The humbling of green Europe

“GERMANY MAKES up 2% of global emissions,” a legislator recently informed his Bundestag colleagues. “So even if we became climate-neutral overnight, it would not prevent a single extreme weather event.” Such statements are commonly used as justifications for inaction by Europe’s hard right, opposed as it now is to almost all forms of climate action. Nigel Farage, leader of Reform UK, was singing from the same hymnal when he recently accused the government of “[defrauding] British taxpayers of billions of pounds every year [by] subsidising wind energy and solar energy for literally zero effect on global CO₂ emissions.” But the German MP was not one of the similarly aligned climate sceptics from the Alternative for Germany. He was Friedrich Merz, the country’s chancellor.

Europe’s hard right, like America’s, has come to loathe renewable energy. It is unreliable, they say, jumping on any grid mishap to prove their point regardless of whether it actually does. It imposes energy bills on consumers they cannot afford, and costs on businesses that make them uncompetitive. Heat pumps and home insulation cause expensive domestic hassle; electric-vehicle mandates mean you cannot get the sort of car you are used to. Being morally well intended, science-led, metropolitan in its vibe and global in its concerns makes the whole idea of fixing the climate “woke”. And even if carbon-dioxide emissions matter (the opponents are not unanimous on the matter) those from Europe are so small that its unilateral actions count for nought.

Now parties on the centre-right are saying things that sound increasingly similar. For some this is a hardening of a long-held lack of enthusiasm for green measures. For others it is a more dramatic about face. Under Boris Johnson, its leader from 2019 to 2022, Britain’s Tory party professed itself convinced of the need to reach net-zero emissions by 2050. Today that support has been ditched .

Few centrists openly question the fundamental importance of fighting climate change, as many on the hard right do. But they are trimming their sails regardless—quite dramatically so, in Mr Merz’s case.

European voters still care about climate change. But they rank it less high than they used to (see chart). Increases in the cost of living, driven by post-covid inflation, have become the paramount issue. The robust growth which might reduce the pressure by raising wages is nowhere to be seen; the IMF projects a meagre 1% growth for the eurozone in 2025, and only 1.2% in 2026. The new tariff deal with America will do nothing to improve matters.

The voters, and the politicians, are also worried about security. Russia’s full-scale invasion of Ukraine in 2022, coupled with Donald Trump’s transactional approach to foreign affairs, means that most of Europe has committed itself to greatly increased defence spending. The need is felt by Greens as well as by most of the rest of the political spectrum “We need money for defence,” says Lena Schilling, an Austrian MEP who sits with the Greens/European Free Alliance block. “We need to defend Europe and get ready for the worst-case scenario.”

It is a very different world from that of December 2019, when European political ambitions on climate change, already strong, reached their high-water mark. Inflation and interest rates were low; growth, though not great, was an almost-respectable 1.6%. Pandemics were the stuff of history books; so were wars of conquest on European soil. The Paris agreement of 2015 had finally provided an internationally agreed basis for action on climate change. Plunging prices in the renewables sector suggested that meeting the promises made in Paris would be getting easier.

In Brussels it looked like a perfect time to double down on the climate. The incoming president of the commission, Ursula von der Leyen, said that “keeping our planet healthy” was the EU’s greatest challenge. On December 12th the European Council decided to increase the ambition of the bloc’s emissions-cutting plans. At Paris it had promised a reduction in emissions of 40%, compared with those of 1990, by 2030. In 2019, as part of an overarching commitment to climate neutrality by 2050, the council increased that to 55%. It was to be achieved through a set of policies known as the Green Deal.

Climate Action Tracker, an independent monitor, reckons that if the EU sticks to its currently announced policies the cut achieved in 2030 will be 52%: less than the target, but still impressive. The problem is that the currently announced, but not yet implemented, policies are at the heart of what has become politically and fiscally challenging. Cuts to date have been made in large part through decarbonising electricity generation, something achieved in part through the EU’s flagship emissions trading scheme (ETS), which covers electricity generation and heavy industry. The decarbonisation being counted on in the years ahead will fall more directly on households and everyday businesses.

Existing subsidies and climate-associated costs definitely add to electricity bills in the EU, though not as much as they do in Britain. European energy subsidies, which were around €200bn ($230bn) a year from 2019 to 2021, shot up to €400bn in 2022 thanks to the war in Ukraine, outages in the French nuclear fleet and droughts which reduced the capacity of hydroelectric dams. But the share of the subsidy going to renewables actually fell over that period; high wholesale prices meant that renewable electricity attracted the prices that had been guaranteed to its suppliers without any need for topping up from the public purse. A significant amount of subsidy still goes to fossil fuels, though that goes ignored in right-wing rhetoric.

