July 13, 2020

Carbon Critical: Angela Merkel’s Green New Deal

The German chancellor has signaled that climate protection is high on her EU presidency agenda. She is well positioned to advance her goals.

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A graph showing the EU pursuing its 2050 carbon neutral aim
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As the German government takes over the presidency of the EU Council, it is focused—lamentably, necessarily, unavoidably—on overcoming the COVID-19 pandemic and the accompanying recession. Chancellor Angela Merkel made this clear in her speech to the European Parliament in Brussels on July 8. The parliamentarians had to listen a little longer to hear what the number one priority would have been had the novel coronavirus never made the jump from animals to humans: climate change. 

Still, second place isn’t bad. In fact, the European Green Deal is now a bigger deal than it was before—and the biggest decisions about it will be taken under Germany’s stewardship.

The Long Road to Zero

The EU announced the European Green Deal in December 2019 to no small fanfare. This, said Commission President Ursula von der Leyen, was Europe’s “man-on-the-moon moment.” The comparison works, but von der Leyen won’t get to make the equivalent of US President Richard Nixon’s celebratory interplanetary phone call. Her speech was really more analogous to US President John F. Kennedy’s 1961 address to Congress, where he said America should commit to putting a man on the moon “before the decade is out.” The EU’s man on the moon moment, however, will actually come in thirty years. The lodestar of the European Green Deal is the target of net-zero greenhouse gas emissions by 2050, and the other elements are the booster rockets for initial launch.

Fittingly, the first order of business is enshrining the 2050 net-zero target in law. The member states—with the temporary exception of Poland, which will achieve net zero “at its own pace”—already reached a political agreement on the target in December. The proposed European Climate Law will give that commitment legal weight when it is passed, and future member-state actions are meant to be compatible with the net-zero target.

The negotiations over the EU’s target for 2030 will be trickier. Whereas today’s politicians can let someone else figure out how to make cement or fly planes without emissions in the late 2040s, changing the 2030 target will restrict their own policy options in the near future. The current target is to reduce EU emissions by 40 percent (compared to 1990 emissions) by 2030; as of 2018, EU emissions were down about 21 percent since 1990.

In order to give Europe a better chance of getting to zero by 2050, the European Commission (with Merkel’s backing) has proposed raising the 2030 target to a 50-55 percent cut and is drawing up an “impact assessment plan” to show how this is possible. For Poland, Czechia, and some conservative politicians on the national level, the tougher target is a non-starter, while Swedish MEP Jytte Guteland of the environment committee has put forward a plan that would mandate a 65 percent cut in order to align with the highly desirable and increasingly illusory 1.5C temperature increase goal in the Paris Agreement. Guteland has ambitious member states like Sweden and Luxembourg on her side, as well as Greens throughout the continent. The Germans chairing meetings in 2020 will have to mediate between the various camps and hammer out an agreement.

Germany was robbed of two opportunities to lead the EU on climate matters at international summits when the pandemic forced the postponement of both COP26 (planned to be held at Glasgow in November, but now pushed back by a year to November 2021) and the EU-China summit that had been scheduled for Leipzig this September. In another sense, though, the coronavirus has only made Germany’s presidency more relevant.

Then Came Coronavirus

Before the pandemic, Brussels liked to call the Green Deal a “one trillion euro climate finance plan.” Climate campaigners objected to the fishy accounting, pointing out that much of the €500 billion meant to come from the EU budget was relabeled money from existing EU spending, like the farm subsidies it hands out through the Common Agricultural Programs. The other half of the trillion was a combination of co-financing by member states (e.g. in research programs like Horizon or cohesion funds), mobilized public and private investment, and loans and grants in the framework of the Just Transition Mechanism, which is meant to help fossil-fuel reliant communities with the transition.

The €1 trillion figure was meant to grab headlines, of course. But in a way, complaints that the EU itself is spending too little are besides the point. The EU has limited financial resources of its own and is better at regulating than spending: there are a lot of policy layers in between a vote in Brussels to raise an energy efficiency target and, say, a Latvian construction firm’s decision to use better insulation to comply with local regulations, but the EU policy is nevertheless partially responsible in ways that are hard to capture in budget projections. Member states have announced larger stimulus packages since the outbreak of the pandemic that will not count towards the Green Deal.

What’s more, the EU actually plans to spend more money now that it did in January, and the coronavirus crisis has shifted the Overton Window for EU financing in a way that could have significant, beneficial long-term climate impacts.

Take the Just Transition Mechanism. Before the crisis, the Commission was going to pitch in just €7.5 billion of the €100 billion total from its long-term budget (the multiannual financial framework, or MFF). The Commission will now spend €10 billion from its long-term budget and add another €40 billion from the EU’s planned €750 billion recovery package over the next four years. Reportedly, previous pledges to ensure 25 percent of all EU spending is climate related will also apply to the recovery package. For instance, the Commission wants to set aside €91 billion of the recovery fund for building renovations such as rooftop solar panels. 

It was Germany’s move to break with taboo that made that coronavirus recovery package possible. Long opposed to the idea of a “transfer union,” the German government is now willing to allow the EU to borrow much more on financial markets than it ever has and distribute the money as grants to the hardest-hit member states. This spending, in turn, provides the rationale for revenue-raising measures that help the climate and environment: Council President Charles Michel has proposed a tax on plastic waste and a carbon border adjustment to help the EU plug the newly punched hole in its finances.

Primus inter Paris

In the wake of the Lisbon Treaty, which created Michel’s job and the position of High Representative (and Vice President) for Foreign Affairs, the holder of the rotating Council presidency no longer has the ability to set the agenda that it once did. The role now is more of a service provider and a mediator.

Yet it matters that Germany is at the head of the table at a time like this. No member state speaks with as much gravity (or has as much power) on matters of European spending and debt; none has a national leader with as much experience and clout; few have a comparably large administration to handle the workload of the presidency. The long-term EU budget and the recovery fund are about much more than climate change, but for the sake of the climate, it is beneficial to have a newly open-minded Germany heading debates about the European checkbook.

The rocket is still moving too slowly, but at least the EU is on the way to the moon. Whether Germany is doing enough at home to be a legitimate climate leader on the EU level is a question for another column. 

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