Making the Green Deal work: a social and environmental programme to lead Europe out of crisis
By Julien Hallak & Mathilde Dupré & Wojtek Kalinowski
28 April 2020
With the public health crisis and the dramatic downturn in the economy, the European Green Deal is more needed than ever if the EU is to stay on the path towards carbon neutrality and other sustainability objectives.
While the political debate is currently focusing on emergency measures and the safeguarding of jobs, the Green Deal should be accelerated rather than postponed or watered-down, as it offers the best framework for linking immediate responses and long-term policy, to ensure that recovery policies serve rather than undermine the social and ecological transition.
Pursuing the Green Deal’s ambitious goals could mark a turning point in European history. But this project suffers from many weaknesses and inconsistencies, and needs to be substantially enhanced. It should address the sustainability crisis at its roots while strengthening democracy and fighting against inequalities at the same time. And in order to be implemented, all European policies and governance tools must be adapted to the task. At a time when crisis is forcing the European Union to expand the scope of what is possible in terms of economic policy, the Green Deal must be able to benefit from it. Only then will it become a social and environmental programme capable of answering the civilizational challenge facing our continent.
OUR PROPOSALS AT A GLANCE
1) Strengthen European democracy
– Democratise EU decision-making processes
– Stop deregulation programmes
– Encourage citizen participation in Green Deal programmes
2) Combat social and territorial inequalities
– Add social objectives to the Green Deal (unemployment, inequalities, etc.)
– Increase the ambition and resources of the “Just Transition Mechanism”
– Deploy the Green Deal and investment projects at territorial level
3) Base the Green Deal on strong sustainability
– Integrate planetary boundaries and adopt indicators (taking into account the measurement of the EU’s actual ecological footprint)
– Improve measurement of decoupling and account for rebound effects
– Focus more on lifestyles, not just technologies
4) Revisit all European policies
– Adapt competition rules: public procurement and state aid
– Make trade policy a lever for transition
– Transform agricultural and food models
5) Massively redirect financial flows
– Move beyond green finance and make the financial system serve the transition
– Develop a monetary policy based on environmental conditionality (cross-compliance)
6) Overhaul macroeconomic coordination within the EU
– Change the budget rules on green public investment
– Reform the European Semester
– Create a European standard for green budgeting and increase green budget allocations
7) Adapt all measuring instruments
– Account for imported emissions
– Introduce extended national accounts
– Present an annual report to the European Parliament
8) Increase the European Union’s own revenue
– Develop new taxes (environmental, financial, property, advertising, etc.)
– Combat tax evasion more effectively
In its European “Green Deal” project presented on 11 December 2019, the new European Commission proposed a roadmap for steering the European economy towards the objective of carbon neutrality in 2050 and, more broadly, towards sustainable development. In particular, it aims to promote a European economy “where economic growth is decoupled from resource use ”. While most of the elements announced in this Green Deal are still to be clarified, the Commission’s ambition to propose a set of “profoundly transformative” measures and to revise numerous European laws and programmes for this purpose must be recognised. As such, this project could mark a turning point in the history of European environmental policies.
The year 2020 marks the beginning of a period of consultation and preparation of the detailed content of the proposals announced. More than ever, European civil society must be involved in this essential debate to increase our chances of meeting climate and environmental challenges. This note aims to contribute to this by analysing the strengths and weaknesses of the project in its current state and suggesting ways of achieving the Commission’s stated objectives.
The European Union’s climate and environmental policy has so far been characterised by a significant discrepancy between relatively high ambition and much more modest concrete progress; for example, the EU is proposing, within the framework of the Green Deal, to revise upwards its climate objectives for 2030, while its current trajectory does not yet permit the achievement of its existing commitments . This discrepancy is partly explained by a lack of coherence in the European approach to sustainability issues: an incomplete situational analysis of current crises, a fragmented vision of the ecological challenge itself, inadequate means of action and, above all, numerous contradictions between the various European policies. While some policies are steering Europe towards transition, others continue to put obstacles in the way or even to steer the European economy in the wrong direction.
Compared to the previous project, “A Clean Planet for All”, presented in 2018 by the Juncker Commission, the van der Leyen Commission’s Green Deal has the great merit of recognising these inconsistencies and of looking for ways to remedy them. However, detailed analysis of the Communication reveals that it does not far enough and that inconsistencies remain at various levels.
First of all, it is difficult to further environmental goals by completely or almost completely separating the crisis, as the Green Deal does, from the social and democratic issues that are part of the problem. European societies have been hit by a triple crisis: ecological, social and democratic. These three dimensions are closely interlinked and must be incorporated in solutions from a holistic perspective.
