In early 2025, European lawmakers drastically minimized the scope and scale of corporate sustainability disclosure requirements – cutting by up to 90% the share of companies that are required to report. Then, in December, European Parliament members delayed a law that would help reduce deforestation and forest degradation around the world. That same month, another law that was set to ban production of new combustion-engine cars in Europe by 2035 was watered down. In every case, global competitiveness was among the main reasons cited for the scale-back. 

But oscillating between climate leadership and regulatory retreat could also mean that Europe loses its place as a climate pioneer and an industrial power. “If Europe continues with this deregulation drive,” says Andreas Rasche, a professor at Copenhagen Business School, “the climate rules for European businesses will be written elsewhere in the world.” 

Simplification vs. deregulation 

Opponents of the European Union’s ambitious policies say they have overly complicated reporting structures and impose too much bureaucratic red tape. 

Rasche says that, in theory, regulatory simplification is a good idea, but “the problem comes in where simplification itself is politicized and is turned into an unjustified deregulation.” 

Fewer reporting requirements tend to mean lower costs, but that doesn’t necessarily translate into competitiveness. “The logic is that you increase competitiveness [by] reducing costs with compliance,” explains Hanna Ahlström, senior adviser and sustainability business developer at Æra, a consultancy firm in Oslo. But even if costs are cut and a company’s profitability increases, it doesn’t necessarily make a company more competitive, Ahlström says. For that to be the case, “the money [saved] needs to be reinvested in ways that makes the company competitive, and not all firms will do this.” 

While investing in new technologies is something that can help make a business more competitive long-term, the EU’s policy inconsistencies have also made businesses more hesitant to act. 

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For instance, Yara International, a fertilizer company, said in January that if the EU suspends its carbon border adjustment mechanism (CBAM), which came into effect on January 1, they will have to rethink a major low-carbon ammonia project in the United States. CBAM, which has so far avoided suspension, taxes EU companies importing steel, cement, aluminum, fertilizers, hydrogen and electricity based on the origin of the import. Yara CEO Svein Tore Holsether told Reuters that CBAM helped improve the business case for low-carbon ammonia products, but that regulatory uncertainty makes it difficult to bank on more expensive low-carbon investments.   

Businesses that make the first moves tend to also reap economic benefits as trailblazers, says Marcin Menkes, an associate professor at the Warsaw School of Economics and Vrije Universiteit Brussel. But when geopolitical turbulence is met with inconsistent behaviour on the part of the EU, it stifles not only innovation but also competitiveness, he argues. In order to make investments, companies bet on new rules and regulations being implemented. Uncertainty might incentivize businesses to be cautious instead. 

Even if a new approach, product or technology has an environmental benefit, if the rules change the business will incur the costs of being a first mover. “We must protect those businesses that boldly try to experiment, to deploy new environmental technology, technology solutions, without surprising them with different . . . regulatory approaches,” Menkes says. 

Regulation can mean opportunity, too 

When EU regulations stay in place, like CBAM has so far, there are business opportunities for companies willing to invest in compliance to gain access to the EU’s single market of approximately 450 million people. 

Canada, which ranks fourth in aluminum and 16th in steel production, could seize the opportunity to become a bigger player in the European market. Canadian aluminum and steel are largely produced by hydroelectricity, giving Canada one of the lowest carbon footprints among the world’s major producers. “Given the dependency on U.S. markets and the tariffs in place,” says Michael Lenaghan, associate director at Anthesis, a U.K.-based consultancy firm, “CBAM couldn’t have come at a better time for Canada and for steel and aluminum.” 

With the Canadian government looking to diversify trade, there is now an opportunity to become a major player under the CBAM regime, Lenaghan says. Currently, the EU imports most of its steel and aluminum from China, India and Turkey, he says. When comparing the emissions values to Canadian production, it’s significant: Canadian emissions are “between 50% and 70% lower across these materials, and that translates into a significant cost savings for EU importers when they’re looking at where to buy.”  

Lenaghan says that he doesn’t think that Canadian producers are fully tuned into CBAM yet. But it’s not every day that your competitiveness over other exporters is altered so drastically. “That’s what CBAM is doing,” Lenaghan says. 

It’s also an illustration that ambitious EU climate policies can co-exist with profits and competitiveness in a global market. “For me,” Copenhagen Business School’s Rasche says, “ambitious climate policy and competitiveness is not a contradiction.” It depends on the time frame. If competitiveness is looked at in the short term, there will be cost savings. Rasche, however, believes that competitiveness should be seen as a long-term horizon: “For that, you need an ambitious climate policy, and you need to decarbonize.”  

Ashley Perl is a Canadian freelance journalist based in Stockholm.  

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“The first half of the year shows fossil generation’s narrowing role in the power sector, and gains for renewables that are beyond temporary variations in conditions,” said Chris Rosslowe, senior data analyst at Ember, a think tank that assessed EU energy developments to measure progress on the clean transition.

Fossil fuels generated 17% less in the first half of 2024 compared to the same period in 2023, Ember writes. Coal fell by a quarter and gas by 14, even as demand rebounded by 0.7% after two years of decline.

Meanwhile, “wind and solar overtook EU fossil generation for the first time.” Together, the two renewable sources generated 30% of the EU’s electricity in the first half of 2024, compared to 27% from fossil fuels.

“We are witnessing a historic shift and it is happening rapidly,” Rosslowe added. “If [EU] Member States can keep up momentum on wind and solar deployment, then freedom from fossil power reliance will truly start to come into view.”

The report found that “wind and solar were boosted by structural growth through capacity additions as well as favourable conditions.”

Strong winds “were prevalent during the first six months of 2024 in northern Europe, where most wind energy is generated,” Andrea Hahmann, a scientist at Denmark Technical University who co-wrote an Intergovernmental Panel on Climate Change report chapter on energy systems, told The Guardian.

