EU recovery

EU Recovery: How green should it be?

As Europe slowly pulls out of the worst of the pandemic, there is increased focus on the road to recovery. Particularly, an EU Green recovery. The EU has long championed the cause of a greener, more sustainable future. Many now see Europe’s post-corona recovery package as an opportunity to push for the kinds of structural changes in finance, industry and policy-making that will pave the way for this. But such changes are made neither quickly nor easily. They take time and involve significant shifts in mindset from businesses, employees and politicians. This week, a variety of policy, industry and think-tank leaders shared their hopes and hesitations for a Green EU recovery in two EURACTIV webinars.

The Covid 19 pandemic has affected the attitudes of Europeans toward the EU. Although recent research by the European Council on Foreign Relations shows that citizens have been disappointed in the EU response to the pandemic. It has, paradoxically, raised awareness of just how important a European response to such a crisis is and will be in future crises. Add to this the fact that new EU Commission president, Ursula van der Leyen, has made the EU Green Deal her priority.

The stage is now set for wide spread buy-in for a green EU recovery. Chief Economist for DG GROW of the European Commission, Kamil Kiljanski, is hopeful that ‘at the end of this recovery, we will successfully nudge citizens to rally around the EU flag rather than only their national flags.’ He also speaks of the need for a green recovery, one that is ‘transparent but also speedy.’

The question of course, is are these two requirements compatible? Business owner and President of the Mechanical Engineering Industry Association (VDMA), Carl Martin Welcker, sees the machinery industry as the key driver of recovery. He points out that a full re-structuring of their industry will take time – anything between 3 and 10 years, he estimates. But if one simply wants to kick-start the industry, this can be done far more quickly, in about 6 months.

‘We must not replace market forces with political forces’ – Carl Welcker, VDMA .

MEP, Tom Berendsen, who is also Shadow Rapporteur for Europe’s long-term industrial strategy, agrees that the priority for recovery should be a focus on those investments that create jobs.  Welcker therefore argues against the idea that recovery money is invested in some industries and not others. Instead he calls for EU recovery investment to be driven by the markets. ‘We must not replace market forces with political forces’ he insists. Berendsen also agrees that any realistic, affordable green transition will in fact require all available technologies.

Director of Policy Coordination at DG CLIMA in the European Commission, Yvon Slingenberg, agrees that an ‘orderly Green transition’ is important. To this end, the Commission is preparing an enabling framework. This includes a taxonomy of investment options for companies keen to support the Green transition. In keeping with the focus on sustainable finance, the taxonomy will come with information about the risks for companies who wish to invest.

Nevertheless, General Manager of Europe’s largest insurance firm, Generali,  Frédéric de Courtois, points out that a Green EU recovery is not assured. ‘The status quo is always powerful’ he notes and although, ‘having good will is good, it is not enough’. Even ‘sincere companies need incentives, pressures and opportunities’ to make the green transition, he says.  

Not enough Green investment options available in Europe – Frédéric de Courtois, Generali.

The role of SMEs is crucial to post-corona recovery. Business owners and economists on both sides of the Atlantic have highlighted this. As Carl Welcker points out, SMEs are more flexible than larger firms and are ‘very close to the markets’. In this way, ‘we have a lot of potential but need the freedom to use it’ adds Welcker. He accuses EU industrial policy of being ‘too theoretical’ and not practical enough. De Courtois draws attention to the fact that large investors like Generali, do not have enough Green long-term investments in Europe.

He admits that, in general, they ‘struggle to invest in SMEs’ as it is difficult to select them. More platforms and instruments are need to help companies like Generali do this, he suggests. The Capital Markets Union project would certainly speed up this process. It would stimulate the role of market forces in boosting investment and reallocating capital. Slingenberg points out that the InvestEU programme, to be launched in 2021, is designed to make EU funding simpler to access and more effective. It will trigger at least €650 billion in additional investment.  

This is the EU’s chance to ‘seize the moment and lead the world in green transition’ – Nicolae Ştefănuță, MEP.

Nevertheless, there are pitfalls of which one needs to be aware. MEP and member of the Renew Europe Group, Nicolae Ştefănuță, agrees that the pandemic has provided Europe with an opportunity to ‘seize the moment and lead the world in green transition’. But it is a long term plan. ‘We need to stick to it for the next 30 years’ he insists. Ştefănuță cautions about an increase in ‘low probability, high impact events’ in the future. A transition to greener, more sustainable societies is therefore essential.  

Ştefănuță is particularly concerned about the so-called corona generation – the youth, whose future the Next Generation recovery plan is designed to ensure. But as the MEP points out, this funding is designed to be accessible only until 2024. For member states whose administrative infrastructure is less developed, gaining access to such funds may well prove more difficult. Ştefănuță therefore suggests keeping the distribution process simple. For example, municipalities should be able to apply directly to the EU for relevant funding.

Can the EU work with China for a global Green transition?

There is broad agreement that Europe has an opportunity to provide a model for Green transition for the rest of the world. Clearly climate change is a global concern. Europe emits only 9% of the world’s green house gases. So it can provide leadership on this issue but will need to secure support from other large countries. Carl Welcker calls for ‘going global fast’ in this respect and ‘picking the low hanging fruits first’. Director of the European Climate Foundation, Astrid Manroth, and Frédéric de Courtois are both hopeful that the EU and China can work together for a Green recovery.

But as de Courtois points out, a Green EU recovery will also have to be a just recovery. One that is able to tackle issues of inequality. He recalls the Gilles Jaunes movement in his native France. This is an example of the kind of push back received on policies that leave some behind. These are problems that the developing world faces, but on a much broader scale. Green transition is complex and relatively expensive in the short term, yet vital for EU recovery in the long run.

by

A freelance journalist based in the Hague, I grew up in South Africa. I have since lived, studied and worked in the UK, Hong Kong and Spain. My blog, Souwieon.com brings you news, views and interviews each week, designed to inspire and inform my readers.