The upcoming EU Industry Strategy must be a cornerstone of the Green New Deal, making it possible for the EU to both meet its climate goals and strengthen its global industrial leadership in a fast-changing global economy, write Adair Turner and Sandrine Dixson-Declève.
Adair Turner is Chair of the Energy Transitions Commission. Sandrine Dixson-Declève is President of the Club of Rome and Senior Advisor to the Energy Transitions Commission.
Enthusiasm and a renewed sense of opportunity: this is the predominant response from the global and European business leaders who compose the Energy Transitions Commission after the release of the EU’s Green New Deal by the new European Commission.
In November 2018, we had collectively argued in favour of a “net-zero by 2050” target for Europe, based on our Mission Possible report, which demonstrated the technical and financial feasibility of this goal, including for the “harder-to-abate” sectors of the economy. A year later, we are delighted that this target has now been confirmed by the European Union, paving the way for other major regions in the run up to COP26, in particular for China, where the ETC’s latest report China 2050: a fully developed rich net-zero economy has just shown that a similar goal could be set and reached.
The two flagship measures of the Commission’s first 100 days – the Climate Law and the Just Transition Fund – are essential foundations to ensure that the net-zero target can be achieved.
But actually getting there will be no small endeavour. It will require a profound transformation of our energy systems, with a massive increase in renewable power generation and parallel drop in fossil fuels consumption.
It will also demand major change across all energy-intensive sectors. In buildings, transport and industry, disruption will come from new business models (with a shift from linear, product-based to circular, service-based models) and from new technologies enabling the use of zero-carbon energy sources in multiple applications (with electrification of end uses playing the most important, though not exclusive, role).
That’s why the upcoming EU Industry Strategy must be a cornerstone of the Green New Deal, making it possible for the EU to both meet its climate goals and strengthen its global industrial leadership in a fast-changing global economy. The Energy Transitions Commission is working with a range of global industry leaders across sectors as diverse as steel, chemicals or aviation.
Businesses are positive: technologies to heat our homes, produce materials, move people and goods without emitting carbon are known and within reach, but companies cannot deploy them at scale and flourish economically in the absence of appropriate policies to ensure that green products and services can outcompete high-carbon ones.
Expanding carbon pricing to the harder-to-abate sectors will be essential to bridge that gap. Given the exposure of most of these sectors to international competition, this will have to come with some form of border adjustment – and we welcome the audacity of the President who clearly put this question on the agenda of the Commission. Bilateral trade deals can also be a powerful vehicle to help major trade partners like China and India walk the road to net-zero with us.
Inevitably however, these agreements will be several years in the making and we cannot wait to act. The EU can and should drive progress in the meantime, by ramping up support for innovation, industrial-scale demonstration and early deployment, stimulating demand for green products and services (through lifecycle carbon emissions standards on key end-consumer products and public procurement practices), and laying out in 2020 clear sectoral emissions targets for 2030, 2040 and 2050.
The supply of finance is not the key constraint; if the business case for low carbon investment were clear, financing would follow; but without a robust business case, it won’t. The EU Green Industry Strategy needs to create that business case so that European industry can thrive on the road to net-zero.