Energy & Environment

The Green Deal is Not Cost-Free

February 2024
By Gianni Pittella

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An old saying goes, “you can’t make weddings with dried figs.”

The European Union has been virtuously at the forefront in understanding that a true revolution was needed to reduce global warming, defend and enhance the environment, and build a planet on a human scale.

This revolution, called the Green Deal, comes with precise deadlines and constraints aiming for climate neutrality by 2050 and intermediate milestones that concern biodiversity, transport, housing, agriculture, businesses, and more.

Only the naive could think that all this would come at no cost. There are sectors that need support to be able to face the ecological and energy transition; otherwise, they suffer and explode, questioning the sustainability of the commitments made with the Green Deal. The farmers’ protests are the most striking testimony!

Indeed, the European Union has established a Just Transition Fund to mitigate the social effects of the Green Deal, but its budget is only 17.5 billion for all of Europe, proving to be very limited. The Member States would remain, but as seen from the negotiations on the new Stability Pact, the budgetary margins for the Member States seem to be reducing instead of increasing, due to the usual German reluctance and the obsession with austerity.

In the absence of financial resources, the EU thus seeks to shape the economy through rules, but, as we see from the farmers’ mobilizations, this risks being counterproductive. The EU lacks the financial resources to finance the necessary investments to achieve the goals by 2030 and 2050 and also to mitigate the social effects of this regulation. All this poses not only a problem of social sustainability but also of competitiveness for Europe.

The USA, which is a federal system equipped with a budgetary capacity instead of mere budget regulation, is for example heavily subsidizing their green economy, which is now more productive and innovative than the European one.

To put it simply: “Europe gets environmental rules without financial resources, the USA gets financial resources without the rules.” This contrast between rules and financial resources is even more evident in the case of China, which, also thanks to government subsidies, is becoming a leader in the production of low-priced electric cars and thus risks colonizing the European market by 2035.

I believe that a significantly larger allocation for the Just Transition Fund, along with a reform of governance in a federal direction, is indispensable so that the green revolution is not a far-sighted and courageous insight hampered by the social and economic interests it impacts.