ForTheDoers Blog

High climate ambition laying ground for the EU’s competitiveness

Kari Kankaanpää 09 February 2024, 10:06 EET

The EU is faced with a triple challenge to solve: decarbonisation, competitiveness, and security of supply. In this post, drawing on insights from our recently published White Paper, I am discussing why the EU’s climate ambition is not only necessary but also foundational for addressing these challenges and securing a competitive, sustainable future.

The success of the Green Deal and the road ahead

The European Green Deal is without doubt the world’s most ambitious decarbonisation plan, aiming for carbon neutrality in Europe by 2050. However, it is not just about outright decarbonisation. It will indeed provide broader benefits and opportunities, helping Europe to reduce dependency on fossil fuels, creating a competitive advantage for clean products and thereby strengthening Europe’s resilience while cleaning our industries. It will also increase energy independence and security.

Yet, as the EU moves to national implementation of the Fit for 55 legislation, stretched action and tight follow-up is needed from the next Commission as the challenges loom large. The recent analysis by European Scientific Advisory Board on Climate Change (ESABCC) concludes that the EU is struggling to meet its 55% target in 2030 with the member states’ current climate plans delivering a narrow 49-51% cut. The situation looks even bleaker for reaching the EU’s net zero goal by 2050.

This gap underscores the need for accelerated action across all sectors and the importance of transitioning to a European Green Deal 2.0. While good progress has been made in decarbonisation, in particular in the power sector, this new phase should focus on decarbonising high-impact sectors, such as industry, transport, agriculture, and waste, and on leveraging innovation and technology to secure a net-zero future.

Addressing challenges with balanced solutions

The rightwards shift of European politics and growing public concern over the costs of decarbonisation highlight the need for a balanced approach. The clean transition is seen as punitive more than anything, and the citizens’ interest is moving away from climate change and towards security and cost of daily living, etc. Politicians have to recognize this and try to find a middle-of-the-road approach by clearly communicating the economic and social benefits of the transition, benefits such as job creation and new business opportunities.

Need for a European Green Deal 2.0 

What, then, should be expected from European Green Deal 2.0? Europe must prioritise the decarbonisation of industrial sectors by scaling up electrification and adopting renewable energy sources, such as in the steel industry’s shift towards fossil-free power and renewable hydrogen. Furthermore, expanding the use of heat pumps and e-boilers in industrial heat is crucial for efficiency and sustainability.

The reindustrialisation of Europe, powered by clean, reliable and affordable energy, will drive growth and competitiveness. This necessitates a robust power sector capable of supporting the green transition across the economy, including the key industrial segments – and citizens.

Carbon pricing as the central instrument

The EU Emissions Trading System (ETS) has been a success in reducing greenhouse gas emissions from the sectors covered by the scheme. The ultimate goal and target for the EU should be to expand this success by establishing a uniform carbon price across all sectors. The polluter-pays principle and price-based mechanisms should be developed for those sectors that are currently not included in the EU ETS - for example, agriculture and waste. I note with satisfaction the strong commitment to carbon pricing in the recent EU 2040 Communication. 

Moreover, the EU Commission should promote market-based carbon pricing also globally while ensuring a level playing field until other countries have adopted similar mechanisms. Therefore, I am glad to see in the EU 2040 Communication a proposal to establish a taskforce to support the development of carbon pricing globally. 

Final remarks

Industrial competitiveness, security of supply and energy independence are expected to be among key priorities during the next EU Commission’s mandate. While the decarbonisation of the power sector is already advancing well, enhancing decarbonisation of industries is one of the key next tasks at hand. 

As the EU navigates the turbulent waters of global geopolitics and climate change, its commitment to ambitious climate policies post-2030 will be crucial. As we look towards 2050, the EU’s path is clear: a steadfast commitment to climate ambition is the cornerstone of a competitive, secure and sustainable Europe.

More information:

Kari Kankaanpää

Director, Public Affairs and Climate Policy
Tel: +358 50 453 2330
kari [dot] t [dot] kankaanpaa [at] fortum [dot] com