As with all publicly-funded economic stimulus measures, conditions must be applied to the upcoming EU recovery plan, argues Peter Vis. He outlines a few ideas when it comes to the car and airline industries as well as the upcoming building renovation wave.
Peter Vis is a senior adviser at Rud Pedersen Public Affairs. He is the former chief of cabinet of Connie Hedegaard, the EU’s first climate action commissioner.
Mr. Vis has co-edited a book on the future of the ETS with Jos Delbeke, the former director general of the European Commission’s DG CLIMA. The book, “Towards a Climate-Neutral Europe – Curbing the Trend”, can be downloaded for free as a PDF.
Making the case for there to be a post-coronavirus European economic recovery package consistent with the European Commission’s “European Green Deal” is already a crowded field.
But will that call be heard? Certainly, if Ursula von der Leyen’s goal of a carbon-neutral Europe by 2050 were to be thrown off track in the early stages of a new five-year mandate, the President of the European Commission – and the Parliament that supported her nomination – would lose all credibility, even in the throes of the coronavirus crisis.
European institutions have been stung by criticism over the EU’s response to the health crisis. Nevertheless, the case for international collaboration to counter a global pandemic is being made by the virus itself.
Parallels are easily drawn with the climate crisis. Anticipation and preparedness are key. Of course, there are major differences too, particularly with respect to speed. Climate change is a slow onset crisis, but the effects are irreversible on any practical human timescale. Effective responses in both cases must be informed by science, entail collective effort, and require investments to be made before the worst effects make themselves felt.
The economy does need a push, and we now have an opportunity to shape it. As is common to all publicly funded stimulus measures, conditions must be applied. For there to be no conditionality would be an abject negation of the principles of good governance and responsible financial management.
There is at least convergence of timing between the need for a large economic stimulus package just when the transition to a carbon-neutral economy will require hundreds of billions of euros of extra public and private investment every year.
So what should the guiding principles be for the coronavirus economic stimulus package? They must ensure that investments funded from public sources contribute to the objectives of the European Green Deal while creating jobs and kick-starting economic activity. What is being sought are productive, future-orientated investments that fit with the goal of carbon neutrality by the mid-century.
Here are three concrete examples that fit these principles:
First, the planned “renovation wave” already foreseen by the European Green Deal needs to be bigger and better funded than anything yet attempted. The target should be the existing building stock rather than new buildings. A performance-focused investment in retrofitting existing housing will reduce fuel poverty and energy imports into the EU and will have health benefits linked to protecting citizens against extremes of both heat and cold.
Such a renovation wave will create local jobs and reduce emissions by savings energy. Europe already excels in the production of high-quality building materials with high insulation capabilities. If we can beat the coronavirus, then surely we can put in place a renovation wave that really makes a difference.
Second, a car scrappage scheme combined with investment in public transport should be envisaged that gives benefits to those who forego their cars and switch to public transport, or, where cars are replaced, aid should only go to those whose replacement cars are ultra-low emissions vehicles.
The subsidy scheme should help offset the cost of season ticket purchases, or offset the higher cost of ultra-low emission vehicles. By stimulating the uptake of such vehicles, manufacturers will more easily meet their CO2 performance standards. Air quality improvements in cities will provide lasting health benefits. Investment in public transport will increase its attractiveness and create jobs.
Third, the aviation sector has been hit hard by the coronavirus crisis and must be put back on its feet, but on a path to sustainability.
Economic support to the sector should require the use of an increasing blend of innovative synthetic fuels made from sustainable renewable energy. Such fuel is certainly more expensive, up to four times more so than conventional aviation fuel, and the availability is extremely limited (far below 1% of aviation fuel used). Small beginnings will have to be scaled up over time.
Costs of such synthetic fuels will come down as the market for them expands. We have seen this happen in Europe with renewable energy technologies. If the cost of air travel increases modestly, that is a small price to pay by a sector that has long benefitted from fuel and sales tax exemptions. Aviation will continue to be a crucial sector for our future economies. It also needs to become sustainable. This cannot be done in the short-term, but a pathway for achieving this goal must be formulated now.
Both the coronavirus and climate crises will require planning, collaboration and the sharing of innovative solutions if we are to succeed. The present coronavirus is causing immense hardship and suffering which necessitates immediate responses. Fortunately, there is confidence that this health crisis can be overcome.
However, the climate crisis is a medium- and longer-term crisis, without there being the same confidence that the crisis will be overcome. Much depends upon an adequate global response made in time. Mitigation and adaptation measures must be strengthened now.
If in addressing the economic consequences of the present health crisis we can also reduce emissions and improve our resilience for the climate crisis, then we will all stand stronger when the fight against the coronavirus is eventually won.