Businesses and consumers will decide whether the EU Green Deal works

EU Commission President Ursula von der Leyen outlined the plan to the European Parliament last week, promising to put the Green Deal at the centre of the EU’s recovery effort. [European Union, 2020. Source: EC - Audiovisual Service]

As the European Commission fleshes out its Green Deal policy unveiled by Ursula von der Leyen one year ago, companies are looking at how they fit into the picture.

In December 2019, shortly after she took office, Ursula von der Leyen unveiled her first flagship policy – the EU Green Deal. It’s an umbrella of policies designed to get the EU to its target of reducing emissions by 55% by 2030 and down to net zero by 2050. Since it is a work in progress, many of those policies were unveiled last year, and there are more to come this year.

But one year into the Green Deal, there is still uncertainty among the business community about how they, and their consumers, fit into the picture. Will the transformation be led top-down by EU regulation, or bottom-up by consumer demand?

“It’s about consumer choices: what we do, what products we buy, how we adjust our lifestyle,” said Slovakian centrist MEP Martin Hojsik at a EURACTIV virtual event last month.

“It’s about what we ask for, from the companies and from the policy-makers. These are very important things because the pressure from the public did change the European Parliament elections and due to the pressure from the public, we have – in my opinion – the green deal. We can say it was because scientists were calling for action, sadly I think no, it was because of public pressure.”

But the framework that consumers exist in to make those choices will be key. This is where both regulators and companies will play an important role, said Climate Action Network Europe Director Wendel Trio at the EURACTIV event. “We need everybody on board, we need governments and businesses to do their fair share, but we also need to look at how we change our consumption behaviour,” he said.

“We need companies to create the right framework, giving incentives in the right direction, providing only those products that are the most sustainable. Consumption patterns do play an important role.”

The question for regulators then becomes: how do you set a framework that encourages companies to change their practices, which then in turn incentivises consumers to change their behaviour?

So far, the EU’s approach has been very target-focused. The 20-20-20 package in 2008 set a goal of reducing emissions by 20% by 2020, increasing the share of renewable energy by 20%, and increasing energy efficiency by 20%.The efficiency goal was not met, and analysts say the emissions goal might not have been met without the economic slowdown caused by the economic crash of 2009.

This has prompted a discussion about whether the target-setting approach is really the right one. But that hasn’t stopped the EU setting new targets for 2030 and 2050. Are the targets working? Or should the EU be looking at a more bottom-up approach?

“People outside the climate space watching this debate often ask this question,” said Thomas Lingard, global climate director at consumer goods manufacturer Unilever, who also spoke at the event. “The truth is you need both, the long-term political signal to get you where you’re going as well as the pathways that get you there.”

“It’s not just the point at which we reach the targets, it’s how much carbon emissions we make along the way,” he added.

Some businesses have complained, however, that the European Commission’s climate strategy is not fully taking their concerns on board, and that some climate legislation can be disruptive for the European economy. This will be a particular concern as the EU seeks to rebuild the economy after the devastation caused by the COVID-19 pandemic.

But the Commission says there is no contradiction between economic recovery and climate action, and that it is consulting businesses on these regulatory changes.

“We rely a lot on businesses, they should be the agents of change,” said Christian Holzleitner, head of unit at the Commission’s climate department. “On climate policy, what the Commission has done with the Emissions Trading System is really bringing the right incentives at the level of the companies, to reward those companies that are most disruptive, who move out fossil fuels and move in clean technologies.”

“Now we will have €1.1 billion this year from ETS revenues for the innovation fund, and there’s huge interest out there from the industry to invest in this new technology and new business models.”

“Here in these discussions we always talk about regulation and which types of targets will be set,” he added. “But that’s just one side of the coin. Now with the recovery and resilience facility we have a unique opportunity to invest in our future, to really change our energy system and industrial system for the next 100 years.”

Lingard agreed. “We’ve got to end this false dichotomy of ‘can we stop climate change or can we have an economy?’ We’re talking about a new industrial revolution. We’re talking about something that is good for growth, good for jobs, good for business and delivering a better quality of life, which is ultimately what the economy should be delivering.”

> Watch the full recording of the event below:

[Edited by Benjamin Fox]

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