Impact on Europeans, their industry and economy now being questioned

One of the key subjects discussed at the Sustainable Future conference organised by Politico in Brussels this week was how the Green Deal will pan out under the new European Commission (EC).

The EC has set climate goals to be achieved by 2030 and by 2050, but each member state has its own climate policies and targets. That poses challenges to achieving Green Deal goals. And right now, the EC’s green policies and their impact on Europeans, European industry and the economy are being questioned. They are facing increasing political and popular resistance.

There is criticism that the Green Deal moved too fast in terms of regulation, with implementation lagging behind. Some European leaders – notably President Macron – went public, asking the Commission for a ‘regulatory pause’ to give implementation a chance to catch up.

But even more importantly, it has not succeeded in getting people behind it, as evidenced by the shift to the far-right in the June European Parliamentary elections. With this political shift still unravelling in Europe’s leading economies, Germany and France, it has become clear that gaining EU citizens support for the Commission’s green policies has become a top priority.

There is an urgent need for people back it. An increasing number of Europeans are suffering from high energy prices – higher than in most other competing economies – and energy poverty, feeling insecure, with glaring inequalities creeping in. And on top of that, there are warnings that deindustrialisation has become a reality.

If Europe wants to regain public support for its climate policies it must address these concerns convincingly. Everybody is entitled to have access to reliable and affordable energy. The EU needs to make ‘just transition’ more tangible. Europe’s credibility depends on this.

Europe needs a new social contract linked to the Green Deal. One that grapples with high energy prices supported by a new competitive industrial policy.

As the German think-tank Bruegel warned, “Europe is at a juncture where political resistance to decarbonisation is mounting and where budgetary means to buy-off consent are becoming scarce, at both EU and national levels. To get the Green Deal done, a new investment strategy is needed.”

Bruegel recommends that “clean electricity generation and electricity transmission systems need to be expanded rapidly, while industrial decarbonisation must be boosted and the green transformation of buildings and transport accelerated sharply.”

But as the EU’s politics shift to the right, the ability of its public sector to finance this is becoming constrained. As a result, it requires targeted public financing with the aim of catalysing private sector finance. The EU has a reputation for bureaucracy and over-regulation. It needs to create a more efficient investment environment and clearer permitting and approval processes. It needs clear rules and predictability.

In doing so, Europe must also come to terms with and address some harsh realities: the coming of President Donald Trump, the shift to the far-right, loss of competitiveness, its glaring defence shortcomings and its lack of a coherent industrial policy. And it needs to lessen its dependency on external supply chains. The EU must reset the Green Deal and realign it to global trends or be left behind.

All this comes at a time when politically and geopolitically it is becoming more challenging – things are becoming harder: security, economic safety, resilience. Within this environment, keeping the Green Deal alive over the next five years requires trade-offs between all these competing priorities.

Shifting priorities

The backlash to green policies, that came to a head in the period leading to the June elections, led to the slowing-down, watering-down and even abandonment of a number of Green Deal policies.

EC president Ursula von der Leyen recognised in a document entitled Political Guidelines for the Next European Commission 2024-2029, published in July, admitting that “Europeans have real doubts and concerns about the instabilities and insecurities we face – from the cost of living, housing and doing business, to the way issues such as migration are handled.” She said “we are in an era of anxiety and uncertainty… All of these expectations and concerns are real, legitimate and must be responded to.”

Top of the list in her new political priorities are: competitiveness, defence and security, food security, clean industrial deal, research and innovation and productivity. The Green Deal is mentioned but it is not at the top of the political agenda anymore. Indeed, the focus now will be on implementing the legal framework that has already been agreed. Among the priorities of the new Commission are counteracting the growing climate backlash and protecting the EU economy.

Moving forward, especially in setting up a new Clean Industrial Deal centred on decarbonising and bringing down energy prices, requires agreeing and enshrining the recommended 90 per cent emission-reduction target for 2040 into the European Climate Law, probably in February.

Clean Industrial Deal

At the centre of the new Commission’s Strategic Agenda 2024-2029 is the Clean Industrial Deal, a follow-up to the Green Deal, but instead of being climate driven it will be centred around industrial competitiveness. It will seek “to decarbonise Europe’s industries while advancing economic and technological goals.”

Key to this will be ensuring access to cheap, sustainable and secure energy supplies and raw materials. This requires that the EU’s “energy market must work better to bring prices down and ensure consumers benefit from the lower production costs of clean energy.”

Under the Clean Industrial Deal, the EC intends to reinforce joint procurement for fuel and develop the governance needed for a ‘true’ Energy Union.

EC’s Political Guidelines for the next five years include a commitment to scale up and prioritise investment in clean energy infrastructure and technologies. “This will include renewables and low-carbon technologies, grid infrastructure, storage capacity and transport infrastructure for captured CO2…also investment in energy efficiency measures, digitalisation of the energy system and deployment of a hydrogen network.”

Achieving these commitments will be very challenging, especially if the swing to the right carries on at the national level. In Europe, energy is a shared competence exerted at EU and national levels but both energy regulation and levies are set at the national level. It is unlikely that EU member states will be prepared to cede more control to the Commission, limiting how far a ‘true’ Energy Union can go.

Impact on Cyprus

How the future of the Green Deal and the new Clean Industrial Deal develop next year, could have profound impacts on Cyprus’ future energy policies. Cyprus continues to be a laggard in Europe when it comes to lowering emissions and transitioning to clean energy.

Without serious change, Cyprus will find itself under increasing pressure to conform to Europe’s decarbonisation goals. Such change must be reflected in Cyprus’ final National Energy and Climate Plan that must be submitted to the EC by June.

Dr Charles Ellinas – Councilor, Atlantic Council