Your guide to Europe's 'Green New Deal,' the continent's new plan to get to net zero
Europe soon could become the first continent in the world to be aiming for net zero emissions by 2050, if EU leaders adopt a ground-breaking plan (PDF) released by the European Commission. The long-awaited European Green Deal promises a radical transformation of the trading bloc's economy over the next 30 years, which would see the EU fully decarbonize while creating green jobs in new low-carbon industries.
The plan has major implications for businesses across Europe. But it comes at a busy time: The United Nations climate talks in Madrid and the result of the United Kingdom's general election have just passed.
So, assuming very few people have the time to actually sit down and read the EU's Green Deal, BusinessGreen has stepped into the breach to pull out the need-to-know information, along with a handy timeline of what to expect and when.
Net Zero law
The jewel at the heart of the Green Deal is the pledge to make Europe a net zero continent by 2050. To cement the target for future administrations, a Climate Law is scheduled to be introduced by March.
Getting to net zero will be a tall order. Since 1990 the bloc has cut its emissions by 23 percent, but on current trends only will have cut emissions by 60 percent by mid-century.
The EU's current 2030 target mandates a 40 percent cut in emissions against 1990 levels. The Green Deal plans to boost the goal to between 50 and 55 percent cut, a move that experts agree will be essential to accelerate emissions cuts in line with a 2050 net zero goal.
Crucially, the deal revealed these targets are set to be finalized by "summer 2020" — before a planned EU-China bilateral and the COP26 Summit in Glasgow next autumn. Previous drafts suggested sign off of the 2030 targets would not happen until autumn, which campaigners warned would weaken the plan's impact as a galvanizing force for other nations to boost their climate plans.
From an investment perspective, the sooner the targets are signed off the better, according to Stephanie Pfeifer, CEO of the Institutional Investors Group on Climate Change. "There is no time to lose in strengthening the 2030 greenhouse gas emissions reduction target as the next step in this process, so that the EU can ideally resubmit new 2030 targets to the U.N. climate process during 2020," she said. "This will provide investors with confidence that the EU is serious in delivering on the commitments it has made, as well as sending a strong signal to the rest of the world during a key moment in the international climate negotiations."
If all is approved, by June 2021 all climate-related policy will be brought in line with the new 2030 targets. As such, the bloc could move to extend the EU Emission Trading System into other areas of the economy, particularly emissions from buildings and shipping, and road transport from 2025 onwards, the commission suggested.
Carbon border tax
In a bid to protect EU industries aligning with stringent climate policies from being undercut by climate laggards outside the bloc, the EU is proposing a carbon border adjustment mechanism for "selected sectors." There has been no word on which sectors will be covered, but most bets will be on new levies on cement and steel imports for starters.
The proposal is almost guaranteed to prove controversial. Speaking last week at the U.N. climate talks in Madrid, Chinese officials said a carbon border tax would create uncertainty in the international markets — code for displeasure in Beijing.
Cutting emissions now will not stop the warming already baked in to the atmosphere. Whatever happens, floods, heatwaves and wildfires are set to increase in intensity and ferocity.
To address the threat, the commission has promised to come forward with a new, "more ambitious" EU strategy on climate adaptation by 2021. There is also a signal that the EU will focus on pushing businesses and investors to account for climate risk and do more to adapt to the threats.
Cracking down on greenwash
The commission is promising to "step up" its efforts to tackle "false green claims" companies make about products. One idea mooted is for products to carry digital passports that would provide consumers with information on a product's origin, composition, repair and dismantling potential.
The rate at which buildings are renovated across the EU needs to double if the bloc is to hit net zero in time. To accelerate action, the EU is proposing Brussels and member states should start a "renovation wave" of public and private buildings from next year. The program would come alongside a new initiative from the commission, details of which have not yet been hashed out but which the plan indicated would include innovative financing schemes to organize renovations in large blocks of homes.
The commission is also promising to "rigorously enforce" legislation relating to the energy performance of buildings — measures which in many member states, including the United Kingdom, have been left unenforced for years.
Business and industry
A new Industrial Strategy for Europe will be released in March to ensure that the bloc's industrial sector takes decisions to prepare for net zero. "It takes 25 years — a generation — to transform an industrial sector and all the value chains," the EU points out. "To be ready in 2050, decisions and actions need to be taken in the next five years."
EU industry still accounts for 20 percent of the bloc's emissions and will be one of the hardest areas to decarbonize. The commission hopes an industrial strategy will help kick-start action, by twinning the green growth agenda with digital transformation.
