Year LXII, 2020, Single Issue, Page 24

 

 

Green Deal, Digital Future,
New Industrial Strategy: What is Needed to
Ensure the Rebirth of the European Economy?

 

MASSIMO MALCOVATI

 

 

Reading the European Green Deal[1] communication published by the von der Leyen-led European Commission at the end of 2019, it is impossible not to hear echoes of the December 1993 “Delors Report”.[2] Leaving aside the formal differences between them, both these documents offer a profound and carefully constructed plan for the development of European society and the European economy, intended to help the EU address the challenges created by the technological revolution and the end of the bipolar world order. But the climates in which they were produced could not be more different. Whereas, at the start of the 1990s, a combination of circumstances — the collapse of the Soviet Union and subsequent affirmation of democracy in Central and Eastern Europe, Germany’s reunification, and lively economic growth that appeared to be offering developing countries a way out of poverty — suggested that the “Western” model had proved to be the ultimate success (one need only think of Fukuyama’s ideas on the end of history[3]), in more recent times, a seemingly endless succession of crises and critical developments has thrown up dangers that have threatened, and continue to threaten, the EU’s very survival. I refer, of course, to the repeated economic crises, the decline of the United States as a hegemonic power, China’s rapid economic and political growth, the ongoing instability in different parts of the Middle East and Africa (and the consequent migratory crises), the increasing degradation of the environment and the pressing climate emergency, and finally the European countries’ inability to counteract the economic and social effects of uncontrolled globalisation, which is driving the expansion, throughout Europe, of nationalist, racist and xenophobic movements. All these are phenomena exacerbated by the power vacuum in Europe, and now of course, we must add the disastrous coronavirus pandemic to the list.

It was therefore amidst hugely difficult circumstances that, on 11 December 2019, the von der Leyen Commission (itself the expression of a resurgence of pro-European feeling among European citizens voting in the June 2019 European elections) unveiled the European Green Deal. This document broadly outlines a process has multiple aims: to “transform the EU into a fair and prosperous society, with a modern, resource-efficient and competitive economy where there [will be] no net emissions of greenhouse gases in 2050 and where economic growth is decoupled from resource use”; “to protect, conserve and enhance the EU’s natural capital, and protect the health and well-being of citizens from environment-related risks”; to “transform its economy and society to put it on a more sustainable path”; and ensure a “transition [that is] just and inclusive [and pays particular] attention to the regions, industries and workers who will face the greatest challenges”. It underlines that all this “will not be achieved by Europe acting alone”, and urges the EU to “use its influence, expertise and financial resources to mobilise its neighbours and partners to join it on a sustainable path”.

In short, the European Green Deal does not merely address the need to control greenhouse gas emissions, but rather proposes a whole new development model that tackles, in a coherent way, the full range of critical environmental issues: pollution, raw material shortages, and the need for biodiversity protection and for effective management of areas inevitably exposed to the phenomena generated by global heating, as well as the need to stimulate innovation and manage social problems related to the profound changes in the mode of production brought about by this new economic model. The communication sets out a series of highly ambitious intermediate objectives, indicates tools for and means of achieving them, and lays down a timetable for reaching the final objective. Albeit concisely, it outlines a profoundly innovative development model that hinges on a set of indispensable interventions — nevertheless insufficient on their own — through which Europe must rise to the challenges it faces, not least in order to meet the demands and respect the sensibilities of a large swathe of the European population.

With regard to greenhouse gas emissions, it is specified, in the communication, that the aim is to raise the reductions target for 2030 to 50-55% compared with 1990 levels, and to achieve zero net emissions by 2050. To this end, actions are proposed across all the areas that can help to cut emissions:

– research into alternative fuels (and the progressive decarbonisation of the European energy system);

– the pursuit of greater energy efficiency and energy savings (through “smart” grids, new rules on the energy requirements of new buildings and on the energy re-qualification of existing ones, more use of multimodal transport to help bring about a 90% reduction in EU road transport emissions by 2050, a 75% reduction in inland freight transport, greater use of public transport, and less traffic congestion in urban areas);

– the promotion of CO2 storage and reuse, in this regard building afforestation efforts into land management strategies; and finally

– penalisation of the use of fossil energy sources, not only by having states ban any form of facilitation of their use, but also by introducing carbon pricing (i.e., a policy of taxing goods in proportion to the amount of CO2 from fossil sources emitted in order to produce them; this would be applicable both within the EU and, through a border tax, beyond it).

