Author: Teemu Koskimäki
From the point of view of solving the root problems that lead to the global environmental problems.
Emphasis added by yours truly.
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.
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“.
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.
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.
This would counter the current wasteful practices incentivised by the market system.
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.
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).
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.
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.
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.
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.
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.
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).
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.
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.
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.
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.
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.
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.
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/
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]).