Author: Alyssa Jade McDonald-Bärtl

4th of March 2020, Brussels | The European Commission presented its proposal for the EU climate law in Brussels at the beginning of March. The proposed regulation outlined an EU net-zero goal for 2050, and a review of the current 2030 target, by passing the request from climate change scientists to adopt carbon budget accounting and leaving the European Union with little more than an optimistic ‘destiny’ approach.

President von der Leyen emphasized the EU’s determination of becoming carbon-neutral by 2050, and Vice President Timmermans announced his optimism for future carbon-neutral technology to deliver the necessary solutions. Given the European Parliament declared a climate emergency, today’s press conference felt like a Disney-movie in comparison.

The proposal for a new climate law (https://ec.europa.eu/info/files/commission-proposal-regulation-european-climate-law_en ) postpones the most important actions of climate mitigation, a border tax and the review of the Emissions Trading System Directive for energy-, transport-, and land use industry to 2021.

Many People out of the political, business and scientific sustainability community hoped for the EU to implement the advice from the 2018 IPCC 1.5 degrees report (https://www.ipcc.ch/sr15/) by setting the goals for carbon neutrality a decade earlier.

While Germany considers itself the land of pioneers, it was embarrassingly absent from the 12-country letter sent to the EU in advance of the announcement demanding faster transition goals. (The letter was sent by Austria, Denmark, Finland, France, Italy, Latvia, Luxembourg, the Netherlands, Portugal, Slovenia, Spain and Sweden) https://www.euractiv.com/wp-content/uploads/sites/2/2020/03/Joint-letter-call-for-plan-to-increase-2030-target.pdf .

The climate law, which is now negotiated with the European Parliament and European Council, will impact every new law made in Brussels and given that approximately half the laws out of Brussels impact German-business, this can be considered a very relevant piece of legislation.


It was under-whelming

UnternehmensGruen considers the announcement a disappointment because it does not focus enough on fundamental carbon budget accounting (https://www.mcc-berlin.net/en/research/co2-budget.html), does not relate to concrete implementable and commercially relevant incentivization/dis-incentivization, and over-indexed the role of future carbon-neutral technologies; especially when there are many pioneering sustainable companies reaching major goals in energy reduction, waste prevention and alternative materials already today.

What we suggest should be prioritized in the EU impact assessment for the Climate Law as it pertains to quick wins for business to contribute:
  • Obligations for an increase in secondary raw materials to be mandated in new product design and eco design laws to focus on design aspect of product dis-assemble, waste prevention, ease of re-use, refurbishment and maintenance.
  • Standardization in recycled materials in industries such as construction, textiles and electronics
  • Public contracts to prioritize sustainable tender applications from companies who offer green services and products
  • Public private partnerships for high up front investments in materials supply, infrastructure and people upskilling
  • Incentives and support on the EU-internal market for to prioritize availability and support for secondary raw materials and secondhand goods / machinery / fixtures exchange
  • Actively invest in renewable energy supply options for economically viable uptake of small companies
  • Sustainable finance via decarbonization fund, simplified access to funding nationally and EU-wide for companies taking on transition investments in infrastructure, materials and people-upksilling
  • Reduced VAT for sustainable products and services
  • EU-harmonized GHG reduction targets consistent with carbon budgeting approach (for reliable future planning for large investments such as factories)
  • Investment in R+D for low carbon technology with the agile SME business community at the forefront
  • Make lifecycle assessment for products and services on open information market and upskill those to use them

Just transition inside the EU, carbon tax outside the EU:

In the opinion of UnternehmensGruen, the Just-Transition Fund is an important mechanism for those in regions with high upfront costs and a lack of skillsets for quick transition. We also support the differentiated approach within the EU to support the more affected regions in preparation for transition. We furthermore see the need of harmonizing the member-state national energy and climate plans in order to assess these transitions.
Cameron, Aliénor, et al. “How good is the European Commission’s Just Transition Fund proposal?” https://www.bruegel.org/wp-content/uploads/2020/02/PC-04_2020-V2.pdf 

At UnternehmensGruen we are curious about the ‘carbon boarder adjustment mechanisms’ (carbon tax for imported products/services) potential to encourage an ‘even playing field’ for companies who adopt green transition technology and adjustments, within the EU-region.

During the press conference, Timmermans talked about a conversation with his Chinese-counterpart which suggested a #nudge to encourage other regions to implement the Paris goals for a more globally fair carbon-related playing field.

Considering the World Trade Organization rules on trade and agreements, this will be an interesting development to watch, and it is certainly going to be a key topic at the next UN climate conference in Glasgow later this year.

Further reading: Kiviranta, Juuso. “The magnitude of carbon leakage and addressing it in the EU ETS.” (2020) https://aaltodoc.aalto.fi/handle/123456789/43006 and Simola, Heli. “CO2 emissions embodied in EU-China trade and carbon border tax.” (2020) https://helda.helsinki.fi/bof/handle/123456789/16561

An opportunity to reduce tax to incentivise

Missing from the topic of taxing outside EU-companies was the topic of incentivizing inside-EU companies such as the members of UnternehmensGruen. We support the idea of reduced VAT for circular products, giving those who use secondary raw materials as key ingredients a competitive boost, and companies which adopt eco-design goals such as design for repair, re-use, refurb and disassemble a priority in purchase decisions. We call for simplified access to finance when sustainable business models are in play, a single and clear GHG goal so sustainable and long-term infrastructure investments can be made with confidence by investors, business owners and municipalities.

Future carbon innovation

While we support and actively work on greenhouse gas reduction, capture and re-use technologies, there is not enough evidence to prove that they are reliable to hit environmental targets. It is furthermore unclear which business models are needed to sustain a strong workforce and which skillset employees need to adapt.

Many of our member businesses are already trialing versions of reforestation, biochar, ‘Blue carbon’ habitat restoration, biomass-based construction, soil carbon sequestration and ocean productivity. However, the models around efficiency, the productivity skills-set in the workforce and availability of supply elements are not yet ideal. We are still yet to see convincing evidence about alkaline-treated cloud and ocean treatments through direct air capture.

What the EU Green Deal means for Germany

The latest Environmental Implementation Review 2019 shows that SMEs in Germany have great potential for the transition to a green economy, and the hundreds of businesses who are members of UnternehmensGruen show that it is not only possible but also profitable and a vibrant sector of the economy (While Germany’s population is living on a relatively small portion of land in the EU, Germany has the capacity for resource-efficiency in many areas, however we seem to be failing at mobilizing our states to implement localized versions of EU commitments and Paris agreements.

Almost a third of our air-quality zones are still far too high with over 60 000 people dying prematurely due to air particle pollution while N02-concentration is still above the EU-targets. Germany is still literally a ‘fog’ on the EU-map, despite being a forerunner in developing clean energy and water technology. Due to intense agricultural farming Germany has a high nitrate pollution in the groundwater. Everyone, starting with our farming colleagues up to our factory peers, must change their work regarding the application of agrichemicals and waste-water treatments in order to prevent the nitrate pollution from increasing.

In Germany we furthermore seem to be more focused on protection of German cars then on the conservation of species. We seem to be more shocked and concerned about emissions scandals than protecting the biodiversity. We have the means, yet we are still not applying them where they could have the biggest impact.

Darwinian policy approach
While UnternehmensGruen thinks critically about the climate law announced today, we do agree with Vice President Timmermans in one point: we don’t need to save the planet earth because it already has a history of extinctions (reference: dinosaurs).

But we need to save humanity! We should apply our climate emergency response as rapid as we responded to the Corona virus by aligning the best innovations, minds and actions to save our future.