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10 months ago

War, Peace and the Green Economy

  • Text
  • Green economy
  • Peace
  • War
  • Ukraine
  • China
  • Africa
  • Europe
This magazine is about the world’s collective and potentially transformational journey towards a green economy. It is also about taking you, the reader, on what we hope is an equally fascinating ”green voyage” across some key parts of Europe as well as to Africa and China.

WHAT’S HAPPENING IN

WHAT’S HAPPENING IN THE EU WAR, PEACE AND THE GREEN ECONOMY to burn more coal temporarily. And crucially, it requires member states to speed up the Green Deal, especially its emission reduction policies (dubbed “fit for 55”). Current policies would already decrease gas consumption by 30 percent by 2030. By speeding up measures, to be paid for with existing pandemic funds, the commission estimates it can reduce Russian natural gas imports to 55 billion cubic meters before the end of the year, down from 155mcm last year. Before the Ukraine war, there was the pandemic Before the war, it was the Covid-19 virus which almost scuppered the Green Deal. Even as Timmermans was presenting his bid idea to the European Parliament in December 2019, almost 9000 kilometres away, a Wuhan resident surnamed Chen was the first human on earth to fall sick to the Covid-19 virus. “Everything changed overnight,” an EU official reflecting back on the first pandemic months told EUobserver. Unwittingly, “patient zero” launched a post-pandemic new normal, changing EU politics, and the Green Deal, along with it. By setting the Green Deal up as a geopolitical tool, encompassing both domestic politics and foreign relations, a dynamic emerged in which uncertainty and the pandemic began feeding into and driving the Green Deal. Climate policy is now a matter of national security.” “There was a fear the pandemic would derail the Green Deal,” an EU official said, with some EU leaders openly calling to “shut down” the Green Deal and focus on battling the virus. But instead, the pandemic super-charged it. Threatened by a total economic shutdown and Frans Timmermans, EU Commission lead for the Green Deal Source: European Parliament by a lack of medical supplies, which it turned out were primarily produced in China, member states in rapid-fire mode agreed on a slew of policies that built on EU climate policies. The most consequential was NextgenerationEU, a €750bn pandemic fund that would support governments by issuing joint European debt. Much of these investments were meant to support citizens and boost the pandemic response. But one-third of this was earmarked for Green Deal investments, which together with the regulate seven-year budget added up to €600bn - more money the continent has ever spent on climate policy. This collective action was coordinated by the commission, who pushed the Green Deal as the bloc’s main growth strategy throughout the year. EU banks joined in This was supported by an unprecedented response from the European Central Bank, which promised to buy up all government debt (1850bn eventually) under its so-called pandemic emergency purchase programme (PEPP). Financial institutions like the European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD) pooled their resources to help support pandemic stricken economies by spending a large part of their funds on climate action. This set up a system of collective action between institutions and member states, now described by the EU as “Team Europe.” From a climate policy perspective, there is no question this approach has been successful. By the end of 2020, even coal-reliant states like Poland recognised the need (and benefit) to decarbonise their economies with EU money, and agreed to increase the bloc’s legally binding emissions reduction goal from 40 percent to a net 55 percent cut by 2030 - now enshrined in the European Climate Law. Governments were seen propping up entire economic sectors, changing ideas of what governments and institutions should and could do - tied together into its central climate policy. Reflecting on this moment in May 2021, EU foreign policy chief Josep Borrell later said that Europeans are “masters of disjointed efforts.” He added: “Each policy tends to develop according to its own logic and rhythm. The way to go is to use these instruments as part of one political strategy.” Uncertainy looms Since its launch in 2019, the Green deal has become the EU’s linchpin policy, tying together questions of stimulating and investing in the economy, responding to the climate crisis, and foreign policy threats. Questions like joint debt, huge fiscal and monetary crisis support and massive public investments in green infrastructure are now part and parcel of the EU’s policy toolkit. But even as some of its efforts have proven successful under pressure crises and conflict, it is unclear where it will lead. Before the Ukraine war, it was Covid 19 that almost scuppered the Green Deal. For one, the future success of the Green Deal is almost wholly dependent on the availability of money. And there are signs that in addition to the impact of the Russian war, the period of massive monetary interventions and government generosity may be drawing to a close. The ECB has already decreased its pandemic asset purchases. Although the bank has not yet signalled that it will increase interest rates, worries over inflation will pressure the bank’s management to do so. This will lead to an increase in borrowing costs for governments, while energy prices will by all expectations remain high. As a result, increasing investments in renewables is likely to become more difficult. Italian Prime Minister Mario Draghi, who previously served as ECB president, has already called for a new version of the NextgenerationEU fund to pay for green investments and weather the financial fallout from the war by issuing mutual debt. But opposition to joint European debt remains potent among “frugal” northern EU member states. Magdalena Andersson, the Swedish prime minister, recently warned that “some countries always find new arguments why they shouldn’t pay their expenses.” Such intransigence will complicate debates over revamping EU fiscal rules to be held this year. Even if crises and conflict have driven the Green Deal forward in recent years, this may not continue to be the case in the future. Political will and determination can go just so far. The Green Deal has survived two major external challencges. But without sustainable long-term financial resources - either through governments’ monetary financing or joint European debt – the EU’s flagship initiative is at risk of impasse. ◄ About Wester van Gaal Wester is a journalist from the Netherlands with a focus on the green economy. He joined EUobserver in September 2021. Previously he was editor-in-chief of Vice, Motherboard, a science-based website, and climate economy journalist for The Correspondent. 9

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