In social terms, the EU’s ability to respond to the ecological crisis will depend directly on its ability to tackle inequalities as effectively, to regulate the economy and to empower citizens. This is the only way to ensure the social acceptability of the ecological transition and to maximise its chances of success. Although the Green Deal introduces a “Just Transition Fund” to help the territories most exposed to the economic effects of the transition, the financial amounts proposed in this framework remain insufficient and will have to be supplemented by an investment policy that is much more ambitious than the one announced in the Investment Plan (see next point). Above all, the articulation of the ecological and social dimensions is not simply a matter of distributing funds between a limited number of territories, as the Just Transition Fund does: the ability of Member States to implement support policies for the most vulnerable populations must, at the same time, be increased.
From a democratic point of view, the Green Deal is not really interested in the question of how to involve citizens in this project or how to boost the abilities of our democracies to regulate the economy effectively. The Communication merely stresses the importance of “the participation and involvement of the general public and all stakeholders”, making no mention of citizens’ crisis of confidence in the European institutions or, more importantly, the conflicts that are likely to envelop the pursuit of the Green Deal objectives.
Indeed, the measures that will enable us to achieve ecological transition involve lifestyle changes for all citizens and conflict with a wide range of economic interests. A transition policy presupposes, for example, much more effective regulation of the influence activities deployed by economic sectors and new forms of citizen participation, such as consultations inspired by the Citizens’ Convention on Climate Change established in France.
An overly technical vision of sustainability
From a strictly environmental point of view, a thorough reading of the text reveals two problems. Firstly, the Commission seems to be aware that the ecological crisis is not just about climate change, and its project embraces other environmental issues such as loss of biodiversity; yet the proposed responses, and especially the specific objectives, still appear to be strongly climate-focused.
More fundamentally, although the Commission states that its objective is a European economy “where economic growth is decoupled from resource use ”, it does not really specify how this decoupling can be achieved in a sustainable way. The Commission even seems to believe that this decoupling is already at work thanks to technical progress, at least as far as greenhouse gas emissions are concerned; we demonstrate below that this situational analysis is highly debatable (see Box 3) and that further efforts are needed in this regard. Furthermore, the Commission does not present any equivalent analysis for biodiversity or the other forms of impact on natural resources, despite its overall stated objectives.
In order to lead the European economy towards this dissociation or decoupling of economic growth from the pressure on natural resources, we believe that the Green Deal will have to focus more intensely on lifestyles and consumption patterns and develop the tools for measuring progress in this area. These aspects are contained in the project but remain secondary to purely technical solutions such as the decarbonisation of industrial processes, the circular economy and digital technology. However, sustainability is measured through final demand and not through the efficiency gains (of material or energy) per unit produced. The Green Deal must therefore be based on targets and indicators that measure the “size” of our economic system, understood as a set of material and energy flows consumed in the production and consumption process .
Section 4 below proposes that we reformulate the situational analysis of the crisis based on the key principles of ecological economics  such as physical limits, rebound effect, decoupling and strong sustainability. By incorporating these principles, the Commission’s project will be able to take into account the interdependencies between technical systems, public policies and consumption patterns. Unless this complexity is taken into account, environmental policies will not produce the desired effects.
Insufficient financial resources
The investment plan accompanying the Green Deal announces the “magic” figure of €1 trillion over a ten-year period; but much of this involves reallocating already planned expenditure to the Green Deal rather than mobilising additional financial resources (see Section 2.2.). As such there is no real “additionality” of investments. And, even assuming real additionality, the “magic” sum of €1 trillion is still far less than what is needed. The European Commission has itself recognised this by identifying, in the same document, an annual investment requirement of €260 billion, an estimate taken from the most recent EUCO  scenarios used by the Commission to calculate the costs of the investments needed to meet climate and energy objectives. Since the scenario in question is calibrated to achieve the current target (a 40% reduction in GHG emissions between 1990 and 2030), this estimate should, logically, be revised upwards to take account of the ambitions of the new van der Leyen Commission, which proposes a 50% – or even 55% “if possible” – reduction in European GHG emissions by 2030.
However, the real problem lies elsewhere, in the persistent gap between the investment needs indicated by the models and the investments actually made. The sum of 260 billion indicated by the Commission represents the additional annual investments needed to meet the upwardly revised targets for 2018 for reduced energy consumption and renewable energy.
As such, this figure has been added to the investment needs previously identified – the graph below distinguishes between these two categories – but which remain largely unmet, particularly in the area of transport.
Estimated average annual investment volumes needed to meet European energy and climate policy objectives.
