This article is part of our special report Europe’s new Climate Law: Leaving no-one behind?.
The European Union will need to “re-orient most, if not all” of its policies in order to protect vulnerable regions and workers in industries affected by the transition to a green economy, the EU Commission’s vice-president Frans Timmermans has said.
The European Commission tabled its much-awaited Climate Law on Wednesday (4 March), promising “predictability and transparency to industry and investors” as Europe embarks on a journey to cut global warming emissions to net-zero by 2050.
While some investor groups hailed the Commission’s move, Eastern EU countries and trade unions have expressed concerns about the costs of the transition, and the lack of finance to support the move to a net-zero economy.
Responding to those concerns, Frans Timmermans, the Commission’s executive vice-president in charge of the European Green Deal, again emphasised the EU’s commitment to a fair and just transition.
“Our commitment is that no-one will be left behind,” Timmermans insisted when asked about worries over the costs of the transition in countries like Poland, which relies on coal for almost 80% of its electricity.
The Commission is also committed to using its proposed €7.5 billion Just Transition Fund to support vulnerable regions, Timmermans added, referring to a wider Just Transition Mechanism aimed at leveraging €100 billion every year for the green transition, using private finance.
“But we will have to re-orient most if not all the instruments we use in Europe” towards the net-zero emission objective, Timmermans added, calling the shift “tectonic”.
Sustainable Europe Investment Plan
Overall, the Commission estimates that an extra €260 billion in investments is needed per year to finance the switch to clean energy and reduced emissions.
In January, the EU executive published a Sustainable Europe Investment Plan, aimed at mobilising investment of €1 trillion over 10 years, using public and private money to help finance its flagship project – the European Green Deal.
But critics say there is hardly any fresh money on the table and that the sums are too small in relation to the scale of the challenge.
At a summit last month, EU leaders failed to agree on the bloc’s long-term budget, as Austria, Denmark, the Netherlands and Sweden – the so-called ‘frugal four’ – insisted on capping national contributions to 1% of their country’s gross national income.
Timmermans did not deny that the effort will be huge. “Let there be no misunderstanding: it will be a Herculean effort to get there. Yes, we’re under budget constraint. But we’ve made that commitment and we want to show the rest of the world that we can do this.”
The former Dutch foreign minister also pointed to the costs of non-action, saying poor people will suffer most from the rise in temperatures.
“So yes, we will make sure that our policies will be fair and leave no-one behind. But let’s also be clear about the cost of non-action,” Timmermans stressed.
Poland in the spotlight
In Poland, the transition to net-zero by 2050 will require an investment in the range of €179-206 billion for the power sector alone, according to PKEE, the Polish electricity sector association.
And new climate targets for 2030 – to be discussed later this year – will require a rapid transition away from coal and a massive replacement of Poland’s power generation capacity in a very short time period, it says.
“This is simply not doable for us from a technical, economic and social point of view,” said Wojciech Dąbrowski, CEO of PGE, Poland’s largest electricity utility.
According to the Polish electricity sector, additional measures should be considered when the EU reviews its carbon market, in order to cushion the anticipated increase in CO2 prices resulting from the 2050 net-zero target.
“The Climate Law establishing the framework for achieving climate neutrality should directly stipulate that the compensatory measures should be amended proportionally with additional costs that the new 2030 reduction targets generate,” PGE said in a statement.
11 million jobs on the line
While the energy sector is particularly exposed to the clean energy transition, other carbon-industries are also expected to take a hit.
“We are talking about almost 11 million jobs directly affected in extractive industries, energy-intensive industries and in the automotive industry,” said Luc Triangle, secretary-general of IndustriAll, a European trade union.
According to IndustriAll, European industries will need to invest €250 billion on an annual basis for the next ten years in order to stay on track with the 2050 climate neutrality objective.
“Where is the money for those investments?” Triangle asked, pointing to the “inconsistency” between Europe’s high level of ambition on climate and the lack of additional finance EU member states are willing to put on the table.
State aid to the rescue
In Brussels, the European Commission pointed to an upcoming revision of the bloc’s state aid rules, suggesting those will give national governments more leeway to support industries in the transition to net-zero.
“State aid rules are a vital part of the green transition,” said Margrethe Vestager, the EU’s antitrust chief. “And it’s important that we keep them up to date, so they can support the investments we need,” she added in a recent speech.
The EU executive is also considering revising state aid guidelines to help energy-intensive industries cope with higher electricity costs resulting from the EU’s emissions trading system.
The EU’s updated state aid rules should be in place by the end of 2021, Vestager said.
[Edited by Zoran Radosavljevic]