Furthermore, given that “climate change will continue to create significant stress in Europe in spite of the mitigation efforts”, the Commission proposes to “adopt a new, more ambitious EU strategy on adaptation to climate change”, above all “to ensure that across the EU, investors, insurers, businesses, cities and citizens are able to access data and to develop instruments to integrate climate change into their risk management practices.”

The actions set out, if implemented, are destined to have a profound impact on the world of manufacturing. Nevertheless, the Green Deal seeks to go further; in a section headed “Mobilising industry for a clean and circular economy”, it addresses the closely related problems of the exhaustion of raw materials and pollution in its various forms. “It takes 25 years — a generation — to transform an industrial sector and all the value chains. To be ready in 2050, decisions and actions need to be taken in the next five years”, the Commission explains. Convinced that the transition towards a circular and low emission-based economy is “an opportunity to expand sustainable and job-intensive economic activity”, the Commission document outlines the plan to adopt, in 2020, an EU industrial strategy designed to “leverage the potential of the digital transformation”, and “a new circular economy action plan” to help “stimulate the development of lead markets for climate neutral and circular products, in the EU and beyond.” It is stated that the “circular economy action plan will include a ‘sustainable products’ policy (…) based on a common methodology and principles.” This “will prioritise reducing and reusing materials before recycling them [and] will set minimum requirements to prevent environmentally harmful products from being placed on the EU market.” Action, in this sense, “will focus in particular on resource-intensive sectors such as textiles, construction, electronics and plastics.” With regard to this latter category, the Commission sets out plans to adopt “measures to tackle intentionally added micro plastics and unintentional releases of plastics, for example from textiles and tyre abrasion [and to] develop requirements to ensure that all packaging in the EU market is reusable or recyclable in an economically viable manner by 2030 [as well as] a regulatory framework for biodegradable and bio-based plastics”. It will also “implement measures on single use plastics.”

“The circular economy action plan will also include measures to encourage businesses to offer, and to allow consumers to choose, reusable, durable and repairable products. It will analyse the need for a ‘right to repair’, and curb the built-in obsolescence of devices, in particular for electronics”. To ensure that consumers receive “reliable, comparable and verifiable information”, and thus to reduce the risk of ‘green washing’, i.e., deceptive and misleading use of marketing spin relating to environmental issues, the “Commission will step up its regulatory and non-regulatory efforts to tackle false green claims.”

Noting that a “sustainable product policy also has the potential to reduce waste significantly,” the Green Deal states that: “Where waste cannot be avoided, its economic value must be recovered and its impact on the environment and on climate change avoided or minimised. (…) In parallel, EU companies should benefit from a robust and integrated single market for secondary raw materials and by-products. (…) The Commission will consider legal requirements to boost the market of secondary raw materials with mandatory recycled content (for instance for packaging, vehicles, construction materials and batteries).” In this regard, in particular, the document states that the Commission “will propose legislation in 2020 to ensure a safe, circular and sustainable battery value chain for all batteries, including to supply the growing market of electric vehicles.”

Pursuit of these objectives is necessarily based on certain prerequisites, of which the Commission is well aware: first of all, “access to resources is (…) a strategic security question”, which makes it essential to ensure “the supply of sustainable raw materials, in particular of critical raw materials necessary for clean technologies, digital, space and defence applications”. Second, “digital technologies are a critical enabler for attaining the sustainability goals of the Green Deal in many different sectors”, and with this in mind, the “Commission will explore measures to ensure that digital technologies such as artificial intelligence, 5G, cloud and edge computing and the internet of things can accelerate and maximise the impact of policies to deal with climate change and protect the environment.”

To tackle the climate emergency, combat pollution, and promote proper land management, the Green Deal also includes a plan to design “a fair, healthy and environmentally-friendly food system”, exploiting, as “key tools”, the EU’s “common agricultural and common fisheries policies”. The Green Deal pencils in Spring 2020 for the presentation of its ‘Farm to Fork’ strategy, which envisages: support to strengthen the efforts of farmers and fishermen “to tackle climate change, protect the environment and preserve biodiversity” (it is proposed that, in the period 2021-2027, at least 40% of the CAP budget and 30% of the Maritime Fisheries Funds should contribute to climate action); legislative measures to reduce the use of chemical pesticides, fertilisers and antibiotics; incentives for the creation of a circular economy in the food sector; and a ban on importation of “food that does not comply with relevant EU environmental standards”. To support its aim of preserving and restoring ecosystems and biodiversity, the Commission had been meant to unveil, by March 2020, a “Biodiversity Strategy”, expected to include the following elements: building on initiatives already under way (Natura 2000,[4] e.g. by “increasing the coverage of protected biodiversity-rich land and sea areas”); “effective afforestation, and forest preservation and restoration in Europe”; the creation of a  ‘blue economy’ to contribute to “alleviating the multiple demands on the EU’s land resources (…), improving the use of aquatic and marine resources and (…) promoting the production and use of new sources of protein that can relieve pressure on agricultural land”; the development of European policies along environmental protection lines, and the identification of more sustainable land management methods.