Ember also found that a warm winter meant less energy needed for heating, while higher-than-average rainfall helped boost hydropower after years of drought. Poor conditions for solar held back further growth in the sector.

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In addition to wind and solar, hydropower accounted for 21% of electricity generation, meaning that more than half of the energy mix came from low-carbon sources. Nuclear generation increased by 3.1%.

The report follows years of renewable energy growth in Europe, accelerated by the threats to fossil fuel access posed by Russia’s 2022 invasion of Ukraine. High energy prices in the war’s wake drove consumption down, with fossil fuels taking the hardest hit. This year, energy demand has started rising again, but fossil fuel demand has continued to fall, while new permitting reforms have buoyed the rise of renewables, reports Canary Media.

More than three-quarters of the drop in fossil fuel use was centred in five EU member states with the region’s largest power sectors, with significant cuts to coal-fired generation producing the continent’s largest drop in Germany. Italy cut back equally on coal and gas, while Spain, Belgium, and France mostly slashed gas consumption. And even member states that have traditionally relied heavily on fossil fuels followed the trend, like Poland, where coal’s share dropped from 80% of the energy mix in 2019 to 57% so far this year.

The EU’s shift to renewables is unlikely to reverse, the report added, since the gains were largely the result of an increase in installed additional capacity that is set to continue through the rest of 2024.

“It’s very likely that that is a kind of permanent shift in the EU’s electricity mix,” said report author Euan Graham, an electricity and data analyst at Ember.

This article was first published on The Energy Mix. Read the original story here.

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In fact, European Commission President Ursula von der Leyen was downright jubilant after the elections, saying that the political centre was “holding” as her European People’s Party (EPP) won 189 of 720 seats to remain the largest party by far. While the liberal (Renew) and socialist (S&D) parties lost seats, the groups together held enough ground to have a workable majority in Parliament. The Greens, who lost 19 seats to return to their pre-2019 size, also look likely to support the conservative EPP, ensuring a comfortable majority.

There were serious concerns heading into the election that the far right would win enough seats to force itself into a ruling coalition and roll back parts of the continent’s Green Deal (a sweeping package to boost renewables, energy efficiency and building renovations; reduce methane emissions; develop a carbon border tax; boost EVs; expand carbon taxes and more), but that bullet has been dodged, and in doing so, von der Leyen has secured her single greatest legacy.

“The election results show that while the far right has gained some ground, they do not have enough seats to form a stable ruling coalition or dismantle the European Green Deal,” says Linda Kalcher, executive director of Strategic Perspectives, a Brussels-based think tank. “Any rollback would be economic insanity as it would create uncertainty for business and investors at times when the U.S. and China are the more appealing destinations for net-zero industries.”

Analysts see two primary concerns about Europe’s climate ambitions in the future: procrastination at the EU level and delay at the national level.

“With increased pressure from the right, the mainstream centre-right European People’s Party might be tempted to push for postponements or watering down some of the most controversial provisions of the Green Deal (such as the 2035 ban on internal combustion engines),” wrote Simone Tagliapietra, a senior fellow at Bruegel, a European think tank that specializes in economics. The other risk is that “Germany, France, Italy and other large countries are expected to do the heavy lifting, but what if their governments do not deliver?”

One national diplomat, who preferred to remain anonymous but was intimately involved in Green Deal negotiations, is optimistic: “As competitiveness and security come into greater focus due to external events, the clearest pathway to achieving these goals is to drive forward with policies that deliver on European renewable and energy-efficiency targets. This is the most cost-effective way to ensure energy security, autonomy, competitiveness and decarbonization.”

During the election campaign, it was clear that climate issues would not be front and centre the way they had been in 2019. “The main priorities [now] will include strengthening industrial competitiveness, enhancing energy security, and addressing the cost-of-living crisis,” Kalcher says. “The new coalition can align on a European industrial strategy that delivers on decarbonization goals, reindustrializing the economy and reducing dependency on fossil fuel imports.”

Essentially, decarbonization efforts are likely to continue, but the motivation will be different – it will be about energy security, protecting jobs and helping industry.

“However, efforts related to biodiversity and nature protection might face more resistance due to the protests by farmers,” Kalcher adds.

Farmer protests have been a regular occurrence in several EU countries over the last year. Irish and Dutch farmers have protested over nitrogen emissions limits, Polish farmers blocked shipments of now tarif-free Ukrainian wheat, French farmers have dumped manure in front of government buildings over low prices and overseas competition, and German farmers protested the end of fuel subsidies. Greece, Portugal and Italy have also seen tractors in their streets.

The first big test for the new Parliament will be the approval of the bloc’s 2040 targets. They are a key complement to the existing legally binding 2030 and 2050 targets. A European Commission report earlier this year recommended a 90% emissions-reduction target compared to 1990 levels, but there has not yet been a formal legislative proposal. That will fall on the incoming Parliament and Commission likely in early 2025.

If conservative parliamentarians do try to weaken the 2040 targets, it could mean that the next few years will be very rocky indeed for European climate action.

Perhaps the biggest surprise of the elections came from France. President Emmanuel Macron called snap legislative elections after his party, Renaissance, was trounced in the European elections. If the far-right National Rally (RN) wins the domestic elections scheduled for June 30 and July 7, it would claim the post of prime minister, while Macron would continue as president until 2027.

Marine Le Pen, who leads the RN in the legislature, threatened to pull France out of the EU Green Deal and to impose a moratorium against wind turbines (on shore and off) and on all solar production. She did promise not to take France out of the Paris Agreement, at least.

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I’m reminded of this debate amid the current turmoil over a green investment label in Europe, a situation caused largely by the unwillingness of the sustainable investment sector to create its own industry standard.

Back then, some members of the SIO, the precursor to today’s Responsible Investment Association (RIA), felt the lack of a sustainability label placed the industry at risk of greenwashing.

Yet, when we put the question to our advisor and money manager members, a strong message came back: don’t touch it.

