London — The EU's Green Deal will not only transform Europe's economy, but also affect geopolitics in oil and gas-producing neighboring countries, pan-European think tank the European Council on Foreign Relations said in a report Feb. 3.
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The ECFR's report urged the EU to manage the far-reaching impacts of the planned energy transition on European nations and to also consider the wider implications further afield.
"The European Green Deal will not only profoundly transform the economy but will also have deep geopolitical repercussions," the ECFR said in a statement.
"It will affect geopolitics through its impact on the EU energy balance and global markets; on oil and gas-producing countries in the EU neighborhood; on European energy security; and on global trade patterns, notably via the carbon border adjustment mechanism," it said.
The EU should prepare to help manage the geopolitical aspects of the Green Deal, particularly through its relationships with key energy partners including Russia and Algeria, and global players including the US, China and Saudi Arabia, it said.
The European Commission in 2019 proposed the European Green Deal -- an ambitious policy package that aims to transform the EU into a sustainable economy.
"The Green Deal is at root an effort to transform the European economy and European consumption patterns," the ECFR said.
"But because it entails a fundamental overhaul of the European energy system and because it ranks so high on the EU policy agenda, it will change the relationships between the EU and its neighborhood, and it will redefine Europe's global policy priorities," the report said.
"As such, it is a foreign policy development with profound geopolitical consequences."
Only a proactive EU attitude will help turn potential frictions into opportunities for renewed international partnerships, the report said.
Seven action points
The report made seven recommendations that its authors believe will help manage the geopolitical aspects of the European Green Deal.
First, the EU should help neighboring oil- and gas-exporting countries manage the repercussions of the European Green Deal by engaging with them to foster their economic diversification, including into renewable energy and green hydrogen that could in future be exported to Europe, it said.
Second, the EU should improve the security of critical raw materials supply and limit dependence, first and foremost on China, it said, by diversifying supply, increasing recycling volumes and substituting critical materials.
Third, the EU should work with the US and other partners to establish a "climate club" whose members will apply similar carbon border adjustment measures -- effectively putting a price on the carbon content of goods imported into the EU, it said.
Fourth, Europe should become a global standard-setter for the energy transition, particularly in hydrogen and green bonds, it said. This could involve requiring compliance with strict environmental regulations as a condition to access the EU market.
Fifth, the EU should internationalize the European Green Deal by mobilizing the EU budget, the EU Recovery and Resilience Fund and EU development policy, it said.
Sixth, the EU should promote global coalitions for climate change mitigation, for example through a global coalition for the permafrost, which would fund measures to contain the permafrost thaw in places such as Siberia, Canada, Greenland and Alaska.
Seventh, the EU should promote a global platform on the new economics of climate action to share lessons learned and best practices, it said.
The report was issued jointly by the ECFR and Brussels-based economic think tank, Bruegel. Its findings represent the views of its five authors – all of them senior figures at the two think tanks – rather than a collective position by the ECFR, it said.
The European Commission is expected to make legislative proposals in June on a number of elements of the European Green Deal, including revisions to the EU Emissions Trading System Directive, the Renewable Energy and Energy Efficiency Directives and a Carbon Border Adjustment Mechanism for selected sectors.
The work will also include a Just Transition Mechanism to help mobilize at least Eur100 billion ($118 billion) for the period 2021-2027 to help the most affected regions.