EU climate chief rebuts business fears that green policies hit competitiveness

The EU’s climate chief has warned the bloc must not be lured into a “false narrative” that action against global warming is undermining the competitiveness of European businesses, as Brussels fights a backlash against its ambitious environmental laws.

Speaking to the Financial Times ahead of the February 6 announcement of a new EU plan for cutting greenhouse gas emissions by 2040, climate commissioner Wopke Hoekstra said that despite “significant worries” from industry, he was “absolutely convinced” Europe could continue to have a “world class, second to none, business environment”.

“We need to stand on two legs: one leg is climate action, the other leg is the just transition, competitiveness and a thriving business community, because both are needed,” said the Dutch politician. The EU should not “be lured into the false narrative that you can only have one or the other”, he added.

Brussels intends to propose that the EU should cut emissions by 90 per cent by 2040, compared with 1990 levels, according to drafts of the document seen by the Financial Times.

In 2019, following a wave of green sentiment, the EU set out one of the world’s most ambitious climate policies with its Green Deal climate law. It committed the bloc to reaching net zero emissions by 2050 through a near-total overhaul of its economy.

But the picture has since changed dramatically as the bloc battled the repercussions of Covid-19, the war in Ukraine, a gas supply crisis and competition from vast subsidy schemes for clean technologies in the US and China.

The burden of environmental regulation has prompted widespread protests from farmers in France, Germany, Poland, Romania and Belgium in recent weeks, and criticism from rightwing politicians ahead of EU-wide elections in June. Industrialists, still struggling with the effects of 2022’s energy crisis, said EU targets and bureaucracy were holding up investment and innovation.

The 2040 target is intended as a waymarker on the bloc’s path to net zero and a guide to setting an EU-wide Nationally Determined Contribution — the measure by which countries report their efforts on cutting emissions to the UN — for 2035. It must be formally proposed and agreed by the bloc’s 27 governments before becoming law.

Countries including Germany, France and Spain have said that they would back an ambitious climate goal for 2040. But the EU’s scientific advisory board said in a report this month that the bloc needed to more than double its current rate of emissions reductions if it was to meet an existing 55 per cent target by 2030.

Such a transformation of the bloc’s economy will require vast investment, the European Commission has said. It estimated that a 90 per cent emissions cut could require investment of €1.5tn annually, according to a draft assessment.

The investment figures are given in current prices.

Hoekstra acknowledged that the transition had already inflicted “heavy change” on industries and would continue to do so for the foreseeable future. “That is in both a geopolitical and a business climate that will continue to be uncertain and disruptive,” he said.

Linda Kalcher, executive director of Brussels-based think-tank Strategic Perspectives, said such high levels of investment might “cause concerns and unease in member states”, especially those with smaller economies.

“The rewards are evident though: greater energy security, industrial competitiveness and more affordable electricity,” she added, noting that EU countries spent €400bn on gas imports alone in 2022. “Manufacturing green technologies in the EU doesn’t only help compete with the US and China, it can also reindustrialise regions that face multiple transitions.”

Critics of the impact on industry of the EU’s environmental regulations also question the effort the bloc is putting into cutting emissions, which account for 7 per cent of the global total compared with about 13 per cent from the US and nearly 30 per cent from China.

Hoekstra said one of the “most effective” things the bloc could do would be to help other countries create carbon markets akin to the EU’s that forced polluters to pay for their emissions.

“It is an illusion to think, as with any global problem, that if you solve it in your own continent you are there,” he said. “If we don’t manage to drive down the other 93 per cent [of emissions], climate change will still happen, because climate change is indiscriminate. It happens north, south, east and west.”

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Letter in response to this report:
EU’s climate conundrum / From Vladimir Dlouhy, President of Eurochambres, Brussels, Belgium