Some said a single label would lock in a niche standard, discouraging adoption by mainstream finance. Others argued a label could pose a governance conflict, making SIO both a promoter of social and environmental investing and a de facto industry regulator. And still others, including some labelling proponents, feared a weak label would perversely encourage greenwashing by giving investors a false sense of assurance.

Informed by this debate, the SIO adopted a “big tent” strategy, welcoming a wide variety of environmental, social and governance (ESG) strategies and membership from players across the investment industry. The RIA continues to follow this playbook in Canada, as do sustainable investment networks in other countries and regions.

The European Commission has allowed European governments to drag this Taxonomy Act into the gutter – and this fiasco is going to create a huge mess in financial markets.

-Sebastien Godinot, economist for the World Wildlife Fund

This hands-off approach to labelling has achieved its intended effect of spreading the practice of responsible investing, with more than $35 trillion worldwide invested under ESG strategies, up from about $14 trillion in 2012, when these figures were first gathered. But it has also led to a proliferation of ESG rating and investment methodologies, many that focus more on the risk to revenues or stock prices posed by social and environmental controversies than real human or planetary impacts of business practices.

All of this brings me to the current crisis surrounding the European Union’s ambitious initiative to establish a green label for social and environmental investing. The fear 20 years ago that a green investment label could itself enable greenwashing is now playing out two decades later in Europe.

In 2019, European policy-makers launched a project under the obscure and uninspiring title of EU Taxonomy to combat real and perceived greenwashing in the sustainable investment industry fuelled by the lack of an industry-wide standard. 

The taxonomy establishes firm technical standards to determine which economic activities can be considered sustainable under six environmental objectives: climate change mitigation and adaptation, use of water resources, transition to a circular economy, pollution prevention, and ecosystem protection.

As an example, the taxonomy recognizes that the steel industry is generally not low carbon but that it can contribute to climate change mitigation by drastically lowering its CO2 emissions, while doing no significant harm to other environmental objectives and respecting human rights and labour standards. This incentivizes the industry to switch to net-zero technologies like electric arc furnaces and green hydrogen steel-making.  

By identifying these promising activities, the EU aims to unlock billions of euros in a “green list” of climate-friendly investments to help finance its target to lower CO2 emissions by 55% by 2030 (compared to 1990 levels) and to net-zero by 2050.

Until very recently, the initiative has been considered a success. The financial and environmental communities widely supported draft proposals to exclude coal projects and endorse renewable energy.

If we lose the trust of the investors by selling something as a green project, which turns out to be the opposite, then we cut the feet on which we are standing.

-Werner Hoyer, president of the European Investment Bank

But opposition formed late last year when EU bureaucrats proposed concessions to include some natural gas and nuclear projects in a new “transition activities” category. France, eager to expand its atomic energy industry, pressed for the nuclear concessions. Poland, Hungary and the Czech Republic, faced with politically contentious fast-rising electricity prices, pushed for gas concessions to finance new gas-fired power plants. Both industries lobbied heavily for the changes.

The concessions were included in a final set of proposals on February 2 for adoption by the European Parliament, prompting swift reaction.

“The European Commission has allowed European governments to drag this Taxonomy Act into the gutter – and this fiasco is going to create a huge mess in financial markets,” World Wildlife Fund economist Sebastien Godinot said in a statement.

The president of the €550-billion European Investment Bank (EIB), the largest infrastructure bank in Europe, also expressed big disappointment in the new proposals, saying the EIB has no plans to invest in gas or nuclear.

“If we lose the trust of the investors by selling something as a green project, which turns out to be the opposite, then we cut the feet on which we are standing,” said EIB president Werner Hoyer in late January.

The European Parliament could still vote to reject the concessions within the next six months, in which case EU bureaucrats could bring it back without the gas and nuclear concessions. There could also be an alternative framework such as an “amber” category for greenhouse-gas-reduction investments that aren’t necessarily net-zero aligned. Green Party members of the European Parliament are mobilizing a “no” vote among their own members and those of other parties.

But even if changes are made, the taxonomy has been dealt a heavy blow. The project appears to have lost the trust of important stakeholders since it has shown it can be manipulated by political and business agendas. The Institutional Investors Group on Climate Change (IIGCC), whose members manage €50 trillion in assets, hinted it will switch its focus to its own voluntary net-zero investment framework.

The IIGCC framework is similar to the Paris Aligned Investment Initiative model, in which holdings and portfolios are managed under climate metrics and methodologies in accordance with a global temperature increase of no more than 1.5°C.

The model is generating a lot of excitement in the sustainable finance community, especially given the recent carbon-neutrality pledges by members of the Glasgow Financial Alliance for Net Zero, a network of companies managing $130 trillion in assets. 

Although flawed, the EU Taxonomy still has great value as a tool for educating investors and businesses on which economic activities contribute to environmental objectives. 

But the Paris Aligned model, shielded from political and business interference by its scientific basis, is emerging as a more reliable investor assurance model for financing a net-zero future. 

Eugene Ellmen was executive director of the Social Investment Organization between 1999 and 2012. He now writes on sustainable business and finance and lives in Hamilton.

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Political leaders in the European Union, the United States and Canada are increasingly exploring how they might implement carbon border adjustment measures (CBAMs), also known as carbon border taxes, to allow greater ambition on emission reduction without undermining their economies. Imposing higher carbon costs on industry can result in lower emissions in the home jurisdiction but higher ones elsewhere, resulting in no benefit for the climate. Governments in Canada and Europe currently levy carbon taxes on a small portion of production to avoid that leakage scenario. Border measures would allow them to impose steeper carbon costs while protecting their industry.

In Canada, Prime Minister Justin Trudeau has given his cabinet ministers the task of figuring out how to stop what’s known as carbon leakage, when carbon-emitting industries move abroad to avoid paying penalties. The Liberal government has committed  to raise Canada’s federal backstop carbon price from $50 a tonne in 2022 to $170 by 2030, and that includes the output-based pricing system that applies to large industrial emitters. Provinces that have adopted their own pricing systems to avoid the federal one will be expected to match Ottawa’s price increase.

