All that glitters is not Green. Is the EU’s Green Deal as great as it sounds?

Published 29 June 2022 by Lydia Jones

All that Glitters is Not Green blog IMAGE

If this is “Europe’s man on the moon moment” as proclaimed by Ursula von der Leyen, then the Green Deal will be an object of immense pride and success to all Europeans. Since the industrial revolution, we have been polluting our air, land, and seas relentlessly, exploiting and simultaneously destroying our environment. A Green Deal is long overdue, but how will the Commission make it work for every one of its citizens? Promises of an attractively green, low-carbon economy may be music to the ears of the Europe’s financially secure middle classes, but to the low-income and carbon-intensive industry-employed households, it is rather the tune of terror. The EU has published a proposal guiding member states on how to tackle the threats to employment and social impacts of the low-carbon transition. Recognition of the issues faced is good in the proposal, however, there is a severe lack of legally binding implementations, meaning the EU will reply entirely upon political pressure within member states to ensure, as they write, ‘no one is left behind'.

Fuel poverty

As required by the Green Deal under the Energy action section, energy production will move increasingly to renewable sources, thus seeing a decline in production and use of high-carbon technologies like coal. Whilst this may be a step in the right direction, the EU’s deal shows little consideration for the time needed to mass develop and produce low-carbon technologies. On top of this, the EU will be introducing heavy carbon pricing to drive consumers towards renewable, sustainable products instead. Again, this seems to be a sensible idea, making the sustainable choice the cheapest, and subsequently the most popular. However, with low-carbon technologies requiring development before they can match the availability and affordability of their high-carbon alternatives, consumers can expect a difficult period during which they will be stuck between high carbon pricing and limited availability of alternatives. Additionally, low-income households who dedicate a substantial proportion of their income to fuel and transport will be disproportionately affected by this transition as they possess less capacity to change. The low-carbon products (e.g., solar panels and electric vehicles), despite their low running costs, have considerably high upfront costs. Households with minimal disposable income will struggle to keep up with the transition to low-carbon sustainability because of this.

The EU’s proposed introduction of an EU-wide carbon price will not ‘level the playing field’ as they hope. A single price will undeniably have a vastly unequal effect on say Luxembourg with its sub-5 % fuel poor population than on Bulgaria with its 30% fuel poor population. This is further unwelcome news for low-income households who, due to a lack of information on available low-carbon alternatives, have only a short-term planning horizon causing them to discount potential, long-term cost savings.

Coal and automotive job sectors

Whilst the EU forecasts the creation of thousands of new jobs in the transition to a zero-carbon economy, thousands will also be lost as certain industries and sectors undergo great transformations. Recent studies show the EU holds 128 coal mines, employing over 238,000 people from the regions spanning Aragón to Silesia. This represents 0.15% of total EU employment, and of this proportion, 90% of these jobs are within 10 NUTS 2 regions (populations ranging between 800,000 to 3 million), with four out of ten of these regions being in Poland. Essentially, due to the EU-sanctioned move to a low-carbon economy, focused areas such as Poland will face unequally sharp rises in unemployment. In a similar vein, another high-carbon industry- automotive, employs more than sixteen million people, meaning over 6% of European employment will be at risk given the industry faces a full-scale redevelopment, rebuilding it from the very bottom. The death of the combustion engine and the growth of the electrification of the powertrain will result in manufacturing job losses estimated at up to half a million by 2030. The new jobs promised by the EU are expected to arise in the renewable energy sector, construction, and low-carbon infrastructure, however, job replacement is not as easy as it sounds. Where jobs are lost and created are not necessarily the same places and workers cannot simply be shuffled around like livestock. Further, the new jobs will require a different set of skills and competencies, especially in areas of STEM and digital as innovative, breakthrough technologies need discovery and development. In response to this, the EU proposes in their Just Transition Mechanism (JTM) a €55 billion fund to be injected into the regions most at risk from these changes. Yet the structure of this mechanism, with member states required to apply for funding by submitting individual territorial just transition plans to the EU, lacks concrete support and planning. Specific reskilling programmes need to be created, working with businesses to understand the requirements and adapt the programmes to fit them. These resources must be easily accessible, with classes running a wide range of hours and having online access to ensure workers can access the reskilling outside of current employment hours so that they may maintain employment at their current job, whilst preparing for their future one. Additionally, the workforce of tomorrow needs preparation. The education curricula across all member states need adapting to meet the demands of the labour market. Not one country will retain the current state of their labour market; we can expect to see swift transitions to an increasingly digitally dependent and STEM-focused practices. Hence, the EU’s Just Transition legal framework should contain skills strategies and the right to training for every worker, supported by Trade Union involvement. Without reinforced proposals guiding governments on how to support those experiencing job transitions, the restructuring will have unequally negative effects on citizens based on their gender, age, economic activity, region, and skill.

Social infrastructure

For the green and social transition to live up to its name, attention must be given to the creation and maintenance of regional social infrastructure. The rise of the AFD in Germany and the Gilet Jaunes protests in France highlight a need for citizen engagement and support of the sustainable transition. As Charles Grant, director of the Centre for European Reform thinktank says, “The green agenda will meet more and more opposition as voters start to realise it will make them poorer and affect their lifestyles”. Preventing the rise of Populists, keen to promote anti-greenery, will require investments and proposals targeted at reinforcing social infrastructure. Beyond employment, these services give citizens reason to stay in a community. What use is there in having a green and sustainable EU if healthcare, transportation, public facilities, and education are ailing? The EU’s 2018 Boosting Investment in Social Infrastructure in Europe Report is nearing its ‘fully operation stage’, but in the wake of the EU’s Green Deal, more tailored proposals need to be constructed and launched. Social infrastructure provides an alternative way of combatting the issues the Green Deal raises. By improving it, member states will see headway being made in gaining support from those who were once opposed, like the Gilet Jaunes.

Conclusion

A Green Deal is necessary, but the one put forth by the EU in 2018 is lacking. The deal is too presumptive in its plan to leave no one behind. Whilst €55 billion has been dedicated to this cause, member states lack the instruction they need to ensure their citizens do not suffer in the transition to sustainability. Each member state will have unique requirements and need an individually tailored plan, something the EU should bear responsibility for if these states are to adequately support their most at-risk citizens. The EU should resist being too swept up in the excitement of becoming the first continent to reach net-zero emissions, and instead focus on ensuring the Fit for 55 is fit for all.

But even with its flaws, there is no denying the Green Deal represents a watershed moment for Europe - not only in its wide-ranging ambition, but also through the elements of it that have already been implemented as regulation. The detailed and comprehensive strategies for sustainable finance, biodiversity, offshore renewable energy, common agricultural policy, and many others are commendable. But now the EU must build a strategy to adequately implement the Just Transition Mechanism. With a few critical amendments and a clear strategy of implementation, the JTM could be an effective tool for securing a more certain future for the EU citizens that will be most vulnerable in the transition to a more sustainable economy. Forgo those changes however, and the green deal could be a bad deal for those that need help the most.


About the author

Lydia Jones is a second-year student at the University of St Andrews, pursuing a Master of Arts (Honours) English and Mathematics, set to graduate in 2024. She is currently an intern at CMi2i in London.

About CMi2i

CMi2i, the world’s leading forensic capital markets intelligence firm, specialises in the world’s most accurate Equity & Debtholder identification service and supports issuers and their advisors with their ESG investment, investor relations, M&A, AGMs/EGMs, corporate governance, shareholder activism and capital restructuring goals through its integrated approach. The company has supported more than 1000 corporate transactions and over 500 clients worldwide.