It is also planning a new Circular Economy Action Plan to encourage EU businesses to use more recycled materials, enable more reuse of goods and extend producer responsibility for the disposal of products at the end of their lives. In particular, the textiles, construction, electronics and plastics sectors will be in the crosshairs for new policy interventions.
"The price of transport must reflect the impact it has on the environment and health" the EU declares, warning that as part of its review of the Energy Tax Directive it will consider removing tax exemptions for aviation and maritime fuels.
Spring will see the release of a "Farm to Fork" Strategy for greening the EU's food system, which is set to prompt an overhaul of farming and fishing in the bloc. A planned reform of the Common Agricultural Policy will be harnessed to promote climate action, the commission said, while strategic plans for agriculture submitted by member states will be assessed against "robust" climate and environment criteria.
What does this all mean in practice? Well, think more rewards for organic farmers, refreshed efforts to cut pesticide use, tougher animal welfare standards and lots of tree planting — an EU forest strategy is also in the mix. However, few topics are more political than farming and land use and the EU can expect fierce lobbying and protests if the reforms are interpreted as cuts to farming subsidies.
Meanwhile, a zero pollution action plan for air, water and soil will be presented in 2021 to help measure and improve the quality of Europe's natural environment.
"The European Green Deal includes important commitments to a toxic-free environment, to end harmful subsidies and loopholes, and to design the genuinely transformative policies we will need to deliver for future generations," noted Patrick ten Brink, EU policy director at the European Environment Bureau.
Sustainable finance and a 'Just Transition'
The commission will draw up a Sustainable Europe Investment Plan to help plug some of the $346 billion annual green investment shortfall needed for the bloc to hit net zero, although no detail was given on how much cash this plan would be backed by. What we do know is that this plan will contain the details of the Just Transition Mechanism, which will boast a $133 billion fund to help member states manage the economic costs of the transition — a mechanism seen as critical to securing support for the plan from carbon-intensive member states in Eastern Europe.
Meanwhile, at least 70 percent of the $51 billion InvestEU fund will fund action to tackle climate change, and a new sustainable finance strategy for the private sector will be published next year.
"This European Green Deal is a material signal of the prominent role that the environment will play in the new commission legislative cycle and will help to develop Europe's global leadership on sustainable finance," concluded Michael Cole-Fontayn, chairman of the Association for Financial Markets in Europe.
Green Deal diplomacy
The EU has promised to develop stronger international climate diplomacy strategies focused on persuading other nations to adopt "green deal" type strategies, with plans to "mobilize all channels," including the U.N., G7, G20 and World Trade Organization, to advocate bolder climate action — particularly ahead of COP26 in Glasgow.
Meanwhile, the commission has acceded to French President Emmanuel Macron's request and is set to propose that membership of the Paris Agreement be essential for any future EU trade agreement. That could have major implications for the United States, which under Donald Trump is withdrawing from the Paris Agreement but is also interested in securing a trade deal with the EU.
Maintaining good international relations while pushing its climate agenda will be a balancing act, predicted the European Corporate Leaders Group of top businesses. "A key challenge for Europe will be to manage and develop its trade relationships to secure and incentivize the transition to a zero-carbon economy, whilst not creating unnecessary confrontations with other economies," it said.
The Green Deal has received a largely positive reaction from NGOs and business groups, who in particular welcomed the influence it could have on global progress on carbon emissions, even if some activists insist it should go further.
But many in the green business sector remain nervous about translating the long-term ambition of the strategy — however laudable — into concrete action on the ground in the next few years. After all, Europe is already off track to meet its current 2030 decarbonization targets, and meeting the more ambitious goals will require real action almost immediately.
As Aldersgate Group Executive Direction Nick Molho stressed, implementing the deal will require fast and far-reaching legislation across a range of sectors. "For the European Green Deal to be effective, it will need to be supplemented by ambitious near-term measures to accelerate emission cuts in the buildings, transport and energy, as well as greening the financial system," he said. "These near-term priorities must be urgently accompanied by an ambitious EU-wide innovation program to test critical solutions like carbon capture and storage, hydrogen and new land use management techniques. These will be key to cutting emissions in hard to treat sectors, such as heavy industry and long-distance transport."
But although the Green Deal is still a long way from being EU policy, and further still from delivering a net zero transformation on the ground, its release just 11 days into the new Commission sends a clear signal that whatever happens, the environment is set to stay at the top of Europe's political and policy agenda.