Canada would be well-served to find co-operative approaches in implementing any border measures, researchers from the Canadian Institute for Climate Choices (CICC) told a webinar on December 15, previewing a report on CBAM co-operation to be released in the coming weeks. That effort is enormously complex, as different jurisdictions – even within Canada – have varying approaches to carbon pricing that make it difficult to make comparisons, the report concluded. At the same time, governments will have to avoid the temptation to wield CBAMs as unfair trade measures that use the climate battle as a pretext for outright protectionism. 

“Coordinating best practices [on CBAMs] can smooth the protectionist waters,” CICC economist Dave Sawyer said. Through a co-operative approach, governments can maintain competitiveness by ensuring equivalent climate costs while motivating other countries to increase their ambition. 

Former environment minister Catherine McKenna said the trade issues around climate transition are challenging but must be addressed. “It matters because competitiveness matters,” she told the webinar. “It matters because we want to tackle climate change, but we also want to have industries in Canada and we want to have good jobs in Canada.”

The Liberal government is currently developing its approach to carbon border adjustments. In his mandate letter to Finance Minister Chrystia Freeland that was released December 16, Trudeau tasked the minister with working with provinces as well as key trading partners like the United States and the EU on CBAMs.

Trudeau’s instructions to his ministers signalled an unprecedented government-wide effort to combat climate change. Freeland is charged with a host of policies to ensure that financial markets and pension funds put climate change risks and opportunities front and centre in their decision-making. Environment Minister Steven Guilbeault and Natural Resources Minister Jonathan Wilkinson have lengthy to-do lists, grounded in the Liberal commitment to reduce emissions by at least 40% by 2030 from 2005 levels and achieve net-zero by 2050. Their remit includes setting greenhouse-gas-reduction targets for the oil and gas sector and putting the country on track for a fossil-free power grid by 2035. Guilbeault is also tasked with producing the country’s first strategy on climate adaptation by the end of 2022.

Coordinating best practices [on CBAMs] can smooth the protectionist waters.

– Dave Sawyer, economist, Canadian Institute for Climate Choices

Every minister in an economic portfolio had climate-related priorities. Infrastructure Minister Dominic LeBlanc is to oversee an effort to establish a “buy clean” strategy that would support the use of made-in-Canada, low-carbon products in Canadian infrastructure projects. Innovation, Science and Economic Development Minister François-Philippe Champagne is tasked with promoting the country’s cleantech sector and the electric vehicle supply chain, including establishing new rules around foreign investment in the critical mineral sector. 

Freeland’s mandate on CBAM suggests the federal government will apply a carbon tariff on imports from countries “that are not doing their part to reduce carbon pollution and fight climate change.” The measures would apply specifically to carbon-intensive goods such as steel, cement and aluminum, the letter said.

The tricky business of determining which countries are “doing their part” in cutting emissions will be fraught with tensions and international rivalries, particularly given the long-standing principle at the United Nations that developed, emerging and least-developed countries have differing responsibilities for climate action.

EU championing carbon border measures 

The EU is leading the charge on CBAMs as it drives greater climate ambition and a rising carbon price. New German Chancellor Olaf Scholz is a champion of carbon border measures and pledges to help push such measures through the European Parliament.

The Canadian government has begun to assess the impact that the adoption of carbon border measures would have on exports to the EU, said Marie-France Paquet, chief economist at Global Affairs Canada. If the Europeans acted alone, it would result in tariffs on Canadian exports averaging 0.54% – higher than the average levies for the U.S., Australia or Japan, Paquet told the webinar. In a joint approach, that average tariff would drop to 0.15%, and Canadian exports to Europe would increase, she said.

Germany is taking over the presidency of the G7 in January, and Scholz is expected to push members to work together on carbon border measures, Ambassador Sabine Sparwasser told the webinar.

Germany and the EU have set out to rapidly transform their economies from a reliance on fossil fuels to clean energy, the ambassador said. “With this agenda, we do need to look at good ways of keeping our economies competitive and at good joint ways of avoiding carbon leakage within the EU and with very like-minded partners.”

Cooperation with the United States – which is by far Canada’s leading trading partner – would be tougher because it has no national carbon price and instead relies on a raft of state and federal regulations, pricing systems and subsidies. At the same time, Canada’s own climate strategy goes well beyond pricing to include a host of regulations, such as the Clean Fuel Standard.

The U.S. and EU announced at November’s UN climate summit in Glasgow, COP26, that they intended to negotiate a CBAM for trade in aluminum and steel.

It is impossible to overestimate the enormity of the challenge, even in reaching agreement with the EU, Sawyer said. Governments will have to ensure consistency regarding how carbon intensity in industry is measured and in assessing what climate-related costs are imposed by governments. 

It matters because competitiveness matters.

-Catherine McKenna, former minister of environment and climate change

The Canadian system alone is a patchwork of federal and provincial policies, noted Ken Boessenkool, a former Conservative Party strategist and a lecturer at the Max Bell School of Public Policy at McGill University.

“Each province has addressed the competitiveness issue in a different way,” Boessenkool said. “That will be a challenge when you want to put on top of it a single carbon border adjustment.”

Under the output-based pricing system adopted by Ottawa and provinces like Ontario and Alberta, industry pays the carbon levy on a small percentage of emissions. The approach avoids adding undue costs to industry while encouraging the companies to cut their emissions. But each province has its own procedures to determine what output will be taxed. Under a cap-and-trade approach used by Quebec and Nova Scotia, companies get free allowances up to a cap, again effectively paying only a small percentage of their output.

The EU has an emissions trading system, and the goal is to drive down the amount of free allowances provided in order to reduce emissions by 55% by 2030 and to zero by 2050, said Susanne Droege, a researcher at the German Institute for International and Security Affairs. 

