Described by European Commission president Ursula Von Der Leyen as Europe's "man on the moon moment", the European Green Deal (EGD) is a trillion euro programme, which aims to transform the EU-27 into a low carbon economy within a decade and into the world's first carbon neutral economic and trading bloc by 2050.
Delivering the deal will involve a transformation of the EU’s economy with just about every sector including transport, construction, agriculture, industry, and energy all having to become substantially more environmentally sustainable if economic growth is successfully to be decoupled from resource use.
The EGD also sets new and even more ambitious climate targets for member states. Emissions reduction targets for 2030 are to be increased from 40 per cent to at least 50 per cent and to as high as 55 per cent relative to 1990 levels. It also contains a mechanism to reduce the risk of businesses relocating elsewhere in the search for less stringent environmental regimes.
It’s not all about climate, and the Green Deal also addresses environmental challenges such biodiversity and pollution to air, water and soils. Sustainability policies will be mainstreamed through measures to support a just transition, action on sustainable finance, the greening of national budgets, and amendments to relevant national legislation and state aid guidelines.
But we’ve had lofty targets before, including those from our own government, and they have remained as high-minded aspirations and been consistently missed. We’ve also had well thought out strategies and plans but they have been left to gather dust while the policy makers start work on the next one.
This time it looks different, however. At least that's the view of KPMG global head of renewables, Mike Hayes. "The European Green Deal is the real deal," he says. "It shows a scale of ambition which is clearly matched by the absolute determination of the EU. That's already sending messages through the marketplace and encouraging investors."
Mazars managing partner Mark Kennedy shares this view. "There are different ways you might look at it but if take the Green Deal itself there are a couple of notable facets. It aligns with the Paris Agreement and other national and international frameworks on climate change which have already been subscribed to by member states. It has been thought through on that basis. The EU is not alone in this respect. The Chinese are pushing on with their own plan and the new Biden administration in the US will probably sign up to the Paris Agreement."
He notes also that this is the first economic plan of its nature. “It is well thought through and holistic in nature and not just from a climate change perspective but an economic perspective as well. It represents a maturing of a thought process people which has been going on for a long time. It’s also the first time an international group has put together a document like this.”
That collective involvement is highly significant, Kennedy adds. “One of the issues that held back progress on these things in the past was actions being devolved to a national level. That created problems for governments on basis of competitiveness. If an action affected the competitiveness of a particular industry sector, they faced political problems. The collective basis of the Green Deal will help with the cross-border nature of modern business. Most companies are not doing business in just one country and the fact that it is an international plan rules out potential transition advantage and disadvantage.”
That last point is also very significant, according to Hayes. “The Green Deals contains a proposal for the CBAM – the carbon border adjustment mechanism,” he says. “This is an attempt to avoid carbon leakage and prevent carbon arbitrage. High carbon production outside the EU may be cheaper than low carbon production within the EU. This will place a tax or other levy on high carbon import to the EU to prevent that.”
The EGD also contains practical measures to achieve the carbon reductions and other efficiencies required to meet the overall targets. The European Commission has issued a €1 billion call for research and innovation projects that address the climate crisis and help protect Europe's ecosystems and biodiversity.
The investment is aimed at accelerating a just and sustainable transition to a climate-neutral Europe by 2050. Another objective of the Horizon 2020-funded European Green Deal call is to boot Europe's recovery from the coronavirus crisis by turning green challenges into innovation opportunities.
In order to highlight the opportunities presented to Irish companies by this call, the Enterprise Europe Network in partnership with Enterprise Ireland, Invest NI and Northern Ireland National Contract Points held an international partnering event on the Green Deal in October.
"We had more than 1,470 market opportunities listed on the site in advance of the event," says Enterprise Ireland programme manager Garrett Murray. "Almost 2,500 people from 46 countries took part in 3,586 formal meetings over the two days. There were lots more informal engagements as well."
There will be further Green Deal calls under the new Horizon Europe research and innovation fund, according to Murray. “The eight thematic areas of this Green Deal call are reflective of the many areas where researchers and innovators can support the achievement of our national and European climate ambition through competing for and winning European research funding,” he adds. “Supporting industrial competitiveness, securing clean and affordable sources of energy, protecting our environment, and testing and demonstrating systemic innovations for sustainable food from farm to fork. The eight thematic areas could benefit society and the economy at an individual, company level, farm level and society as a whole.”
