Dirty Energy? Still Here, But Not for Long

The coronavirus pandemic and the 2022 energy crisis have cast a shadow over the European Union's plans to transition to a carbon-neutral economy. Nonetheless, in 2023, the European Commission has once again actively advocated for the idea of carbon neutrality. It's almost a step back to the fever of 2019 when it all really began.

Late in the evening on November 9, negotiators from EU member states and political groups in the European Parliament concluded talks on the Nature Restoration Law. The name is quite poetic, focusing on nature. However, in reality, it's a law about the impact of the Green Deal, primarily on the agricultural sector. Therefore, the law is highly sensitive and touches upon almost everything—from prices of products in supermarkets to the possibility of producing these products in EU countries. This law will also affect the ability to export anything to the EU.

Some Members of the European Parliament passionately react, stating that the law turned out to be too compromising, likening it to having a toothless golden fish instead of a piranha. However, there's another opinion. "The Commission's proposal was ideologically justified, practically unfeasible, and became a catastrophe for farmers, forest owners, fishermen, and local and regional authorities, especially in densely populated areas. Moreover, it threatened to slow down the development of key infrastructure and renewable energy sources, crucial for achieving our climate goals. We are pleased to see that other political groups have moved in our direction on many key issues we have," insists European Parliament member Christine Schneider, representing the European People's Party in the discussions.

In Schneider's statements, one can find the main contradiction in the "Green Deal" process. It's a struggle between the desire to achieve beautiful decarbonization results and the necessity to survive until these results are obtained without impoverishing too much.

"The European Green Deal was conceived as an opportunity to preserve our prosperity. Our ambitions are crystal clear and transparent: the future of clean technology industries must be created in Europe," stated Ursula von der Leyen, the head of the European Commission, addressing the European Parliament in September during the State of the European Union (SOTEU) address.

Conceptually, the EU's strategy related to environmental decarbonization remains unchanged. Europe aims to become the first climate-neutral continent with "zero" greenhouse gas emissions by 2050.

But before that date, the European Union has a long path of transformation ahead. And it might prove to be quite painful, both for European business and industry, as well as for ordinary consumers.

PHOTO: European Parliament member Christine Schneider, representing the European People's Party in discussions, is pleased EP returns to common sense. SOURCE: Twitter Christine Schneider

Sounds Like a Plan

The green transition route that the EU is embarking on can be divided into two phases. By 2030, greenhouse gas emissions should be reduced by 55% from the level recorded in 1990. Over the next 20 years, the European Union aims to achieve complete carbon neutrality. Currently, the EU ranks third, after China and the USA, in terms of the contribution to environmental pollution with carbon dioxide.

To achieve these goals, a significant overhaul of many sectors of the economy is necessary. This includes a shift to renewable energy sources, the exploration of alternative fuels in the transportation sector, combating waste through recycling and reuse, as well as promoting organic farming and restoring natural resources such as rivers, forests, and marine ecosystems.

The European Commission places a particular emphasis on fuel and energy, industry, and agriculture, as they are the major contributors to greenhouse gas emissions harming the environment. According to statistics, the energy sector in the EU emits 25% of CO2, transportation more than 21%, industry another 21%, and emissions from the agro-industrial complex exceed 10%.

All for the Sake of Saving the Planet

In October 2023, the Council of Europe updated its directive, stating that the share of energy from renewable sources should increase to 42.5% by 2030. In 2022, about 22% of energy came from renewable sources.

Additionally, due to Russia's military invasion of Ukraine, in May 2022, the European Commission approved the REPowerEU plan. This plan aims not only to generate "clean" energy but also to diversify energy resource supplies and reduce the EU's dependence on Russian fuel. Ideally, a complete cessation of energy supply from Russia should occur by 2027. Furthermore, the European Union, together with the USA and the UAE, proposed in early November to completely end the use of coal by 2030.

The primary tool to combat emissions from transportation is the popularisation of electric propulsion. The EU is betting on electric vehicles and has decided to definitively stop selling new internal combustion engine cars from 2035.

In addition, in February 2023, the EU presented the Green Deal Industrial Plan. Essentially, it can be seen as the EU's response to the generous subsidies for "green" projects in China and the USA. For instance, in the United States, federal support for renewable energy has doubled from 2016 to 2022, reaching $15.6 billion annually.

The Green Deal Industrial Plan covers not only issues related to reforms in energy and automotive industries but also addresses the challenges of transitioning the entire industry onto "green tracks." The European Commission symbolically calls this plan the "leader of the clean technology revolution." The idea is to accelerate the implementation of zero-emission projects and simplify access to preferential financing for companies involved in creating a low-carbon economy.

As mentioned earlier, the European Union is also concerned about nature restoration. On November 9, the European Parliament and the Council of the EU agreed on the environmental preservation regulation. EU member states commit to renovate at least 20% of marine and terrestrial ecosystems by 2030 and restore up to 90% of ecosystems affected by human activities by 2050. In addition, the EU intends to focus on organic farming. By 2023, the volume of pesticides used in agriculture should be reduced by 50%, and 25% of agricultural land is planned to be converted to organic farming.

PHOTO: On the way to carbon neutrality, the EU will have to solve the problem associated with the deficit of production and components necessary for widespread use of solar panels and battery stations. China is the main supplier of these products. The same China that the European Commission dreams of reducing its dependence on. SOURCE: Getty Images

Trillions in Investments and Hazy Prospects

There's a risk that not only the European Union but the entire global economy will pay a steep price for "neutrality."

Experts have voiced concerns that the assets of major corporations deciding to abandon the extraction of fossil fuels (oil) might fall into the hands of smaller companies eager to seize a profitable business. Therefore, emissions may not decrease. According to the International Energy Agency (IEA), large private companies only control 15% of oil extraction.

Saudi Arabia has already urged other countries to refrain from reducing investments in resource development due to the "green transition," as reducing oil production could lead to a sharp rise in prices. This statement sounds odd since Saudi Arabia is pushing its initiative to shift up to 50% of its power generation capacity to renewable sources by 2030.

European industrialists are also not thrilled. Overhauling production will require colossal investments that may be insurmountable for small and medium-sized businesses. According to the Potsdam Institute for Climate Impact Research, the EU needs to find €2 trillion by 2040 to completely abandon fossil fuels.

Moreover, solving the problem associated with the deficit of production and components, without which neutrality is practically unattainable, will be extremely challenging. For example, these include solar panels and battery cells, the primary supplier of which is China. Yes, that's right, the same China that the European Commission dreams of reducing dependence on.

And finally, there's the question of how all these far-reaching plans will impact the incomes of Europeans. Every euro invested in the "green transition" will inevitably affect the prices of goods and services. For instance, one of the largest European automakers, BMW, has already admitted that a hasty abandonment of internal combustion engines will be an extremely costly venture and will lead to a rise in prices for electric vehicles.

Green energy also gives a deceptive impression of affordability. Not everyone realizes the true cost of solar and wind, starting from the expensive equipment and ending with the expenses for maintaining and servicing the infrastructure. European consumers have just recovered from shocking gas prices that hit unthinkable records in the spring of 2022. And taxpayers in the EU will certainly not appreciate if the "green transition" becomes another blow to their wallets.