Author: Teemu Koskimäki

  • December 13, 2019

TOP 10 BEST AND WORST THINGS ABOUT THE EU GREEN DEAL

From the point of view of solving the root problems that lead to the global environmental problems.

Emphasis added by yours truly.


TOP 10 BEST THINGS

  1. “it is essential to increase the value given to protecting and restoring natural ecosystems, to the sustainable use of resources and to improving human health. This is where transformational change is most needed“.

This is one of the most important things that can be done to ensure that the incentive structure that leads to global environmental problems is fixed. Increasing the value given means that prices will be corrected to include externalities, so that nature would no longer be treated as a valueless source and sink when determining the marginal costs of investments and production.

  1. ensure effective carbon pricing throughout the economy. This will encourage changes in consumer and business behaviour, and facilitate an increase in sustainable public and private investment”.
    AND
    “review and propose to revise where necessary, all relevant climate-related policy instruments. This will comprise the Emissions Trading System, including a possible extension of European emissions trading to new sectors
    “.

Carbon pricing is perhaps the most important action that can be taken to fix the broken incentive structure that currently drives everyone from governments to individuals to contribute to climate change.

It is highly important to include the price of carbon to marginal costs and thus prices in an effective way. This requires that free emission allowances are removed and the caps are set low enough to achieve the required reductions, even if that has to come at the cost of economic growth.

A related positive was the intention of “Ensuring that taxation is aligned with climate objectives“.

  1. “The Green Deal will make consistent use of all policy levers: regulation and standardisation, investment and innovation, national reforms, dialogue with social partners and international cooperation”.

Time is running out and the economic system is too locked-in to evolve by itself. Changing the incentive structure of the economic system using all possible policy levers will facilitate a transition into a new system that is aligned with natural limits.

  1. At national level, the European Green Deal will create the context for broad-based tax reforms, removing subsidies for fossil fuels, shifting the tax burden from labour to pollution, and taking into account social considerations”.

Shifting from taxing the things people want (income) to taxing the things we do not want (environmental harm) is important and can also help to alleviate income inequality.

Ending subsidies for fossil fuels is a must. They should instead be directed to industries that seek to replace these industries and lower environmental footprints.

  1. The circular economy action plan will include a ‘sustainable products’ policy to support the circular design of all products based on a common methodology and principles. It will prioritise reducing and reusing materials before recycling them. It will foster new business models and set minimum requirements to prevent environmentally harmful products from being placed on the EU market. Extended producer responsibility will also be strengthened”.
    AND
    “The circular economy action plan will also include measures to encourage businesses to offer, and to allow consumers to choose, reusable, durable and repairable products. It will analyse the need for a ‘right to repair’, and curb the built-in obsolescence of devices, in particular for electronics”.
    AND

    The Commission will consider legal requirements to boost the market of secondary raw materials with mandatory recycled content (for instance for packaging, vehicles, construction materials and batteries)”.
    AND
    “The Commission is of the view that the EU should stop exporting its waste outside of the EU and will therefore revisit the rules on waste shipments and illegal exports.”

This would counter the current wasteful practices incentivised by the market system.

  1. New business models based on renting and sharing goods and services will play a role as long as they are truly sustainable and affordable”.

I believe sharing resources in an effective and convenient way is the future of humanity. It will significantly reduce resource needs and increase efficiency, with subsequent reductions in environmental footprints.

  1. “As part of the Sustainable Europe Investment Plan, the Commission will propose a Just Transition Mechanism, including a Just Transition Fund, to leave no one behind”.
    AND
    “managing the transition will lead to significant structural changes in business models, skill requirements and relative prices”.
    AND
    Pro-active re-skilling and upskilling are necessary to reap the benefits of the ecological transition. The proposed European Social Fund+ will play an important role in helping Europe’s workforce to acquire the skills they need to transfer from declining sectors to growing sectors and to adapt to new processes. The Skills Agenda and the Youth Guarantee will be updated to enhance employability in the green economy”.

The just transition applies to everyone from nations whose economy relies on fossil fuel industries to individuals who would lose their jobs and need to re-educate themselves. It is important that such trade-offs are recognized and the EU is seeking to resolve them beforehand. This will increase public support for the transition away from the unsustainable economy (or at least weaken the opposition).

  1. To ensure appropriate management of environmental risks and mitigation opportunities, and reduce related transaction costs, the Commission will also support businesses and other stakeholders in developing standardised natural capital accounting practices within the EU and internationally“.