To protect its industry from resulting climate costs, the EU has introduced legislation with carbon border measures to be phased in over 12 years. It would cover steel, aluminum, cement, fertilizers and electricity from non-EU countries.

The legislation was drafted with an inward focus on European industry, and “there was not much dealing with the international ramifications,” Droege said. But trading partners – from Ukraine and Russia to the U.S. and China – are now engaging in the debate.

Leading politicians in Europe, including Germany’s Chancellor Scholz, have acknowledged the EU will not be able to go it alone in establishing a workable carbon border regime and will need partners. Scholz is looking to establish “climate clubs” – countries with high mitigation ambitions – to work together on trade issues. It’s a club from which Canada cannot afford to be excluded.

With the support of the Embassy of the Federal Republic of Germany in Canada.

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The executive vice-president in charge of the European Green Deal, Frans Timmermans, has said that the next decade will be “make or break” in the fight against climate change. Crucially, he has also been clear that tackling the climate crisis needs to be a global endeavour. “We challenge everyone to beat us to it, because in a race to zero we are all winners at the end,” he said in a statement.

The European Commission is hoping that the race to zero well and truly starts in November at the UN’s landmark COP26 climate summit in Scotland. Hurrying to publish the plan in July left four months to convince, cajole and coerce other countries to arrive in Glasgow with detailed targets and plans of their own for big reductions by 2030. Below is a year-by-year blueprint for how the European Commission plans to achieve its emissions-cutting goals over the next decade and beyond. These are proposals that haven’t yet been approved by the European Parliament or the EU Council, where the EU’s prime ministers and presidents gather to approve legislation. The Parliament will want more ambition, while the Council will want less. The most difficult thing about a decade-long sprint is that policy, especially EU policy, doesn’t work that quickly. There are too many layers of government, processes to develop, and plans to be made and approved. So in reality this “make-or-break decade” is more of a five-year sprint. Beginning in 2025, we will start to see far more concrete objectives and milestones about what will be done, spent and built.

2021

Fighting finance greenwashing with a Green Taxonomy. Although it’s not technically part of the European Commission’s Fit for 55 package, the Green Taxonomy is seen as an important part of the effort to achieve the 2030 targets. Essentially, it is a list to help companies and investors know what’s “green”and what’s greenwashing, and it’s seen as a vital tool in achieving the 2030 targets. It builds confidence that “green” investments can be trusted and should help mobilize trillions of euros in private investment and avoid costly stranded assets, like a number of proposed gas infrastructure projects that have been cancelled as they simply won’t be needed in the net-zero future. Just as importantly, it will make business more expensive for companies and technologies with dubious environmental credentials – thereby slowing the growth of polluting business and accelerating investments in clean tech. It covers 13 sectors of the economy that represent about 80% of Europe’s emissions.

But defining “green” is a Sisyphean task. NGOs have walked out of meetings on the topic, while France and Germany have butted heads over whether nuclear energy should be included. For now, the taxonomy has avoided two big powder kegs by delaying decisions on whether nuclear should be considered green and whether gas should be treated as a transition fuel, replacing coal. Expect squabbles on these questions to continue for years to come.

2022

The New Bauhaus. Ending the fossil fuel era isn’t enough; Europeans want to make sure they look good doing it, too. The New Bauhaus initiative is a pet project of European Commission President Ursula von der Leyen, who has said it “combines the big vision of the European Green Deal with tangible change on the ground. Change that improves our daily life and that people can touch and feel – in buildings, in public spaces, but also in fashion or furniture.” The plan is to mobilize designers, architects, engineers, scientists, students and creative minds across other disciplines to reimagine sustainable living in Europe and beyond in ways that are inclusive and affordable. It could lead to nothing or it could spark a deeper cultural shift, a green cultural renaissance designed to infiltrate demography, mobility, construction, artificial intelligence and more. Either way, the EU plans to spend €85 million on the project between 2021 and 2022, bringing together smart and creative people to combine beauty and sustainability at five Bauhaus hubs across Europe.

2023

Carbon border tax on six products. Known by the acronym CBAM (carbon border adjustment mechanism), six imported products (iron, steel, aluminum, cement, fertilizers and electricity) will be targeted with a carbon levy to ensure that European producers don’t face unfair competition from countries that have no carbon tax. It’s a way of levelling the playing field so that a Swedish steelmaker using more expensive hydrogen won’t be undersold by imported steel made with cheaper, and dirtier, coal. The money raised will be used to cover the costs of administering the CBAM, with any surplus going into general revenues. That’s not to say it’ll be a big moneymaker, as putting the tax in place, gaining World Trade Organization approval and then actually administering the tax is likely to be incredibly complicated and expensive. Canadian firms should be largely unscathed, since Canada’s carbon tax will make the adjustment unnecessary, depending on where the EU carbon price lands in the coming years. The EU will launch a reporting system in 2023 to ensure a smooth rollout and plans to get the whole system up and running by 2026, when importers will start paying money into it.

We challenge everyone to beat us, because in a race to net-zero we are all winners at the end.

—Frans Timmermans, executive vice-president, European Green Deal

2024

A nice, draft-free library, and super-efficient sports hall, too. Decarbonizing buildings is a massive undertaking. It’s a beast of a file to standardize, and most homeowners would rather get a new kitchen or bathroom than a heat pump. To get around this, the European Commission has proposed mandatory deep energy retrofits for all government buildings (national, provincial, regional and local), as well as ones that serve the public interest such as health, fitness or educational buildings. This will most likely come into effect in 2024 so that there is time for projects to be developed and tendered. Other renovation encouragements will include slapping gas heating with a new carbon tax and the likely development of minimum energy-performance standards for existing buildings. Each EU country will also develop a plan and funding to directly help homeowners double the renovation rate.

