Part Four of the EGD Series: Protecting Our Environment and Financing the Sustainable Transition
What the European Green Deal Means for Sustainable Industries
By Tom Carter, Senior Associate, Amplia Group
If you have not read the previous blogs in this series on the European Green Deal (EGD), please do so using the links below:
This is the final blog in our four-part EGD series, and covers “Protecting Our Environment/Financing the Sustainable Transition.”
As perhaps the most pressing issue confronting humankind, climate change forms the focal point of the EGD, but the plan also addresses other key threats to human and ecosystem health. These include biodiversity loss, toxic chemicals in our food and environment, and other forms of air and water pollution.
The EGD is ambitious, revolutionary, and requires dramatic changes to multiple infrastructures and systems. The European Commission must envision means of financing the proposed transitions and innovations. The plans for doing so are described below.
Protecting Our Environment
Biodiversity and the health of vital ecosystems have been dramatically diminished by habitat loss, pollution, and climate change. To minimize this loss and best preserve nature’s resilience, the Commission will propose the EU Biodiversity Strategy, related strategies on forestry and oceans, and a plan for creating a toxic-free environment.
EU Biodiversity Strategy
A case can be made that biodiversity and ecosystems embody inherent value to humans, but there can be no debating the fact that healthy ecosystems are essential for providing food, shelter, climate regulation, clean air and water, and mitigating pests, diseases, and natural disasters. But human emissions and irresponsible use of land and sea continues to erode biodiversity.
The Biodiversity Strategy is designed to ensure that the EU meets existing commitments and leads the world in taking action to protect biodiversity and ecosystems. Upcoming proposals will identify specific measures, potentially including:
Expanding the Natura 2000 network to increase coverage of protected biodiversity-rich land and sea areas;
Restoring damaged ecosystems;
Connecting and better managing European protected marine areas; and
Greening European cities and increasing biodiversity in urban spaces.
Other EGD provisions addressing climate change and pesticide use will also provide significant ancillary benefits to biodiversity and ecosystems.
Forestry Strategy
Climate change and habitat destruction put forest ecosystems under increasing pressure.The EU’s goal of carbon neutrality will require improving and expanding forested areas in Europe to increase their resilience and maximize absorption of CO2 while promoting a circular bio-economy. The Commission will prepare a new EU forest strategy addressing the entire forest cycle and promoting forests’ ecosystem services.
The objectives of the strategy include:
Preservation, reforestation, and expansion of Europe’s forests;
Increased absorption of CO2 by trees;
Reduced incidence and extent of forest fires; and
Promotion of a bio-economy cognizant of ecological principles favorable to biodiversity.
Ocean and Marine Life Protection
Oceans play an important role in absorbing CO2 and stabilizing climate change, but this resource is not limitless. The seas are stressed to their limits by acidification, pollution, and overfishing. The EGD will include measures to protect maritime areas and utilize their resiliency and resources to complement other efforts to improve sustainability. These include:
Maximizing offshore renewable energy;
Banning all illegal and unregulated fishing; and
Reducing chemical pollution and single-use plastics.
Creating a Toxic-Free Environment
Human-made toxins pose multiple risks to human and ecosystem health. The EGD will aim to simultaneously reduce new production and release of these toxins and to clean up those previously introduced into the environment. This will require EU Member States to explore policies and regulations to better “monitor, report, prevent and remedy pollution from air, water, soil, and consumer products.” This plan culminates in 2021 with an EU zero pollution action plan for air, water, and soil.
The Commission will take the following actions:
Strengthening provisions on air quality monitoring, modelling, and mitigation;
Revising air quality standards;
Reducing pollution from large industrial installations; and
Developing a chemicals strategy for sustainability.
Financing the Sustainable Transition
The Commission acknowledges that financing the deep transitions envisioned in the EGD will require equally revolutionary approaches to the development of investment mechanisms. The EU has already proposed the European Green Deal Investment Plan to provide around €1 trillion of sustainable investments by 2030, supported and de-risked by the InvestEU guarantee. The Renewed Sustainable Finance Strategy will mainstream a culture of sustainability by providing incentives to redirect private capital to green investments. Finally, the Just Transition Mechanism and Fund will strive to ensure that all Europeans can benefit from the greening of the economy by modernizing and diversifying those sectors that lag behind.
