The European Green Deal

What is the European Green Deal, which policy areas are impacted by it and what is the roadmap for its implementation?

The European Green Deal is the new growth strategy for Europe and a dedicated roadmap for making the EU’s economy sustainable. In the words of Ursula von der Leyen, President of the European Commission: “This is Europe’s man on the moon moment. Our goal is to reconcile the economy – the way we produce, the way we consume – with our planet and to make it work for our people.”

In this article, we introduce the European Green Deal by answering four questions. First, what is the European Green Deal? Second, which policy areas are impacted by the European Green Deal? Third, what is the roadmap for the European Green Deal? Fourth, where does the money come from?

 

What is the European Green Deal?

First outlined as a strategic priority in the political guidelines of Commission President Ursula von der Leyen, the European Green Deal was later detailed in the Commission Communication on the Green Deal.

The European Green deal sets out a detailed vision with the aim to make Europe the first climate-neutral continent by 2050, to safeguard biodiversity, establish a circular economy and eliminate pollution while boosting the competitiveness of European industry and ensuring a just transition for the regions and workers affected. Achieving carbon-neutrality by 2050 requires a move away from coal, oil and gas as well as a comprehensive restructuring of the economy, agriculture, transport and private energy use. The EU Green Deal strives to implement this move, while at the same time taking account of the needs of the economy and the importance of promoting solidarity among the Member States.

 

Which policy areas are impacted by the European Green Deal?

The EU Green Deal is ambitious and broad in scope, targeting climate, energy, agriculture, biodiversity, forests, food, green cities, the circular economy and many more. It is about cutting emissions while, at the same time, creating jobs and boosting innovation. Eventually, the European Green Deal should contribute to a Global Green Deal. Nine policy areas are located at the heart of the European Green Deal:

  • Climate action: Making the EU climate-neutral by 2050 is at the heart of the Green Deal. The Green Deal included, therefore, a climate initiative paving the way towards climate-neutrality. First, the European Climate Law that enshrines, into law, the climate-neutrality objective. Second, the European Climate Pact is an EU wide initiative to engage citizens, communities and organizations in climate action. Third, the 2030 Climate Target Plan aiming to cut GHG emissions by at least 55% by 2030 (EC, 2020f). The planned revisions required for the Climate Target Plan are presented under the ‘Fit for 55’ Package.
  • Clean energy: Decarbonizing the EU’s energy system is critical to reaching climate-neutrality. This policy area is based on three fundamental principles. First, prioritize energy efficiency and renewable energies. Second, secure and affordable EU energy supply. Third, a fully integrated, interconnected and digitalized EU energy market.
  • Biodiversity measures: the EU ecosystem is fragile and needs to be protected. The EU biodiversity strategy for 2030, part of the Green Deal, aims to put Europe’s biodiversity on the recovery path by 2030, targeting the biodiversity loss’ drivers, bringing benefits to all, the people, climate and planet.
  • From Farm to Fork: European food systems account for nearly one-third of global GHG emissions and consume large amounts of natural resources, which highlights the need to redesign them. The ‘From Farm to Fork’ strategy aims to ensure a healthier and more sustainable EU food system.
  • Sustainable agriculture: Agriculture and forestry are not only about providing feed and food. They are also about providing non-food products needed for different types of consumers and industries. This requires a multitude of geographical and socio-economic conditions. The Common Agricultural Policy (CAP) combines social, economic, and environmental approaches in order to realize a sustainable agriculture system. The CAP reform specifies the future direction for the CAP and incorporates the Green Deal sustainable objectives. It also sets the path for the “farm to fork” strategy.
  • Sustainable industry: EU industry should be assisted to evolve and make the most of domestic and global opportunities. The new EU industrial strategy, based on circular economy principles, aims to support the green transformation. A key aim should be to create more sustainable and environmentally-friendly production cycles via the development of new markets for climate-neutral products.
  • Building and renovating: The European Commission recognizes the need to develop a cleaner construction sector and to start a renovation wave of buildings to help people cut their energy bills and decrease their energy use. The Renovation Wave Strategy aims to improve the energy performance of buildings, leading to higher energy and resource efficiency. The Commission targets at least double renovation rates by 2030. Thirty-five million buildings could be renovated by then, and up to 160,000 additional green jobs created.
  • Sustainable mobility: The Green Deal includes measures to reduce emissions in transport by promoting more sustainable means of transportation. The Sustainable and Smart Mobility Strategy lays the foundations for the future EU transport system. The strategy aims to achieve a green and digital transformation and make the transport system more resilient. The targeted transport system is smart, competitive, safe, accessible and affordable.
  • Eliminating pollution: The Green Deal encompasses a plan to protect Europe’s citizens and ecosystems and prevent air, water and soil pollution. The Zero Pollution Action Plan includes measures to cut pollution rapidly and efficiently. It aims to attain no pollution from “all sources” and clean the air, water and soil by 2050.

