The European Green Deal was announced in December 2019, before the coronavirus struck Europe. Now, the pandemic has forced subtle changes in the scheme to create the first climate-neutral continent. However, the Green Deal is set to become the backbone of Brussels’ recovery plan to help nations affected by the virus.
Although the recovery plan is not a formal part of the Green Deal, it proposes a long-term investment in Europe’s future in a manner aligned with Green Deal targets.
The multi-year Green Deal covers the whole EU economy. Major initiatives include climate action, sustainable industry, a circular economy, a farm-to-fork strategy, biodiversity, pollution and mobility. A carbon border-tax is scheduled by January 2023.
The main element of the recovery plan is the Next Generation EU fund, which would issue EUR750 billion of bonds to provide loans and grants to member states most affected by COVID-19. Its key themes are green, digital and resilience issues and it will support investments and reforms essential for a sustainable recovery.
The pledge for at least 25 per cent of spending to contribute to climate action has now been raised to 30 per cent. Originally about 75 per cent of the fund was to finance a Recovery and Resilience Facility but now this element has been increased to 90 per cent. But EUR30 billion was set aside for a Just Transition Fund helping small firms and start-ups and this fund has been cut to EUR10 billion and will also receive less from elsewhere.
Furthermore, countries will only receive half their allocation until they commit to a climate-neutral EU by 2050, in line with the Paris Agreement. This shows Brussels is determined not only to become the first climate-neutral continent but also to regain some climate leadership.
The EU is also seeking a more ambitious 2030 emissions target. The current target, a 40 per cent emissions reduction by 2030, is in line with limiting warming to below 2°C. The Green Deal proposed increasing that to at least 50 per cent to 55 per cent by 2030 – consistent with 1.5°C warming. But until 2030 targets are finalised, the future trajectory cannot be determined and the decision has been deferred because COVID-19 postponed the UN COP26 climate conference for 12 months.
The Green Deal will require substantial financing. The climate and energy targets alone need EUR260 billion of additional annual investment (around 1.5 per cent of GDP) and the total will be considerably more. Both public and private finance will be used but the pandemic has changed some of the financing means.
A revised industrial strategy under the Green Deal has three key aims: climate neutrality, competitiveness and digital.
Details remain vague, but we think the green commitments will be maintained even if the virus-induced economic downturn may shift the focus a little.
Despite the increased volumes of protective equipment and single-use plastics caused by the pandemic, the EU has resisted lobbying to relax its goals for a circular economy. These goals include goods having less plastic and packaging, and the right to be repaired and recycled.
The EU is strongly advocating a ‘green recovery’. It believes the pandemic makes the need to protect and restore nature all the more urgent.
Original publication date: 30 July 2020
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