Europe's global green reach
Wednesday, 4 september 2024
In a recent episode of the Future is Blue podcast, host Carlos Carnicero Urabayen sat down with Cecilia Trasi, a research analyst at Bruegel, to discuss a compelling new policy brief she co-authored with her colleagues Giovanni Zgaravatti and Simone Tagliapietra. Their paper, entitled "Re-energizing Europe's Global Green Reach," explores the EU strategy to balance decarbonization, competitiveness, and strategic autonomy while fostering global green partnerships.
The discussion centered on how the EU can extend its influence beyond its borders to support global climate goals while also boosting competitiveness in a rapidly changing geopolitical landscape.
The EU's Global Green agenda
The EU's Global Green Reach strategy is an ambitious attempt to simultaneously advance the EU's domestic green agenda and promote environmental sustainability worldwide. Trasi explained that the strategy began with a focus on "green diplomacy," aimed at championing climate action on the global stage while securing the EU's own environmental goals.
However, the scope of the strategy quickly expanded to include various facets, such as trade, financial levers, and technological innovation. These elements are integral to achieving a balance between reducing carbon emissions, maintaining economic competitiveness, and ensuring strategic autonomy.
Trasi highlighted that the primary driver behind the strategy is the urgent need to address the shrinking carbon budget. With 200 gigatons remaining under the 1.5-degree Celsius threshold set by the Paris Agreement, even full compliance by the EU with its domestic green transition targets would not be sufficient. Since the EU accounts for just 7% of global emissions, significant reductions must also come from other global partners, including the US, China and India.
This reality underscores the necessity for the EU to not only transition internally but also support the global shift towards greener practices.
Balancing decarbonization with competitiveness
One of the most pressing questions in the discussion was how the EU can continue to decarbonize its economy while remaining competitive on a global scale, especially in light of potential political shifts, such as a possible second term for former U.S. President Donald Trump. Trasi noted that while climate action remains a cornerstone of the EU agenda, there is growing concern over competitiveness, especially in a geopolitical context where alliances and policies can shift dramatically.
The answer, according to Bruegel’s analyst, lies in a dual approach. Firstly, the EU must prioritize delivering its green transition domestically, setting a strong example and maintaining credibility on the global stage. Secondly, it must actively engage with other countries to ensure they also undertake meaningful climate actions. This involves fostering equitable partnerships that not only secure resources but also promote technology transfers and financial support to emerging economies.
The EU is encouraged to prioritize innovation over increased protectionism when competing in sectors where other countries, such as China in solar panel technology, have already established a very strong lead. By concentrating on advancing new, market-ready technologies, the EU has the opportunity to establish leadership in areas where it holds competitive strength.
The role of the Carbon Border Adjustment Mechanism (CBAM)
A key component of the EU's strategy discussed in the podcast is the Carbon Border Adjustment Mechanism (CBAM). Set to be fully implemented in 2026, CBAM is designed to prevent "carbon leakage"—where companies move production to countries with less stringent climate policies. Trasi described CBAM as essentially a tariff on carbon-intensive goods imported into the EU, ensuring that foreign producers face similar costs to EU producers who are subject to the EU Emissions Trading System (ETS).
However, CBAM has sparked controversy internationally, with some countries accusing the EU of using environmental policy as a protectionist device. Trasi acknowledged these concerns but argued that CBAM also encourages other countries to adopt their own carbon pricing mechanisms. Some countries, like South Korea and Japan, have already taken steps in this direction, influenced by the EU’s policies.
While CBAM might have some negative repercussions, such as economic challenges for countries heavily reliant on exports of carbon-intensive goods, it also presents an opportunity for these countries to innovate and align with global climate goals.
Financial instruments and trade regulations
Financial instruments and trade regulations also play a critical role in the EU Global Green Reach strategy. Trasi stressed the importance of leveraging private finance and designing mechanisms that can effectively mobilize the vast amounts of capital needed for global climate action.
On the trade front, a more tailored approach was needed, ensuring that environmental and social regulations do not inadvertently hinder development. Bruegel’s analyst advocated for greater coherence in the EU's external actions, suggesting that all instruments, from trade agreements to financial support, should align under a unified strategy to avoid mixed signals and ineffective outcomes.
Trasi recommended streamlining partnerships and establishing stronger governance structures within the EU to ensure a cohesive and impactful approach to global climate leadership.
As the EU continues to navigate the challenges of decarbonization, competitiveness, and geopolitical dynamics, its ability to lead by example and foster international cooperation will be crucial in shaping a sustainable future for all.
You can listen to the podcast here and you can read here Bruegel’s paper.
Carlos Carnicero Urabayen