Wednesday, 05 May 2021 08:30

The Green Brief: Beware the carbon price backlash Featured


Since she took office in December 2019, European Commission President Ursula von der Leyen has been talking big about climate change, saying global warming is “an existential crisis” and dubbing the European Green Deal as “Europe’s man on the moon moment”.

That EU leaders are finally addressing climate change is a welcome development. But it also creates expectations. What if Europe fails to deliver? What if the transition to a green economy creates social and economic disparities within the EU?

Those concerns are likely to resurface after the price of carbon on the EU’s emissions trading scheme hit €50 per tonne for the first time ever this month.

A higher carbon price is a good thing, of course, because it encourages polluting industries to invest in cleaner technologies. This is good news for the climate and the modernisation of Europe’s economy.

But if, as expected, the price of carbon continues to increase – by 2030, it could hover around €100 per tonne – the impacts will soon be felt across the entire economy.

What will be the consequences? First among the industries impacted will be the electricity sector, which will likely pass on the rising cost of carbon to their clients. You and me, that is.

While rising electricity prices may not be an issue for Brussels Eurocrats, they can have far-reaching political consequences at the national level. In Bulgaria, the prime minister was forced to quit in 2013 following weeks of mass protests over electricity bills.

What lessons can be drawn from this? First, extending the carbon market to housing and transport, like the European Commission is planning to do, is a high-risk policy that should be handled with care. The rewards in terms of climate are likely to be slim, while the social consequences are unpredictable.

A further risk is that social policies are decided at the national level, not at the EU level. The result is a patchwork of national policies to deal with essential questions like when or how to phase out coal.

“We’re indeed always in a situation where the policy ambition is at the European level, and the policy tools are at the national level. So you end up with a puzzle effect and regional disparities as a result of that, with leaders and laggards,” said Judith Kirton-Darling, a former MEP turned trade union leader.

“Politicians at every level need to understand: we need climate ambition, but we need that social pillar alongside,” she told EURACTIV in a recent interview.

Granted, the EU has adopted a Just Transition Fund worth €17.5bn to cushion the social impact of the transition. But this pales in comparison with the €40bn that Germany is pouring into its own coal transition, exposing glaring disparities in Europe when it comes to managing the social aspect of the green transition.

Frans Timmermans, the vice-president of the European Commission, has coined a catchphrase about it: “This will be a just transition, or there will just be no transition.”

He is entirely right, of course. “By far the biggest challenge is to create a just transition,” his chief of staff said at a recent EURACTIV event. If people are left on the sidelines, they will take the issue to the streets. And protests can sometimes turn violent.

  • EU carbon price hits record €50 per tonne on route to climate target
  • LEAK: EU’s draft renewables law confirms 38-40% target for 2030
  • Germany’s onshore wind expansion continues to struggle
  • EU sets plan to promote rapid green transition of key industries
  • EU’s industry alliances need stricter oversight, say green critics
  • A tale of three countries: how Czechia, Germany, and Poland plan to ditch coal
  • Expert: Limit living space to shrink building carbon footprint
  • Mainstream parties block ECR resolution to force vote on Nord Stream 2
  • EU ‘concerned’ by Ukraine sacking of energy firm chief
  • Poland prolongs Turow mine life despite international outcry
  • Carbon border levy should start with steel, cement and fertilisers, says Poland

STOCKHOLM. Nuclear energy to make a comeback in Sweden? Preceding next year’s general elections, nuclear energy is once again a focal point of political debate in Sweden, after a television debate on Sunday made apparent that liberal-conservative Moderates, Christian Democrats, Liberals and Sweden Democrats would be ready to build new nuclear capacity once in power. Read more.

SOFIA. Hunting fences restrict access to 470,000 decares of land in Bulgaria. More than 470,000 decares of Bulgaria’s land and forests are restricted to the public by hunting fences, many of which are controlled by private companies, announced the Green Laws initiative on Tuesday, following a large-scale study under the Access to Public Information Act. Read more.

