Staying the course – with carrots and sticks
In the recent State of the Union speech, Ursula von der Leyen reiterated the need to stay on course towards Europe’s climate targets. In the coming months, the negotiations on EU’s Emission Trading System and the new framework for resilience and risk assessment will reveal the political and industrial forces at play, and if Member States are ready to rally behind this ambition, says Benoît Leguet, managing director of the Institute for Climate Economics.
“Europe can, must and will stay on course towards our climate targets.” A clear message from the President of the European Commission during her recent State of the Union speech. Europe must stay on course. It goes without saying, as the Commission President pointed out: the European Union is poor in fossil fuels, and its only chance of remaining competitive is to free itself from its costly dependence on imported fossil fuels and to move steadily towards carbon neutrality. The Strait of Hormuz is there to remind us of this every day.
Furthermore, following ‘the hottest summer on record’, as Ursula von der Leyen put it, we must step up our efforts on adaptation to climate change. This applies both to crisis preparedness and management and to reducing our vulnerabilities to a changing climate.
So, what does it take for Europe to stay on course? The EU’s road map for moving towards carbon neutrality, the Green Deal, was agreed in 2019 in a very different political climate. We have since come through the summer of 2026; and, with the war in Ukraine and then in Iran, we have seen a surge in fossil fuel prices. This stark revelation of our vulnerabilities should strengthen our ambition and determination.
Yet Europe finds itself – paradoxically – in a political climate less conducive to a productive debate on ‘climate’ issues. This is true at the level of the European Parliament. It is also true at the level of the Member States. Still, it will be critical for Ursula von der Leyen’s ambition to stay on course to ensure that the EU Member States remain on board with not just the long-term view but also agree on how to get there.
The timing is just right. In the coming weeks, there will be ample opportunity to gauge the extent to which Member States are aligned with the President’s ambition.
Negotiations on the Emissions Trading System
The first opportunity will be the negotiations on the EU’s Emission Trading System (ETS), the CO2 allowance system for industry. The Commission has put forward proposals to reform the system. It is a delicate balancing act between measures designed to encourage investment in the decarbonisation of European industries and measures aimed at lowering the price of carbon.
These proposals have not yet garnered clear or widespread support from the Member States, although coalitions of Member States are pulling in different directions. Beyond the differences between Member States, it is indeed necessary to resolve differences within Member States – a number of which, including France, are still fleshing out their positions; between industrial sectors; and within industrial sectors, between industries capable of decarbonising and those which are not yet able to do so.
Whilst there are though decisions to be made, one point is clear: Europe’s only chance to improve its competitiveness is by freeing itself of imported fossil fuels. Signs of hesitation on this, will be read as an encouragement to the enterprises who are not engaging in the decarbonisation.
Preparing for crises
The second opportunity will be the ambition to improve the resilience and crisis preparedness of the EU and its Member States. After a thorough preparation phase, the European Commission will publish the much-anticipated new framework for climate change resilience and risk assessment by the end of October. In several Member States the different implications of this summer’s heat waves, fires and droughts are still materialising. Likely proposals to align the risk assessments practices in Member States and to consider a common reference trajectory when developing national plans should fall into fertile ground. Still, the new framework needs to tread a careful balance with national competences for land use and planning as well as economic opportunities to get all Member States fully on board.
Taking an aim at just this, Ursula von der Leyen highlights the potential of tapping into a huge market for adaptation technologies, which Europe can lead. That is the carrot. But alongside the carrot, the stick of climate change must spur us to think quickly, effectively and collectively to reduce our vulnerabilities.
Staying the course may well be one of the European Union’s existential challenges. Only the coming years will demonstrate our collective ability to do so. And the coming months will be crucial. Not to say heated.
