The path towards the digital and green transitions must be carefully charted and all legislation proposals within the Fit for 55 framework undergo a thorough competitiveness check to retain public and business support, argues Stefano Mallia.
Stefano Mallia is President of the Employers’ Group in the European Economic and Social Committee
There is no doubt that the biggest challenge ahead of us is the challenge of climate change and addressing it will have huge financial, social and environmental implications. The margin for errors and delays have become extremely small and whatever steps we take in this direction, they must be undertaken in a correct and timely manner.
The revised 2030 climate targets, as proposed in the European Commission’s Fit for 55 package, will unevenly impact companies and people across Europe. This is why we need to make sure that the package is an important stepping stone rather than a stumbling block towards a net-zero European economy by 2050.
For that to happen, the European Commission must undertake a granular mapping of the impacts of the digital and green transitions whilst all legislative proposals within the Fit for 55 framework must undergo a thorough competitiveness check. This will help ensure that every step we take is a sustainable one and allows us to continue on a much needed growth path.
The rapid shift towards a decarbonised economy will entail massive challenges for citizens, workers, companies and regions, particularly those that are the most reliant on carbon-intensive sectors and industries. If those are not sufficiently addressed, this could result in increased inequalities and lead to massive restructuring processes, unemployment and deindustrialisation of territories. Not least, this could create a lack of social acceptance and political backlash from EU citizens against the European Green Deal agenda.
Also, adopting a model which does not lead to growth based on Sustainable Development would only isolate us in the international area. This would mean that our European model would have failed creating the space for other global competitors to take leadership. If this were to happen, we would then have to follow a model dictated and decided by our competitors.
The business community is fully aware of the climate threats and is ready to undertake the required steps towards achieving the 55% reduction target.
We know that the Green Deal provides us with a unique opportunity to build a stronger and more sustainable future and Europe’s enterprises must be an integral part of all solutions moving forward. The private sector is ready to play its role and invest in the needed infrastructure and technologies, and create new jobs. Indeed, massive private investment is already taking place.
However, we also know that low carbon technologies require massive capital investment and, in most cases, entail higher financial operating costs and technological risks than traditional ones. This requires a predictable regulatory investment framework, which can be facilitated if all new legislations undergo a competitiveness check so that the full implications on enterprise are well understood.
As underlined by the International Energy Agency, most of the global reductions in CO2 emissions through 2030 come from technologies readily available today. But in 2050, almost half the reductions would have to come from technologies that are currently at the demonstration or prototype phase. In heavy industry and long-distance transport, the share of emissions reductions from technologies that are still under development today is even higher. Therefore, it is crucial that regulations pave the way for the development and market uptake of new technologies.
Also, investment decisions to meet the 2030 targets will have to be made at a time when the European economy is still recovering from the pandemic-led economic crisis. It is therefore essential that the EU finds the right equilibrium between the Green Deal and the Recovery and Resilience Fund to drive investments in future-oriented technology and practices.
MSMEs have the potential to accelerate innovation in products and solutions to decarbonise the European economy. Many MSMEs will be the early adopters of the new business models and should be supported in order to ensure their innovation does not come at a competitive disadvantage. This support must help companies that are accessing technologies to decarbonise their production, processing, remanufacturing and distribution processes. It must also respect the principles of equitable access to MSME finance tools and should be based solely on climate objectives.
To facilitate the required massive investment in zero-carbon electricity, businesses also need visibility vis-à-vis long-term market signals and instruments. One of the biggest bottlenecks to the deployment of renewable energy projects is the lengthy and complex permitting procedures. The Employers’ Group supports the action being taken by the Commission in this regard.
It is clear that Europe needs to capitalise on its current position as a front-runner on climate change by acting as an innovation catalyser. As the EU has considerable technical expertise, we need to take the industrial leadership in the Green Economy. External EU action or climate diplomacy will play an important role in promoting high environmental standards in the world market.
In fact, EU competitiveness should go hand in hand with ensuring that competitors both inside and outside of the EU adhere to the highest environmental and social standards.
Ensuring competitiveness should not be misinterpreted as an excuse for operating at the lowest common denominator in terms of green standards, in a global market. This calls for a coherent strategy for increasing the export of low carbon goods and services from within the EU to third countries.