The target for transport will not be easy to reach, according to Joachim Brandt of professional services provider Gemserv. He points out that the Green Deal recognises that 25 per cent of carbon emissions come from transport and decarbonisation will require a mass switch to electrical vehicles, but he is not impressed by current strategies, or lack of them.
“If you look at the reality, Ireland has about 14,000 electric vehicles on its roads in comparison to about 4 million fossil fuel vehicles,” he says. “On one hand there is ambition, on the other hand if it doesn’t translate it into tangible action it won’t go anywhere.”
He points out that EV uptake won’t be implemented by any single sector. “No sector can do it by itself. It will require an effective integration of an electricity system – which needs to power a whole economy – with all the new demand from EVs. And the charging infrastructure required is also vital to ensure motorists enjoy a consumer-friendly charging experience. If 80 per cent of charging will be done at home, the public charging infrastructure won’t be commercially viable. Things like this are not being addressed. We see ambitious targets, but no one is saying how we get there.”
“Only if we all work together will we be able to remove the barriers facing what is a fragmented market and come up with solutions that are scalable, investable and provide confidence to consumers to make the switch to EVs,” he continues. “We can’t just wait for things to work themselves out. Choices need to be made now.”
On the other hand, the research funding available will stimulate private investment across a variety of sectors, including transport. “The Green Deal is encouraging the hydrogen economy, for example,” says Hayes. “There is a focus on new technologies, and it has zoned in on hydrogen. That’s going to be really important for decarbonisation. It presents a solution for energy storage and the decarbonisation of heavy industry like steel and cement in certain circumstances. It will also provide a solution for the decarbonisation of heavy goods transport and shipping. Electrolysis generated by renewable power can be used to make hydrogen, effectively storing the energy. There is a bit to go to make it commercial, but the Green Deal will support industry to get there.”
Renewable energy is at the crux of the Green Deal, he points out. "We are going to see a dramatic surge in renewable energy investment across Europe and Ireland. We have already seen an offshore wind Renewable Energy Support Scheme (RESS) auction in Ireland. The focus there is on fixed and floating offshore wind technologies. Ireland has an opportunity to establish a leading position in floating wind technology. Over the next 20 years that will become an export industry with power being sold abroad through interconnectors."
Opportunities for Ireland are not limited to renewable energy. “The plan is also a beacon for investors,” says Kennedy. “There is a lot of interest from investors in this. Ireland is blessed with a certain position internationally and is well placed to benefit from the plan. There is a trillion euro on the table and the availability for funding of things like infrastructure projects will be tied to their greenness. That will allow us to go ahead with things we want to do anyway.”
Ireland has other strengths. “We have a very strong financial services sector,” he continues. “Finance is going to be at the centre of this and that will provide opportunities for banks in green finance and for the state to create a framework for green finance providers and for Ireland to be a leading nation in that regard. The Green Deal will bring about massive changes in numerous sectors and that will provide a lot of opportunities for Ireland.”
Dublin stands to benefit as well, according to Sinead Healy, senior public affairs executive with Dublin Chamber. "The goals of the EU Green Deal align with many of the long and medium term goals for the Dublin region, particularly in the areas of public transport and mobility. Projects to accelerate the electrification of our transport system overall should be evaluated for Green Deal possibilities, as should active and smart mobility projects."
Alignment with the post Covid recovery will be crucial, she adds. “The European Commission has remained fully committed to the Green Deal and has doubled down by linking its NextGeneration EU Covid recovery fund to the goals of the Green Deal. Dublin needs to similarly align its post-Covid recovery to become a more sustainable and resilient capital city. By doing this, Dublin can line itself up for funding and ensure that it is well placed for the jobs of the future that are clearly going to be in the green economy and supported through digitisation.”
The scale of the Green Deal is a sign of how seriously it should be taken, Hayes concludes. “It shows the level the EU is going to go. We are past the point of no return on climate action and we are going to see real action across all three key battlegrounds of countries, companies and individuals.”