Europe Election Will Show What Voters Really Think of Green Deal

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(Bloomberg) — The world's most ambitious climate plan has become a major political liability.

Public support for the EU's Green Deal, which aims to eliminate carbon emissions by 2050, is under threat as the energy crisis reaches voters' wallets. The flood of incentives for clean technologies, launched by the United States and China, has also raised concerns that Europe's carrot-and-stick approach could make it less competitive.

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The extent of the damage will be made clear when citizens vote in parliamentary elections from June 6 to 9. In their campaigns, the leading mainstream candidates have shifted from framing climate action as a means for Europe to lead globally to focusing on how to do it. We will protect local industries and reduce the cost to families. Meanwhile, discontent with everything from boiler bans to sustainable farming directives has helped right-wing climate skeptics gain support.

“Many people feel that democratic parties have failed to find reliable solutions to their daily problems, and view the climate transition as a financial burden at a time when their finances are already under severe pressure,” said Dirk Messner, head of the German Environment Agency. “They turn to populists because of the protest.”

Although opinion polls indicate that a coalition of major parties is expected to retain a majority in the European Union Parliament for its next five-year term, the gravity is shifting to the right. Far-right groups are set to increase their number of seats, even if their rise has lost some momentum in recent weeks.

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In a poll conducted by the European Environmental Policy Institute in May, 67% of experts saw the elections as negatively affecting the implementation of climate reforms. While the majority believed that the goals of the Green Deal would become approved legislation, they also expected this to happen in a weakened or more restrictive form.

Financing obstacles

The challenge for the next European Commission, which will be formed after the vote, and the 27 member states, will be to find more financing for the Green Deal even as other pressures mount. Many member states want to increase defense spending amid the deteriorating geopolitical environment following the Russian invasion of Ukraine.

It is a dilemma that has no easy solution. Economic growth is slow, inflation is difficult, and government budgets are strained as the European Union approaches the most difficult phase of its net zero campaign. The union had barely begun to include the agriculture sector in its green regulations when it was forced to relax policies after farmers blocked highways and dumped manure on the streets.

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In 2027, a new carbon market is set to be launched to cut pollution from heating and road transport fuels – a move that will impact consumers. By 2035, all new passenger cars must be zero-emission, effectively putting an end to the internal combustion engine.

“There is a perfect storm brewing,” said Simone Tagliapietra, a senior researcher at the Bruegel Research Center in Brussels. He said that these measures would harm consumers, just as the European Union reduced green grants. “This will only aid the far-right parties’ narrative of blaming Brussels.”

The Green Deal's accomplishments have been overshadowed by the backlash. The European Union was able to overcome national differences and adopt a huge package of measures to reach a tougher target to reduce emissions by at least 55% by 2030 compared to 1990 levels. Pollution fell by 32.5% in the period from 1990 to 2022, even as the economy grew by 67%. However, the bloc will have to accelerate the deployment of renewable energy, climate-friendly infrastructure, and clean technologies to achieve its goals.

According to European Union estimates, the continent needs to invest about 1.5 trillion euros annually in its energy and transportation systems to reach net zero, with the bulk of it coming from private financing. This is up from the €863 billion it spent on decarbonising sectors each year between 2011 and 2020. But the largest current public source of financing for the green transition – the €750 billion post-pandemic recovery program – is coming to an end. Opinions are divided on potential new financing instruments, including issuing syndicated debt.

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“The elections will be a reality check for the Green Deal,” said Ingo Raming, head of carbon markets at Banco Bilbao Vizcaya Argentaria SA in Madrid. He said these policies were born during a “goldilocks economy,” but now there are “higher interest rates and energy prices, and the realization that decarbonizing industry is going to take a lot of money.”

Implementation challenge

The Green Deal was based on the ability to build momentum through carefully planned policies that take effect over the coming decades. A poor performance in this election and poor choices over the next five years could set the bloc back more than one election cycle, according to Polish Deputy Climate Minister Krzysztof Paulista.

“There are a lot of measures that we need to implement,” he added. “This implementation must be such that politicians who do the job can be re-elected to continue the transformation.”

Part of the original deal with voters was for the EU to fill the Social Climate Fund with revenues from the new carbon market to help protect the most vulnerable companies and citizens from the costs of the green transition. It is expected to bring in at least €86 billion from 2026 to 2032. Big companies can also benefit from a separate innovation fund, currently worth €40 billion.

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None of this was enough to allay the fears of leaders facing backlash from their voters.

Still shaken by the yellow vest protests in 2018, French President Emmanuel Macron's administration sees energy prices as an explosive topic and easing the fiscal burden for more green measures as a scary issue, according to government officials. In Germany, a proposal led by Economy and Climate Minister Robert Habeck to ban new fossil fuel boilers backfired badly, forcing him to admit it had gone too far.

Climate risks

Reversing course is not an option for Europe, which is warming faster than any other region. The continent experienced its largest ever wildfires last year, as well as one of the costliest floods on record, according to scientists at the Copernicus Climate Change Service and the World Meteorological Organization.

“As we enter the implementation phase of the Green Deal, it is fair to consider and confront the issue of competitiveness, provided that this is not used as an excuse to delay the transition,” said Chiara Di Mambro, head of decarbonisation policy at the Italian Climate Authority. Change Think Tank Eco.

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But analysts and government officials say there is a real risk that member states will implement agreed measures too slowly, and some governments may exploit the right-wing tilt in the new parliament to relax existing regulations, such as a new carbon market or the car industry. The emissions rules last contain a review clause in 2026 that could pave the way for opponents to seek a delay in phasing out the combustion engine.

The more hostile political environment also puts a question mark over a new interim target put forward by the Commission, to cut emissions by 90% by 2040, which would put the EU back on track to achieve its goal of net-zero emissions by 2050. To support Member States and the new European Parliament to become binding.

Eleonore Caroix, vice-chair of the French National Assembly's foreign affairs committee and a member of Macron's Ennahda party, said the success of the Green Deal depends on member states making difficult choices, and it is worrying that politicians are avoiding the issue.

She said the Green Deal “is one of the most ambitious and influential pieces of legislation passed by the European Union Parliament in decades.” “It must remain a top priority.”

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