Welcome to the first edition of #CambreTalksGreen, a series of articles focused on dissecting EU environmental & climate policy. In our latest analysis, we looked at the European Commission’s proposed recovery plan and its ambition to kickstart the green and digital transitions. While the environmental dimension of the package is likely to face political hurdles, opportunities for new business models will arise.

Ilaria Graceffa

More than three months have passed since our ‘new reality’ started, between videocalls, webinars and virtual networking. After the initial confusion generated by the outbreak of the coronavirus and the adoption of unprecedented measures to face the emergency, the focus of the political debate has shifted to the economic recovery. On 27 May, and after months of discussions among EU institutions, national governments, civil society and the private sector, the European Commission presented the ‘Next Generation EU’, which will provide €750 billion in grants and loans complemented by a revised EU long-term budget for the next 7 years, for a total amount of €1.85 trillion. The proposal responds to calls for sustainable growth based on the ‘twin’ green and digital transitions. And indeed, it seems that the EU executive has accepted the challenge, putting the European Green Deal at the core of its recovery strategy, alongside digital and health priorities.

The green path . . .

At the beginning of the crisis several questions emerged on whether the pandemic would have hampered the EU’s ambitious environmental plans and the fate of the Green Deal. However, once the initial confusion subsided, both EU and national leaders made it clear that the pandemic would be the Green Deal’s turning point. This was echoed by the creation of broad alliances bringing together Members of the European Parliament, CEOs from different sectors, national ministers and civil society, all calling for a green recovery plan. Confirming the Green Deal as one of the pillars of the EU’s economic recovery, the Commission’s plan encompasses several policy areas, from clean mobility to sustainable buildings and energy efficiency. It is also inextricably linked to other key initiatives such as the long-awaited Biodiversity Strategy, the Farm to Fork Strategy as well as the Circular Economy Action Plan and the upcoming Renovation Wave for buildings. This approach provides clarity on the way forward and is consistent with the von der Leyen Commission’s ambition to decarbonise energy-intensive sectors and achieve climate neutrality, through strong investments on renewables, alternative fuels, and jobs based on sustainable activities. The adjusted European Commission work plan 2020 further confirms this by keeping climate-related initiatives largely on track, despite slight delays.

. . . between remaining challenges . . .

The Commission proposal is only the starting point of longer negotiations where the European Parliament and the Member States will shape the final legislation. And although an agreement on the recovery package is expected ideally by July, tensions are already rising on the size of the budget, the allocation of funds and the conditions attached to their use, as confirmed during the last European Council meeting, where national leaders failed to reach consensus on these issues. One of the most prominent characteristics of the proposed stimulus measures is the ‘green conditionality’ (echoing a green trend throughout the proposal), which dictates that public investments must follow the ‘do no harm’ principle and steer away from polluting activities, avoiding the mistake made during the previous financial crisis. This is further complemented by 25% of the EU budget being earmarked for climate investments and additional funding under Horizon Europe – a significant increase compared to previous budgets. However, it is up to Member States to decide how strong these environmental strings should be and under which mechanisms they would work.

This is where things could get tricky. Previous negotiations on the Multiannual Financial Framework (MFF) 2021-2027 already showed contrasts between Northern, Southern and Eastern countries. Differences could now be exacerbated by the pandemic’s aftermath, with each country aiming to preserve its own interests. Despite the support for the Commission’s proposal and its green focus, diverging positions may surge between the “frugal” countries such as the Netherlands and the Scandinavian block – which have already raised concerns on the economic measures to be used and requested conditionality for the use of recovery funds – and those countries hit hardest by the crisis, for which the green transition is expected to be more difficult.

. . . and emerging opportunities

Looking at the other side of the coin, the integration of sustainable growth into the EU recovery plan will have an impact on companies, SMEs, workers, municipalities, and regions, all required to readapt quickly. If before the crisis it was already clear that new business models are needed, the ‘new reality’ has shown that greener practices, resilient value chains, and new sustainable jobs will be crucial for the future of Europe. Changes are not always easy to implement, and time and money are needed. However, this new path should be seen as an opportunity for the private sector to look beyond, by investing in long-term business strategies and aligning with the new EU environmental policies. There is wide consensus that business, as usual, will no longer be accepted. It will, therefore, be key for energy and resource-intensive sectors to innovate and invest in clean technologies and value chains.

Political negotiations and different national interests will inevitably change the proposed recovery package, but one thing is certain: the Green Deal and the initiatives stemming from it are here to stay. Sustainability is no longer an option. It is a mandatory requirement which is finding its way in all sectors. The crisis has only cemented this trend. It is now up to policymakers to agree on the right tools within appropriate timelines, and to the private sector to not miss the boat.

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