Europe’s Climate Moonshot Runs Into Instant Trouble Over Costs

(Bloomberg) -- A radical plan to turn Europe into the world’s first climate-neutral continent is running into opposition right out of the gate.

Governments from the East of the European Union are threatening to torpedo a pledge to eliminate net carbon emissions by 2050 unless they are guaranteed more help in financing the transition. The airline industry signaled it’s ready to fight any attempt to make it pay more for polluting. And a push to regulate the burgeoning green finance industry got snarled up by a dispute over whether nuclear power should be included.

Europe’s Climate Moonshot Runs Into Instant Trouble Over Costs

As EU leaders prepare to gather for their end-of-year meeting in Brussels Thursday, the bloc is trying to show that it can lead the global campaign against climate change and demonstrate to other nations that they can sustain economic growth while de-carbonizing. But the challenge of finding a way to satisfy 28 national governments and all of the multiple interest groups and industries that they in turn have to worry about means that debate over the emissions objective may run into the wee hours.

“We have to take into account all economic and social costs,” Polish Prime Minister Mateusz Morawiecki said on his way into the summit. “It’s too early to predict which way the talks will go, but our arguments will certainly be strong and unequivocal because we can’t agree to such a transformation model that would hurt the Polish society.”

A unanimous endorsement of the 2050 target would give the European Commission a political boost as it starts to push through the laws required to put its Green Deal plans into effect. It would also send a signal to other major emitters like China and the U.S. as this year’s annual UN-backed climate conference wraps up in Madrid.

The biggest sticking point for the EU is how to cover the costs of the shift.

Poland is leading a group of eastern nations demanding more financial guarantees from the EU and estimates its own bill for eliminating CO2 emissions will be more than 500 billion euros ($550 billion). The Poles -- whose industry is reliant on coal-fired power stations -- want to water down a joint statement to be adopted by the leaders at the summit so that countries with particularly high emissions only have to reach zero “in the second half of the century.”

“The cost of energy transformation in Poland is much higher than in many other countries that were more lucky in the past decades and based their energy mixes on other sources of energy, for example France that developed nuclear energy,” Morawiecki said.

Eastern Opposition

Hungary will only support the EU’s proposal if it receives sufficient funding from the trading bloc to overhaul its economy, which it estimates to be around 152 billion euros. Czech Prime Minister Andrej Babis said it could cost his country as much as 40 billion euros to zero-out emissions.

“If we really want to reach climate neutrality we have to understand that every member state has a different energy mix and different costs,” Babis told reporters in Brussels.

The leaders of Poland, Hungary and the Czech Republic already blocked a push toward climate neutrality at the leaders’ previous summit in June. Since then Estonia has dropped its opposition to the target and the commission has proposed a “just transition” mechanism with 100 billion euros to help poorer member states finance the shift.

Since the details of the fund are to be unveiled only in January, the incentive may be too weak for the eastern nations to get on board this week while several of the richer states in the West have signaled the price tag is already too high.

With hopes of a compromise receding, officials are considering a conditional agreement that might link the climate target to the next EU budget, due to be agreed next year. Another scenario under consideration is a statement from those leaders who are in favor of the goal. That would be weaker than a unanimous statement of course, but would still signal the direction of travel as the commission starts drafting legislation.

©2019 Bloomberg L.P.

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