 

What is the roadmap for the EU Green Deal?

The publication of the European Green Deal Communication by the European Commission in December 2019 was only the beginning of a long journey. In the annex of that communication, an indicative timetable was published for 47 key policies and measures to be implemented in the framework of the Green Deal. This initial roadmap and timeline will be updated according to evolving needs and required policy responses. All EU actions and policies are henceforth expected to contribute to the Green Deal objectives. The timeline of policies and measures taken so far is summarised in Figure 1.

eu green deal
Figure 1: Timeline of EU Green Deal policies and measures from December 2019 to January 2021

 

The European Climate Law

In March 2020, the European Commission published a proposal for the European Climate Law. It aims to complement the existing policy framework, i.e. the “2030 climate and energy framework”[1], by setting the long-term direction of travel and turning the political commitment to achieve net zero greenhouse gas emissions by 2050 into a legally binding obligation and a trigger for investment.

In September 2020 and based on the 2030 Climate Target Plan, the European Commission published an amended proposal for the climate law that raises the 2030 greenhouse gas emissions reduction target, including emissions and removals, from at least 40% to at least 55% compared to 1990. In December 2020, the European Council endorsed the 55% net emissions reduction target for 2030. At the time of writing, trialogue negotiations are in progress.[2]

The updated target of 55% results in the need to update the legislation that was foreseen to implement the 40% GHG emissions reduction target, which includes Regulation (EU) 2018/1999 on the Governance of the Energy Union and Climate Action, the EU ETS, the Effort Sharing Regulation with Member States’ emissions reduction targets, and the Land use, land use change and forestry (LULUCF) Regulation (EP and Council, 2018b). In addition, it is foreseen to reinforce energy efficiency and renewable energy policies and to strengthen CO2 standards for road vehicles.[3]

The proposal for a European Climate Law empowers the European Commission to adopt delegated acts setting out a trajectory to reach carbon-neutrality by 2050, starting from the 2030 targets. When setting the trajectory, the Commission needs to consider a broad range of factors including cost-effectiveness, the competitiveness of the EU economy, fairness and solidarity, just and socially fair transition as well as technology, science and international developments.

The European Commission is required to monitor and assess the collective progress towards the 2050 climate-neutrality objective as well as the consistency of relevant EU and Member State measures with the climate neutrality objective. In case of insufficient progress or inconsistencies with the objective, corrective measures would need to be taken. The assessments need to be based on information submitted as part of the Member States’ National Energy and Climate Plans (NECPs), reports of the European Environment Agency (EEA), European statistics and data, scientific evidence and supplementary information on environmentally sustainable investment. The assessment of national measures is foreseen to be included in the annual State of the Energy Union Report. The global progress will be reviewed every five years, in line with global stocktaking measures foreseen in the Paris Agreement.

 

Where does the money come from?

The implementation of the Green Deal ambitions requires significant investment from the EU and national public sectors, and the private sector. In January 2020, the European Commission published a communication that detailed the investment pillar of the European Green Deal: The European Green Deal Investment Plan (EGDIP), also referred to as the Sustainable Europe Investment Plan.

The EGDIP aims to finance a sustainable transition by complementing other initiatives under the Green Deal and combining legislative and non-legislative initiative. The EGDIP has three main objectives:

  • Financing the transition through the mobilization of at least €1 trillion of sustainable investments over the period 2020-2030 to reach the updated 2030 climate and energy targets. Creating an enabling framework to facilitate sustainable private investments and the public sector investments needed for the green transition.
  • Providing support to public authorities and project promoters for the planning and execution of sustainable projects.

