A German Climate Presidency
Noemi Amelynck // 7 September 2020
On the 1st of July, Germany took over the rotating presidency of the Council of the EU. This presidency came at an important time as the continent and the world are beginning to deal with the after-effects of the coronavirus. This has shifted the priorities of the German presidency, as its goals are more directly linked to recovery from the pandemic. Nevertheless, Germany has maintained its commitment tackling climate change at an EU level.
In its programme, Germany strongly supports the European Commission’s Green Deal which ultimately aims at achieving EU climate neutrality by 2050. The German presidency was able to demonstrate their commitment to the Green Deal during the negotiations of the coronavirus recovery package and the EU’s next long-term budget. Of the 750 billion EUR coronavirus recovery fund and the 1.074 trillion EUR long-term budget, around 30% will be invested in climate change policy. That investment will include the Just Transition Mechanism which offers financial support and technical assistance to help people, businesses and regions which are most affected by the green transition. Having an EU dedicated fund to the matter can help counteract the possibility that those funds may not be available at the domestic level. It is a first step towards an EU-wide strategy.
However, the negotiations came with a major flaw. Poland managed to remove the condition of signing up to the EU’s 2050 target of climate neutrality in return for access to the Just Transition Fund. This is concerning as there is no guarantee that Poland, or other Member States, will then apply the fund for its supposed purposes. This makes it difficult to hold those countries accountable for their actions. Additionally, it provides a major setback for the EU potentially meeting its 2050 goal as 33 out of the 50 most polluted cities in Europe are in Poland and they are the EU’s largest coal producer.
Poland is in favour of an EU carbon border adjustment mechanism as they see it as a source of revenue to fund the costs of making the green transition. Domestically, the Polish government has also voiced its support for the green shift. However, the problem is that the Polish government does not invest its support into those the renewably energy sector, but rather continues to largely subsidize conventional energy. So, how will it be ensured that countries may possibly invest the revenue from a carbon border adjustment mechanism into a green transition?
The simple answer is it won’t. The efforts of attempting to come up with an EU-wide climate strategy is almost impossible due to the significant differences among Member States. Instead, the German presidency should focus more on European businesses to pave the way for change. In Poland, big energy companies are slowly moving their investments away from coal mines and into the renewable energy sector. The revenue that comes from the border tax should be directed at helping European businesses who are attempting to undertake a green transition but struggle with the costs that come with it, such as research and development.
Many large businesses in Europe are showing a willingness to lead in the fight against climate change, and over 70 companies have targets which are more ambitious than those proposed by the Commission. In order to encourage this behaviour, the EU should implement measures such as tax breaks, which may encourage more firms to adopt science based targets. This also puts into question whether or not the EU should then revise their targets.
This is on the table as the Commission has proposed to increase the EU’s greenhouse gas emissions reductions target for 2030 to 50-55% instead of 45%, and this has been supported by the German presidency. However, it will be difficult for Germany to convince other Member States to do more, as they themselves haven’t reached their targets and are likely to largely miss them.
On the other hand, the German Presidency should also work towards ameliorating existing EU policies, such as the cap-and-trade system. The number of permissions should be reduced as they remain high, and this will reduce the overall carbon emissions. This remains a viable market-based solution that is not picking winners and losers directly.
Furthermore, the Presidency has the opportunity to reform the Common Agricultural Policy (CAP) with the help of the Commission’s “Farm to Fork” strategy, an area of the Green Deal. The CAP has been criticized for the way in which it encourages the use of unsustainable farming to increase output. The Farm to Fork strategy focuses on sustainable food systems through investments in research and innovation. It also aims to reward farmers who have undergone a greener transition. However, it remains unclear on how they will do so.
Without an incentive to go greener, it is unlikely that a big change will happen. If farmers are able to appreciate the long-term returns of a transition, they may be more likely to adopt those methods. Nonetheless, the agriculture and fisheries sector should not be given an exception and receive more investment compared to other sectors. Instead, it should be replaced by a carbon tax mechanism, similar to the one explained above, which is applied to all contributors of climate change.
Although the German presidency remains committed to fighting climate change, the focus should increasingly be on the market rather than Member States. European businesses can be the leaders in the fight against climate change.
EPICENTER publications and contributions from our member think tanks are designed to promote the discussion of economic issues and the role of markets in solving economic and social problems. As with all EPICENTER publications, the views expressed here are those of the author and not EPICENTER or its member think tanks (which have no corporate view).