EU notebook: Von der Leyen's green transition plan takes shape

Energy officials outline ambitious plan to invest €350 billion a year in renewable energy for the next 10 years

By Stephen Rae, Elizabeth Hearst and Dan Byrne

DUBLIN (Callaway Climate Insights) — European Union energy and environmental leaders Thursday filled in the plan for the bloc to slash greenhouse gas emissions in the next decade, pledging to invest as much as €350 billion a year on renewable energy in the wake of the economic destruction caused by the Covid-19 pandemic.

More flexible carbon reduction targets will “help focus Europe’s economic recovery,” as it will “stimulate investments in a resource-efficient economy” through innovation in clean technology and creating green jobs, said Executive Vice President of the European Commission Frans Timmermans.

Member states will be encouraged to draw on the €750 billion ($888 billion) NextGeneration EU recovery stimulus and the EU’s budget to ensure it reaches its green transition.

The Commission also announced the implementation of an EU Renewable Energy Financing Mechanism, designed to make it easier for member states to work together to finance and deploy renewable energy projects.

In a press conference Thursday, Timmermans and European Commissioner for Energy Kadri Simson outlined the bloc’s climate plan to reduce greenhouse gas emissions by 55% of 1990 levels by 2030.

Following Commission President Ursula von der Leyen’s State of the European Union address on Wednesday, in which she described the move as “ambitious but achievable,” Timmermans pledged his support and said the decision was made to increase the reduction from 40% to 55% on the basis of an in-depth impact assessment.

The goal of meeting a 55% greenhouse gas emission reduction will “require action in all sectors of the economy,” said Simson. She added that “a climate-neutral transition can only be accomplished with contributions from everyone.” Currently, the energy sector represents over 75% of total EU greenhouse gas emissions, something that Simson said she is determined to change.

The EU estimates that annual investment in the energy system will need to be roughly €350 billion higher in the coming 10 years, in comparison to the previous decade. It also estimates that if greenhouse gas emissions were reduced by 55%, this would lead to a 60% decline in air pollution by 2030, something they believe will significantly improve the health of Europeans.

Under its current regime, the EU currently imports fossil fuels equivalent to roughly 2% of GDP. Increased expenditure in renewable energy and reducing emissions could result in falling imports of fossil fuels by 25%, potentially leading to a saving of €100 billion in the next 10 years and €3 trillion by 2050.

In a statement, Simson detailed that the EU was “on course to surpass our current 40% target for 2030,” which illustrates that “being more ambitious is not only necessary, but also realistic” and added that these ambitions would “lay a firm foundation for a greener Europe.”

Timmermans added that this announcement was a “crucial moment for our health, our economy and for global climate action,” and said the move was essential for Europe to lead the way to a green recovery. Timmermans said, “we owe it to our children and grandchildren to take action now” and described that Europe was showing the world that the bloc will enhance the “wellbeing and prosperity of its citizens” as it strives to be climate neutral by 2050.

In her first State of the European Union address as president, Ursula von der Leyen warned that “the planet is dangerously hot,” pointing to fires burning in the western United States and unprecedented drought and crop loss in Romania. 

Von der Leyen said that despite the challenges, the newly increased target of a 55% reduction in 1990 greenhouse gas emission levels by 2030, is “achievable,” citing public consultation and analysis conducted by the European Union. She stressed that no one will be left behind in this transition and said it would be good for the climate and good for business. 

Von der Leyen highlighted the mission of the bloc to be carbon neutral by 2050 and that the European Green Deal was the Union’s blueprint.

She added that Europe has “already shown we can do it,” detailing how, while emissions have been reduced by 25% since 1990, the EU economy grew by more than 60%. The EU will revisit all targets next summer and von der Leyen vowed to reform energy, technology and implement systemic modernization.

Dubbing current energy usage as “not sustainable,” she said that the EU would aim to tackle hazardous chemicals, deforestation and pollution, implementing an “investment plan for Europe” in its efforts to deal with climate change. 

Following the devastation of the Covid-19 pandemic on populations, health systems and economies, the EU devised a NextGeneration EU plan to assist Europe in its recovery. Von der Leyen announced that 37% of this €750 billion budget would be earmarked for Green Deal objectives and added that Europe was a world leader in green bonds, which would raise 30% of capital needed for this bailout. 

Von der Leyen highlighted the production of clean hydrogen as a top priority for the EU and spoke about a project in Sweden where fossil-free steel was introduced two weeks ago. This work “shows the potential of hydrogen to support our industry with a new clean, license to operate,” adding that her wish is for NextGeneration EU to create new European “‘Hydrogen Valleys’ to modernize our industries, power our vehicles and bring new life to rural areas.”

Ska Keller, president of the Greens, said she welcomes the Commission’s decision to push for increased targets, but warned that a 55% reduction is not enough. She added that the European Parliament’s environment committee recently voted in favor of a 60% reduction, and that the Parliament should fight for this.

Von der Leyen also announced plans for the EU to implement a carbon border adjustment mechanism, which she believes “should motivate foreign producers and EU importers to reduce their carbon emissions while ensuring that we level the playing field in a WTO-compatible way.”  

