The European Green Deal: More than a roadmap for green transition

Introduced by the European Commission in 2019, the European Green Deal (EGD) has been characterized as the leading mechanism for the green transition of the European economy that would combine the elements of sustainability and prosperity.  Besides its vast impact on the economy and climate, the EGD would also pose new challenges on the foreign policy of the European Union (EU). What are the major effects of the green transition of the European economy and what are the challenges that emerge after the Covid-19 crisis?

Towards a sustainable future

According to the President of the Commission, the EGD can be described as “Europe’s man on the moon moment” that would “reconcile the economy with our planet, reconcile the way we produce, the way we consume with our planet and to make it work with our people.” (Tamma et al, 2019). Nevertheless, the European Union has been traditionally a leader in the international stage on combatting climate change. The EU adopted its first climate change policies already from 1992, and endorsed the goal of limiting global warming to 2 degrees Celsius above the preindustrial levels in 1996. In 2002 it gathered numerous signatories for the Kyoto protocol and became its main supporter after the United States’ withdrawal. Moreover, in 2005 it introduced the Emissions Trading Scheme, the world’s most important greenhouse emissions trading system, which became the flagship of the EU’s climate policy. In 2007 the climate legislation package was  introduced which included the 20-20-20 targets (20% increase in energy efficiency, 20% reduction of CO2 emissions, and 20% renewables by 2020) and despite the Copenhagen summit failure in 2008, the Union was among the strongest supporters of the Paris Agreement in 2015 (Siddi, 2020).

Henceforth, the proposal of the EGD constitutes the next step on the global effort against climate degradation. The EGD could be viewed as a roadmap of key policies for EU’s climate agenda strategies and legislative proposals for the post-2020 period, that aims to transform the 27-country bloc from a high- to a low-carbon economy, without reducing prosperity and while improving people’s quality of life, through cleaner air and water, better health and a thriving natural habitat (Harvey & Rankin, 2020; Siddi, 2020). The ultimate targets of the Green Deal are to completely decarbonize the EU by reaching net-zero carbon emissions by 2050 and decrease emissions by 55% from 1990 levels by 2030. To meet this end, the Union promised to mobilize more than 1 trillion euros, most of which (503 billion) will come for the EU budget and the rest from national governments and the private sector. The deal is expected to create millions of new jobs in new high-tech industries from renewable energy to electric vehicle manufacturing and sustainable building, and the efficiencies in resource use will repay the cost of the transition. According to von der Leyen the EGD is “our new growth strategy – a strategy for growth that gives back more than it takes away” (Harvey & Rankin, 2020).

A geopolitical tool?

Besides its tremendous impact on the European economy, the EGD will undoubtedly reshape geopolitics, including global economic, trade and security interests as Europe is the world’s second largest importer of energy after the Asia- Pacific Region (Leonard et al, 2021). More specifically it will change the trade patterns with the neighbors of the Union and most notably those of Russia and Algeria.

Firstly, the EGD will have a major impact on the Russian economy as the EU imports most of its oil and gas from the country. As Leonard et al note: “In 2016, oil and gas revenues contributed 36 percent of the country’s government budget and Europe absorbed 75 percent of Russian natural gas exports and 60 percent of its crude oil exports” (2021, p.11). Therefore a decrease on imports of Russian gas and oil will not only evaporate substantial capital from the Russian public revenue, potentially triggering phenomena of social unrest, but would also weaken the overall economic output of its national economy and the legitimacy of its oligarchy which is closely connected with the energy exports. However, the EU-Russia oil and gas trade will not be substantially impacted over the next decade, as Europe would only marginally reduce its oil and gas imports by 2030, but the situation will radically change after 2030 when Europe is expected to substantially reduce its oil and gas imports. (Leonard et al, 2020).

