Europe's Gamble

This article is taken from World Energy (WE) number 44, "Rethinking energy". Read the magazine.

Whether or not you agree with the climate policies or have doubts about the Intergovernmental Panel on Climate Change (IPCC) report adopted last October by the United Nations, Europeans, whether leaders, entrepreneurs or ordinary citizens, can not ignore the policy framework proposed by the Commission and European Parliament, as it provides a basis for the work to be done by the new Commission President, Ursula von der Leyen. The framework—based on the budget proposal that was finalized in May 2017 and which was to be approved last May 9th at the Sibiu Summit (it was then delayed due to the European Parliament elections)—is not expected to change substantially, thus expressly dedicating 25 percent of the Commission’s budget and related structural funds for the period 2021-2027 to the battle for climate change, the environment and renewable energy. Behind this plan is an ambition, supported by the document approved in November 2018, for the European Union to play a leading role on these issues and be the first to achieve zero emissions. The new President reiterated this during her investiture speech in the European Parliament and the negotiations that preceded her “début” in the European Council, under the Romanian Presidency last June.  She detailed policy outlines with a final document that dedicates a paragraph to “the importance of tackling climate change in line with the Union’s commitment to implement the Paris agreement and the UN’s sustainable development goals”. 

Therefore “programs and instruments should contribute to the integration of climate actions and the achievement of the general objective of allocating (at least) 25 percent of budgetary expenditure.” What does this mean in daily practice for each Member State, which should have presented a general plan by December 2018?

I should point out first of all that we are talking about a draft budget and funds for 2021-2027. These are currently being debated by the new European Parliament, which can approve or reject them in their entirety but not propose individual amendments. Given that, following the European Council’s decision to postpone the final decision and the related agreements, outgoing legislators only issued an “interlocutory report” on the multi-year financial framework and in theory any changes can only be made following a laborious meeting of the “sherpas” from each individual country, who are analyzing the budget and its items, calculating losses and related gains. However, it is highly likely that the general framework will not change and the allocation of approximately 1.246 billion euros at current prices, or 1.08 percent of the EU 27’s Gross National Income (GNI), will be confirmed. (The United Kingdom and its position as a net contributor of  8-10 billion euros a year will be lost.) Within these figures is a commitment on the part of the European Union to climate, renewable energy, combating emissions and the circular economy in line with the projections of the 2015 Paris Agreement for a two degree decrease in global warming, bringing it to at least 1.5 degrees by 2030. The EU has set itself a first threshold of a 40 percent reduction in its contribution to global emissions and also, starting with Africa,  making a contribution to improving conditions in countries with which it has a stable trading relationship.

The objective, however, is ambitious, considering that a quarter of the EU budget and funds will be devoted to it, and it involves all EU policies (or almost all of them—the proposed action concerns energy and its efficiency, the development of renewables, mobility, industry, infrastructure and European infrastructure connections, the bio-economy of biomass and the circular economy), the thorny issue of the transition from coal and the organization, both administrative and social, of a sustainable society, particularly in a continent where 75 percent of the people live in a situation that can be defined as “urbanized.” The road has already been marked, and it is a very long road map that requires intermediate stops, verifications and monitoring. Launched with current funds, the program calls for  a 20/20/20 option for 2020: a 20 percent cut in the 1990 parameters for CO2 emissions, 20 percent more renewable energy and 20 percent more efficiency in the use of existing energy resources.

This program is objectively almost completely in sight, so much so that the European Union has relaunched it with new targets for 2030, bringing success rates to 40 percent for emission cuts, 32 percent for sharing renewable energy and finally 32.5 percent for more efficient use of available energy in its entirety. In short, the European Union feels that, in the wake of the US trade wars and China, it might be able to seize the opportunity to be the number one global power in this field, with repercussions on the economy, society, innovation and employment. (In this respect Brexit could be significant, because the UK has been one of the countries that has most ardently marched in sync with the EU’s demands in field.)

The budget is in fact based on the “long-term strategy for 2050,” which lists possible actions also divided territorially within the Union, taking into consideration the substantial social and industrial differences between Scandinavian countries and the continental or Mediterranean economies. Eight specific scenarios are considered: the production of lower emissions, the widespread use of renewable energy and decarbonization, transport and mobility policies, the use of land, the environment and new agriculture, an innovative and technologically cutting-edge European industry in the world, the sustainability of cities, the construction of socially informed and resilient communities and the social “experience” of a circular economy. Concrete measures, replicable actions, stringent checks and huge costs, both in the public and private sectors, must be carefully considered.

In the first scenario above, a lot of attention is being paid to the current condition of the continent’s buildings: “energy efficiency will be decisive and the most visible drop in energy demand will occur in buildings, both in the residential sector and in the service sector, whose energy consumption now stands at 40 percent. In 2050, most of the building stock will be made up of buildings that already exist today. The rate of refurbishment needs to be stepped up, switching to different heating fuels so that the vast majority of houses are heated by renewable energy (electricity, district heating, renewable gas or thermal solar power), disseminating the most efficient products and equipment, using intelligent building and equipment management systems and improving insulation materials”, the European Commission writes.

There is also widespread discussion about the current problems of transport and mobility, which produce 25 percent of current EU emissions, two-thirds of them from road transport alone, not to mention that everything that travels by sea, from or to Europe, consumes one billion tons of fuel per year, producing 3 percent of global/world-wide emissions. Here too the EU is providing funds for switching to other fuels, greater efficiency in energy use and renewing the European shipping stock, starting with fishing boat fleets. There is also a commitment to create financing lines for projects related to the climate and energy challenge, as well as European Union plans to invest in remote, rural or island areas, or projects in neighboring Africa, including providing economic support for technological upgrading and change in regions that have long been structurally committed to coal and linked to its economy, and finally investments in industrial sectors and technological and public and private mobility hubs.

These actions provide for millions of euros of integrated investments in each of the seven different areas of the European budget and could, according to Juncker’s EU Commission, which is now passing the baton to Von Der Leyen, bring the Union’s commitment in this field from 2 percent of GDP currently invested to around 2.8 percent as early as 2030. This percentage of GDP equals  550 billion euros of total public and private commitment, including around 200 billion in investments alone. This is why the EU is already showing its satisfaction and reaffirming its commitment with the 70 billion euros a year invested in supporting the European energy system. This would guarantee a 1 to 1.5 percent increase in employment levels according to Commission documents, new employment derived from the policies on climate change, the circular economy and technological innovation for new renewable energies.

Here, then, is the paradox: while those who zealously denounce the risks of climate change scramble to define as “post-truth” the reasons that Trump and the detractors of the IPCC and the United Nations believe to be the actual global “post-truth” that needs to be fought, the leaders, entrepreneurs and citizens of the European Union, whether willingly or not, have to deal with a challenge that will mobilize resources, projects, initiatives and actions with an economic lever that the European Union estimates to be around 312 billion euros over the next seven years (this being only the “public” part of the Union, not taking into account the power that can be exercised on private financial commitment in these sectors). Whichever way you look at it, this is a commitment not just for the EU but also a challenge that Europe is setting for itself, not only as an institution but as an economic and social community. The worst thing would be to pretend that the challenge/opportunity does not exist.

Roberto Di Giovan Paolo is a journalist, has written for, among others, ANSA, Avvenire and Famiglia Cristiana. He was Secretary General of the Italian Association for the Council of European Municipalities and Regions, and he is a lecturer at the University of International Studies of Rome.