Source: COM(2019) 285 final (Graph 5)
The underinvestment we are observing is nothing new. The targets adopted in 2014  committed the EU to reducing GHG emissions by at least 40% by 2030 compared to 1990, increasing the renewable energy share to at least 27% of overall consumption, and reducing primary energy consumption by at least 27% compared to 2007 levels. As early as 2016, however, the Commission’s “Reference Scenario”  indicated that the EU was not going to achieve these targets due to a lack of necessary investment: by continuing the trend, it could only hope for a 23.9% reduction in primary energy by 2030 compared to 2007, and, of course, this poor result jeopardises the emissions target. In response,
the Commission has revised upwards the target for reducing energy consumption – raised to 32.5% by 2030 by Directive 2018/2002 – as well as the level of renewable energies in the European energy mix by 2030 (Directive (2018/2001)). The impact study conducted by the Commission on energy efficiency measures and transport estimated the volume of investment needed to achieve the three 2014 targets at €1.036 trillion .. By raising the primary energy consumption reduction target from 30% to 40%, this amount increased to €1.565 trillion per year according to the same study, i.e. 8% of the European GDP and more than a third of the private and public investments made each year in the EU; it therefore seems theoretically possible to achieve.
However, climate investment has never even approached this level: according to the European Investment Bank, the total public and private sums invested in climate mitigation in Europe amount to around €200 billion per year, or 1.3% of the EU’s GDP . A massive increase in the volume of investment is therefore needed in order to meet the ambitions defined in 2018, whereas the Green Deal proposes to go further.
These numerical exercises are daunting but in no way signify that the task is impossible: on the contrary, the same impact study observes that “an initial increase in investment in energy efficiency improvements will be largely offset by lower operational costs ”. On the other hand, the massive nature of the investments means that the investment horizon is very long and vulnerable to numerous uncertainties – not least the future fluctuation of fossil fuel prices – which probably explains the low level of private investment. Given the uncertainties of such magnitude, the only apparent way forward is to mobilise much more public investment than is currently planned, and to rapidly change the accounting of “green” public investment within the framework of the European budget rules (see Section 6.1).
Furthermore, a coherent Green Deal must be able to link investment policy to disinvestment policy, using financial regulation (see Section 5.3) and monetary policy (see Section 5.4) to make harmful investments more costly. This also entails putting an end to subsidies for fossil fuels and other climate-damaging industries and to investment protection mechanisms in these sectors (see Section 5.2.).
Inconsistencies between the various European policies
The climate and environmental objectives affirmed in the Green Deal must guide all policies in areas where the EU has exclusive or shared competence: not only transport and energy, for example, but also common market rules, monetary union and trade policy. Failing to mention them, or only doing so in a cursory manner, might suggest that they are neutral with respect to the Green Deal, which is far from the case. Agriculture offers an intermediate case in this respect: a “From farm to fork” programme is mentioned in the project, but the measures currently proposed fall short of the general objectives set out in the Green Deal.
Inconsistent instruments of governance
As for the European policies, all the governance tools at the EU’s disposal – European Semester, impact studies and earmarking of EU budget – must help guide the EU’s efforts to meet the Green Deal’s objectives. The Green Deal announces the reform of the European Semester and opens the debate on the place of “green criteria” in the budget rules (green investments). The Commission also wants to examine the “Green Budgeting” methods used by Member States and announces certain legislative texts. All these avenues must be pursued, but the integration of the Green Deal objectives must go further, including the strengthening of social and environmental assessment methodologies, extended national accounting and the inclusion of new indicators in the assessments carried out regularly by the European Commission.
Now that the outlines of the Green Deal have been unveiled, we need to “consistency test” them and offer proposals for improvements.
 European Commission (2020), “The European Green Deal”, COM (2019) 640 final, p. 2.
 European Environment Agency (2019), “Europe’s State of the Environment in 2020”
 European Commission (2020), op. cit. p. 2.
 Herman Daly (2018), “Économie stationnaire”, Petits Matins and Veblen Institute.
 More precisely the EUCO3232.5 scenario published in 2019, in a final update of the “Reference Scenario 2016” developed for the Commission by the company E3-Modelling. The initial 2016 scenario calculated the investment needs on the assumption that the EU and the Member States would achieve all the targets set in 2014 (reduction of GHGs, reduction of energy consumption, renewable energy share) in 2020. See European Commission (2016), “EU Reference Scenario 2016.Energy, transport and GHG emissions: trends to 2050”.
 Defined by “The policy framework for climate and energy in the period from 2020
to 2030”, adopted by the EU at the European Council in October 2014.
 European Coecmmission (2016), “EU Reference Scenario 2016.https://op.europa.eu/en/publication...Energy, transport and GHG emissions: trends to 2050”.
ommission Staff Working Document, Impact Assessment Accompanying the document Proposal for a Directive of the European Parliament and of the Council amending Directive 2012/27/EU on Energy Efficiency, COM(2016) 761 final, Table 22, p. 66.
 Retooling Europe’s Economy.EIB Investment Report 2018/2019, Key Findings. p. 12.
 Commission Staff Working Document, Impact Assessment, op. cit, p. 66. See also Table 23 on page 67.