This is very important for setting correct prices (or at least sufficiently good approximations) for products and services, accounting for the associated environmental costs. However, as it might not be in the best interests of businesses to evaluate the costs correctly, the standards must be developed in cooperation, with guidance from scientists and governments.

  1. The EU should use its expertise in “green” regulation to encourage partners to design similar rules that are as ambitious as the EU’s rules, thus facilitating trade and enhancing environment protection and climate mitigation in these countries“.

This would mean that if something really is cheaper to produce elsewhere and transport to Europe, measured by corrected prices, then mutual benefits from trade could be had.

  1. [The Green Deal] will be updated as needs evolve and the policy responses are formulated“.

This may be crucial, because the top 10 worst things about the Green Deal would seem to require a fundamental change to the deal, if it is to succeed.


TOP 10 WORST THINGS

  1. “[The Green Deal is] a new growth strategy [which] aims to transform the EU into a fair and prosperous society, with a modern, resource-efficient and competitive economy where there are no net emissions of greenhouse gases in 2050 and where economic growth is decoupled from resource use”.

Firstly, the problem is that economic growth cannot be decoupled from resource use in an absolute and sufficiently fast manner, as would be required if growth were to continue (Antal, 2014; Jackson and Victor, 2019; Parrique et al., 2019).

This means that growth is not an option, if developed nations wish to achieve the environmental goals and also allow developing nations to improve their standard of living. Rather than being a growth strategy that seeks the (impossible) absolute decoupling of GDP from environmental impacts, the Green Deal needs to be changed into a degrowth strategy that seeks to decouple the dependency of employment on growth (Antal, 2014; Okun’s law ).

This way the well-being of people could be maintained without requiring the economy to grow. Several mechanisms mentioned and proposed in the Green Deal communication, such as the Just Transition Fund, could potentially be used to facilitate this.

Secondly, the competitiveness of the economies should not be a priority. This is why the suggested carbon border tax should be established.

  1. “[The Green Deal] recognises the need to maintain [EUs] security of supply and competitiveness even when others are unwilling to act”.
    AND
    “The policy response must be bold and comprehensive and seek to maximise benefits for health, quality of life, resilience and competitiveness“.

Maximising quality of life can mean employment through growth, or it can mean policies that guarantee jobs or income despite no growth or degrowth.

Maintaining competitiveness in terms of exporting goods which have higher (corrected) prices may prove difficult, if other areas do not correct prices. Competitiveness should therefore not be prioritized over the environmental goals.

  1. In March 2020, the Commission will adopt an EU industrial strategy to address the twin challenge of the green and the digital transformation. Europe must leverage the potential of the digital transformation, which is a key enabler for reaching the Green Deal objectives. Together with the industrial strategy, a new circular economy action plan will help modernise the EU’s economy and draw benefit from the opportunities of the circular economy domestically and globally. A key aim of the new policy framework will be to stimulate the development of lead markets for climate neutral and circular products, in the EU and beyond”.

Although necessary to reduce the resource intensity of the economy in relative terms, digital transformation is insufficient to achieve absolute decoupling (Antal, 2014; Parrique et al., 2019).

Furthermore, a perfectly or even sufficiently circular economy is not possible due to unavoidable requirements for virgin resources and energy (Antal, 2014; Parrique et al., 2019).

  1. EU industry needs ‘climate and resource frontrunners’ to develop the first commercial applications of breakthrough technologies in key industrial sectors by 2030. Priority areas include clean hydrogen, fuel cells and other alternative fuels, energy storage, and carbon capture, storage and utilisation”.

The reliance for breakthrough technologies to achieve decoupling is apparent (as is the avoidance of truly transformative change). However, studies show that such breakthrough developments are unlikely (Antal, 2014) and gambling on them is ill-advised, irresponsible and goes against the EU’s ‘precautionary principle’ (Parrique et al., 2019).

The Green Deal seems to include no alternative plan in case the technological innovations do not come to fruition.

  1. “New technologies, sustainable solutions and disruptive innovation are critical to achieve the objectives of the European Green Deal. To keep its competitive advantage in clean technologies, the EU needs to increase significantly the large-scale deployment and demonstration of new technologies across sectors and across the single market, building new innovative value chains”.