The EGDIP builds on contributions from the EU budget, national budgets to EU projects, public and private investments mobilised by InvestEU and the ETS funds (Modernisation and Innovation Funds), as is shown in Figure 1. Part of the plan is the Just Transition Mechanism, which is designed to provide financial support and technical assistance to those most affected by the green economy’s transition. The European Commission is convinced that the transition towards a more sustainable economy and a climate-neutral continent can only be successful if it works for all Europeans and nobody is left behind.

The Just Transition Mechanism will be financed from the EU budget, co-financing will be provided by the Member States and contributions are foreseen from the InvestEU programme and the European Investment Bank (EIB). It consists of three main sources of financing:

  • A Just Transition Fund used primarily to provide grants.
  • A dedicated just transition scheme under InvestEU that will crowd in private investments.
  • A public sector loan facility with the European Investment Bank backed by the EU budget to leverage public financing and mobilise additional investments to regions concerned.

The Just Transition Mechanism is, however, more than funding. The mechanism will also include a strong governance framework and a Just Transition Platform through which the European Commission aims to provide technical assistance to Member States and investors and to ensure that affected communities, local authorities, social partners and non-governmental organisations are involved.

The debate on the European Green Deal Investment Plan and the Just Transition Mechanism cannot be decoupled from the debate that took place on the EU’s long-term budget, the 2021-2027 Multiannual Financial Framework (MFF), which in itself was linked to the debate on the Next Generation EU (NGEU) recovery instrument. In May 2020, the European Commission presented its recovery plan from the consequences of the COVID-19 pandemic, including proposals for a NextGenerationEU (NGEU) recovery instrument and a revised MFF. The political negotiations that followed led to an increase in the percentage of spending allocated to climate action, but also resulted in reductions of the budget for other instruments.

eu green dea
Figure 2: Conceptual overview of the mechanisms to finance the European Green Deal (modified from EC, 2020)

A significant contribution to the EGDIP is coming from the EU budget. In January 2020, the Commission proposed that 25% of the total EU be allocated for climate action and environmental. The political agreement of the Special European Council of July 2020 raised the spending target for climate actions from 25% of the EU budget to 30% of the total amount of expenditure from the EU budget 2021-27 and NGEU. Following its adoption in December 2020, the EU’s final 2021-27 long-term budget amounts to a total of €1,824.3 billion and is composed of the 2021-2027 MFF (€1.074 trillion) and the temporary recovery instrument NGEU (€750 billion). This means that, over the period 2021-27, climate-relevant projects could receive some €550 billion. It is expected that such a high contribution of the EU long-term budget to the EDGIP will stimulate an additional national co-financing on climate and environment projects.

However, the allocations proposed by the European Commission for other climate-specific instruments were reduced, the effects of which are not entirely clear yet. The budget for the Just Transition Fund, which is one source of financing for the Just Transition Mechanism, was reduced from €40 billion (€10 billion from the MFF and €30 billion from NGEU) to €17.5 billion (€7.5 billion under the new MFF and €10 billion under NGEU).

Another significant contributor to the EGDIP is InvestEU. InvestEU was proposed in June 2018 as part of the future long-term EU budget and both complements and significantly contributes to the EGDIP. Noteworthy is the inclusion of an EU budget guarantee to allows the European Investment Bank Group and other implementing partners such as National Promotional Banks and International Financial Institutions to invest in more and higher-risk projects. InvestEU is foreseen to have a budgetary guarantee of €26.2 billion funded from NGEU resources and the MFF. The overall investment to be mobilized on this basis is estimated at more than €372 billion across the EU, of which 30% will contribute to climate objectives.

A smaller contribution to the EGDIP is coming from the EU ETS system. The European Commission foresaw about €25 billion to come from the Innovation and Modernisation Funds that are financed by a part of the revenues stemming from auctioning carbon allowances under the EU ETS.


Notes

[1] The key targets in the 2030 climate and energy framework are: (i) at least 40% cuts in greenhouse gas emissions (from 1990 levels), (ii) at least 32% share for renewable energy, (iii) at least 32.5 improvement in energy efficiency.

[2] Note that the European Parliament had called for a more ambitious target of 60% emissions reduction by 2030.

[3] Proposals for updates are expected by 30 June 2021.

 

If you still have questions or doubt about the topic, do not hesitate to contact one of our academic experts:  

Valerie Reif,  Nicolò Rossetto

 

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The EU Green Deal

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