Sustainable Europe Investment Plan
According to the European Commission, the estimated price tag for achieving the EGD’s climate and energy targets will be €260 billion per year, requiring sustained investment from both the public and private sectors. The Sustainable Europe Investment Plan will combine dedicated public financing to support sustainable private investment. Technical assistance and advisory services will simultaneously help kickstart the flow of sustainable projects.
The EU budget will include targets to mainstream climate objectives across all EU programmes and develop new revenue streams from sustainable activities such as recycling and emissions trading. All EU projects will be assessed to ensure that they support—rather than undermine—climate, environmental and social objectives. InvestEU will offer Member States budgetary guarantees for sustainable policy measures and strengthen cooperation with banks and other institutions to encourage broad societal adoption of green objectives.
The EU Emission Trading System will be revised to enhance the role of Innovation and Modernization Funds in deploying innovative, climate neutral technologies, products, and systems in Europe and beyond. Additional revenues from allowances and investments from the European Investment Bank Group will be allocated to help finance the Just Transition to a sustainable economy.
Just Transition Mechanism and Fund
The Just Transition Mechanism will form a cornerstone of the Sustainable Europe Investment Plan to ensure that it is implemented in a fair and inclusive way. This comprehensive and orchestrated effort will be required to ensure that the States and regions of varying economic, social, and geographic circumstances have the same capacity for benefiting from the structural changes and opportunities envisioned in the EGD. A key objective is to reduce the dependence of Member States on fossil fuels and carbon-intensive manufacturing processes: promoting a transition towards low-carbon and climate-resilient activities while protecting citizens and workers most vulnerable to the transition.
The specific objectives of the Just Transition Mechanism and the associated Just Transition Fund are to:
Strengthen the foundations for sustainable investment;
Provide increased opportunities for investors and companies to identify promising and credible sustainable investments; and
Manage climate and environmental risks and integrate them into the financial system.
Greening National Budgets
In addition to adjusting the EU budget, the Commission plans to ensure the utilization of green budgeting tools in the development of national budgets across all Member States to “redirect public investment, consumption, and taxation to green priorities and away from harmful subsidies.” Tax policy will also reflect the need to simultaneously encourage economic growth and resilience to climate impacts by incentivizing sustainable production and consumption. Examples of actions under consideration include:
Removing subsidies for fossil fuels;
Shifting the tax burden from labor to pollution;
Adopting uniform value-added tax rates; and
Providing incentives to support market penetration of organic food.
Another key element of financing the EGD Is the evaluation of guidelines to support policy objectives such as climate neutrality and removal of market barriers to the development and adoption of clean products.
EGD Action items
The EGD includes a comprehensive suite of specific legislative and non-legislative proposals addressing each of the eight elements covered in this series of blogs. Those for this blog’s topics are listed below.
Protecting Our Environment
EU Biodiversity Strategy for 2030 (non-legislative, Q1 2020);
8th Environmental Action Programme (legislative, Article 192(3) TFEU, Q2 2020);
Chemicals Strategy for Sustainability (non-legislative, Q3 2020)
Financing the Sustainable Transition
European Green Deal Investment Plan (non-legislative, Q1 2020);
Just Transition Fund (legislative, Article 175 TFEU, Q1 2020);
Renewed Sustainable Finance Strategy (non-legislative, Q3 2020);
Review of the Non-Financial Reporting Directive, including impact assessment (legislative, Article 114 TFEU, Q4 2020)
What are the Opportunities for Sustainable Industries?
The EGD offers opportunities for innovators and providers of sustainable products, systems, and services. The European Green Deal will enhance these opportunities for industries and companies in the following sectors:
Providers of chemical free and non-toxic products
Developers of innovative and sustainable forestry systems
Creators of innovative aquaculture systems and technologies
Providers of technologies, products, and services to educate consumers on the availability and benefits of sustainable products
Developers of systems for assessing the effectiveness of tax incentives and market penetration approaches
The industries and companies that begin now to engage in EU policy will have a greater voice in the specific characteristics of the measures to implement the EGD, including the actions described above.
We are living in extraordinary, challenging times. Now more than ever it is important for businesses to be resilient, scalable, and innovative. We are uniquely positioned to assist companies to engage with EU partners and leverage our expertise in advocacy, sustainability, EU policy, and relationship-building with the European Commission.
Contact us to explore how to encourage supportive policies and maximize markets for products and services that align to the new European Green Deal.