Europe is about to "stake its economic future on an environmental clean-up that will overhaul the way the world's biggest single market polices businesses and manages trade relations", say Ewa Krukowska and Jonathan Stearns on Bloomberg. Under the "European Green Deal" announced by the new European Commission president, Ursula von der Leyen, the EU transition to climate neutrality would start next year. It is set to include stricter emission limits, updated energy taxes, new rules on subsidies, greener farming and a possible environmental import tax. The EU also hopes to catalyse global action and uphold the Paris Agreement. The US has "turned its back on the accord" and some of the world's biggest carbon dioxide emitters including China, India and Japan have "so far failed" to translate their pledges into action.
Grand ambition, limited tools
Although an overwhelming majority of EU citizens support climate action (93%) and it was the Green Deal which helped to clinch von der Leyen's appointment, with the European Parliament's "fragmented" political groups largely uniting behind her programme, it paves the way for "months of lobbying and political fighting". The rules require the support of EU governments and the bloc's assembly. "Expect every word and comma to be analysed by national governments, parliamentarians, companies, industry lobbies and environmental activists."
Nor will opposition be limited to the EU, says Alan Beattie in the Financial Times. For growing numbers of developing countries, "translating these European ideals into trade policy evokes darker traditions of protectionism and oppression". Brazil's president, Jair Bolsonaro, and Malaysia's prime minister, Mahathir Mohamad, whose countries stand to lose access to the EU market because of poor environmental stewardship, have even used the word "colonialism". If the likes of Brazil and Malaysia divert trade to economies with less stringent criteria, the EU's actions could prove counterproductive.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The truth is, von der Leyen's team have "limited tools" to combat climate change without causing problems to international trade. Some measures, such as standardising low-energy designs for electrical goods, may be relatively simple, but "heavier-duty policies" such as extending the EU's emissions trading scheme to shipping and aviation are much harder as they become international issues. The idea of a carbon border tax (an import tariff equal to the difference between the EU carbon price and that of the exporting country) would, in practice, be "fiendishly difficult" to implement because of the complexity of international supply chains. The EU would need to assess the carbon footprint of each imported component. The EU's ambition has the potential to "cause diplomatic conflicts across the world".
There are other obstacles, says Jillian Ambrose in The Guardian. Take the Energy Charter Treaty, an "obscure" cold-war-era policy designed to protect Western energy firms, which is increasingly being used to challenge climate policies. Unless it undergoes a "fundamental overhaul" it will continue to put a spanner in the works. More generally, we also have to face some harsh facts, says The Economist. To "stand a good chance of scraping under the 2% target" (the maximum temperature rise over pre-industrial levels as decreed by the Paris climate agreement) would "require cuts far more stringent than the large emitting nations are currently offering". As a result, the accord also envisages significant carbon capture and storage. On this front, there is an "encouraging buzz, but not yet much more".
-
Why Chinese stocks are so far out of favourThere’s little appetite for Chinese stocks despite low valuations.
-
The 62 UK areas where you could be priced out of using your Lifetime ISASaving for your first home in Croydon, Ealing, Brent or any one of these other locations? You could be at risk of being priced out of using your Lifetime ISA
-
Britain’s inflation problemInflation in the UK appears to be remaining higher for longer when compared with similar rich countries. Why? And when can we expect a return to normal? Simon Wilson reports.
-
Will the sanctions aimed at Putin have any effect?Briefings Russia’s invasion of Ukraine has changed the West’s strategic calculus and tougher than expected sanctions have followed. Will they be enough to change the course of events?
-
Why the City should create a single financial market with the SwissOpinion A tie-up between London and Zurich, two global financial centres, could pay huge dividends for both, says Matthew Lynn.
-
Which countries sell citizenship and how much it costsFeatures Fancy living in a European capital, or gaining citizenship of a Caribbean island? If you have deep enough pockets, the world is your oyster, says Alex Rankine.
-
How Brexit will save the United KingdomFeatures Leaving the EU should strengthen the United Kingdom – a multinational union Europe can only aspire to. Alex Carew, a London-based fund manager and economic historian, explains how.
-
Farage victory would tip the balanceFeatures A Brexit Party win may concentrate minds in parliament and break the stalemate. Emily Hohler reports.
-
Labour defeats a Remainer rebellionFeatures Jeremy Corbyn has faced down a challenge spearheaded by his deputy, Tom Watson, for Labour to signal its backing for a second Brexit referendum.
-
May seeks a compromise on BrexitFeatures The PM turns her back on the eurosceptics and reaches out to Jeremy Corbyn. Emily Hohler reports.
