The EU’s Green Transition
The Future of European Competitiveness Depends on Technology
The European Union can only become more competitive if it escapes the "middle technology trap," characterized by research and development investments focused on sectors with limited growth potential
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It defies any sense of equity that countries facing rising sea levels, or like Pakistan which suffered a flash flood in 2022, submerging a third of the country, should borrow on commercial terms to cope.
American, Chinese, and European policymakers seem convinced that supporting high-tech green industries is the key not only to a sustainable future, but also to a prosperous one. But the idea that green tech could form the foundation of a major economy is unrealistic.
The 16th meeting of the Conference of the Parties (COP 16) to the Convention on Biological Diversity (CBD), or "Biodiversity COP 16", will take place in Cali, Colombia, from October 21 to November 1.
This dismantling of the European Grean Deal would be one of the main mistakes that the Europeans could make. The often critics should not lead us to underestimate or marginalize people's desire to take action and deny the necessity to accelerate the transition.
After a detailed presentation of the Green Deal’s main measures in each sector, we will focus on a few of them to analyze its failures or successes in greater detail.
The concept of green backlash has recently become more salient in the news, in part due to the widespread farmers’ protests held in a number of European countries. However, there is so far not much robust empirical evidence of an electoral penalty against governments that implement ambitious climate policies.
This policy brief highlights that while the green subsidies provided by the Inflation Reduction Act of the United States are homogeneous across beneficiaries, the subsidies associated with the Green Deal industrial plan are highly fragmented across European member States. We quantify the extent of resource misallocation due to this subsidy dispersion by using the model of Hsieh and Klenow (2009), calibrated on the EU electricity-producing industry. We compare both the actual allocation of subsidies, and a policy of subsidies coordinated at the EU level, to a hypothetical frictionless benchmark with no subsidies. We find that moving to coordinated subsidies can increase productivity by more than 30% with respect to the uncoordinated scenario, substantially reduce the productivity gap with the United States, and generate gains worth up to 6% of the EU value-added in the industries considered. Policy recommendations include greater EU-level coordination to minimize misallocation and enhance productivity.
If the EU (and other rich countries) is genuinely interested in tackling climate change, it has to ensure that adequate funding is available for adaptation and loss and damage. It can then justifiably expect all countries to pitch in with mitigation.
The current EU natural gas price cap on gas does not lower TTF volatility, fails to prevent price spikes, and has no significant impact on lowering inflation and commodity market volatility.
The climate diplomacy surrounding the COP28 summit has taken center stage in the inaugural session of the working lunch series organized by the Institute for European Policymaking in collaboration with the European Council on Foreign Relations and the SDA Bocconi School of Management.
The EU negotiating delegation at the UN Dubai conference will put forward initiatives to phase out CO2-emitting fossil fuels and fossil fuel subsidies.