2025

The road to more EVs. In a bid to maintain the recent momentum of electric vehicle (EV) sales, the EU plans to build a comprehensive charging network with one million chargers by 2025. The main European highways will see 300-kilowatt (kW) charging (enough to add a 100-kilometre range to your car in less than five minutes) every 60 kilometres. Heavy-duty usage is also being promoted, with 1400kW charging appearing just as often for EV trucks. Five years later those peaks should double and also fan out to Europe’s broader, secondary highway network. By 2030 the EU expects there should be a total of 3.5 million chargers on European roads.

2026

Separating the forest and the trees. The EU burns a lot of trees for energy. As of 2026, Europe will end financial support for electricity-only biomass plants (biomass plants that produce electricity and produce heat aren’t excluded). It’s part of a broader shift to improve the use of biomass (mostly trees, but also 27% agriculture and 12% waste), which represents an enormous 60% of renewable energy consumption in the EU. There will be crackdowns on where biomass can come from, and smaller five-megawatt facilities that generate both electricity and heat for district heating or industrial uses like paper making will be subject to emissions regulations for the first time. This would dovetail with the EU’s new 2030 target to boost forests as carbon sinks, potentially by planting three billion trees and paying forest owners for providing ecosystem services such as cleaning air and water, fighting erosion or decomposing waste.

2027

The Social Climate Fund. Maybe it’s the gilets jaunes (yellow vest) effect of France’s 2018 gas tax protesters, or maybe it’s just good politics, but there is a clear effort to ensure that funding goes toward smoothing out public opposition to the inevitable increase in gas heating costs and at the pump. 2027 will be the final year of the first fund, which begins in 2025 and will disperse €23.7 billion ($35.36 billion) to low-income households. The EU will spend another €48.5billion between 2028 and 2032, mainly supporting the poorest regions in Europe.

Ending the fossil fuel era isn’t enough; Europeans want to make sure they look good doing it, too.

2028

More wind turbines, fewer gas plants. There are a slew of initiatives designed to tinker with Europe’s energy markets by 2028. They aren’t transformative, but collectively they should make a big difference in reducing GHGs. The 2030 renewable energy target gets increased to “at least 40%” from the current “at least 32%.” An “energy efficiency first” principle will be mandated to apply to all major policy and investment decisions. And the EU’s methane reduction strategy for all energy-related methane emissions received a big boost in September when a shared 30% reduction target with the U.S. was announced and more countries quickly joined the pact.

2029

Cutting aviation and shipping’s CO2. By 2029, airlines will have just one year left to ensure that 5% of their fuel is sustainable aviation fuel (SAF). It doesn’t look like much, but that will rise to 63% by 2050. To encourage uptake, taxes on SAF will be low, while traditional aviation fuel will be subject to carbon taxes for the first time. The targets and taxes will apply only to flights within Europe (so, Canadians, your flights to Europe shouldn’t cost any more). Maritime shipping will be treated similarly, though GHG shipping fuel targets will apply to voyages outside of Europe as well.

2030

Hydrogen highway. The buzz around hydrogen has started to fade as the physics of what it can efficiently achieve become better understood. But big things are still being planned. In 2030, the EU intends to produce 10 million tonnes of green hydrogen. This is the point at which the European Commission expects green hydrogen made from renewable electricity to become cost-competitive with blue hydrogen made from fossil fuels. And while much of the hydrogen will be destined for chemicals, fertilizers and other industrial uses, there is also a goal to have hydrogen refuelling stations along the core highway network.

2035

Farewell to the internal combustion engine. Technically, the proposal is not a ban on fossil-fuelled engines but a requirement that all vehicles sold as of 2035 be zero-emitting. That has left parts of Europe’s auto supply industry scrambling to promote e-fuels (synthetic biofuels made with animal fats, oily plants and electricity) as a way to save their business and meet emissions targets. But as the NGO Transport and Environment points out, e-fuels have an overall efficiency of just 13% (compared to 73% for direct-charging EVs). In the long run, e-fuels may find a niche keeping antique cars on the road. With many carmakers vowing to completely shift from gas-powered cars to EVs prior to the 2035 deadline, this should be one of the easiest targets to hit. Fully electric vehicles are about 10% of sales in Europe and are growing quickly.

By the time this article hits North American doorsteps in November, it should be clear whether COP26 has been a success or, as the UN chief warned in September, a failure. While Europe can claim global leadership on combatting climate change for now, that leadership is ultimately worth relatively little without developing a broader global coalition for greater ambition. The EU accounts for only about 10% of global emissions, and without global action on emissions, the deadly floods in Belgium and Germany that punctuated the summer of 2021 will become a more common occurrence. On the other hand, the European Commission clearly has its eyes fixed on creating a virtuous circle of international competition driving for net-zero. The more countries strive for it, the cheaper it gets; the cheaper it gets, the faster it goes. The clock is ticking.

Adrian Hiel is a Canadian dad, husband and writer who has spent the last 17 years in Brussels imbibing more Tintin, Gueuze and political dysfunction than he ever thought possible.

Illustration: Jason Raish

The post The race against time appeared first on Corporate Knights.

“It’s not just a case of sticking a whole bunch of shovels into the ground,” said Don Drummond (Queen’s University) . “We need a new mechanism and new sources of growth in Canada. The traditional sources aren’t working.”

The panel featured:

Ambassador Sabine Sparwasser (Germany), Ambassador Kareen Rispal (France), Don Drummond (Stauffer-Dunning Fellow & Adjunct Professor, School of Policy Studies, Queen’s University, Canada), Rainer Agster (Executive Board Member, Adelphi, Germany), Richard Florizone (President & CEO, International Institute for Sustainable Development, Canada), Sanda Ojiambo (CEO & Executive Director, UN Global Compact), Claire Tutenuit (Déléguée Générale, Entreprises pour l’Environnement, France).

To watch the full recording of the roundtable, head to CKTV.

See our recent coverage of the EU budget deal for a taste of the discussion, as well as Shawn McCarthy’s piece explaining the consequences of building back to business as usual.

