By opting for an emission reduction target of 40 per cent Brussels can provide the foundations for the kind of deep emissions reductions that are needed
Ask yourself this: Who should be happier about the EU's proposed 2030 energy and climate strategy, the chief executive of a coal company or the chairman of a wind turbine manufacturer? Does this package favour the manufacturer of gas-guzzling SUVs or the pioneer in electric vehicles? Does the promise of a new emission target for the EU suit investors in fossil fuels or investors in clean technology? As the architects of a previous project in European integration once asked - cui bono?
To me the answers to these questions are obvious. The European Commission and its most powerful member states have sent a pretty unequivocal signal that despite the biggest crisis in the bloc's history they remain committed to decarbonising the continent's economy by embracing cleaner technologies and business models. They accept the immense risks presented by climate change and the economic damage caused by footing the bill for billions of Euros of fossil fuel imports. They have done the economic modelling and concluded, with good reason, that a low carbon economic transition can be achieved at a manageable short term cost and in a way that unleashes significant long term benefits. They are telling business leaders and investors that throughout the 2020s the EU will continue to deliver sizeable annual emission reductions, will continue to increase its reliance on renewables, and will continue to push up the cost of carbon for fossil fuel companies.
And yet to judge by some of the reaction from green business groups and NGOs you would think the EU had just torched its climate commitments and sent its environmental credentials up in smoke. The Commission has become "a shadow of its former self", complained the European Wind Energy Association. It was "a depressing day for Europe", said the European Alliance to Save Energy (EU-ASE). The White Paper contains "a set of proposals that will satisfy almost no one", observed Greenpeace, with a considerable degree of prescience.
These reactions are, in many ways, justified. Given the scale of the climate change threat the EU's targets are nowhere near ambitious enough. With scientists recommending the EU should be aiming for emission reductions of more than 50 per cent by 2030 to reduce the risk of dangerous climate impacts, the Corporate Leaders Group on Climate Change are being generous when they say 40 per cent represents the "minimum level of ambition" that we need. The weak renewables target may make sense as a compromise with those who argue technology specific targets are economically inefficient, but it also dilutes an important long term driver of investment in technologies that could deliver low cost energy in the future. The refusal to deliver clearer and more ambitious targets for energy efficiency is little short of insane given everyone agrees it represent the most cost-effective means of reducing emissions. In this context it is easy to understand the anger and frustration felt by many within the green economy, particularly when you consider what is at stake.
But while green businesses and NGOs need to be aware of the new framework's weaknesses and should continue to call for them to be addressed, fixating solely on the problems with the package risks diluting the impact of the positive clean tech investment signals the EU's new proposals send.
Ultimately, officials in Brussels cannot click their fingers and magically guarantee that emissions are cut by 40 per cent of 50 per cent in 16 years' time. As Green Alliance's Alastair Harper argued yesterday all policymakers in a democracy can ever do is try to steer investment away from high carbon infrastructure and towards low carbon alternatives. In this respect, the new framework sends some strong signals that low carbon investment is the way forward - the EU's emission reduction trajectory will be steepened during the 2020s; investment in renewables, particularly in those countries who want a legally binding target, will continue; the environmental regulations governing new fracking projects will have to be tighter than the industry's cheerleaders think; and the overarching business case for clean technologies will be strengthened. Anyone doubting this should look at Thomson Reuters Point Carbon's early analysis of the Commission's proposed reforms to the EU emissions trading scheme and their prediction the average price of carbon will stand at €35 between 2019 and 2030 - still not high enough, but a big leap in the right direction.
The Guardian's Damian Carrington today rightly characterised the EU's proposals as a classic case of the glass being half full - given the still bleak economic backdrop in many EU countries the targets were stronger than many expected, but were still far short of what is needed. However, it is the job of green businesses, investors, and entrepreneurs to see the half full side of the glass, not least because the only way the EU can deliver the green economic growth and deeper cuts in emissions that are required is for innovators to develop even more cost effective clean technologies and even more competitive green business models that will allow the bloc to again far exceed the targets set for 2030.
As the recent rapid reduction in the cost of renewable energy technologies and the emergence of ultra-efficient new buildings and vehicles proves, such over-achievement is entirely possible. But it will only be realised if those business leaders who are committed to the green economy refuse to be disheartened by the fact that the European Commission's policies could and should be better.
Instead they should return to those original questions about whether it is the green economy or the high carbon economy who are the long term winners from today's announcements. Apologists for the unsustainable and carbon intensive status quo may be celebrating this evening having secured some watering down of the Commission's more ambitious proposals, but their celebrations look more like a retirement party than a coming of age. With the prospect of at least a 40 per cent cut in emissions within 16 years and a carbon price of €35 plus I'd much rather be the boss of a renewable energy company than the boss of a coal company. Savvy investors will realise that today's announcements represent confirmation that in the depths of an economic crisis Europe's leaders, including its most powerful economies, remain committed to decarbonisation. This decarbonisation might not be happening fast enough, but increasingly the smart money is focused on making it happen faster, not slowing it down.
The battle for the future of Europe's green economy is not won yet. Months of negotiations await and even if the Commission's proposals were adopted exactly as they stand they still fall a long way short of what is required. But these proposals provide a further boost to clean tech investor confidence and a further signal that, despite all the protestations from the right wing media, policymakers remain convinced that the low carbon transition is in their electorates' best interests.
Cui bono? All of us, that's who.
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