Green Deal Reloaded - Inventing a New European Model of Prosperity

Unsurprisingly, 170 European business leaders have joined the Green Recovery alliancethat I initiated in spring 2020 to embrace the green transition-they now know it is in their interests too. And we will not make the transition without ensuring a "level playing field" for our industries vis-à-vis their non-European competitors, who are not yet subject to high carbon prices. This is what is at stake with the carbon border adjustment mechanism. While the latter has been discussed for over 20 years, it is finally supported by a majority in Europe, primarily due to France’s initiative. This initiative will prevent climate dumping while allowing our industries to shift their technological models towards climate neutrality.

Another key issue is financial credibility. The historic 750-billion-euro European Recovery Plan will devote at least 37% of the total to climate investments. Not a single euro can be used for investments that could harm the environment. To finance this plan, the European Commission will raise 250 billion in green bonds, becoming by far the world’s largest issuer of green public securities. At the same time, these 250 billion euros represent the biggest green investment shock ever. For its part, the European Central Bank-under the significant leadership of Christine Lagarde-has been taking on a taboo, changing its rules to boost green assets in the economy and gradually applying a "carbon filter" to its monetary policy. Two years ago, this was mere fiction, which is only further evidence of the acceleration within the decision-making process.

When it comes to social and territorial justice, credibility is equally vital. A fundamental condition for the Green Deal’s success is that it must leave no one behind. This is especially true for regions that are still massively dependent on coal, such as Poland and Romania. The European budget has allocated 17 billion euros for the Just Transition Fund to support the green transition in these regions. Europe is also going to change its approach in the fight against fuel poverty. This issue affects millions of low-income European families renting energy-leaking homes, whose energy bills are often higher than their rent. 

A new consensus in Brussels for post-crisis recovery

This dynamic is unprecedented and has not been mitigated by the COVID-19 crisis. On the contrary, we will emerge from this economic crisis having broken from the approach taken to manage the 2008 crisis. A little over ten years ago, during the previous financial crisis, Europe made three major mistakes that we are now making efforts to prevent. 

The first mistake was to limit the budgetary response capacity of Member States. This time, besides an accommodative monetary policy, we have the suspension of tax rules and relaxation of the state aid framework, which have both freed up a maximum of intervention capacity for Member States. What is more, it is already clear that the Stability and Growth Pact’s current rules need revising to make them less rigid and procyclical. 

The second mistake was not implementing a joint recovery and investment plan. In July, after a historic four-day and four-night Council at the level of European Heads of State and Government, and then after the agreement of the European Parliament in December, we reached an agreement on a 750-billion-euro Recovery Plan, financed at the European level through common debt. 

Ten years ago, the third mistake was not linking economic recovery with the much-needed response to the climate crisis. This time around, the opposite is true-the United Nations Environment Programme (UNEP) has ranked the European Recovery Plan as the second greenest in the world, after South Korea’s.

Imagining a new theory of change to get all citizens on board

We now have two decisive levers: the technological lever mentioned above and the cultural lever. The European population is much more sensitive to ecological imperatives; social norms are changing, and market trends are evolving. But we still need to change policy rules and regulatory frameworks to make such systemic change possible. That is precisely what we are doing with the Green Deal. Second, a new method of negotiating transitions is needed. Faced with the challenges of transforming our agriculture and mobility, escaping our dependence on fossil fuels or proposing a circular economy that no longer overexploits resources, we must make profound changes in our economies. There are many potential areas of tension and competing interests, and there is nothing worse than giving in to oversimplification. The time has come to build the conditions for this transformation - to build the "how." 

Our society is complex, and people are complex. They are caught up in contradictions and material constraints. The green transitions of the 21st century must be negotiated in the same way as the social negotiations that built the welfare state in the 20^th century. That is why, in both France and Europe, I am pushing for sector negotiations that will enable us to overcome the obstacles we have encountered thus far. Let’s use truckers as an example. The debate usually focuses on reducing the tax subsidies they receive on diesel fuel, which is a subsidy that costs taxpayers billions and goes against our climate objectives. But by doing so, we are making the weakest link in the value chain pay the cost of the green transition, when their economic equilibrium is already precarious. As a result, threatening the French government with blocking a traffic circle is enough to curb any existing reformist ardor. And nothing changes. We need to turn the problem on its head and create the conditions that will allow truckers easy access to cleaner trucks that they cannot afford on their own. And, of course, the electric or hydrogen charging infrastructure must be financed so that the deployment of clean trucks can occur in the first place. This must be paid for in part by the community and in part by the players in the value chain - not only truckers, of course, but also shippers, principals and so on. All this necessitates a negotiation that has not taken place yet. This example can also be transposed to agriculture, housing and other impacted sectors. That is why, in addition to the normative shock represented by the European Green Deal, we must develop a method and a culture of negotiating green transitions, as we did throughout Europe in different but convergent forms for the creation of the welfare state in the 20^th century. 

The European Green Deal is an exceptional endeavor. Should we succeed, we will be able to make Europe even more meaningful - as the driving force behind a new prosperity model for the 21^st century, just as it once was for modernity and economic revolutions.

Copyright : JACQUES DEMARTHON / AFP