The European Commission’s push for regulatory simplification is welcome but incomplete. As the EU executive cuts red tape with one hand, with the other it is pushing ahead with new legislation that is bound to fail: a new 2040 climate target for reducing greenhouse gas emissions.
The simplification drive responds to citizens’ concerns about the cost of living and complaints from businesses that Europe’s regulatory burden is harming their competitiveness. A 2040 climate goal, building on 2030 targets that look certain to be missed, will make both of those worse.
None of this means that the EU should abandon decarbonisation. Far from it, especially as Europe is a fossil-poor continent that urgently needs to improve its energy security. But for climate action to be effective it must be global. Nobody will follow Europe’s example if it makes us poorer.
It is high time for Brussels to recalibrate. Arbitrary climate targets and restrictive mandates are simply not producing the desired effect.
Flawed foundation
As the EU has a set of 2030 sustainability targets and a 2050 commitment for climate neutrality, the European executive thinks we need to mind the 2040 gap. The Commission sees this move as “ensuring predictability” for businesses, “boosting competitiveness” and strengthening European strategic autonomy.
It is difficult to read these lines without raising an eyebrow. Even if the simplification efforts are successful, this will count for little if the EU persists with its current design of costly wishful thinking and baseless overambitious target-setting.
EU countries are spending a record €400 billion on slashing greenhouse gas emissions – about 2.6 % of GDP, more than on defence. And yet we are still falling short of the 2030 targets.
The Commission has found that more than €700 billion of annual investment would be needed to meet those targets. In a recent paper, the ECB called for additional investment of up to 3.7% of EU GDP each year in order to cover the spending gap. With a hot war on our borders and the US no longer guaranteeing security, is that really our top priority?
The reality is that the 2030 targets are an impossible overshoot. Even though European greenhouse gas emissions have fallen in the last few years, the EU is significantly off-track from its objective of cutting emissions by 55%. BloombergNEF modelling estimates excess emissions of between 9% and 29%, depending on the economic sector.
When it comes to renewables the EU is, again, far off the mark. The EU aims for renewables to account for 42.5% of total energy consumption, from about 25% now. That share has been increasing by about 0.8 % per year in recent years. It is difficult to see how the EU can achieve more than a 30-32% renewable share by the end of the decade.
The only notable movement is in the decline of final energy consumption in the EU. However, this can be linked to the EU producing fewer goods, especially in energy-intensive industries. Some see this as progress, others as a clear example of a degrowth mentality and the deindustrialisation of Europe.
Climate targets as a straitjacket
For the European Green Deal to succeed, it must achieve three things: generating economic growth, boosting European clean tech to ensure a smooth societal transition, and incentivising the rest of the globe on climate action. Five years on, none of these objectives are met. A 2040 climate target gives no “legal certainty,” but rather increases the cost of doing business in the EU and signals unpredictability for investors.
What is the point of a costly transition which is becoming a wealth transfer to China as we continue to absorb their oversubsidised solar panels and EVs, made in an economy with poor labour standards and a large amount of coal in the energy mix?
The goal should be to facilitate decarbonisation, not just make everything fossil-related extremely expensive or prohibited. The EU should focus on the enabling conditions: boosting power grids, connectivity in energy infrastructure and incentivising clean energy research breakthroughs. Why are we afraid to push forward a 'Buy European' regime on clean tech? Why not a targeted subsidy regime in the areas where we have comparative advantage?
A legally binding 2040 climate target will be a sandcastle built on a house of cards. Unsurprisingly, half of the EU member states are unconvinced with this effort, and the Polish presidency of the EU Council sees no unified position for supporting it.
Historically, great powers have ensured their global success by course-correction and strategic pivots. The decision in 2019 to put climate at the heart of economic policy-making and societal progress was well-intentioned but unrealistic. A pandemic and a war later, there’s no shame in changing course.
If the EU is serious about competitiveness and growth, it needs to set its priorities straight.
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