landmarks to reach a clean, circular economy, stop climate change, reverse biodiversity loss and kill pollution.
The underlying aim can be simply stated – to become the first continent which reaches zero emissions by 2050 (and by implication then use that position to beat up every trading partner to follow suit). It will start with a new European Climate Law laid down in March 2020 and be followed with a Biodiversity Strategy for 2030, and an entirely new Industrial Strategy which relates almost entirely to climate change. There will also be a Circular Economy Action Plan, and something called the “Farm to Fork Strategy” for food development and sustainable farming. This isn’t so much getting in the way of EU strategy as it has BECOME the EU strategy.
And the promise is that all the proposals will be evidence-based and underpinned by broad consultation. So obviously they cannot happen immediately since there has not yet been any consultation. But the thinking is that this job will take 25 years, so that all the rules to make this happen need to be in place within 5 years, leaving 25 further years for the strategy to kick in.
The price is expected to be in the order of €260 billion by 2030 and more down the road, which translates into 1.5% of Europe’s 2018 GDP. Naturally the private sector is also being called to action, so not all of that funding is coming from the EU, but it will stimulate it or create a policy to drive it.
The launch statement talks about 25% of the EU’s long-term budget being dedicated to climate action, and investments will fall heavily on the European Investment Bank and there will be a Green Financing Strategy come 2020, which we presume will be all about making green investments more profitable, so that money chases these deals. The laissez-faire attitude of the European Investment Bank, which was very slow to cease its investment in fossil fuels, will find itself pointed heavily at renewables.
We know that one of the most expensive areas is going to be dragging those EU states which are heavily dependent upon coal for electricity currently, into a zero emissions world, by giving them extra financial support. Commission President Ursula von der Leyen talked about a “Just Transition Mechanism” which we take to be money and incentives to retain workers in the carbon sectors and access to reskilling programs, which key countries can draw on.
In March 2020, the Commission will launch a ‘Climate Pact’ to give citizens a voice and role in designing new actions, sharing information, launching grassroots activities and show-casing solutions that others can follow.
The Commission boasts its track record on reducing emissions saying that in 2018 they were 23% lower than in 1990, while GDP grew 61%, so is not impacted by this.
The European Green Deal white paper gives quite a bit of detail and first talks about revising the Energy Taxation Directive throughout the EU; and the first step here is to get all regulations to be on a majority basis, not based on unanimity – so that recalcitrant economies like Poland, Hungary and the Czech Republic, can see both the carrot from the Just Transition Mechanism and the stick from this tax directive.
And the idea of imports to the EU which are “tainted” by other high carbon economies, was only just touched upon – there are no concrete plans to introduce a border carbon tax straight away – but the warning is there – should differences continue in the ambition of trading partners to match the EU’s zero carbon moves, then it will free to tax imports from that country. We suspect that a few warning shots will be fired here, but very quietly as warnings to a trading future – as much to the US, as to China, Brazil and others.
But this will somehow be done in keeping with World Trade Organization rules. That’s one for the laywers.
This vision should form the basis of the long-term strategy that the
EU will submit to the United Nations Framework Convention on Climate Change in early 2020. To set out conditions for an effective transition, to provide predictability for investors, and to ensure that the transition is irreversible, the Commission will propose the first European ‘Climate Law’ by March 2020. This will enshrine the 2050 climate neutrality objective in legislation. The Climate Law will also ensure that all EU policies contribute to the climate neutrality objective and that all sectors play their part.
Any industries rife with climate change deniers had better take heed, if sectors dig in their heels, the Commission will simply apply carbon taxes, and other penalties.
The reason for all of this is that current EU policies would only reduce greenhouse gas emissions by 60% by 2050 on a business as usual basis.
By summer 2020, the Commission will present an impact assessed plan to increase the EU’s greenhouse gas emission reductions target for 2030 to at least 50% and towards 55% compared with 1990 levels.
This will all begin with member states presenting their own revised energy and climate plans by the end of this year and if they are not tough enough, the Commission will make additional suggestions.
The document discusses the need for smart infrastructure and increased cross-border and regional cooperation, and foster the deployment of smart grids, hydrogen, carbon capture and storage, and energy storage.
And to ensure that everyone is using comparable data when talking about going green, and to stop “greenwashing,” companies making ‘green claims’ must substantiate them using a standard methodology and the Commission will step up regulatory efforts to tackle false green claims.
The idea is mooted in the Green deal of an electronic product passport to provide information on any product’s origin, composition, repair and dismantling possibilities, and end of life handling. And public authorities will be called upon to lead by example and buy green.