September 21, 2020

Carbon Critical: How Green Is the EU’s Coronavirus Recovery Package?

The EU’s coronavirus recovery package is much greener than that of China or the US. Brussels hopes that its partner-competitors follow its lead next year.

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A graph showing increase/decrease of EU CO2 emission 1997-2017 by sector

The EU and its member states are spending colossal sums to jumpstart their economies amid the coronavirus recession. How green are these spending packages?

Given the climate context, they arguably couldn’t be green enough. The flames devouring the Northwestern United States and the waters flooding Karachi in Pakistan are visible signs of a world entering a crisis. Less visible is the fact that Arctic sea ice is approaching record lows. Petteri Taalas, the head of the World Meteorological Organization, warned in September that the situation is deteriorating quicker than previously thought. The planet, he says, is “very likely” to pass 1.5 degrees of warming “in the next decade if we don’t change our behavior.” The years 2016-2020 will likely turn out to be both the warmest five-year period on record and the coldest five-year period for the rest of the century.

The greener the better, in other words. In the interests of fairness, though, it is important to consider the international context. The EU and its member states are spending €1.15 trillion in direct response to the pandemic. This figure includes direct fiscal measures like national recovery packages and the Next Generation EU fund, but leaves out loans, equity, guarantees, and fiscal support that would have occurred in the absence of the pandemic, i.e. much of the European Green Deal

€210 billion  of this direct recovery spending, or around 20 percent, is “green” according to a report from the Rhodium Group. 20 percent is of miles ahead of what the US, China, and India are spending on climate action in their recoveries. Those giant economies are spending €22 billion, €1.2 billion, and €674 million respectively on green stimulus, less of 3 percent of their overall recovery packages. As far as green recovery is concerned, the EU is by far the tallest Bonsai tree in the rock garden.

Ms 20 Percent

Judging a spending package by how much of it is devoted to climate action can be misleading: it wouldn’t help the climate for Europeans to spend less on unemployment benefits in 2020, though that 20 percent figure would rise if they did. When the EU gives member states grants for public investments in hospitals, it can free up other funds for climate-related initiatives. And when the EU passes new climate legislation, it forces car companies and construction firms to spend money that doesn’t show up on the EU ledger.

Yet the EU actually measures itself in this way. To determine what counts as climate action, the EU assigns its own budgetary activities a percentage depending on the extent to which they are climate related. In the last budget period, the EU just missed its 20 percent target for climate-related spending—and that was after making some questionable assumptions about how its payments to farmers protect the climate, as Alan Matthews, Professor Emeritus of European Agricultural Policy, Trinity College Dublin, has pointed out.

The climate-spending target is higher this time around. The Council proposes to spend 30 percent of the Next Generation EU fund and long-term budget for 2021-27 on climate action, going so far as to say that “all EU expenditure should be consistent with Paris Agreement objectives.” Unfortunately, the EU Court of Auditors has said that the European Commission is again making “unrealistic” estimates about how much the Common Agricultural Program (CAP) contributes to climate objectives.

Since CAP spending is by far the largest item in the “natural resources and environment” section of the EU budget, it’s a serious problem if that money does less to prevent global warming than advertised. EU agricultural emissions were essentially flat from 2006-2017.

While there are plenty of encouraging developments in European climate policy, from the more ambitious emissions target to the collapse of coal power, the EU must do better on agriculture or it risks having to cheat to pass its own test for how green its upcoming budget is.

50 Shades of Green

The debate about what counts as “green” also extends to the energy and finance sectors. The EU is currently finalizing its Sustainable Finance Taxonomy, a classification scheme that determines which projects are eligible for EU aid and some member-state aid. Bearing an official “green” label is increasingly useful for attracting private funding too.

The provisional list of green projects excluded most natural gas and nuclear power infrastructure on the grounds that they emit too much greenhouse gas or produce toxic waste, respectively. But both industries are lobbying furiously to be deemed sustainable, while member states are making their own cases in Brussels. The Czech Republic wants to expand one of its nuclear plants “even if we were to breach European law” Prime Minister Andrej Babis has said. Polish Climate Minister Michał Kurtyka just unveiled a plan to build a half-dozen nuclear power plants, which will be the country’s first, by 2040 to wean its economy off coal.

Here in anti-nuclear Germany, meanwhile, the poisoning of Alexei Navalny has triggered Berlin’s seemingly annual debate about whether it needs another pipeline to import natural gas directly from misbehaving Russia. (With so much LNG available and energy efficiency improving, it probably doesn’t.) And next door in France, Finance and Economy Minister Bruno Le Maire has presented his vision for making low-carbon hydrogen with domestic nuclear power, throwing in for good measure some light criticism of Germany’s plans to have hydrogen produced with renewables in North Africa and then import it. “The [German] carbon footprint,” he said, “won't be very good."

A Once-in-a-Year Opportunity

One silver lining of the deteriorating climate is that there will be frequently recurring pressures for more action. Just as we now have “once-in-a-century” weather events every few years, we also have major chances to bend the emissions curve every year.

Next year we have the rescheduled COP 26 climate conference, by which time Paris Agreement signatories should have submitted their updated climate action plans, as well as hopefully some in-person EU-China meetings that achieve more than the shortened, virtual September 14 summit. Brussels is pushing Beijing to stop building coal power plants and launch its own emissions trading system. Commission President Ursula von der Leyen’s presentation of the new 2030 climate target in her State of the Union speech, a 55 percent cut on 1990 by 2030 as opposed to the previous target of -40 percent, should add weight to European pleas for other powers to step up.

But climate action at the highest level will only make a big leap next year if a certain US president is kicked out of office. On climate, the United States is less a sleeping giant than one intentionally knocked out with Ambien, and many countries are hesitant to make big climate promises until this rich, powerful polluter wakes up and recommits to the Paris Agreement. For now, the EU can only do its part—and hope that next year brings major green spending packages worldwide, without a pandemic to trigger them.

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