EU outflanked by Asian rivals on green economy

global_food_security_06.jpg

Europe’s stimulus spending on greening the economy is dwarfed by China’s investment, with some EU countries diverting less than 2% of national recovery plans into sustainable industries. The disparity has sparked fears that ‘green jobs’ will migrate to Asia.

Figures from banking giant HSBC show the percentage of EU spending directed towards green measures is less than 10%. This looks paltry when compared with South Korea, for example, which has earmarked 80% of stimulus spending for greening the economy. Others are also racing ahead, including Australia with 40%, China with 34%, and Japan with 15%. 

A policy paper by the European Trade Union Institute said green spending in Europe is considerably less than is widely acknowledged as necessary. Not only does this leave Europe lagging behind Asia, but the report says many of the measures described by European governments as “green” will not actually contribute to a more sustainable economy.

A separate report commissioned by the UN’s Green Economy Initiative calls on high-income OECD countries to spend at least 1% of GDP on reducing carbon dependency. Most EU nations currently fall well short of this target.  

However, even in countries like France, where a major emphasis has been put on green fiscal stimulus programmes, independent analysis of these suggests the climate-relevant elements of the spending plan have been over-estimated by the French government. 

Matching US, trailing China

Europe has been on the defensive, highlighting its efforts to prioritise big-ticket green projects in areas like greener cars and buildings. 

The EU executive is pumping €40 billion into green measures with the twin aims of reducing carbon emissions and sparking green job creation. On top of that, a further €3.9 billion has been earmarked for green R&D and infrastructure projects as part of the European economic recovery plan. 

Add to this investment from the stimulus programmes rolled out by European governments, and the total comes close to somewhere between €86 billion and €90 billion. 

However, while this is comparable to US spending of around $80 billion, it falls well short of the €150 billion invested by China. 

Karl Falkenberg, director-general of the EU executive’s environment arm, said the combined investment from the European Commission and national budgets amounts to a significant commitment to greening the economy. 

“Compared to our transatlantic friends and competitors we look reasonably well, but Korea and China have significantly higher amounts reserved for greening the economy,” he told a BusinessEurope conference in Brussels last week (28 October). 

Disparity in levels of green investment across Europe 

Falkenberg said European governments had been invited to focus on green initiatives in their stimulus packages, but Brussels is “not totally satisfied with the response from some member states”. 

A huge gulf has opened up between the proportions of spending committed by EU member states to the green economy. He said Italy is spending just 1.3% of its stimulus package on green projects, compared with 21% in France. 

“There is a lot of potential in the member states to do more,” Falkenberg said. 

However, he added that the European Commission’s role is limited when it comes to influencing national budgets and Brussels is focused on coordinating investment. 

Political support needed for high-risk R&D 

Thomas Weber of Daimler AG said manufacturing industries, including the auto sector, needed support to expand into expensive new fields such as battery technology and carbon capture and storage (CCS). 

“We have to ask who will be the world leaders in these areas. Will it be the US, the EU or will it be the most dangerous opponent – China?” he asked. 

Claude Turmes, a Green MEP from Luxembourg, said Europe would have to weigh in behind its industries in order to compete with Chinese industry. 

He said Europe may need “an Airbus-type solution” for its battery technology sector if the EU is to take on giant state-backed monopolies in China, noting that European efforts in this field are currently too fragmented. 

The European Commission’s Falkenberg said there is already considerable cooperation between EU companies and their counterparts in China and South Korea, particularly in the area of battery technology and CCS, where pilot projects are already under way. 

“This is a global challenge and we will have to work with our global partners,” said the senior EU official. 

Fears that new green jobs will go oversees 

Falkenberg added that it was essential to keep green jobs in Europe for social and environmental reasons. He said the EU’s climate package was designed to be feasible for industry because if companies were to leave Europe, they would move to regions with lower environmental standards. 

John Monks, secretary-general of the European Trade Union Confederation (ETUC), said Europe is at risk of setting standards so high that it will hurt its competitiveness and job situation. 

He said established industries are under threat and “not everyone is confident technology is the way out”. Monks cited the ailing steel industry as an example of a sector that is suffering but has little to gain from the promise of high-tech green jobs. 

“All our experience suggests that the transition to new technologies will be painful. Jobs will be lost and older workers will be hardest hit. We have to manage it in a way that avoids social catastrophe,” he said. 

Aldo Fumagalli Romario, chairman of 
Confindustria
's committee on sustainable development, said Europe has a strong manufacturing industry which could benefit from the sustainability challenge. 

He stressed that the manufacturing and construction industries account for a third of Europe's GDP and said it was important to incite existing businesses to be more sustainable. 

Mariya Nikolova, researcher at the European Trade Union Institute in Brussels, said there is consensus that the crisis is an opportunity to lay the foundations for the green economy, but many of the measures proposed to date fall short. 

"Green spending in Europe is considerably smaller than what is widely acknowledged as necessary and is left behind by the green investments of Asia and the Americas," she said. 

Europe is investing billions of euros into reorienting its economy towards a more sustainable path. In doing so, it aims to get ahead of global competitors in green technologies, which are seen as a major source of future innovation and competitiveness. 

However, there are concerns that the 'green jobs' promised by this change will not be enough to replace the jobs lost in outdated industries. Europe's economic recovery plan had a major focus on the green economy, but critics say the investment is not coordinated and will see the EU slip behind larger, more focused programmes being rolled out in China and the US (EURACTIV 27/11/09). 

The recovery plan features three public private partnerships (PPPs), including the Green Cars Initiative and measures to make buildings greener (EURACTIV 27/11/09). 

Subscribe to our newsletters

Subscribe