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EU wants €100B lever to convince skeptical states of 'Green Deal' strategy

SNL Image

Ursula von der Leyen, the European Commission's new president, presented her "European Green Deal" in Brussels.
Source: AP Photo

The European Commission unveiled a slate of climate-related policy proposals on Dec. 11, charting a wide-ranging roadmap to faster emissions cuts that includes a €100 billion funding mechanism to help Eastern European states who still rely heavily on fossil fuels.

Ursula von der Leyen, the new commission president, said her "European Green Deal" would transform the bloc's economy and set clear rules for investors to spur green growth. The former German defense minister has made fighting climate change front and center of her policy agenda and the new proposals would involve reviewing every EU law and regulation in order to align them with stricter climate goals.

Countries including Poland, Hungary and the Czech Republic have so far resisted faster emission cuts across the bloc, arguing that the transition away from coal will cost too much and wreck their economies.

The commission now aims to introduce a law by March 2020 that would enshrine a previously proposed target to reach net-zero emissions in 2050. By next summer, it also wants to propose a 50% to 55% cut in greenhouse gas emissions by 2030 against 1990 levels, up from a current target of 40%.

The Green Deal also proposes to introduce a carbon border tax that would protect European businesses from more polluting international competitors, as well as a range of measures from revising energy taxes to improving biodiversity and recycling.

"Our goal is to reconcile the economy with our planet," von der Leyen said in Brussels. "I'm convinced that the old growth model that is based on fossil fuels and pollution is out of date ... The European Green Deal is our new growth strategy."

€100 billion 'mechanism'

The European Parliament has previously supported higher emissions cuts and von der Leyen now hopes to sway still skeptical member states with a "just transition mechanism" — a mix of public and private investment that would reach €100 billion over the next seven years.

Poland alone still generates 80% of its electricity from coal and Tomasz Dąbrowski, Poland's undersecretary of state for energy, has said the country would need to spend around €900 billion to get rid of the fuel. Individual member states, including France and the U.K., have already committed to reaching net-zero carbon emissions by 2050.

The proposed mechanism would include cash from the EU's long-term budget, loans from the European Investment Bank and money leveraged through a series of other EU financing tools, according to materials released by the commission.

"It will be the springboard for those sectors and those regions that have to catch up," von der Leyen said in a speech at the European Parliament. "Some will say the cost of this transition is too high. Well, let us never forget what the cost of non-action will be. It is rising by the year."

'Man-on-the-moon moment'

Green groups have pushed for even deeper emissions cuts, of 60% or 70% by 2030, but critics say even von der Leyen's more modest targets could cripple European industries. The commission emphasized that the Green Deal covers all sectors of the economy, from energy and transport to agriculture and industrial sectors such as steel and cement.

If other countries around the world fail to ramp up their climate targets alongside the EU, the commission said a carbon border adjustment mechanism could be introduced — taxing imports to more accurately reflect their carbon content. The measure would be designed to comply with World Trade Organization rules, the commission said.

The European Round Table for Industry, a group of CEOs from dozens of Europe's largest companies, including Siemens AG, BP PLC and L'Oréal SA, had endorsed the 2050 climate neutrality target ahead of the announcement.

The price tag for von der Leyen's overall strategy is still unclear. The commission said it will come up with an investment plan in January, but noted that even the current 2030 climate targets would require an additional €260 billion in annual investment. That plan will be followed up with a new sustainable finance strategy, focusing on how the private sector can be mobilized to contribute to the targets.

"We do not have all the answers yet, today is the start of a journey," von der Leyen said. "But this is Europe's man-on-the-moon moment."