To achieve the goal of a toxic-free environment (which in addition to “action to prevent pollution from being generated” also involves “measures to clean and remedy it”), “the EU and Member States will need to look more systematically at all policies and regulations”, and “adopt in 2021 a zero pollution action plan for air, water and soil”. This will be based on: monitoring, reporting, preventing and remedying pollution from air, water, soil, and consumer products; on “measures to address pollution from urban runoff and from new or particularly harmful sources of pollution such as micro plastics and chemicals, including pharmaceuticals”; and on tougher legislation against pollution from large industrial installations. Furthermore, the “Commission will review how to use better the EU’s agencies and scientific bodies to move towards a process of ‘one substance – one assessment’ (…). In parallel, the regulatory framework will need to rapidly reflect scientific evidence on the risk posed by endocrine disruptors, hazardous chemicals in products including imports, combination effects of different chemicals and very persistent chemicals.”

The Commission believes that current technologies are not adequate to achieve all this: to do so demands profound innovation in all sectors, and indeed represents a challenge “beyond the means of individual Member States”. In the face of this, it is suggested that at least 35% of the Horizon Europe budget[5] will be needed in order to fund (thus “leveraging national public and private investments”) new climate solutions “relevant for implementing the Green Deal. On the other hand, “pro-active re-skilling and upskilling are necessary to reap the benefits of the ecological transition. The proposed European Social Fund+[6] will play an important role in helping Europe’s workforce to acquire the skills they need to transfer from declining sectors to growing sectors and to adapt to new processes.”

“The Commission has estimated that achieving the current 2030 climate and energy targets will require € 260 billion of additional annual investment, about 1.5% of 2018 GDP [and that this] flow of investment will need to be sustained over time”. To meet these considerable needs, it proposes the following wide-ranging measures, designed to “combine dedicated financing to support sustainable investments [with] proposals for an improved enabling framework that is conducive to green investment”:

–  involvement of the EU budget, through a proposed “25% target for climate mainstreaming across all EU programmes”, as well as the introduction of new revenue streams or ‘own resources’: a tax on “non-recycled plastic-packaging waste” and allocation to the EU budget of 20% of the revenue from auctions conducted within the EU Emissions Trading System;[7]

–  allocation of at least 30% of the InvestEU Fund to efforts to fight climate change;[8]

–  collaboration with the European Investment Bank (EIB), which plans to double its climate target from 25% to 50% by 2025, “thus becoming Europe’s climate bank”;

–  the creation of a “Just Transition Mechanism, including a Just Transition Fund”, in order to support “the regions and sectors that are most affected by the transition because they depend on fossil fuels or carbon-intensive processes (and) protect the citizens and workers most vulnerable to the transition, providing access to re-skilling programmes, jobs in new economic sectors, or energy-efficient housing.” The mechanism “will draw on sources of funding from the EU budget [the European Regional Development Fund and the European Social FundPlus] as well as the EIB group to leverage the necessary private and public resources”;

–  a “review of the European economic governance framework” and of investor communication, in such a way as to promote sustainable investment.

In order to involve, as well, the budgets of the member states in the transition to the sustainable development model set out in the Green Deal, redirecting “public investment, consumption and taxation to green priorities and away from harmful subsidies”, the Commission envisages a “review of the European economic governance framework [that] will include a reference to green public investment in the context of the quality of public finance”, which could give rise to “possible future steps including how to treat green investments within EU fiscal rules, while preserving safeguards against risks to debt sustainability”.

Finally, the Green Deal does not overlook the fact that climate change and environmental degradation are global problems that demand global responses. Hence the calls: to strengthen “green deal diplomacy’”, mobilising all diplomatic channels (the United Nations, the G7, G20, etc.); to respect the Paris Agreement, and support the efforts, to tackle climate change, of Europe’s immediate neighbours (the Balkans, Middle East, North Africa); to introduce trade policies designed to foster ecological transition, allowing only products that comply with European standards to enter the European market.

