What next for the Green Deal?

Two weeks ago, Europeans had their say in European Parliament elections with a clear result: they still back the Green Deal. But public acceptance cannot be taken for granted. Farmer protests in Brussels and other major capitals highlights the real strain that people are facing today – cost of living, European competitiveness and the ease of doing business – all these have taken the limelight as green concerns wane.

Achieving green objectives, widely legislated over the past five years, while maintaining public support calls for a refocused effort. It will require recommitting to the Green Deal as a strategic priority alongside the arising issues. This is the key message our President and E.ON CEO, Leo Birnbaum , and Secretary General, Kristian Ruby , shared with European Heads of State and Government ahead of the European Council meeting on 27 and 28 June. Today, we are unpacking why.

The Green Deal has a proven track record

To argue in favour of the Green Deal going forward, let’s first take a look back. To date, the Green Deal has proven itself to be resilient and a net positive for the EU. Whether for climate action, economic opportunity or energy security.

On climate change, the Green Deal is our best bet for reducing emissions. The Fit for 55 package, passed in the last mandate, lays out the framework for reducing EU emissions to 55% below 1990 levels by 2030. One of the mechanisms to achieve this includes using the emissions trading system (ETS) to incentivise innovation and investment in decarbonisation technologies. Importantly too, it pushes for improvements in the energy consumption of buildings with energy efficiency and renovation targets and sets a minimum amount of final demand for energy to be served by renewables – a homegrown source of energy that will help us shore up European energy security.

Russia’s war of aggression and its ensuing weaponisation of energy was the first real test on whether we were on the right trajectory. But as this turned into an energy crisis that enveloped the continent, the answer was more Green Deal, not less. REPowerEU increased targets for renewable energy capacity and energy savings, doubling down, rather than backing off. This worked. It also ignited a discussion on how to steer investments in the direction of making this buildout a reality.

So, the track record is good. But continuity means going further.

More electrification to make it work

The Green Deal’s success to date can be largely attributed to the focus it puts on electrification. Whether through efforts to power electric vehicles, replace fossil fuel generation with clean and renewable generation or deliver energy savings to reduce dependence on imported fossil fuels, electrification is at the centre. This is for good cause.

Electrification is the most cost-effective way to decarbonise. Electricity as an energy carrier delivers superior energy efficiency and can reduce final energy demand as we transition to a cleaner economy. At the same time, it reduces reliance on fossil fuels, enabling us to decarbonise while saving on the cost of fuel. Our scenarios for electrification outlined in Decarbonisation Speedways are largely in line with the European Commission’s S2 scenario in the 2040 climate target impact assessment . In this scenario, Europe stands to reduce fossil fuel imports from an annual €451 billion today to €142 billion annually for the decade of 2040-2050. That is, if we electrify.

The potential for electrification is huge, but today it is stagnating. Electricity accounts for only 23% of final energy demand today. This means that, as we work hard to decarbonise the continent, three quarters of the EU economy to currently runs on fossil fuels. This is why the Electrification Alliance – an alliance of ten organisations, including Eurelectric, that support the electrification of our society – is calling for an Electrification Action Plan in the first 100 days of the European Commission ’s new mandate. This plan should include a 35% indicative electrification target and electrification indicators in Member State’s national energy and climate plans (NECPs) to gauge progress.

More on the Electrification Action Plan can be found in our own recommendations ?that we published in March. This has also been a key priority for our EU elections campaign that will now shift focus to the next steps of the changeover process. With that, and to ensure that electrification can drive the Green Deal in a way that addresses the priorities of the day, we also believe there needs to be a focus on the four ‘I’s.

Implementation, investment, infrastructure and industry

Ignoring the concerns people have voiced about the Green Deal would be a mistake, even despite the mentioned merits. Addressing them while driving the Green Deal forward is the approach we should have. What we call the four ‘I’s – implementation, investment, infrastructure and industry – are the answers to these concerns and must be the supporting factors for a successful Green Deal going forward. Without paying dues to them, public support will continue to wane.

Implementation

The Green Deal is largely in place in terms of legislation. What remains is implementation. This five-year mandate will end just six months prior to the due date of many 2030 targets. Policymakers must therefore be dedicated to implementing what has been passed and not rolling back any of the legislation. This is needed for progress and for predictability in the EU business environment. Therefore, moving forward, the Green Deal will be about implementation much more than creating new rules and regulations. More doing and less red tape will be well received by Europeans in today’s environment.

Investment

Getting the implementation done means investment. Both private and public funds will need to be leveraged on a large scale to deliver new clean and renewable energy projects, building renovations, process innovation and infrastructure modernisation. We will therefore need a well-functioning Capital Markets Union to raise these funds and new, non-discriminatory access to EU funds. Doing so in a cost-effective manner will also be welcomed by Europeans worried about the Green Deal’s impact on the cost of living.

Infrastructure

Of particular importance in the coming years is our power infrastructure. Enabling electrification on the scale the Green Deal calls for will necessitate the modernisation of our grids. Currently, 30% of our grids are over 40 years old – in 2050 this will reach 90%. While our energy system has changed around our grids, the grids themselves have not kept up. It is high time to give them the attention they need to support the Green Deal. Making the investments in and implementing a modernisation program for our grids will enable electrification, help us decarbonise in a cost-effective manner, and therefore act as the key lynchpin for the success of the Green Deal going forward.

Industry

Last but not least, we need to focus on mustering up our industry. We need to give them the right incentives to locate in Europe and innovate for a better future. We also need to provide them with reliable, affordable and sustainable electricity to make sure they have the inputs needed to make that happen. This two-way street will require collaboration and is a vital juncture where the power sector and its electro-intensive customers will need to work together to make the Green Deal happen. Prioritising this collaboration and supporting European business in the transition should be the goal of policymakers who are trying to address the European competitiveness issue.

Green Deal 2.0

Bringing this all together, we clearly see that the Green Deal should continue. It has merit and support. Electrification should remain at the heart to keep up this support, but it also needs its own support to help it get to the levels needed to have a real impact. The four ‘I’s are the key factors that will make it happen, alongside an Electrification Action Plan. If new policymakers can juggle these priorities in the coming years, backtracking on the Green Deal will be neither politically necessary nor economically desirable. We will be able to address our climate action objectives at the same time as we address concerns over European competitiveness, cost of living and security. Call it a Green Deal for a new time – a Green Deal 2.0.

This week's edition written by:

Nicholas A. Steinwand , Policy Communications Advisor - Eurelectric