At the same time, the EGD will pose serious challenges for the economic and political stability of Algeria as most of the country’s energy infrastructure is oriented toward the European market and the country is highly reliant on Europe for its hydrocarbon revenues (Leonard et al, 2020). Like Russia, Algerian economy is mostly dependent on its energy exports and the legitimacy of its gerontocracy will be immensely jeopardized by the energy transition plan of the Union. Other energy trading partners such as Norway , Kazakhstan, Qatar and Saudi Arabia will also be significantly affected but in a lesser extend as they have also started the transition to renewable energy (e.g. Norway) or have minor energy exports to the EU (e.g. Middle East). At the same time however the EU will become more dependent on imports of raw materials that underpin green technologies, becoming via this way more dependent on China, which is a major supplier of minerals such as rare earths (Leonard et al, 2020, p.16).

Consequently, the EGD will definitely solve Europe’s oil and gas security concerns (Leonard et al, 2021). The bloc will manage to guarantee its energy security as well as the security of supply and thus gradually more and more independent from energy imports. This development will not only give the EU the necessary strategic advantage to expand its mandate in other national-sensitive sectors such as defence and foreign policy, but it would also give the EU the opportunity to act more decisively in events of violation of the international law like the illegal Crimean annexation. Simultaneously though, the Union would also need to come closer with Beijing to secure the much-needed minerals for the renewable sector.

The future of the EGD

Despite its numerous benefits the EGD came under intense scrutiny after the outbreak of the Covid-19 pandemic. Many member-states were proposing the postponing or even the cancelation of the framework in order to focus on the grave consequences of the pandemic (Mason, 2020). Other members however alongside with the Commission and the European Parliament recognized that: “the crisis may actually offer a unique opportunity for the EU to live up to the Green Deal’s promise of economic modernization along the Paris decarbonisation objectives, allowing for a rethink of national taxation, innovation, infrastructure, entrepreneurship or the reform of the common agricultural policy” (Elkerbout et al, 2020, p.10). Thus the recovery plan proposed by the institutions, focus on Green Deal initiatives (New Europe, 2020).

Nevertheless, the EU must rethink the EGD and take sufficient measures to respond on the changes that will happen on a global scale. First and foremost, the EU must avoid the carbon leakage phenomenon, which is to outsource carbon intensive manufacturing abroad and then import the necessary goods, by applying an EU carbon tax. This would not only protect the well-regulated European manufacturing from international competition, but would also incentivize countries outside the bloc to follow similar environmental standards. Secondly, in order to answer to zero-sum and Realpolitik narratives concerning the geopolitics of renewable energy, the EU must improve the security of critical raw materials supply and decrease dependence on China (see also Siddi 2020; Leonard et al, 2021). As the biggest market in the world it is possible to diversify the imports of these essential materials even if it comes to a heftier price.  Finally the EU could support friendly neighboring oil and gas exporting countries in managing the repercussions from lower energy exports to the EU.

References

Elkerbout, M., Egenhofer, C., Ferrer, J.N., Catuti, M., Kustova, I., Rizos, V. (2020). The European green deal after corona-implications for EU climate policy. No. 26869. Centre European Policy Studies

Harvey, F. and Rankin, J. (2020 March 9). What is the European Green Deal and will it really cost €1tn? The Guardian. Available at https://www.theguardian.com/world/2020/mar/09/what-is-the-european-green-deal-and-will-it-really-cost-1tn [Accessed 7/5/2021]

Leonard, M., Pisani-Ferry, J., Shapiro, J., Tagliapietra, S and Wolff, G. (2021). The geopolitics of the European Green Deal. Policy Contribution 04/2021, Bruegel

Mason, A. (2020). Protecting Europe’s Green Deal. International Development Research Network

Siddi, M. (2020).  The European Green Deal: assessing its current state and future implementation. Climate Policy

Tamma, P., Schaart, E. and Gurzu, A., (2019 December 11), Europe’s Green Deal plan unveiled. POLITICO. Available at https://www.politico.eu/article/the-commissions-green-deal-plan-unveiled/ [Accessed 7/5/2021]