Europe’s green recovery
By Connie Hedegaard
EU Commissioner for Climate Action
The need for clean energy has returned to the top of the global
economic agenda. China's new leadership now seems to recognize that
the thick, hazardous smog that has come to define Beijing and other
cities is more than a pollution problem; it is a result of an
excessive emphasis on short-term economic planning.
Likewise, in his second inaugural address, US President Barack
Obama discussed climate change more than any other issue, saying,
"We cannot cede to other nations the technology that will power new
jobs and new industries." At the World Economic Forum in Davos,
International Monetary Fund Managing Director Christine Lagarde and
World Bank President Jim Yong Kim surprised business and government
leaders with their warnings that genuine economic recovery would be
impossible without serious action on climate change. And, at the
most recent EU summit, leaders agreed to commit at least 20% of
their entire common budget to climate-related spending.
These developments suggest that global leaders are finally
beginning to understand that, beyond the global economic crisis,
the world is experiencing a social and employment crisis, as well
as a climate and resource crisis. And none can be resolved without
addressing the others.
Moreover, Europe's main commercial competitors have begun to
recognize that pursuing short-term development policies, while
ignoring long-term threats to the global economy, is both
irresponsible and a strategic mistake for those who aspire to
global leadership in the twenty-first century. Although Europeans
have known this for decades, in the wake of the recent economic
crisis, immediate goals took priority over - and often at the
expense of - long-term objectives.
With the European Union's economy growing more slowly than those of
its major competitors, its leaders must take a more far-sighted
approach to restoring - and preserving - its members' growth
potential. They must begin by identifying not only what is
undermining Europe's competitiveness today, but also those factors
that are putting its long-term prospects at risk.
Analysts often point to Europe's costly social-welfare systems,
high labor costs, and increasing tax rates as a drag on
competitiveness. But other, less widely discussed factors must be
considered - particularly the costs of delayed action on climate
change. For example, Unilever CEO Paul Polman reported that extreme
weather cost his company $ 250-300 million in 2012. Once considered
an issue for the future, action on climate change has become
increasingly urgent, as the outlays required to mitigate its
negative effects have grown.
Furthermore, with record-high unemployment rates, Europe needs jobs
in dynamic, competitive industries that cannot easily be
outsourced. The European Commission has identified the green
economy as one of the areas with the highest job-creation
potential.
At the same time, Europe's growing dependence on imported fossil
fuels is a further hindrance to competitiveness. In 2011, the EU's
combined trade deficit was € 150 billion ($ 200 billion). But the
combined oil-import bill was more than double that - € 315
billion-and the official figure for 2012 is expected to exceed €
335 billion.
If Europe does not address these challenges, it risks being left
behind. But Europe cannot build an industrial strategy on cheap
energy. Unlike the United States and China, which the International
Energy Agency estimates possess the world's largest shale-gas
deposits, Europe cannot rely on its limited energy reserves to
lower prices - especially given that its greater population density
makes extraction more difficult, and thus prohibitively expensive
.
As a result, Europe will remain a net energy importer. And, given
rising global demand for oil, particularly in developing countries,
energy-import prices will remain high.
Meanwhile, China - the world's leading investor in renewable-energy
projects - is undergoing a transformation from the world's low-cost
factory to a global leader in green innovation and a major exporter
of clean technologies. In the contest for this global market,
Europe cannot compete on price alone.
But Europe does have options. EU leaders can build an economy that
is less dependent on imported energy through increased efficiency
and greater reliance on domestically produced clean energy. At the
same time, they should tackle other major threats to Europe's
long-term competitiveness, including low productivity, an
incomplete internal market, and insufficient innovation.
But Europe must not heed short-sighted calls to relax its
environmental standards, which some claim harm its competitiveness
vis-à-vis countries with looser rules. Given their global
reputation as guarantors of quality, Europe's high environmental
standards are crucial to its future competitiveness, and should
therefore be actively promoted, particularly in trade
agreements.
While trade deals have often come at the expense of stronger
domestic climate action, the EU's new trade agreement with
Singapore aims to boost trade and investment in clean-energy
technologies and promote green public tendering. This should serve
as an environmental benchmark for future agreements - including
with the US, despite some American constituencies' expectations
that EU standards could be relaxed in a bilateral trade deal.
By maintaining high environmental standards, and promoting such
standards among its trade partners, Europe can bolster the global
market for clean-energy technologies. As a major player in the
green-technology market - set to triple in value by 2020 - Europe
could regain competitiveness and secure its role in the future
global economy.
To be successful, Europe must play to its strengths. The EU's most
competitive economies are the most innovative and energy-efficient,
with the most highly educated workforces. Indeed, for Europe, cheap
is not the answer; quality and innovation are.
Europe's major competitors are turning climate change into an
opportunity to encourage growth and create high-quality jobs in
rapidly innovating economic sectors. If EU leaders hesitate to take
action on climate change, they will be sabotaging their own
economy's prospects for sustainable recovery.
Copyrights: Project Syndicate