Ever since it was first unveiled, there have been doubts about the Green Deal, as regards both the true effectiveness of some of the proposed measures, and the adequacy of the resources envisaged. Furthermore, it received a very lukewarm reception from the European Council, mainly on account of the reticence of some countries, such as Poland and even Germany, whose economies are strongly linked to the use of energy derived from carbon-related sources (not just hydrocarbons, but also hard coal), and for which rapid decarbonisation would carry very high economic and social costs.

And this brings us to the true limit of the Green Deal: the funding of the project and each of the measures it entails (including ones that fall within the exclusive competence of the EU, such as those relating to agricultural and fisheries policies) have to be negotiated among the member states, whose interests are inevitably divergent, meaning that the compromises eventually reached may fall well short of the ambitions expressed in the Commission document. Added to this is the fact that implementation of the measures resulting from the compromise in any case falls to the member states’ governments, whose goodwill, time frame for transposition of directives and efficiency in this regard are highly heterogeneous. In other words, the main obstacle to the implementation of the Green Deal is the institutional structure of the European Union itself.

The question of the urgent need for a profound restructuring of the entire institutional set-up of the Union has been part of political debate for some time now, as most clearly shown by the idea of setting up a Conference for Europe, an idea initially floated by President Macron in his letter to the citizens of Europe[9] and subsequently taken up by the President of the European Commission, the European Parliament and, albeit less enthusiastically, by the European Council. This Conference had been meant to take place at the start of May 2020.

The outbreak of the catastrophic coronavirus pandemic has exposed the European Union’s limited ability to react to the health emergency in a unified way, and pushed its economy into an unprecedented recession. Furthermore, with the first acute phase of the pandemic behind it, Europe has been confronted with the need to decide how to rebuild, as quickly as possible, the fabric of its economy (heavily disrupted in all the member states) in order to reduce the severe social consequences that the recession is having and strive to maintain Europe’s economic competitiveness in the world.

A return to the pre-pandemic situation is unthinkable: even prior to the explosion of the pandemic, the European economy had been struggling for some years, in clear need of a new development model able to respond to the many challenges presenting themselves at global level (the climate emergency, but also the growing scarcity of raw materials, the new international division of labour, and the emergence of new AI technologies, to name just the key ones).

On the one hand, this is a gigantic task that, once again, is beyond the means of the EU member states individually. Sufficient financial resources can be raised in a sustainable manner only at European level, with the Union as such providing a guarantee of this. But even this objective remains out of reach unless the European Union can be attributed with the fiscal capacity (at least partial) that it currently lacks; this, in turn, can come about only through a modification of the existing Treaties or the signing a new treaty between the member states willing to rise to this challenge as one.

On the other hand, the basis for rebuilding the European economy cannot be the sum of various national political choices, each made with the national interest in mind, which is what would be the case were it to be decided to press ahead with the “Community method”, which provides for bottom-up planning and has no vision of the collective interest within which national choices should be set. And the more asymmetrical the pandemic’s effects on the different member countries are, the truer this becomes. In this framework, the Green Deal, together with the European Commission’s proposed Digital Europe programme[10] and new Industrial Strategy for a globally competitive, green and digital Europe,[11] integrating the various Commission proposals, could represent the unitary framework in which to plan the rebuilding of the European economy, offering the range of structural measures necessary to create its backbone.

France and Germany have been the two countries most willing to highlight these needs. Indeed, on 18 May 2020, in a joint initiative, they launched the proposal to create a Recovery Fund worth 500 billion euros,[12] be raised on the markets and backed by the EU budget. For its part, the Commission, supported by the European Parliament, went even further, unveiling, on 27 May 2020, the Recovery Plan for Europe, a package of measures to be financed by a temporary fund, called Next Generation EU, worth 750 billion euros,[13] which the Commission itself plans to raise on the financial markets through the issuance of bonds against a reinforced EU budget (i.e., boosted also by the introduction of new own resources). The Commission will then distribute these funds, partly through grants and partly through loans, among the members states, directing them “in pursuit of EU priorities to the specific and new financing needs that have been revealed by the crisis”. This move represents a radical advance in quality terms (creation of European public debt and conditionality linked to an economic policy decided at European level), and it could potentially be the starting point from which to create an autonomous EU fiscal capacity and generate the political power Europe needs in order to be able to manage, directly, the transition to the new development model.

