In December last year, the European Commission presented its European Green Deal. The Green Deal takes on this generation’s defining tasks: tackling climate change and environmental challenges as well as creating a more inclusive economy while combating rising inequality. The plan for this green transition contains bold promises such as that it will “leave no one behind” and provide a “new growth strategy for Europe”. Although the plan is ambitious, there are good reasons to believe it has great potential – even geopolitical.

Our observations

• The Green Deal is European Commission President Ursula von der Leyen’s flagship project. The ambitious plan aims to make a deep transition towards a new socio-economic paradigm that is more inclusive and especially more sustainable, by leaving behind the paradigm of industrial modernity (e.g. aresource-intensive economy based on the use of fossil fuels, capital-intensive with lower returns on labor, working on the basis of extractive instead of regenerative business models).
• This requires a set of transformative policies as formulated in the plan, that aim to: 1) reach climate neutrality by 2050 (i.e. by enforcing a climate law to further reduce carbon emissions and by ensuringeffective carbon pricing throughout the economy), 2) decarbonize the energy system (which also involves innovative technologies and infrastructure, such as smart grids, hydrogen networks or carbon capture, storage and utilization, energy storage), 3) create a circular economy (with special focus on action in the sectors that are energy- and resource-intensive and reducing waste), 4) create a “renovation wave” of public and private buildings (as they are responsible for a large share of energy and resources), 5) accelerate the shift to sustainable mobility, 6) create a European food system thatwill be the global standard for sustainability, 7) restore ecosystems and preserve biodiversity (Europe’s natural capital), and 8) reach zero pollution in air, water and soil.
• The European Commission will mobilize €1 trillion of investments to finance the transition. According to the European think tank Bruegel, the European Green Deal should be comprehended as a reallocation mechanism, as it fosters investment shifts and labor substitution. First, effective carbon pricing in all sectors should be guaranteed through the strengthening of the EU emissions trading system (ETS). Besides this carbon pricing, a sustainable investment strategy should push companies to switch to the necessary technologies. Also, innovative, green European companies should be aided by the right conditions to flourish. And finally, those negatively impacted by the climate policies (such as coal-mining regions) should be supported with compensation measures.
• The plan has been received with a lot of criticism. Critics say the deal will mostly be greenwashing and is not inclusive. Furthermore, reaching climate neutrality will not be easy. The EU’s own annual climate action progress report says reductions in emissions will have to speed up significantly for the EU to become carbon-neutral by 2050. Also, von der Leyen’s plan for a carbon border tax, a tariff based on the difference between the EU carbon price and that in the exporting country to create a level playing field for European companies, is seen as a protectionist measure harming developing countries and potentially causing problems in international trade for the bloc.
• Also, one EU member that is crucial in reaching the ambitious climate goals, has opted out of the plan. As Poland is still heavily dependent on coal, von der Leyen wants to bring the country on board by proposing a compensation fund for ultra-carbon-dependent regions.

Connecting the dots

The European Green Deal is a far-reaching policy document affecting every sector of the biggest internal market of the world. It requires all kinds of stakeholders (local, regional, national and international, public and private) across the bloc to take action. In order to get everyone involved, the deal makes considerable promises. First, it promises a just and inclusive transition, to “leave no one behind”. Second, it promises to provide Europe’s new growth strategy, as von der Leyen has said to be convinced that “the old growth model based on fossil fuels and pollution is out of date and out of touch with our planet”. And the third big promise is that the deal could make the EU a global leader. It can show the world that a competitive economy does not have to emit greenhouse gases and that economic growth can be decoupled from resource use. Although the U.S. Democrats’ Green New Deal has a similar goal, the European Union’s version is technically more feasible. While the EU commission wants the plan to inspire the world, the bloc to lead international efforts, and Europe to be a front-runner in climate–friendly industries and clean technologies, it also recognizes that climate goals cannot be achieved without other countries, and wants to build alliances with the likeminded.

Indeed, the EU commission admits that the plan makes bold promises, and von der Leyen herself has dubbed it Europe’s “man on the moon moment”. There is widespread criticism of the plan’s vagueness on details making itunrealistically ambitious. While this is valid criticism, it is beside the point. In her analysis, economist Mariana Mazzucato sees the U.S. Green New Deal (which has a similar mission but is even vaguer on details of how to reach the goals) as a mission-based policy. The value lies in it setting a clear direction for change, it is a good guide because its goal is worth pursuing. A green transition is complex and requires more than the technological accomplishment of getting to the moon, but a positive vision for change is nonetheless a strong driver for success.

More than the clear and widely shared mission of the plan, multiple developments are increasing momentum for a green transition. First, as the conflict between the U.S. and China has shown EU member states that they need Europe to stay competitive in the new era of great power competition, there is more support from member states to unite in pan-European projects. The Green Deal fits with a more assertive European industrial policy that not only aims for green business, but seeks to build European champions as it enjoys first-mover advantage: the Green Deal is a historical occasion to revitalize the European industry. In that vein, von der Leyen has said climate change would be her commission’s top priority and that it will be a “geopolitical Commission”, stressing that Europe needed to be “more assertive in the world”. Second, the EU has a decision-making model that strives for consensus and the deal was unanimously endorsed by the European Council. Third, multiple progressive member states are already positioning themselves as sustainability champions with national policies, such as France, with its sweeping anti-waste and circular economy bill, which may easily inspire othersto do so as well (as the surge in cities and states declaring climate emergency has shown). And fourth, European citizens increasingly vote for a green future by electing green politicians and by consuming sustainable goods.  The European elections in May 2019 resulted in 74 green MEPs (almost 10% of the assembly) being appointed and also showed more environmentalist rhetoric from other factions. The majority of European consumers are willing to pay a premium price for more environmentally friendly products. The idea for a single market for green products has already been tested successfully. Alongside the widespread climate strikes, these are signs that European civil society is pushing for more ambition in fighting climate change.

There is much at stake for Europe. Since the Paris Agreement and other global climate goals such as the SDGs are less effective as they are not legally binding and lack global governance, the European Green Deal could be a vital means for Europe to show it can unite in action. Failing would degrade trust in the EU as an effective bloc. But if the EU succeeds in making a green transition, it will prove an important opportunity for Europe to become a leader in a new, green socio-economic paradigm and simultaneously boost trust in pan-European initiatives.

Implications

• In the absence of effective climate action from the U.S., the question is whether Europe can bring along China in its ambitious climate goals. With tensions rising between the U.S. and China, the EU is suddenly a much more interesting partner in climate and in trade for China, the world’s biggest emitter. Hopes are high for the EU-China summit in Germany in September, as it could be an important gaugeof whether Europe can successfully engage China.
• In a few weeks, the European Commission will present an EU industrial strategy to address the twin challenges of the green and the digital transformation. The latter is key in achieving green goals.