BERLIN. Germany hatches plan to attract green investment capital. The German government is planning a new green financing strategy to steer capital towards environmental projects and develop Germany into a leading hub for sustainable finance. Read more.

VIENNA. Austria proposes reform of Euratom treaty. Austria’s Green Climate Action Minister Leonore Gewessler presented a proposal on Monday to reform the Euratom nuclear treaty, saying its current version is outdated and that stricter rules for the security and decommissioning of nuclear stations and for the final storage of nuclear waste should be adopted. Read more.

BERLIN. German government to discuss the Climate Protection Act. After Germany’s Constitutional Court last week has ruled that the country’s Climate Protection Act does not go far enough to protect future generations and is therefore unconstitutional, Chancellor Angela Merkel is set to hold government talks on a possible amendment to the law. Constitutional judges in their ruling gave the legislature until the end of next year to draw up clearer reduction targets for greenhouse gas emissions for the period after 2030. (Alexandra Brzozowski, EURACTIV.com)

BRATISLAVA. Bratislava port to get its own €40 million LNG terminal. Slovakia is to get a new Liquefied Natural Gas (LNG) terminal worth €40 million aimed at reducing greenhouse gas emissions and pollutants in inland waterway transport on the Danube river, the state-owned investor Public Ports company has said. Read more.

ZAGREB. Most Croatian banks still do not consider climate change to be a serious threat to their business, a survey carried out by the Croatian National Bank (HNB) showed on Thursday. The survey was presented as part of an online conference called “The Role of Banks in Greening Our Economies”, organised by the HNB and the European Bank for Reconstruction and Development (EBRD). According to the survey, only two banks have a climate change-related strategy included in their overall business strategy, expressing concern about risks and anticipating possible changes to the regulatory framework. However, 15 banks said they were waiting for the regulators to take initial steps. (Željko Trkanjec | EURACTIV.hr)

ROME. Italian recovery plan to be submitted to EU Commission. Italy’s recovery plan received its final approval from the Council of Ministers Thursday and will be submitted to the European Commission on Friday, in line with the deadline set by the EU executive. Alongside the €220 billion plan financed by the Next Generation EU funds, a complementary fund worth €30.6 billion for infrastructure was also approved.

“We are among the first countries to submit the national recovery plan to the Commission. There are more than €220 billion in play that will be used to invest in skills, create jobs and start big projects in line with green transition and digitalisation objectives,” said Foreign Minister Luigi Di Maio. “Around €100 billion will be destined to the South of Italy, to ensure all Italians have the same opportunities.” (Alessandro Follis | EURACTIV.it)

LJUBLJANA. Slovenia adopts national recovery plan, eyes higher green spending. Slovenia plans to significantly exceed the green spending target set in the EU’s Recovery and Resilience Facility but will not take advantage of the entirety of the available loans, according to the National Recovery and Resilience Plan that the government adopted on Wednesday. Read more.

PODGORICA. Montenegrin government doesn’t want to give up coal-powered thermal power plant. Montenegro is currently not in a position to give up the Thermal Power Plant (TPP) Pljevlja, Montenegro’s Prime Minister Zdravko Krivokapić stated in parliament. “There are about 1,400 employees in the TPP, as well as a large number of workers in the coal mine, which is directly related to the TPP,” Krivokapić said.

“The government is committed to implementing a drastic reduction in CO2 emissions and the transition of our energy to renewable energy sources. However, as serious and responsible people, we must carefully analyse the decision to accept 2030 as the year of zero emissions. It must be preceded by a complex analysis,” he added. (Željko Trkanjec | EURACTIV.hr)

‘Fit for 55’ delayed to 14 July. The European Commission’s mammoth package of climate and energy laws, initially expected in June, has been postponed to 14 July. The package, dubbed ‘Fit for 55’ aims at reaching the EU’s objective of cutting emissions by 55% compared to 1990 levels by 2030. More.

