BRUSSELS – The European Union’s Green Deal is one of the bloc’s most successful and transformational policy frameworks, offering a clear path toward full sustainability by mid-century. But emerging challenges, such as an increasingly adversarial geopolitical landscape and rapidly escalating climate and biodiversity crises, call for recalibrating the Green Deal to ensure it can achieve its goals.
- The Indian Election and the Country’s Economic Future Manjunath Kiran/AFP via Getty Images Longer Reads 4
The Indian Election and the Country’s Economic Future
Raghuram G. Rajan worries that the country will squander its massive potential by trying to emulate China's growth strategy. - The “Billions to Trillions” Charade Mandel Ngan/AFP via Getty Images Free to read Economics 0
The “Billions to Trillions” Charade
Jayati Ghosh explains why using development banks' resources to incentivize private-sector finance is unlikely to succeed. - What the AI Pessimists Are Missing Philipp von Ditfurth/picture alliance via Getty Images Innovation 0
What the AI Pessimists Are Missing
Michael R. Strain points out that the technology will help to address many of the risks it creates.
There are three ways to strengthen the framework. The first is to align the fight against climate change with the effort to make the EU more competitive. Europe’s energy prices, which have skyrocketed to unsustainable levels following Russia’s invasion of Ukraine, are the root cause of the EU’s declining competitiveness. The invasion and subsequent disruption of Russian natural-gas supplies showed that the bloc’s continued dependence on fossil fuels both exacerbates climate change and poses an immediate risk to Europe’s economic future. Notably, EU member states currently pay twice as much for natural gas as the United States and other countries do.
To remain competitive, European countries must accelerate the decarbonization of their energy systems. The success of the EU’s RePowerEU plan, which rapidly reduced Europe’s dependence on Russian gas, shows that this is feasible. But without taking meaningful steps to reduce its reliance on large quantities of oil and liquefied natural gas, the EU risks achieving only partial decarbonization, leaving it exposed to volatile energy prices.
By launching an EU-wide, decade-long effort to decarbonize Europe’s energy systems and industries, the bloc’s competitiveness could be significantly improved. Building on the EU’s Fit for 55 initiative, especially the Emissions Trading System (ETS), would enable policymakers to establish the necessary regulatory and investment frameworks to accelerate the clean-energy transition while navigating the turbulent energy market in the coming years.
To be sure, this effort would require the EU’s 27 member states to overcome their preference for maintaining separate industrial policies. Under a Green Deal 2.0, member states’ political and financial power could be consolidated into a single European industrial transition plan.
For this transition plan to work, it must be extended to regions like the Mediterranean and Ukraine, which are crucial to providing sufficient amounts of low-carbon energy and raw materials. Regional energy cooperation could also help to address two other major challenges facing the EU: migration and Ukraine’s accession.
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The second way to strengthen the European Green Deal is to foster a just transition to a low-carbon economy. In addition to accelerating the clean-energy shift, policymakers must take measures to ensure that no one is left behind, especially amid high inflation and the ongoing cost-of-living crisis.
So far, the European Green Deal has successfully relied on redistributive mechanisms, such as income support and subsidies, to mitigate the higher inequality that typically accompanies economic transformations. But redistribution is not enough to ensure a just energy transition. A Green Deal 2.0 must emphasize solidarity and implement radical reforms in the housing and energy markets to enable low-income households and small and medium-size enterprises to participate fully in a rapidly decarbonizing economy.
Pre-distributive policy instruments, such as education, job training, urban planning, and public transport, must play a central role in the next phase of Europe’s energy transition. After all, the European Green Deal is not just about income and wealth redistribution but also about the fair distribution of hope, opportunity, and well-being.
Lastly, the EU must reaffirm its commitment to biodiversity. The Green Deal’s biodiversity framework has faced significant setbacks over the past few months, as increased fears of a farmers’ revolt impelled the European Commission to cancel or delay several regulations and provisions. Although the damage to the EU’s overall climate objectives has been limited, the ease with which essential measures were scrapped underscores the framework’s insufficient focus on biodiversity, especially compared to its climate and energy components.
The Green Deal’s energy framework has not faced similar challenges, even amid rising living and capital costs. This is because the energy transition offers tangible economic benefits to society, businesses, and households, thanks to the ETS’s effective carbon-pricing mechanism. By contrast, preserving biodiversity lacks such an economic rationale and relies instead on limited political will.
But there is a strong economic argument for biodiversity. Simply put, the current way to monetize a tree is to cut it down and sell it. By assigning a monetary value to the carbon content stored by trees through the ETS, a Green Deal 2.0 could make afforestation profitable.
A thriving environment can play a pivotal role in climate mitigation and adaptation, and it should be valued accordingly. To this end, the European Commission is developing an ETS-type instrument for the land-use sectors using its Carbon Removal Certification framework, which a Green Deal 2.0 could facilitate. Once we recognize that preserving biodiversity is not just a moral and health imperative but also a smart business strategy, we will be able to start moving in the right direction.
Europe Needs a Green Deal 2.0
23
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06.06.2024
BRUSSELS – The European Union’s Green Deal is one of the bloc’s most successful and transformational policy frameworks, offering a clear path toward full sustainability by mid-century. But emerging challenges, such as an increasingly adversarial geopolitical landscape and rapidly escalating climate and biodiversity crises, call for recalibrating the Green Deal to ensure it can achieve its goals.
The Indian Election and the Country’s Economic Future Manjunath Kiran/AFP via Getty Images Longer Reads 4 The Indian Election and the Country’s Economic Future
Raghuram G. Rajan worries that the country will squander its massive potential by trying to emulate China's growth strategy. The “Billions to Trillions” Charade Mandel Ngan/AFP via Getty Images Free to read Economics 0 The “Billions to Trillions” Charade
Jayati Ghosh explains why using development banks' resources to incentivize private-sector finance is unlikely to succeed. What the AI Pessimists Are Missing Philipp von Ditfurth/picture alliance via Getty Images Innovation 0 What the AI Pessimists Are Missing
Michael R. Strain points out that the technology will help to address many of the risks it creates. There are three ways to strengthen the framework. The first is to align the fight against climate change with the effort to make the EU more competitive. Europe’s energy prices, which have skyrocketed to unsustainable levels following Russia’s invasion of Ukraine, are the root........
© Project Syndicate
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