Talk of a federal state has long fallen out of fashion in Brussels — but the Green Deal climate program could change that.
If the bloc is to reach the goal of becoming climate neutral by 2050, Brussels is going to have to gain massive new political and economic powers, much of that at the expense of member countries.
By marrying the vision of an “economy where there are no net emissions of greenhouse gases in 2050,” the EU wants to claim first-mover advantage on low-carbon tech, and gain back competitiveness that it lost to Silicon Valley in the West, and to Chinese state-led development in the East.
But China was able to shift its energy and environmental policies very rapidly thanks to its top-down approach, which enabled it to become the world’s leading producer of renewable energy and electric cars. The EU’s governance system is for now very different, with crucial power in the hands of nation-states.
“It took Europe almost 20 years in terms of pollution to engage whereas the Chinese did it almost in a decade,” Christian Ehler, a German MEP from the European People’s Party who is coordinator in the energy and industry committee, said at a POLITICO event this week.
“If we want to lead we need to offer a consistent model and if the inconsistency and inefficiency of our model is the biggest obstacle to internationalize the model, it’s our fault,” Ehler said.
Until now, the EU’s climate policy has relied on market mechanisms: the bloc’s Emissions Trading System, which tries to get companies to lower their carbon footprint by putting a price on greenhouse gas pollution, is a good example.
The EU has also relied on setting overall targets and then getting member countries to figure out how to get there — that’s how it set the bloc’s 2020 emissions and renewable energy targets.
Now that Brussels is planning to boost its 2030 emissions cut target from 40 percent to 50 percent or even 55 percent, and to achieve zero net emissions by 2050, that softly-softly approach won’t work as well.
“Moving from zero to 20 percent greenhouse reduction is one kind of race. From 20 percent to 40 and even 50 percent in 10 years time, this is a dramatic change of the economy,” said Máximo Miccinilli, head of energy at Brussels-based think tank Cerre.
Brussels takes charge
There are already signs of economic centralization in Brussels’ thinking on the Green Deal.
Among the host of measures presented this week, the ones with the biggest potential impact are those that affect national budgets and economic policy like taxes, state aid and fiscal rules. The Commission pledged to revise its state aid rules to “facilitate the phasing out of fossil fuels” and “address market barriers to the deployment of clean products.”
This would give Brussels leeway to green-light public investments into cross-border projects aimed at meeting bloc-wide targets, as the Commission recently did with a Franco-German pilot project on battery cell production.
Other candidates for public expenditure — EU and national — include creating the infrastructure to transport and store carbon dioxide; deliver the promise of 1 million charging points for electric vehicles by 2025; producing hydrogen; and decarbonizing steel and cement-making.
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“Twenty years ago, sensible carbon prices alone might have done most of the job. Today, high carbon prices will need to be complemented by significant support instruments … But if we wait another decade, we might only be able to achieve our climate goals by outright bans and direct public investments,” said Georg Zachmann, an energy economist and fellow at the Bruegel think tank.
Brussels also wants to revise EU energy taxation so as to align it with climate objectives — for instance by axing tax waivers for shipping and aviation fuels — and is asking member countries to forego their veto on taxation to give the Commission more control.
It is also considering whether to exempt public investments in decarbonization from the budget deficit cap of 3 percent of GDP, a cornerstone of the growth and stability pact, and one of the EU’s pro-market sacred cows.
“I would be open to that discussion,” said Executive Vice President Frans Timmermans at a press conference on Wednesday.
All that means a shift away from free-market thinking and a larger role for Brussels in directing the European economy.
But a Brussels power grab is unlikely to sit well with some capitals.
“I see the Commission trying to be more political, trying to be more aggressive in terms of policy with member states,” said Miccinilli.
It also risks deepening existing divides across the bloc. Relaxing fiscal rules will please Southern debt-saddled members, and anger thrifty Northerners. Flexible state-aid rules might allow rich economies to inject capital and spur their growth, deepening the divide with poorer ones. Touching taxation might upset everyone.
And pushing the bloc to speed the pace of the green transition risks alienating more-recent members from Central and Eastern Europe, who may lose interest in the European project if they feel they’re over-burdened with Brussels’ demands.
“My fear is that there will be two Europes: the group of member states that will move ahead like Denmark, like the Netherlands, and other member states that will say, ‘We don’t follow any more, because it’s so far from what we can achieve that for us, this is not improvement anymore,’” said Miccinilli.
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