How the EU can help deliver a green grand bargain

Only a year ago, before the 2020 US presidential election, the idea of building a green grand bargain on climate would have seemed impossible.

The weight of US re-engagement with the climate agenda under President Joe Biden has been crucial in persuading other global players to make a constructive contribution to COP26. There may have been a global shift towards recognition of the need to end countries’ reliance on fossil fuels. But this will not be enough in itself to create an agreement at the conference on how to switch to alternative sources of energy. Such an agreement will have to come from the realities of inter-state relations in a world that has begun the transition away from carbon.

This is where the EU should come into its own, as the midwife of a green grand bargain. The bloc is not yet a geopolitical force equal to the US – one that can credibly threaten to use all aspects of its economic power to reinforce its negotiating position at COP26. The divisions and disjointedness within the EU are well known to not just the leaders of its institutions but also the governments of third countries.

European climate power will have to come from a capacity to enact change at a more practical level, through the EU’s interactions with countries of all kinds. The bloc should use its trade tools and the power of its market to push its partners away from carbon-intensive production. It should make a greater investment in the development of green tech, to ensure that it is not only China that shapes this aspect of a global green revolution. The EU should also provide green financing and leverage private sector investment to help the developing world benefit from this revolution. And the bloc should boost the development of the renewable energy sector by reframing the concept of energy security to centre on clean energy and efficiency, and by analysing the energy market reforms that would support this effort.

In a world in which the transition away from carbon is almost inevitable, climate action is a question of European sovereignty. Effective climate action is in the interests of Europeans as much as people in any other region. The EU will need to manage the new dependencies it develops as it attempts to protect its energy security with clean sources of power, and to build the green tech it requires to transform its economy. The bloc should acknowledge the reality that climate action is not just about doing the right thing, but also about protecting European interests. This could help win support for climate action from EU member states that are concerned about the speed and intensity of the green transition.

The EU needs to develop a narrative that explains why a lack of climate action poses far bigger risks. And, in discussions with third countries about how to build new partnerships to manage the green transition, the EU should be honest about its motivations for climate action. This would be a helpful change in tone away from its perceived efforts to lecture the global south about the need to take difficult steps.

The EU also needs to apply lessons from other aspects of European sovereignty, by developing a capacity to withstand coercion by opponents of climate action. Despite the international backlash against CBAM, the bloc should stand firm on the proposed measure (which is already more limited than many climate campaigners hoped). The EU should also work to establish fair carbon pricing mechanisms in coordination with the countries most vulnerable to CBAM’s effects. By creating carbon conditionality in trade, the EU can shape the global discussion on carbon pricing.

If the European Green Deal is a success, other countries will follow the EU’s example – even if they are dissatisfied with the agreement’s direct effects on them. To avoid political disputes and help deliver a green grand bargain, the EU needs to learn from the backlash against CBAM. This will require the bloc to analyse its climate measures’ effects on its partners, and to develop strategies for dialogue with them, before announcing new proposals.

Europe also needs to show its commitment to climate action by implementing the European Green Deal in a socially just manner. Having announced its Fit for 55 package, the bloc should show that it can manage the political consequences of the resulting societal change. But the EU also needs to change its international reputation for hypocrisy on climate issues – which comes from the huge gap between the rhetoric of European leaders and the reality of European investments in carbon-intensive projects outside the EU. One way to do so is to ban European investment in projects that are out of line with Europe’s commitments under the Paris Agreement.

The EU should increase its investment in co-innovation programmes and ensure that green technologies developed with public support are available to those that do not own their intellectual property. To this end, the EU could create a Co-innovation and Green Tech Diffusion Fund, financed partly through the Global Europe programme and partly by income from the ETS and CBAM. The EU could break the deadlock in multilateral negotiations on green technology transfers by taking a more constructive approach to intellectual property rights at the WTO.

The EU should intensify cooperation with countries in its neighbourhood on renewable energy and energy efficiency, to accelerate the green transition in industries such as steel and cement. Many companies in neighbouring countries could lose access to European supply chains and finance under stricter green criteria. For this reason, it is especially important for the EU to develop an external dimension to its green industrial policy, and to help businesses in its neighbourhood become part of the EU ecosystem approach.

The EU’s climate leadership strategy should pay special attention to its relationship with the global south. Green development provides real opportunities to low-income countries, but it remains unclear whether they will receive the support they need to capitalise on them. Therefore, the EU should help these states deal with the combined effects of CBAM, global green development, and climate change by increasing its investment in and dialogue with the most vulnerable among them. The bloc should formulate a sectoral climate and development strategy for Africa – one that focuses on the swift adoption of digital technologies and the creation of the infrastructure essential to African countries’ domestic and export markets.

Finance is crucial to the climate transition and the EU’s green power. Member states should not only use the substantial resources allocated to climate through NDICI-Global Europe, but should increase the climate capital of the EIB. This would give the Global Gateway a sound financial basis to present a compelling alternative to the Belt and Road Initiative in Africa and elsewhere, and to accelerate the transformations in digital and clean energy infrastructure in countries such as India. Member states should also pool some special drawing rights through the EIB.

Ultimately, the EU should continue to support the UK’s COP26 presidency, the COP secretariat, and major powers such as the US by publicly discussing the need for climate action. But Europe will only become a true climate leader if it helps deliver a green grand bargain that makes full use of its economic, multilateral, and soft power.

These are the conclusions and recommendations of a report for the ECFR by Alex Clark, Susi Dennison and Mats Engström

Image: A huge inflatable globe at the COP23 Climate Change Conference on November 2017Image by European Union ©