About this series

In the spirit of globalizing a green recovery, Building Back Better Together explores key insights for how the international community can build back better post-COVID. The roundtables bring together Canadian, German and other European experts, policy-makers and business leaders to exchange insights from the current crisis to spark a global green recovery. 

This virtual series takes place under the banner of Ottawa Climate Talks, initiated by the German Embassy, which have explored climate-related topics since 2015. 

Our goal: To inspire Canadian and European decision-makers to seize this opportunity to Build Back Better Together.

These roundtables are aimed at policy-makers, business leaders, investors and civil society members from around the world, with a strong Canadian and European contingent. Each session will be preceded by a table-setting backgrounder by Shawn McCarthy, shared with registered participants in advance of the roundtable. The discussion will be international in breadth, with focused learning to support action across borders.

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Climate activists noted, with some combination of cynicism and optimism, how quickly the world managed to mobilize in the face of an immediate threat. And indeed, the radical change in human behaviour – the grounded planes, eliminated commutes, reduction in industrial production and power generation – had an impact. By early April, daily global CO2 emissions had dropped by 17% compared with mean levels in 2019.

But the gazillion-dollar question remains: Will the massive disruption of this pandemic serve to fuel our collective determination to combat climate change or undermine it? Will the political response to the crisis be conceived in terms of a planetary recovery or a short-term economic one? In the language of our leaders, will we decide to build back fast or will we build back better?

Europe, for one, seems to be opting for better. The EU’s recovery package, which has been built into its 2021 to 2027 budget, is unprecedented not only in its level of spending but also its commitment to climate and ecological goals. Vast in scope, it aims less to kickstart the economy than to fundamentally reshape it and place it on a greener, more sustainable footing.

It wasn’t clear that things would go this way – that the pandemic would supercharge Europe’s climate ambitions. Last December, as local health authorities were beginning to report cases of a mysterious pneumonia-like virus in Wuhan, China, the president of the European Commission, Ursula von der Leyen, was presenting member states with the commission’s most ambitious climate policy package to date: the European Green Deal. With an overarching goal of climate neutrality (zero emissions) by 2050, the proposals left no sector of the European economy – transportation, manufacturing, energy, construction, agriculture, digital technology – unturned.

But as the virus spread across the globe, voices critical of the deal grew louder: surely now was not the time for massive climate investment, surely policy-makers needed to focus on the immediate health and economic crises. Not surprisingly, this position was articulated most forcefully by the member states that felt they had the least to gain from any green deal: coal-reliant Poland and Romania, the pro-nuclear Czech Republic. But by the end of April, environment ministers from 17 European states had signed an open letter urging the EU Commission to address Covid-19, biodiversity loss and climate change as one. They framed the Green Deal as a growth strategy, “able to deliver on the twin benefits of stimulating economies and creating jobs while accelerating the green transition in a cost- efficient way.”

The economic rationale is important, given the scale of the spending that was announced in May: a €750 billion recovery package on top of a €1.1 trillion budget, totalling €1.8 trillion, 30% of which must be spent on climate action: investing in renewable energy, retrofitting buildings and expanding biodiversity through protection and restoration programs.

That spending will have to pay off, as, unlike the budget itself, which is generated largely through member states’ contributions, the lion’s share of the recovery funding will be borrowed on capital markets and will have to be repaid. Backers of Europe’s green recovery budget – from German Chancellor Angela Merkel to IMF managing director Kristalina Georgieva to former Bank of England governor Mark Carney – see this as a safe bet, not only because borrowing costs are low, but because investments in things like renewable energy and building efficiency are virtually fail-proof. They generate jobs, boost energy security (reducing dependency on Russia in the European context) and are not doomed to end as stranded assets of a carbon bubble.

The EU Commission is considering supplementary funding of its recovery package through a suite of measures that amount to 21st-century sin taxes – on non-recyclable plastics, carbon-heavy imports and digital behemoths like Apple and Facebook. These proposals are still under discussion but reflect an unassailable commitment to back the EU’s climate target with a level of investment that makes it realizable. It’s also determined to stay on track; last week the EU Commission raised its stepping-stone target for 2030 from a 40% to 55% reduction in greenhouse gases over 1990 levels, based on a cost-benefit analysis that deemed this more ambitious target “realistic and feasible.”    

“It’s hard to overstate what a breakthrough this is,” says Brook Riley, a Brussels-based Scotsman who is head of EU affairs for Rockwool, a Danish manufacturer of stone wool insulation. The breakthrough Riley is referring to is the EU’s net-zero objective – which, unlike most major policy decisions at the EU, did not reflect a compromise position but rather a unanimous endorsement by all 27 states of the most ambitious goal on the table.

Rockwool’s insulation, derived from volcanic rock, is one of many low-carbon products destined to play a major role in the coming overhaul of Europe’s building stock, which currently accounts for one third of the EU’s greenhouse gas emissions. Riley is seeing a frenzy of activity as states scramble to draft green recovery plans in a bid for their share of the €312 billion in grants to be disbursed in the coming months.

“It’s a race to figure out what are genuinely green investments, and that’s where we may see the cracks in the windscreen,” Riley says. “The administration of this will be very complex. There is no shortage of funding and no shortage of projects – it’s a matter of matching them.”

Critical to the success of this project is buy-in from the diverse states that make up Europe. The richer countries that traditionally support climate investment will receive a smaller portion of the green grants but can use political leverage – through the possibility of vetoes – to ensure that the poorer ones, which benefit more, actually use them wisely. There may be lessons in this kind of engineered solidarity for Canada.

“Poland has been wedded to coal much like Alberta is to the tar sands,” says Riley, “but Poland sees the writing on the wall.” By signing on to the net-zero goal, Poland entitles itself to a much higher level of financial support from the EU with which to finance the inevitable transition.