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Poland to end hard coal mining by 2049. The Polish government finalised an agreement with trade unions on Wednesday (28 April) to gradually shut down the country’s hard coal mines by 2049. The agreement, described as historic by the Polish state asset ministry, was denounced by green NGOs as insufficient in view of the climate emergency and the EU’s commitment to the Paris Agreement on climate change. It also does not cover lignite mines, like the EU’s biggest thermal power plant, Bełchatów, or the controversial Turów mine.

A preliminary deal had already been brokered in September. Unions had originally wanted the target for phasing out coal to be pushed back from 2050 to 2060, and warned that hasty mine closures would have disastrous economic and social consequences. The agreement must now be approved by the European Commission, which will oversee the part of the deal related to coal sector aid. More on EURACTIV.fr.

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King of the castle – Renew Europe is the new power in climate policy. Since the European Parliament elections in 2019, the centrist Renew Europe group has become the kingmaker in climate legislation, according to a report by the Jacques Delors Institute in collaboration with VoteWatch.eu. That puts France in a strong position as Renew is strongly influenced by French MEPs, but is also good news for the climate, as Renew is greener than its predecessor, the Alliance of Liberals and Democrats for Europe Party.

The report also found a fault line between progressive groups (S&D, Greens and the Left) and conservatives (EPP, ECR and ID) when it comes to climate policy, allowing Renew to shift its support between the two. There is also a national divide that goes beyond party allegiance, particularly around the energy transition. This is especially the case for MEPs from coal-reliant eastern European countries. Read the full report here. (Kira Taylor | EURACTIV.com).

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‘Tale of two cities’. French banks are making substantial progress on phasing out coal, but UK banks are dragging their heels, found a report by green NGO, Reclaim Finance. 19 French financial institutions now have coal policies and 26 plan to exclude coal mine and plant developers, compared to only one in the UK.

The UK financial sector is undermining government efforts to phase out coal and puts in doubt the government’s claim that it is leading on tackling climate change, according to Reclaim Finance.

“This report shows a tale of two cities. While in Paris banks and investors got their act together after COP21, the City of London isn’t lifting a finger to end its deadly coal addiction, even if that means wrecking the UK’s reputation on climate,” said Lucie Pinson, Founder and Executive Director of Reclaim Finance. Read the full report here. (Kira Taylor | EURACTIV.com)

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Brussels clears €33bn German state aid for renewables. The European Commission cleared on Thursday (29 April) the prolongation of a German scheme to support the production of electricity from renewable energy sources and from mine gas, as well as reductions of charges to fund support for electricity from renewable sources. The reduction of charges will be available to (i) energy-intensive companies and (ii) shore-side electricity supply to ships while at berth in ports.

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Green light for €400 million Danish scheme to support renewable electricity production. The European Commission also approved a Danish aid scheme to support renewables, which had come up against state aid rules. The scheme aims to help Denmark reach its renewable energy target by supporting onshore and offshore wind, wave power plants, hydroelectric power plants and solar PV.

“This Danish scheme will contribute to substantial reductions in greenhouse emissions, supporting the objectives of the Green Deal. It will provide important support to a wide range of technologies generating renewable electricity, in line with EU rules,” said Executive Vice-President Margrethe Vestager, who is in charge of competition policy.

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New climate pledges put the world on track for 2.4°C warming. The new climate targets announced at the US climate summit have reduced projected warming based on pledges by 0.2°C, according to analysis by Climate Action Tracker. Meanwhile, if net-zero targets are met, end of century warming could be capped at 2°C, the upper limit of the Paris Agreement.

“It is clear the Paris Agreement is driving change, spurring governments into adopting stronger targets,” said Bill Hare, CEO of Climate Analytics, but he warned that governments still need to step up as their estimate for forming based on current policy is still 2.9°C warming – nearly twice what it should be.