If green subsidies have not risen unduly, though, competition for public spending has. Supporting Ukraine without American dollars is costly; a convincing defensive posture built up under the same conditions will be extremely expensive. For a while the increase in spending can be funded through debt, rather than cuts elsewhere. But that cannot go on for long, especially in those European countries with high public debt (Italy, Belgium) or already-unsustainable deficits (France), or a large budget hole to fill (Germany). And the effect on interest rates of more government deficits has a direct impact on green investment; whether it is on home insulation or offshore wind, green spending tends to be very capital intensive, making investors more sensitive to interest rates than fossil-fuel people are.

When it comes to policies still in the pipeline, one way to cut costs and buy a little popularity is to cut red tape. Member states want rules about standardised climate plans and risk accounting to apply to large firms only. The EU’s carbon border adjustment mechanism has been simplified, too. The commission says that excluding all shipments under 50 tonnes from the adjustments means that 90% of firms originally obliged to participate will no longer have to do so, a change which leaves 99% of the emissions the scheme is aimed at covered. If this is indeed the case the process was badly over-specified.

Reducing red tape can provide benefits and goodwill without much adverse impact on emissions. Nevertheless, some worry. “Of course you can simplify regulations, but the problem is: the climate does not have any buffer left,” says Luisa Neubauer, Germany’s most prominent climate activist. She fears a larger dismantling of climate regulations could follow, and that binding policies will become mere requests. Some firms would prefer predictability to haphazard, opportunistic deregulation. Time and money spent meeting standards is lost if they are then relaxed; investments in lobbying start to look wiser than investments in compliance.

Bolshy firms are something Brussels wants to avoid; it wants businesses and investors to see its policies in a positive light. The continent is already a large exporter of some types of low-carbon kit, according to IMF data. The “clean industrial deal” which the commission tabled in February is designed to spur investment into such industries. It tweaks state-aid and public-procurement rules to allow member states to favour European producers in their policies. It also has provisions for helping workers get useful skills and speeding up permitting for industrial projects.

There are new sources of funds for innovation, too. A report produced last year by Mario Draghi, a former head of the European Central Bank, called for the EU to boost its innovation and the scale of its markets; it also saw a need for public and private sources to invest an additional €800bn a year. In her first proposal for the EU’s next seven-year budget, starting in 2028, Ms von der Leyen proposed a “Draghi fund”. Though it is less than a tenth of the size its namesake suggested, its €451bn, available over seven years, could be helpful to green technology not yet ready for the market.

There is also the problem that some of the things which European industry would see as encouraging would drive up costs to consumers. Companies like government investment and R&D handouts, but many of them want protection from China as much or even more. China completely dominates the solar market; it is the world leader in the battery market; and it is the biggest exporter of electric vehicles. The market for wind turbines and trains is next. European policymakers have imposed a tariff of 8-35% on Chinese-made EVs, on top of existing tariffs on all cars, arguing that Chinese producers have received unjustified subsidies to beat competitors. Further protectionism may well be on the way.

On top of this the EU is trying to become more flexible. Trade-offs between mandated emission cuts in one sector and in others are in the works—for example, faster decarbonisation of the transport sector to give domestic heating more time. Flexibility can also be applied to the ETS. There are plans for permanent forms of carbon removal to be integrated in the scheme over the 2030s. The new emissions-reduction target for 2040 which the commission proposed on July 2nd was, at 90%, eye-wateringly ambitious: but it was pragmatic in stipulating that three percentage points could be achieved by paying for carbon-dioxide removals and reduced emissions beyond the bloc’s borders. This would entail emitters buying “high-quality international carbon credits” of the sort envisioned by the Paris agreement, markets for which are still in their infancy.

Political resistance to these targets is certain. The hard-right parties in the European Parliament have successfully claimed the right to lead negotiations with the commission and member-states over them, as well as about changes to the ETS. “We are not in favour of declining growth levels. We’re not in favour of abandoning our industrial base and leaving them in the lurch,” said Jordan Bardella, head of the National Rally, France’s hard-right party, when explaining the approach they envisioned. Such sentiments will be echoed by politicians of every stripe.

A nearer-term source of potential political risk is a new trading scheme called ETS2. From 2027 onwards it will cover emissions from fuels used in building and transport. To begin with the price per tonne will be considerably lower than that in the present ETS—the plan is for the two to converge later on. Fear of the reactions this new system may provoke mean that ways of softening it are already being talked about: exceptions for some classes of emitter, or the issuance of additional emission permits if the market drives prices too high, are among the options.

Optimists about climate action see a tendency for hard-right antipathy to climate measures to weaken as parties get close to, or into, government. Giorgia Meloni, Italy’s right-wing prime minister, has been sceptical about some climate policies, but has not made them a central concern. Others think that centrists taking on some of the hard-right’s scepticism is a price worth paying if they take some of the hard right’s votes, too. Either way, though, the portents point to less appetite for spending on the climate or inconveniencing voters in its name.

Reversing the trend will take both courage and care. Europe’s elites have sought to make action on climate change a part of what it is to be European. If they want that identity to take root, they urgently need to find ways to convince their fellow citizens that it is worth the candle. And they must rebuild support in a way that makes steady progress hard to reverse, even if that progress is not as fast as would be ideal. ■