How Big a Deal Is Europe’s ‘Green Deal’
(Bloomberg) -- The greenest part of the world is getting even more ambitious about fighting climate change. The European Union is laying out a “Green Deal” to drive a sweeping economic transformation of the 28-nation bloc, which is home to more than 500 million people. It includes new rules for companies, financial markets and consumers, along with a pledge to make Europe the first “carbon neutral” continent by 2050. EU leaders say it should spur the U.S. and China to up their game. The plan already has plenty of critics, including countries that will struggle to afford the shift.
1. How big a deal is this?
The European Commission, the EU’s executive arm, is laying out plans that will affect everything from energy production to transport, farming and the design of cities. It involves retooling every industry, particularly carbon-intensive ones such as steel and cement. Airlines are already pushing back. The plan strengthens industrial strategy to promote certain technologies, such as an initiative to kick-start battery production and compete with Asian suppliers. It also aims to embed environmental goals into standards for banks, money managers and insurers, directing trillions of euros into sustainable investment.
2. How will this happen?
Planned measures include:
- stricter emissions standards for vehicles and industries
- revamped energy taxes, including phasing out tax breaks for jet fuel
- new rules on subsidies for companies
- an environmental import tax, or other measures to prevent flight to regions with laxer policies
- a mechanism of 100 billion euros ($111 billion) to help the most affected regions
- a switch to greener farming practices
- measures to curtail the loss of biodiversity
- tougher air quality standards and a water quality action plan
3. What does it mean to be ‘carbon neutral’?
The term signals a legal commitment to cut emissions to the very minimum and compensate for what can’t be eliminated. Sometimes it appears as “climate-neutral” or “net zero.” It’s driven by investment in renewable energy and clean technologies. It also brings in pledges to offset emissions through carbon-reduction projects such as planting forests. In June, the U.K. and France became the first major economies to pass legislation to become net-zero by 2050. Dozens of other countries have pledged to go beyond targets set out in the landmark 2015 Paris Agreement. The EU plans to accelerate its existing Paris pledges and cut emissions in half by 2030 compared with 1990 levels.
4. Is all of Europe on board with this?
Climate protection has risen on the EU’s agenda as concerns about the risks of not acting have grown. Some 93% of Europeans regarding global warming as a serious threat, a recent poll showed. While the leaders of EU nations are likely to broadly endorse the plan, there is opposition from a small group of eastern European countries, led by Poland, who say the costs is imposes are too high. Expect years of hot debates and intense lobbying ahead: Each measure to be proposed by the commission will need approval from member states and the European Parliament to become binding. The EU legislative process usually takes a year or longer.
5. Who will foot the bill?
The costs of the EU’s green ambition are dizzying. The commission estimates that shift will require as much as 290 billion euros in extra investment annually for energy systems and infrastructure from 2030. Poland, the Czech Republic and Hungary are pushing for financial aid. Poland estimates that the shift will cost its economy 505 billion euros. The EU is readying a fund that will help spur 100 billion euros in investment for the most affected regions. The European Investment Bank, the bloc’s lending arm, is set to play a key role, aiming to mobilize 1 trillion euros in financing over the next decade. Europe is already home to the world’s first and largest cap-and-trade market for pollution credits, which covers almost half of emissions and imposes costs on about 12,000 facilities owned by utilities and manufacturers such as BASF SE, Royal Dutch Shell Plc and ArcelorMittal SA.
6. Is there a similar plan in the U.S.?
The Reference Shelf
- QuickTakes on the EU’s plan for green financial regulation and what it means to be carbon neutral.
- The European Investment Bank is set to play a key role in the Green Deal.
- A primer on decarbonization explains how hard it will be for steel, cement and agriculture.
- The U.S. proposal for a Green New Deal.
©2019 Bloomberg L.P.