Europe notebook: Fiscal reality hits EU's climate goals; hydrogen favored

A debate Tuesday over the impact of aggressive climate goals on EU member finances saw tough talk, and a consensus on hydrogen

By Vish Gain

(Vish Gain is a journalist based in Dublin. He is a correspondent for AML Intelligence covering the financial crimes sector in Europe and beyond.)

DUBLIN (Callaway Climate Insights) — Talk is cheap, as the saying goes. And up to now, Europe has been devising strategies and setting targets. Now that the EU is coming close to the business end of achieving its 2030 and 2050 climate targets, the debate is increasingly nervous and around what change will cost the economy.

A conference Tuesday on the topic of “Is Europe’s 2030 emissions target inadequate or overambitious?” distilled into a debate on how the green transition will affect national economies.

“Obviously, achieving 55% to 60% is not going to be easy,” said Lisa Fischer, senior policy adviser at E3G. “But not doing it won’t be an easy task either because we’ll have to deal with challenges as a consequence of climate change.”

Fischer argued that to achieve the new target, the EU will have to rid itself of some old habits. “The EU needs to start focusing on new energy solutions and put independent science at the heart of the project. In the long run, funding cutting-edge technology is more important than transition solutions,” she told the event organized by Euractiv.

A key concern of some industry leaders and national politicians has been around the issue of impact on GDP. Poland, for instance, has identified a finance gap worth tens of billions of euros, asking for a national impact assessment after the initial target announcement. Some other central and eastern European countries followed suit.

Diederik Samsom, head of cabinet for Climate Commissioner Frans Timmermans, said that while asking for national impact assessments is justified, the Commission has already published detailed assessments that point to the sectors that will be impacted.

“If we want to increase growth and jobs created through this transition, we have to implement smart policies like carbon pricing and redistributing its revenues. If we don’t redistribute, we will risk going through an unfair transition,” said Samsom.

“The increase in growth won’t be dramatic, but its change in direction will.”

The transition period won’t be an easy one, with opposition groups already campaigning for an easing of the target citing possible loss of jobs and crippled national economies as a result of the Covid-19 pandemic.

Head of energy group Enel, Simone Mori, said that committing to renewable plans is Europe’s best bet to ensure a smooth transition, adding that “there cannot be a transition without renewable energy.” He further argued that the process needs to be harmonized and pan-European to be effective.

Centrist Romanian MEP Christian Busoi wasn’t convinced the 60% target for carbon reductions by 2030 — agreed upon by the European Parliament last month — was feasible. He felt the goal was “overambitious.”

“The political will is very clear, we need to meet the initial target. But for some countries, the transition will undoubtedly be tougher to achieve,” Busoi remarked.

Samson, however, argued that the pace of new green tech was a strong ally. Had the EU stuck to the previous goal of 40%, then they would already be on track to achieving the target with current developments in solar and wind energy and electric cars, the European Commission official pointed out.

“By far, our biggest challenge is to create a just transition. Every transition has a sort of a Darwinistic nature, where power and money end up in the hands of a few,” he said. “Instead of repairing the damage afterwards, we need to prevent it during the transition.”

The EU has identified hydrogen as a panacea to its greenhouse gas emissions problem. To become climate-neutral by 2050, Europe needs to transform its energy system which accounts for 75% of the EU's greenhouse gas emissions. Hydrogen is set to replace gas and pave the way for a more sustainable source of energy in the future.

In its hydrogen strategy, the Commission has taken a clear stance in favor of green hydrogen produced from renewables. But the strategy also acknowledges the role hydrogen produced from natural gas can play in the transition.

Samson believes that the use of blue hydrogen during the transition is a necessary evil.

“We need to speed up the demand and supply of hydrogen, which can only happen if we give a role to blue hydrogen in the transition,” he said. “We manage it by gradually financing it and withdrawing the finances when needed.”

Fischer agreed, adding:  “We need to make sure we’re not stuck in the world of pipelines — it’s no longer needed. We do not need to expand our gas infrastructure. Hydrogen is the future.”

On whether the transition to a 55-60% reduction in greenhouse gas emissions was possible at all, Samson said that he had never seen a stronger consensus or momentum on an issue in his adult life.

“For the most part, industry and society are ready for the change. This is remarkable in light of the fact that we are in the middle of a pandemic,” he said. “In a strange twist of events, the pandemic has strengthened the consensus and readiness of industries for a more sustainable future.”

And in that he has a point.