November 24, 2023
This post is the first in our series on COP28
Europe must drive the green transition if it wants to remain competitive in the world. New technologies and green energy are not only better for the environment, they also make economic sense. However, to be successful, the transition must be fair and inclusive.
Climate change is accelerating. Our time to limit global warming to 1.5°C is running out. We can either do our part within our mandates or suffer the dire consequences of our inaction.
As policymakers, business leaders and civil society prepare for climate talks at COP28 in Dubai next week, 2023 looks set to be the hottest year on record. Extreme wildfires, droughts and floods are taking a heavy human and economic toll around the world. The evidence is clear: European Central Bank analysis shows that the longer we wait to reduce our emissions and transition to a greener economy, the higher the costs will be. And the European Investment Bank’s 2023 Investment Survey shows that two out of three European companies are already facing damage and losses due to climate change.
At the same time, the way we power our economies is changing and the energy transition is progressing quickly. A combination of policy, innovation, carbon pricing, and private and tax financing – including through the European Green Deal – is accelerating investment in technologies that will help mitigate the degradation caused by the unchecked burning of fossil fuels and global warming.
Global spending on clean energy is breaking records, the International Energy Agency’s World Energy Outlook shows. This shift to cleaner energy is not only motivated by goodwill, but also makes economic sense. It is now cheaper and faster to use renewable energy instead of building new fossil fuel infrastructure. In a world of heightened geopolitical uncertainty, clean energy technologies help strengthen countries’ energy security and independence.
The green transition is important not only for protecting our environment, but also for protecting our economy. It does not make economic sense to invest in energy sources that are becoming less and less competitive while missing out on technological breakthroughs that will shape the energy mix of the future. If Europe does not participate in the global energy transition, its competitiveness will suffer irreparable damage.
Europe must be clear-sighted, ambitious and determined if we are to avoid this outcome. A stable and favorable regulatory environment with clearly defined strategic objectives must be created in which private capital is consistently focused on green technologies. In order for innovations to flourish, a level playing field is also required worldwide.
Financing instruments such as green bonds issued by the EU will help finance breakthroughs in clean technologies and would be even more effective in a fully completed Capital Markets Union. Tailored financing solutions or guarantees to de-risk highly innovative private investments – such as floating wind farms, green hydrogen or new battery technologies – will help build the infrastructure Europe needs to reach net zero. And at a global level, carbon pricing would provide transparency and encourage consumers and investors to switch to sustainable and energy efficient products and assets.
But Europe going it alone will not be enough: if others don’t join in, we will all fail. Initiatives such as the European Green Deal should be accompanied by an ambitious development policy that supports developing regions outside Europe in introducing clean energy sources. Investments in European cutting-edge technologies can and will make a difference.
As we transform our economy, we must ensure we take everyone along. Europe must strive for a just, inclusive and equal transition. Climate change and transition policies could hit the most vulnerable businesses and households hardest. We need targeted temporary fiscal measures and reskilling initiatives to equitably share the burden of the transition.
In the face of economic challenges, climate policy is too often seen as a scapegoat. But the consequences of inaction would be far worse. The answer lies not in diluting our ambitions, but in unleashing the full potential of our innovators, making the European economy more competitive and resilient, and securing a fairer and more sustainable future for all.
COP28 is an opportunity for the EU and countries around the world to show their commitment to fighting climate change and to back up that determination with concrete action. We will participate in this joint endeavor within the framework of our mandates.
This blog post has also been published as an opinion piece in several European newspapers.
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