Comment

EU climate agenda under threat

Susi Dennison / Sep 2023

Kadri Simson, the European Commissioner for Energy. Photo: Shutterstock

The IPCC’s 2023 synthesis report in March 2023 made for sobering reading. Highlighting that we are currently living with temperatures 1.1 degrees above pre industrial levels, it concluded that the  1.5°C limit is still achievable  but that critical action is required across all sectors and by everyone. The – literally – existential question we therefore face as habitants of this planet is whether or not that ‘’critical action’’ will be taken – by governments, by businesses, by individuals.

Since Joe Biden came to the White House there has been relatively positive momentum at international level, with the US back in a leadership role in international negotiations on climate action after a hiatus during the Trump years. The introduction of the Inflation Reduction Act (IRA) in the US in 2022 has meant that the European Green Deal is no longer the only model for wholescale decarbonisation of the economy. This presents some challenges for European policymakers in the extent to which they are willing and able to embrace the subsidisation model that the US has now put forward without the west undermining the whole system of free trade under the WTO, if some collective rules are not agreed upon.  

Still, the US’ re-engagement on the climate agenda has recreated a common transatlantic agenda in navigating the many thorny elements of climate geopolitics, from efforts to persuade China to take a more committed approach to phasing out fossil fuels, to tackling the claims of OECD countries’ responsibility for loss and damage as a result climate change in countries of the global south.

But for Europeans this short honeymoon now appears to be over as we head into 2024. The EU climate agenda appears to be under threat from three angles.

Firstly, whereas the main resistance to the implementation of the European Green Deal legislation has previously come from various industrial or agricultural sectors ( the fierce political battles ahead of a vote in the European Parliament in July on the nature restoration law being a case in point) concern is now growing in the broader public.  As we head into a phase of implementation of the European Green Deal in which sectors such as housing and transport will have to decarbonise, the costs are likely to be felt by individuals and households as much as businesses. Against a backdrop of growing fears about the cost of living, in a year in which many key national elections will take place – in Poland, Slovakia, the Netherlands - as well as the European Parliament elections in June 2024, politicians are fearful about making the case for continuing to drive the climate agenda forward.

Secondly, there is now also a clear anti-elite, identity policy dimension to opposition to the European Green Deal. Throughout summer 2023, governments have increasingly cracked down on climate movement protesters – including Greta Thunberg in Germany earlier this year. The impact of this visible pushback against overt climate activism, and the association of the climate movement with an invisible progressive international elite feeding into identity politics, with leaders such as Giorgia Meloni’s government in Italy using narratives around climate being an international agenda being imposed on national governments rather than an active choice they are making. This risks further stoking public unease about taking the necessary steps to green their economy.

And thirdly, the geopolitical context is a major factor in the political tensions around the implementation of climate measures. Many of the measures in the Fit for 55 package that remain to be implemented will have a significant impact on the EU’s relationships with third countries and on its economic sovereignty in a decarbonising world. Policy tools such as the reform of the ETS and, linked to this, the CBAM – both tools based on the principle of carbon pricing – will mean that European businesses that green their production processes and supply chains are in a prime position to compete in the future. However, the introduction of the IRA in the United States and the government financial support for ‘made in the US’ green production is already making American companies more competitive abroad. While richer governments in the EU such as Germany are already emulating the US approach with subsidisation, it is unclear whether there is any appetite within an EU already stretching itself in various directions – easing the growing cost of living,  managing the recovery from COVID,  supporting Ukraine – to countenance these kind of measures on a scale to compete with the US. There is also a question over whether the EU – a trading bloc that has always championed a rules based free trade system without recourse to state aid would be willing to do so.

In this environment European policymakers will need to work harder to shore up the public support for driving the green deal forward and to push for more effective structures for climate action in EU institutions after 2024. To convince European citizens, they will need to demonstrate the need for and benefits of climate action, rather than focusing on the interim sacrifices that may be necessary in the green transition . While the cost of climate inaction may focus the minds of policymakers, the case to keep the broader European public on board with the climate agenda should emphasise the opportunities in energy sovereignty and the long term economic growth advantages in embracing decarbonisation early.

And they cannot delay in doing so. US China trade tensions, as well as the introduction of the IRA have shaped the world of ‘’green competition’’ in which the EU is now finding the tools to operate. But if Trump returns to the White House in January 2025, there is every reason to believe that he may take the ‘’green’’ back out of the competition. While the IRA may stay, the broader subsidization of made in US products is likely to reduce the incentives for US businesses to decarbonize that have been working so far.  If this happens, it will be even harder to persuade European businesses to continue to  green their processes, if doing so puts them out of business.

With this in mind, while the current political environment as we head into 2024 may seem adverse for a continued prioritisation of the climate agenda to EU leaders, and embracing a more short termist ‘business demands first’ approach -  as Rishi Sunak’s government in the UK has proposed in watering down the UK’s green commitments in September 2023 -  may be tempting, in fact the reverse is true. The time is now for the EU to double down on its climate agenda. It will pay off over the longer term and the road ahead does not look set to offer a better moment.

Susi Dennison

Susi Dennison

September 2023

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