by Dr. Nicolas Befort, Chair of Bioeconomy and Sustainable Development at NEOMA Business School
In her recent State of the European Union address, Ursula von der Leyen compared the current push for sustainable transformation in the EU with efforts to rebuild the continent following World War Two.
The EU is firmly rooted in the post-war era desire to use the common market as a vehicle for peace and cooperation. The return of war to Europe, combined with the urgent need for ecological transition, is a challenge to those founding objectives and requires a major response.
Yet recent events, including tensions between Brussels and Budapest, pose a hurdle to European unity. In her speech, President von der Leyen advocated relaunching the EU’s integration effort through a convention to revise existing European treaties and promote sustainability objectives. Could the development of a greener way of living and conducting business be a unifying goal for all member states to rally around?
It is widely accepted that sustainable economies must cut their reliance on fossil resources and ensure their emissions are within planetary limits to keep global warming well below the 1,5°C threshold. Green energy projects must be undertaken with the objective of supplanting fossil fuels, not complementing them.
Businesses and governments need to know which policies and technologies need to be developed to promote this transition. Organisations such as the EU could play a vital coordinating role.
Joint European energy policies should support the gradual extinction of polluting industries. The current scarcity of renewable resources means their implementation must be directed in priority to sectors where they will be of most benefit to the largest number of people – such as in the healthcare, housing and education systems.
Achieving these objectives will require a significant level of innovation, and innovation on any scale is expensive. In the case of the EU’s plan to spend €3 billion on the creation of a hydrogen bank, mentioned in President von der Leyen’s address, the element of risk is colossal.
When investing in sustainable technologies, it’s never a good idea to put all your billions in one basket. If a technology is not as effective as initially thought, the potential negative rebound effects can take chunks out of the returns on investment. And, of course, any economies depending on this technology to replace fossil fuels could be seriously destabilised.
The answer to this is abandoning the mentality of investing in a single resource and moving instead towards a wide variety of resources, which can and must be channelled into directives with a high social impact value.
So, instead of pushing this level of capital into investing in hydrogen, the EU should instead split their funding between numerous technologies, with a focus to scaling them up for eventual commercial implementation. This will allow the production of energy and consumer goods to be relocated to European countries.
As well as coordinating the development of new technologies, the EU should set its hand to the rudder in steering regulatory action. The unveiling of the Green Deal in December 2019 was highly effective in helping to launch a wave of new economic policies geared towards the ecological transition.
Such policies aimed to support the development of “Farm to Fork” strategies, and the replacement of linear supply chains with the circular economy. In this case, the policies were directed by the overarching principles of the Deal, providing a sense of cohesion.
For new policies to be effective, they must create a regulatory framework encompassing both the supply and demand for renewable resources. Policies which focus too heavily on demand, without offering support to suppliers and manufacturers trying to reorganise their supply chains, risk causing market segmentation.
For example, governments setting a strict deadline for the banning of plant protection products will help accelerate the transition to more sustainable forms of agriculture. But they will also need to find alternative ways to prevent crop yields decreasing due to insect damage.
However, as with the approach to new technologies, attitudes to policy solutions must not focus disproportionately on any one factor. The carbon tax is a good example, such taxes may be effective, but only in combination with other tools such as regulations and innovation policies.
Strategies must be flexible and receptive to feedback from the general public as well as key sectors of the economy in order to encourage the transformation of industries that have the potential to cut their emissions and incrementally close down those that don’t. Policies should also encourage the emergence of new industries such as bioeconomy.
