The EU’s green legislation could focus on promoting industry over achieving sustainability if June’s European parliamentary elections deliver a right-wing majority, policy experts have predicted.
A webinar hosted by Politico yesterday (10 April) on ‘Progress and prospects across sectors towards net zero’ saw analysts explore how the EU’s net zero ambitions could be shaped over the coming year, in light of an increasingly protectionist political atmosphere.
The team predicts the EU will need to prepare for a challenging “balancing act between Europe’s competitiveness and its climate objectives”.
Rightward swing?
Amanda Crowley, Politico research and data analyst, laid out her expectations for the parliamentary elections, with the right-leaning European People’s Party (EPP) expected to maintain a clear majority, while the “extreme right” Identity and Democracy (ID) party could come in third. The centre-left Socialists and Democrats bloc is expected to come in second.
This result could lead to an overall right-leaning parliament, which Crowley said would be likely to produce a more industry-friendly but less regulated approach to climate policy.
The key legislation which could be affected is the European Green Deal, which includes a pledge to reduce greenhouse gas emissions by 55% by 2030 and a commitment to achieve net zero by 2050.
Crowley notes that areas covered by the more recent ‘Fit for 55’ deal are also likely to be affected. This includes reforms to its Emissions Trading System (ETS), which shapes how businesses in EU member states pay tax on high-emission goods they produce, and the introduction of the Carbon Border Adjustment Mechanism for businesses importing carbon-intensive goods.
“While the upcoming election doesn’t directly negate the net zero ambition, it could slow down the pace of progress, or change how the EU approaches treating these goals.”
Possible pushback
Crowley said a right-wing parliament’s position on net zero is likely to comprise shades of “resistance, modification and variations” to the existing policy agenda.
She cited pesticide regulation as an area which could see possible resistance following a row-back on planned reductions in February, and warned that if sufficient members of right-wing parties were elected there could be resistance to “[accelerating] progress towards net zero”, diminishing the ambition of current targets.
Policy modifications that could help increase Europe’s competitiveness by supporting industry are likely, with a focus on adapting climate legislation to better accommodate sectors like agriculture.
Crowley added that the results of this industrial shift weren’t certain. They could “could necessitate compromises that could innovate new paths to sustainability”, but could equally “dilute the effectiveness of some of these environmental initiatives”.
There could be variation in both implementation of policy but also in the levels of commitment from member states, she suggested.
China competition
Chrystel Papi, Politico intelligence analyst, highlighted that the pivot towards strengthening industrial capacity to support net zero could also be motivated by the EU’s aim to reduce dependence on China amid geopolitical tension.
Describing the Asian nation as “dominating worldwide manufacturing and trade of most green energy technologies”, she noted that China accounts for 60% of the world’s capacity in solar, wind systems and batteries.
Yesterday, the EU began its probe into China’s wind turbine industry, claiming unfair competition due to state funding.
She also highlighted China’s large share of the market for critical minerals, vital for the net zero transition, which she said is high enough that it makes “the entire global supply chain vulnerable to incident”.
In response, the EU has pursued strategic partnerships with other nations like Australia, Canada, Namibia and Kazakhstan, as well as mineral-rich South American countries like Argentina and Chile.
It’s not just China that Europe faces as a rival. India is another rising competitor in the clean tech space, with up to US$3bn set aside for domestic production of electric batteries, cars and solar energy parts between 2022 and 2027.
IRA effect
Papi also points to the US’ Inflation Reduction Act (IRA) as spurring a new approach to industrial policy, causing the EU to reconsider government investment.
The IRA, first signed in August 2022 and expanded in early 2023, provides $369bn in subsidies and tax incentives for green technology manufacturing.
Papi describes the slew of green tech investment worldwide – though particularly from the US – as “reviving Europe’s deep-seated fears of deindustrialisation, compelling the union to respond with its own growth strategy”.
The Green Deal itself contained greater stimulus for green tech industries and also paved the way for the Net Zero Industry Act, which deregulated the permit process for establishing manufacturing projects contributing to net zero.