Viral Crisis Puts Europe’s Green Deal Ambitions to Shock Test

(Bloomberg) -- The economic shocks coming from the coronavirus outbreak are likely to push European Union’s green ambitions down the political agenda.

The project to make Europe the first climate-neutral continent requires an unprecedented overhaul of the economy and energy system that will take years. That’s up against immediate risks to public health and the risk of a deep recession.

The viral crisis may well complicate and overshadow the 27-nations union’s effort to set tighter environment targets and channel of billions euros into green projects this year.

“I see risks and opportunities,” said Simone Tagliapietra, researcher at the Brussels-based Bruegel think-tank. “The risk is that, in order to respond to this crisis, governments will need to massively scale up their fiscal expenditure and therefore direct resources that potentially in peaceful times could have been utilized for decarbonization toward the solution of this more urgent issue.”

The news isn’t different outside Europe, with the United Nations canceling all face-to-face climate meetings at least until the end of April. Five years on from the Paris climate agreement, 2020 was expected to be the year of action. The virus and ensuing economic crash might cause a temporary dip in global emissions, but that’s no substitute for long-term planning

Europe wants to eliminate greenhouse gas emissions by the middle of the century under its far-reaching Green Deal strategy. The program championed by European Commission President Ursula von der Leyen, aims to make everything from energy production to agriculture and transport more sustainable. The biggest challenge is in securing investment for the environmental clean-up, with the EU aiming to mobilize at least 1 trillion euros ($1.1 trillion) over the next 10 years.

Just two weeks ago, as Italy was toughening measures to contain the spread of the coronavirus, the commission unveiled a draft a law to make the 2050 goal irreversible. It also pledged a proposal by September to deepen the 2030 emission-reduction target to 50%-55% from 1990 levels. The existing objective is a 40% cut and to get there the EU needs additional investment of 260 billion euros annually.

The new legislation will require support from EU member states, which have varying domestic economic priorities, industrial strength and sources of energy. They had been expected to wrangle about every word in rules that would implement the Green Deal and the worsening economic situation is set to make the politics only more complicated.

Now, the coronavirus is spreading and authorities are extending lockdowns of whole populations, with no end in sight. That in itself will complicate any discussion of green measures.

Even before the virus emerged, Europe was facing a renewed migration crisis and a rise of populist in many member states. Tensions are still flaring between the EU and Turkey over how to reboot a deal that stemmed the flow of migrants to the bloc.

“There’s a lesson to be learned from the current migration and coronavirus crises: we need to design climate policies to be shock-proof,” said Johanna Lehne, a policy adviser at at the research group E3G.

For now, Europe’s biggest public health challenge in decades is likely to result in some sort of fiscal stimulus. That could provide a channel to inject more green money into the economy, with governments taking advantage of historically low interest rates to make investments in energy and infrastructure, according to Mark Lewis, head of sustainability at BNP Paribas Asset Management

“I would hope that the political response to the coronavirus in the short term will not be conflated with the urgent need to rewire our economies to make them more sustainable and greener in the future,” Lewis said.

In Brussels, the buzz about the Green Deal has ground to a halt. In place of dozens of climate-related events scheduled each month is notices of canceled events and ministers focused on the health crisis.

“I see a risk in the short term but I think governments should really think while designing the measures to boost the economy and take into consideration the Green Deal dimension because that could be part of the solution,” Bruegel’s Tagliapietra said.

--With assistance from Akshat Rathi.

To contact the reporter on this story: Ewa Krukowska in Brussels at ekrukowska@bloomberg.net

To contact the editors responsible for this story: Reed Landberg at landberg@bloomberg.net, Jonathan Tirone

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