The summit saw new announcements on climate targets from the US, the EU, the UK, Japan and Canada, while China clarified it would start phasing out coal in the latter half of this decade. (Kira Taylor | EURACTIV.com)

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EU pushes Antarctica marine protected area. The EU’s environment commissioner, Virginijus Sinkevičius, hosted a ministerial meeting on Wednesday (28 April) to garner support for the designation of new marine protected areas in the Antarctic. The meeting saw the United States and New Zealand rally behind calls to establish marine protected areas in East Antarctica and in the Weddell Sea. More.

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Ukraine energy shake-up. In a surprise move, the Ukrainian government dismissed on Wednesday (28 April) Andriy Kobolyev, the long-serving CEO Naftogaz who had run the company for seven years. The CEO of the country’s state-run oil and gas company will be replaced by Yuriy Vitrenko, who was serving as energy minister until then. Vitrenko, an economist who holds a degree from French business school INSEAD, will be coming back to familiar territory at Naftogaz, where he served as Managing Director until December 2020.

The move was not to the taste of the existing management, though. In an angry statement, Naftogaz denounced the temporary dismissal of the company’s supervisory board as “a legal manipulation” to allow the dismissal of Kobolyev. The move is “a violation of the basic principles of corporate governance of state-owned enterprises,” Naftogaz said in a statement.

Later on Friday, several members of the company’s supervisory board announced their resignation. According to the outgoing management, the move “demonstrates a reversion to the practice of manual control of state-owned enterprises” in Ukraine. Georg Zachmann, a researcher at the Bruegel economic think-tank in Brussels, seems to share this view, saying on Twitter that “all this hardly complies with corporate governance”. Read the company’s press release here and story here. (Frédéric Simon | EURACTIV.com).

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ECB tells banks to ‘drastically’ improve climate risk management. Eurozone banks still do not include climate-related goals in their risk management processes and must make drastic improvements, said European Central Bank board member Frank Elderson.

“Euro area banks need to drastically improve their capacity to manage climate-related and environmental risks and start acknowledging how these risks can drive others, including credit, market, operational and liquidity risks,” he said on Thursday (29 April).

The deputy head of the ECB’s supervisory arm added that the ECB will not have to wait for regulatory developments before formulating its expectations on the management of climate-related risks and the supervisor is now incorporating the issue into its regular assessment of lenders. (EURACTIV.com with Reuters).

  • Unjust and environmentally damaging Turów mining licence prolonged until 2044 – By Martin Hojsik
  • Consumers will only renovate their homes if it’s easy and affordable – By Monique Goyens
  • New EU buildings rules are crucial to deliver on climate targets – By Monica Frassoni
  • It’s time to put climate targets first – By András Huszár, Michal Kaminski and Nils Meyer-Ohlendorf
  • GM food can and must be labelled – By Eleonora Evi
  • Wasted ink on waste water? – By Jean-Luc Wietor

7 MAY. What can the US and the EU learn from each other to accelerate climate action? With Diederik Samsom, head of Executive Vice-President Timmermans’ Cabinet, European Commission. Programme and registration here. [Supported by the Environmental Defense Fund]

20 MAY. Cogeneration and district heating: an enabler of the green transition? Speakers to be announced soon. Programme and registration here.[Supported by PGE]

  • 25 MAY: EU summit in Brussels (face-to-face). Discussions with centre on the coronavirus crisis, the battle against climate change and tensions with Russia. More.
  • MAY (date tbc): Commission to publish zero-pollution action plan for water, air and soil as part of the European Green Deal.
  • 21 JUNE: Environment council. Ministers are expected to adopt conclusions on the climate adaptation strategy.
  • 14 JULY: Fit for 55 package. The Commission is expected to table a huge package of green legislation in June, including a revision of the renewable energy directive, a revision of the emissions trading scheme and our first glimpse at a carbon border adjustment mechanism.