These bold choices, if they are to materialise and, above all, to achieve their full potential, first need to overcome the obstacle of the EU’s decision-making mechanisms, through which the member states’ different visions on the future of Europe risk leading to compromises incapable of triggering the process of rebuilding the economy. Although the above measures are, admittedly, limited in time, their mere implementation would set a crucial new precedent within the process of European integration, and radically alter the whole backdrop to the Conference for Europe, which, now that the emergency caused by the pandemic seems to be easing, is finding its way back onto the agenda. At this point, all those — political and social forces, as well as citizens — who hold the federal objective dear should do all they can to support their realisation.


[1] European Commission, Communication from the Commission to the European Parliament, the European Council, the Council, the European Economic and Social Committee and the Committee of the Regions – The European Green Deal, Brussels, 11 December 2019, https://ec.europa.eu/info/files/communication-european-green-deal_en.

[2] European Commission, Growth, competitiveness, employment – The challenges and ways forward into the 21st century – White paper, Brussels - Luxembourg, CECA-CE-CEEA, 1993, https://op.europa.eu/it/publication-detail/-/publication/4e6ecfb6-471e-4108-9c7d-90cb1c3096af/language-en.

[3] Francis Fukuyama, The End of History and the Last Man, New York, The Free Press, 1992.

[4] The Natura 2000 Network was established pursuant to the Habitat directive (92/43/EEC) with the aim of ensuring the long-term maintenance of natural habitats and species of flora and fauna that are threatened or rare at Community level. It consists of Sites of Community Importance (SCIs), identified by the member states in accordance with the terms of the directive, and Special Protection Areas (SPAs) established specifically for the protection of wild birds and arising from the amended Birds directive (2009/147/EC).

[5] The 9th EU Framework Programme for Research and Innovation (2021-2027), proposed by the Commission with a budget of 100 million euros, is currently being negotiated between the Parliament and the Council.

[6] The European Social Fund Plus (FSE+) 2021-2027, approved by the European Parliament in 2019, aims to boost people’s, especially young people’s, chances of acquiring the skills necessary to rise to the challenges and changes in the labour market. It merges several previous programmes (the European Social, ESF; the Youth Employment Initiative, YEI; the Employment and Social Innovation Programme, EaSI; the Fund for European Aid to the most Deprived, FEAD; the EU Health Programme). According to the Parliament’s proposal, in the course of its seven years, the fund is expected to have a budget of 120.4 billion euros.

[7] The emissions trading system has the dual aim of taxing greenhouse gas emissions and encouraging the quest to find less polluting production techniques. It was introduced by the EU in 2005 and in 2020 has reached the end of its third phase, under which the EU annually sets a ceiling on European greenhouse gas emissions and divides them into quotas, which are then auctioned by member states and purchased by polluting companies according to the extent of their emissions. Companies that exceed their purchased quotas face heavy sanctions, whereas those that manage to keep their emissions below the quotas purchased can auction off those they did not need. The revenue from these auctions goes to the member states, which should channel them into efforts to increase the use of alternative sources of energy. Currently, the system covers around 40% of EU emissions. https://ec.europa.eu/clima/policies/ets_en.

[8] The InvestEU Fund (on which an agreement was reached between the European institutions in March 2019) is the programme that, within the 2021-2027 European budget, will replace the Juncker Plan in promoting investments in the EU; it will bring together the European Fund for Strategic Investments (EFSI) and 13 other financial instruments currently included in the EU budget and aims to stimulate investment worth 650 billion euros.

[9] Emmanuel Macron, For European renewal, 4 March 2019, https://www.elysee.fr/emmanuel-macron/2019/03/04/for-european-renewal.en.

[10] European Commission, Proposal for a regulation of the European Parliament and of the Council establishing the Digital Europe programme for the period 2021-2027, 6 February 2018, https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=COM%3A2018%3A434%3AFIN; Id., A Europe fit for the digital age, https://ec.europa.eu/info/strategy/priorities-2019-2024/europe-fit-digital-age_en, and Id., Communication: shaping Europe’s digital future, 19 February 2020, https://ec.europa.eu/info/publications/communication-shaping-europes-digital-future_en.

[11] European Commission, A new Industrial Strategy for a globally competitive, green and digital Europe, March 2020, https://ec.europa.eu/commission/presscorner/detail/en/FS_20_425.

[12] Initiative franco-allemande pour la relance européenne face à la crise du coronavirus, https://www.elysee.fr/admin/upload/default/0001/07/d4fe338244d28de018c5bf0c538c83c337285d0e.pdf.

[13] European Commission, The EU budget powering the Recovery Plan for Europe, https://ec.europa.eu/info/files/eu-budget-powering-recovery-plan-europe_en.

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