It’s positive that this is acknowledged outright, but it’s very negative that the plan takes such a huge risk despite scientists arguing that we should err on the side of caution, given what is at stake.

  1. Free emission allowances to industries at risk of carbon leakage”.

Free allowances protect inefficient industries at the expense of the environment. Carbon leakage is bound to happen in a large scale when EU is the first region to implement price corrections, and other measures should be found to prevent this.

  1. the Farm to Fork Strategy will strive to stimulate sustainable food consumption and promote affordable healthy food for all. Imported food that does not comply with relevant EU environmental standards is not allowed on EU markets. The Commission will propose actions to help consumers choose healthy and sustainable diets and reduce food waste”.
    AND
    The Commission will explore new ways to give consumers better information, including by digital means, on details such as where the food comes from, its nutritional value, and its environmental footprint”.

However, will these actions include subsidy reforms that make vegetarian and vegan diets cheaper than meat diets? Will there be increased taxes for meat? This was not explicitly stated.

There was no explicit mention of supporting vegetarian or vegan diets, even though it is one of the most important ways to reduce human impact on the environment and combat climate change.

Information alone is not enough. New incentives need to be put in place. This can be achieved if all prices are corrected to include environmental costs.

  1. “Sustainability should be further embedded into the corporate governance framework, as many companies still focus too much on short-term financial performance compared to their long-term development and sustainability aspects”.
    AND
    “increased opportunities will be provided for investors and companies by making it easier for them to identify sustainable investments and ensuring that they are credible. This could be done via clear labels for retail investment products and by developing an EU green bond standard that facilitates sustainable investment in the most convenient way”.

The incentive structure of companies can only be fixed if they are forced to account for the environmental costs and all prices are subsequently corrected. Labels can be very useful but will not be sufficient by themselves.

  1. There was no mention for how to deal with existing vested interests.
  1. Although carbon leakage of production was addressed to some degree, there was no mention of the embedded emissions of consumption, also known as cost shifting or virtual carbon (among other terms). This refers to the environmental effects and emissions of products and services that are consumed in Europe but produced elsewhere and transported.

Conclusions

The Green Deal of the European Commission promises to ensure effective carbon pricing through policy reforms which will be proposed by June 2021.

Actions are also planned to make sure producers pay the costs of intrinsic and planned obsolescence and the eventual recycling of products, along with regulations which would make fundamental changes to the (short-term, self-maximising and externalising) incentive structure of the market economy, solving the issues at the root of global environmental problems.

However, as long as the Green Deal continues to call for economic growth, it will likely fail to meet its environmental goals, as science has shown that absolute decoupling is not possible in the required time.

The Green Deal requires and seeks an unlikely and unprecedented technological push despite scientists’ warnings that such action goes against the precautionary principle, and is basically gambling on the future of humanity.

Irreversibility of the transition, which the Commission seeks to achieve by proposing the first European ‘Climate Law’ by March 2020, is an excellent action and an opportunity to guarantee future emission reductions and true socio-economic change in Europe.

Number 10 in the list of best things about the Green Deal may mean that there is still a chance to make changes and to drop the growth requirement, before a dangerous lock-in is created that guarantees growth at the expense of the more fundamental goals.


References:

Antal, M., 2014. Green goals and full employment: Are they compatible? Ecological Economics. 107, 276–286. https://doi.org/10.1016/j.ecolecon.2014.08.014

European Commission, 2019. The European Green Deal. COM(2019). Brussels. Available at: https://ec.europa.eu/info/files/communication-european-green-deal_en

Jackson, T., Victor, P.A., 2019. Unraveling the claims for (and against) green growth. Science. 366, 950–951. https://doi.org/10.1126/science.aay0749

Parrique, T., Barth, J., Briens, F., Kerschner, C., Kraus-Polk, A., Kuokkanen, A., Spangenberg, J.H., 2019. Decoupling debunked: Evidence and arguments against green growth as a sole strategy for sustainability. European Environmental Bureau. Available at: https://eeb.org/library/decoupling-debunked/

The European Green Deal: Questions & Answers. https://ec.europa.eu/commission/
presscorner/detail/en/qanda_19_6690
.


How to cite this blog post:

Koskimäki (2019) Top 10 Best and worst things about the EU Green Deal. Blog post. Available at: https://teemukoskimaki.com/top-10-best-and-worst-things-about-the-eu-green-deal (Accessed [date]).

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Thanks for reading and (hopefully) sharing! — Teemu