Europe is planning a climate-neutral future – with help of the European Green Deal. The ambitious strategy is to make the EU a frontrunner in climate action and provide green growth with zero emissions. But is this possible?
Ursula von der Leyen has not shied away from big words. “We give our best when we are bold and aim high. With the European Green Deal, we are aiming high”, the European Commission President said when unveiling her highly anticipated flagship environmental plan for the first time in December 2019 that will made climate action a key priority for the EU. The main goal is to make Europe climate-neutral by 2050. But what does this actually mean? Baltic Business Quarterly has compiled the most important facts about the EU’s headline project.
What is the European Green Deal all about?
The Green Deal is the EU’s new strategy for sustainable growth and aims to create the framework for transitioning to a modern, resource-efficient and competitive economy. It covers every aspect of society and the economy, and includes goals for biodiversity and agriculture. The measures accompanied with the initial roadmap of key policies range from ambitiously reducing emissions to investing in green technologies and protecting the natural environment.
"On the one hand, the European Green Deal is about cutting emissions, while, on the other hand, it also means creating jobs and boosting innovation", von der Leyen said. "Our goal is to reconcile the economy with our planet, to reconcile the way we produce and consume with our planet, and to make it work for our people.”
Ultimately, the European Green Deal demands a new economic model, a completely different Europe and a new generation project for a climate-friendly transformation of the whole continent. Unsurprisingly, this has received both support and criticism from all sides. During the coronavirus pandemic, the Green Deal has taken a back seat, but the EU commission stresses that it should form a cornerstone of recovery measures.
How does the EU plan to achieve climate neutrality?
To pave the way, the EU plans to implement a legally binding European climate protection law this year to enshrine into law the goal for Europe to become climate-neutral by 2050. This means achieving net zero carbon emissions for EU countries as a whole. As an intermediate target, the EU is to cut its carbon emissions by 2030 by at least 55% below the 1990 levels.
The entire EU legislation is to be aligned with these goals and implemented by a combination of incentives, support measures and regulations. It will include strategies for biodiversity, agriculture, hydrogen, building renovation, offshore wind energy, methane pollution, sustainable investment, the circular economy and many more parts of the world’s second-largest economy.
Once these new rules come into effect, pressure will be on the 27 EU member states to actually bring them to life. The political wrangling over them will start when the EU commission presents its legislation in summer 2021 on how to meet the proposed 2030 emission reduction target of 55%. At present, the EU target is a 40% reduction of carbon emissions.
"If we can get the legislation in place in the next five years, we will have 25 years as a generation left to get it all implemented", said EU Commission Vice President Frans Timmermans, who is responsible for the European Green Deal. No action is not an option.
What does this mean for the European economy?
To achieve climate-neutrality, radical changes will be required.
ENERGY: The production and use of energy across economic sectors account for more than 75% of the EU’s carbon emissions.
BUILDINGS: Commercial and residential buildings account for 40% of the energy consumed in the EU.
MOBILITY: A growing 25% of the EU’s carbon emissions are generated by transportation.
INDUSTRY: Industry accounts for 20% of the EU’s carbon emission and only 12% of the materials it uses are recycled.
All of these emissions have to flatline in only three decades by switching to clean technologies, and also a climate-friendly transformation of agriculture is on the to-do list. Other elements include greener, cleaner cities, better home insulation and massive reforestation.
Von der Leyen compared the required efforts with the US program for the moon landing in the 1960s and spoke of “Europe's ‘man on the moon' moment”. As the EU executive emphasized, “We will help our economy to be a global leader by moving first and moving fast. The European Green Deal is our new growth strategy – it is a strategy for growth that gives more back than it takes away.”
How much will it cost and who will pay for it?
Meeting the ambitious goal of the European Green Deal will require huge investment. The current 2030 carbon emissions target is estimated to require an additional €260 billion in spending every year. That is about 1.5 percentage points of the EU’s GDP in 2018. Achieving the new proposed 2030 stepping stone on the way to 2050 – a 55% cut in emissions compared to 1990 levels – will involve even higher investment needs. Beyond 2030, the annual investment needs also run into the billions, but the presented figures are vague.
To implement its climate goals, the EU commission plans to channel upfront investments into projects that will see the EU emissions fall drastically in the next decades. It aims to mobilize and leverage at least €1 trillion over ten years for a ‘green investment wave’ in clean technologies, sustainable solutions and new businesses. Around half of the projected sum is to come from EU funds, which should encourage national governments and the private sector to stump up the remainder.
One of the main EU investment components is the so-called Just Transition Mechanism. It will support those regions in Europe that rely heavily on very carbon intensive activities. The funding worth €100 billion will be available for all EU member states.
Extract from the article by Alexander Welscher, exclusively for Baltic Business Quarterly Summer 2021
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