European climate policies need a reality check

Energy - July 5, 2022

The Russian aggression against Ukraine has not only exposed the limits of Europe’s ill-conceived energy policy, which favors autocratic suppliers with little respect for the rule of law; the attack is also highlighting the limits of the ideological approach to climate change mitigation being pursued by EU institutions. As is well known, the Commission has been pursuing a strategy of aggressively abating CO2 emissions by 2030 and of making Europe the first climate-neutral continent by 2050.

Most definitely, the need to preserve our planet imposes a strict timeline about which there is little for us to disagree. In a sense, this is exactly the point. The US is lagging behind Europe in its climate-change efforts, and China has been increasing emissions despite earlier commitments it had made to the contrary. Clearly, if the goal of pursuing ambitious mitigating policies is to encourage a lead-by-example behavior, at the broad international level this strategy has little scope if the carrot is not also accompanied by the stick.

Indeed, the EU should make an effort, for instance, to condition access to the Single Market, if other nations, especially big ones like China, do not share its climate policies or other regulatory standards. Otherwise, the biggest loser will be European businesses, workers, and consumers, who operate under much stricter standards but with no global net benefit to the environment.

This is also consistent, I would argue, with the findings of a recent survey highlighting that people close to conservative values care both about uniform standards being applied throughout the Single Market and about the environment.

Instead, the recent decision by the European Parliament to ban sales of fossil fuel cars goes exactly in the opposite direction and proves even more so how ideological the approach continues to be.

Instead of ensuring that EU efforts are matched by others so as to ensure that the planet is really better off, and that the adjustment costs shouldered by European businesses, workers, and consumers has a purpose, this poorly conceived ban risks replicating the distortion in our energy policy, this time with China, not Russia, as China holds most of the lithium and rare minerals needed for electrification.

One wonders whether the current circumstances impose a word of caution about pursuing plans and policies that were largely conceived in a world utterly different from what it looks like today. That is not to say that the environment should not be safeguarded. On the contrary, indeed it should. But what is the sense of implementing a plan, if no one ensures that it will result in a proportionate net benefit?

If other players ‘appropriate’ the virtuous behavior of Europe by polluting more or mitigating less, we risk overburdening European consumers, workers, and businesses alike with out-of-proportion adjustment costs. It is enlightening that, while the Italian Government has welcomed the decision to ban fossil fuel cars, in Germany, the other European economy with a large manufacturing base, the decision has been met with much less enthusiasm.

At a time when Germany and Italy are talking about reopening previously shut-down coal power plants to cope with an unprecedented energy crisis, European institutions should ensure greater consistency in their climate policies and laws by pausing a moment for a reality check.