Isabelle Turcotte, director of federal policy at the Pembina Institute, the Ottawa-based clean-energy think tank, sees in the EU’s strategy a workable prototype for attaching green strings to recovery investment as well as a unity of purpose that Canada has yet to achieve.

“The disruption was already there,” says Turcotte, referring to the turbulence on the global oil and gas markets even prior to the pandemic. “Now we need to unite Canadians and support all workers in this transition.”

“We’re all in this together,” she says, echoing a trope that is suffering overuse in this pandemic. But the attitude will need to prevail if we, too, are to reach our own government’s goal of net-zero emissions by 2050.  Europe may well show us the way.

Naomi Buck is a Toronto-based writer.

With the support of the Embassy of the Federal Republic of Germany in Canada.

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But this boast is worth more consideration than usual. Canada Nickel’s bold plan could have serious implications far beyond its operations in Timmins. Just weeks before Canada Nickel launched NetZero Metals, the European Union unveiled its pandemic recovery plan. It’s one of the grandest gestures in the history of a political body known mostly for stuffy bureaucratic pronouncements – more than €1.8 trillion in grants and loans, equivalent to nearly 5% of the EU’s GDP. And it leans heavily into a global energy transition whose standard bearer, Germany, was a lead partner in selling the other 26 member nations on the plan. Fully 30% of the package will be spent on initiatives aimed at “climate concerns,” with a similar focus for the other trillion dollars in the EU’s upcoming budget (which covers EU initiatives from 2021 to 2027, not just the pandemic recovery). France – the other lead partner in the EU deal – has since announced that it will spend €30 billion of its domestic recovery package on clean energy initiatives as well.

“With nickel as a preferred metal to power the clean energy revolution,” said Canada Nickel CEO Mark Selby at the launch of NetZero Metals, “our commitment to net-zero carbon production is the right step to take for the environment, for consumers, and for our investors.” You have to assume he was looking past Ottawa and not even glancing in Washington’s direction when he said it. Canada Nickel’s bet is that the EU’s green-saturated recovery is the future of the global economy and the best target for even an established heavy industry like mining. Manufacturing electric vehicles and renewable energy equipment, after all, requires an awful lot of nickel and cobalt.

Now, to paraphrase the great philosopher Ferris Bueller, Canadians aren’t European, nor do we plan on being European, so who gives a crap if they’re green industrialists? Canada’s largest trading partner, by a margin so wide as to be irreducible from the perspective of any particular government’s policy agenda, is the United States. (The current numbers are about 75% of all exports and 51% of all imports; no other nation has more than a 13% share of either end of Canada’s trade.) This is as true for nickel and iron as it is for softwood lumber, auto parts and pro hockey players.

But as one of those exported hockey stars once so famously put it, the way to win – in business as in hockey – is to focus not on where the puck is but on where it is going. And that’s where Canada Nickel’s net-zero bet comes in. If Canada’s heavy industries want to steer clear of a rust-belt scenario, they need to move now to where this century’s best economic opportunities are emerging – and those are increasingly found in the fast-growing cleantech sector. What’s more, Canada’s federal government has a net-zero pledge of its own. The deadline is a distant mid-century, to be sure, but Canada stands now at the bottom of that long ramp alongside numerous EU countries, leading U.S. jurisdictions like California and New York, and pace-setting companies like Google and Microsoft.

And more than that, Canada has a powerful set of assets to bring to the worldwide net-zero movement – its world-class mix of abundant natural resources and low-emissions electricity grids. Nationwide, 81% of Canada’s electricity is derived from non-emitting sources, with hydro powerhouses like British Columbia and Quebec already boasting virtually emissions-free grids. Hydro-Québec, for example, now actively courts data-centre clients on the merits of its clean power. And the choice of Montreal for the world’s first emissions-free aluminum production facility (Elysis, a joint venture of Rio Tinto and Alcan, catalyzed by Apple’s demand for zero-carbon aluminum) was a direct result of its climate-friendly virtues.

“The race for clean materials is certainly one that Canada could play a role in and could be important for Canada,” says Sarah Petrevan, policy director at Clean Energy Canada. Beyond the mineral wealth touted by Canada Nickel, she says, Canadian exports like aluminum, steel, concrete and fertilizer could all be valuable in markets like the EU where a smaller carbon footprint will increasingly impart competitive advantage.

And Canada Nickel is far from alone in its ambitious gaze to that low-carbon horizon. In British Columbia, Lafarge has launched plans for the nation’s lowest-carbon cement plant, bringing in carbon capture and sequestration (CCS) technology and fuel from non-recyclable waste. In Alberta, oil sands producer Cenovus Energy has a net-zero pledge of its own, and numerous companies are making big investments in everything from CCS to hydrogen fuel to shrink-the-oil-patch’s footprint. In northern Ontario, Goldcorp has opened the world’s first emissions-free gold mine, converting all on-site equipment to electric power. The list goes on, and many eyes in such firms are looking to export markets as climate plans grow stronger.

Beyond direct trade, though, Petrevan argues that the EU’s green recovery is the right “level of ambition.” If Canada’s climate goals – its 2030 Paris pledge as well as the net-zero target – are at all serious, then Canadian aspirations need to catch up with European plans. “The EU is the gold standard by which Canada should be judged,” Petrevan says.

Canada’s own pandemic recovery plans, then, represent a golden opportunity to bring our climate policies in line, finally, with our lofty goals. Government procurement rules, for example, don’t yet oblige the government to purchase the kinds of low-carbon materials Canada needs to be producing more of to hit its climate targets – and encourage the growth of companies like Canada Nickel.

“We’ve got everything we need to succeed,” says Chris Bataille, a researcher at the Institute for Sustainable Development and International Relations in Paris who has worked on decarbonization policy in Canada and internationally for more than a decade. “We’ve just got to reorient our efforts.”

Chris Turner’s most recent book is The Patch: The People, Pipelines, and Politics of the Oil Sands.

With the support of the Embassy of the Federal Republic of Germany in Canada.

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