Also on the agenda was the fallout of the Covid-19 pandemic and stresses on European health systems, the implementation of a digital age and investment in digital solutions and existing trade negotiations with countries such as China. Von der Leyen was highly critical of Russia and denounced recent revelations by the U.K. that it was planning on breaking the withdrawal agreement. 

With some politicians and activists keen for the EU to strive toward higher ambitions of 60% reduction and some more conservative countries adamantly opposed to 55%, it’s clear that von der Leyen will have the unenviable task of trying to get both sides onboard. 

More than 150 business leaders and high profile investors have backed the European Commission’s reduction target of 55%. In an open letter published on Tuesday, a coalition of 157 multinational companies, 21 business associations and investor groups voiced their support for the plan. 

Microsoft (MSFT), Apple (AAPL), IKEA, Google (GOOGL) and Unilever (UN) have all pledged their support. The letter describes “what we urgently need to see next is an ambitious implementation of the recovery package focused on achieving a green and digital transition, with the European Green Deal at its core and an elevated short-term emissions reduction target in its sights.” 

The European Corporate Leaders Group at the University of Cambridge spearheaded the letter and said: “From a business and investor perspective, clarity on the net-zero transition pathway and timetables for each sector, as well as policy that enables substantial investments in carbon neutral solutions is essential. This, in turn, would provide us with the confidence needed to invest decisively at the necessary pace and scale to reduce emissions, create decent green jobs, drive innovation, and accelerate the rebuilding of a resilient zero-carbon economy.”

Pascal Canfin, French MEP and chairman of the European Parliament’s environment committee tweeted his support for the letter, saying: “I strongly support this initiative. Following the launch of the European Green Recovery alliance, a significant number of business CEOs once again demonstrate that the fight against climate change is a key priority. It is essential that businesses back the need to raise our ambition to make sure that we deliver during the next decades for Europe to become the first climate-neutral continent.” 

The hard-hitting Institutional Investors Group on Climate Change (IIGCC) represent 250 members who are in control of more than €33 trillion and have backed the European Union’s stance, saying a 55% reduction “is the minimum level of ambition required to achieve net zero emissions by 2050.” 

It remains to be seen if these pledges can come to fruition or may go up in smoke, but one thing is for certain, the implications of any implementation of these measures will impact not only every European, but will require all global citizens to take note also. 

The EU has threatened China with potential future tariffs if they fail to meet climate obligations. In advance of a virtual trade summit this month involving von der Leyen and Chinese President Xi Jinping, EU officials said they will press China to aim for climate neutrality by 2060. They will also ask China to bring their target year for peak emissions forward. The Chinese government is currently agreed on peaking in 2030, but the EU wants this to be 2025.

Overall, the EU has committed itself to a net-zero emissions target across the bloc by 2050. That goal received an ambitious boost this month as the sub-target of a 40% reduction by 2030 is now being changed to 55%. The EU is now calling on China to follow similar measures, according to one senior official. If these targets are not met by China, the EU has suggested a punitive carbon tariff as a response. 

The Swedish Green Party risks falling below the required threshold of votes to win even a single seat in the nation’s next parliament, according to recent opinion polls.

The party, founded in 1980, has held seats in the Riksdag after every election since 1994, and has experience as a junior government coalition partner.

However, multiple polls show the party struggling to reach the 4% support mark, which is the required amount a party needs on election day if it wants a voice at the national level.

While environmental lobbyist Greta Thunberg continues her activism both in Sweden and across the world, the political arm of the green movement in her home country acknowledges its drop in support and said, “we have to turn that around.”

Although party secretary Märta Stenevi defended past successes such as new climate laws and renewable fuel incentives, she admitted that whoever leads the party, “has a huge task ahead.

Not everyone is happy with the EU’s decision to change its emission reduction target to 55%.

Industry lobby group European Aluminium said the EU has lost one-third of its primary aluminum production capacity in the past 10 years and faces higher energy costs compared to global competitors.

With more stringent carbon regulations and higher electricity charges, they say, the industry will simply relocate outside the bloc — where regulations are laxer and costs are less — rather than adapt to new EU standards. These views are similar to those of other big industrial energy consumers such as cement, steel and chemicals.

(Stephen Rae is the former Group Chief Editor of INM, Ireland’s largest online and print media group. He serves on the board of the World Association of News Publishers (WAN-IFRA) and was previously on the board of the World Editors Forum. He was appointed by the European Commission to its High Level Expert Group on Online Disinformation.)

(Elizabeth Hearst is a journalist based in Ireland and a graduate of Dublin City University's Masters of Journalism. She has interned with the Racing Post — the UK and Ireland's top horse-racing newspaper. She has worked for the National Broadcaster RTE at the Irish General Election).

(Dan Byrne is a correspondent based in Dublin, covering climate and finance matters. He is a graduate of Dublin City University and previously worked in communications and fundraising for NGOs, He recently covered the 2020 Irish General Election for state broadcaster RTE.)