The incoming European Commission president Ursula von der Leyen has recently unveiled her plan to make the European Union carbon neutral by 2050. Labelled the European Green Deal, it is a set of measures to protect the environment and fight climate change. The ambition is to get at least €1 trillion of investment over the next decade and to use a mix of private and public funds, including a quarter of the EU budget.
The issue of climate change and environment protection is increasing in importance both in Malta and in the European Union – however, not to the same extent in all countries. As such, it needs to be recognised that the plan can only be successful if all countries are on the same page simultaneously. Climate change and environment protection belong to everyone simultaneously and they also belong to future generations.
Moreover, we also need to recognise that there cannot be losers in this game. There can only be winners. A European Green Deal can only work if it is just and it works for all. There cannot be a situation where a country experiences job losses while other countries create new jobs as a result of this initiative. Von der Leyen was quoted saying that the transition should “leave no one behind”.
From an economic perspective, this will entail investment of a significant amount of funds as the application of the Green Deal will mean structural changes in a number of EU economies. For instance, one can mention those communities where a large number of people work in coal, peat mining or shale oil and gas.
Some industries may be lost while new activities will be created
If the EU is to become carbon neutral by 2050, funds need to be invested to provide alternative job opportunities to these communities. In effect, part of the €1 trillion investment is to be allocation for this transition process.
Turning to the sources of this €1 trillion investment, around half is to come from the EU long-term budget, with national governments contributing €100 billion and €300 billion coming from the private sector. Another €7.5 billion from the 2021-2027 EU budget is earmarked as seed funding within a broader mechanism expected to generate another €100 billion in investment. This means that the EU will eventually be diverting funds from areas that have so far been the recipients of funds. This is why some have been critical of the European Green Deal.
This again strengthens the view of a restructuring of the economy in a number of EU member states. This initiative, if implemented fully and correctly, could represent the most significant change in the EU economy of the last forty years. It could have the same impact as when ICT was introduced. It will bring about a transformation of the EU economy.
Some industries may be lost while new activities will be created. Some industries may need to go through a whole transformation if they are to survive. From a policy perspective, this should not just require investments in new technologies, but also investments in the reskilling of people. People need to be trained to be able to face the challenges of economic restructuring.
The European Green Deal will impact Malta as well. The worst thing we can do is ignore its existence. The Green Deal will bring its threats but it will also bring its opportunities. As a country, we need to prepare ourselves to manage the risks posed by these threats and to maximise the benefits which the opportunities will present us with.