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An Energy Transition with a European Touch

Whereas the United States under President Donald Trump clearly will be unable to lead the fight against climate change, Europe aims to become the first carbon-neutral continent. And at the heart of the European climate agenda is the imperative of undertaking a “fair transition” to green economic growth.

MADRID – Tackling climate change is a monumental challenge, but the leader of the foremost global power continues to wash his hands of the matter. At the beginning of November, US President Donald Trump gave official notice of America’s withdrawal from the Paris climate agreement, thus confirming a decision he had announced in 2017. The notification came as soon as the agreement allowed, and the withdrawal will become effective the day after the US presidential election in November 2020. The United States will thus become the only country in the world that is not party to the pact.

All of the Democratic US presidential candidates have promised that, if they are elected, the US will rejoin the Paris accord. But the problem runs much deeper, because the Trump administration has been systematically dismantling environmental regulations introduced by President Barack Obama. Fortunately, the continued efforts of US states, cities, civil-society organizations, and businesses – along with economic drivers such as the competitiveness of natural gas – have partly mitigated the negative impact of Trump’s policies. Nonetheless, it is clear that America will be unable to lead the fight against climate change as long as the Trump administration continues to ignore and undermine the scientific evidence.

Other countries, meanwhile, are much more willing to embrace the cause. China, the world’s most prominent emerging power, still has plenty of room for improvement in terms of environmental protection, but has been making notable efforts to this end. In fact, it has even taken on a central role in climate diplomacy, alongside the European Union.

European leadership has long been a staple of the global campaign to mitigate climate change, and the EU has repeatedly shown its strong commitment to accelerating the energy transition. The incoming European Commission, under President-elect Ursula von der Leyen, looks poised to add even more momentum to this effort.

The decision to elevate the climate portfolio to one of the Commission’s three executive vice-presidencies, under the social democrat Frans Timmermans, is an excellent start. Timmermans will be in charge of presenting, during his first 100 days in office, a “European Green Deal,” which should provide the basis for Europe to become the first carbon-neutral continent. This broad strategy implies that the new Commission will need to ensure a high level of coordination across its departments so that they all work in the same direction.

Like the so-called Green New Deal advocated by leading US Democrats, the European Green Deal will have a pronounced social dimension. For reasons of equity and pragmatism, the energy transition cannot be at odds with economic growth. Any proposal that implies a massive downscaling of production and consumption is politically unviable and doomed to fail – both in advanced economies and, even more so, in developing countries.

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At the heart of the European climate agenda is the imperative of undertaking a “just transition.” This means helping those people and regions – such as workers in mining areas – that are particularly vulnerable to the profound changes needed in our energy systems. Establishing a “Just Transition Fund,” an idea that von der Leyen has embraced, could make it easier for all EU member states to commit to becoming carbon neutral by 2050. Until now, lingering opposition from Poland, Hungary, and the Czech Republic has made consensus on this elusive.

Overcoming these obstacles is essential, as is the need for EU governments to agree, as soon as possible, on the Union’s next round of voluntary contributions under the Paris agreement. All parties to the accord are obliged to present their new contributions before the end of next year. If the EU acts quickly and adopts an ambitious objective for reducing emissions by 2030, other countries may be encouraged to do the same.

Obviously, ambitious targets are not enough: the EU must also create the necessary conditions to meet them. Here, the bloc can leverage the European Investment Bank, which von der Leyen has proposed to convert partly into a “climate bank.” The EIB is already the largest multilateral investor in climate-related projects, and it plans to channel at least 50% of its financing to climate action and environmental sustainability by 2025. Moreover, the bank recently confirmed that, from the end of 2021, it will no longer consider new financing for unabated fossil-fuel energy projects. This momentous shift will enable the EIB to dedicate more resources to green energy and to exploring mitigation options such as carbon capture and storage.

In addition, the EU is working to classify economic activities and financial products according to how “green” they are. This regulatory taxonomy will be extremely useful for investors, because it will limit the practice of passing off some products as green when they really are not. If the EU succeeds in creating a solid and reliable taxonomy, it could set a global standard – something that we lack today.

The EU’s leadership by example in the fight against climate change is, without a doubt, cause for celebration. The Spanish government’s offer to host the United Nations’ upcoming annual climate summit – COP25 – is further evidence of this leadership. After Chile, the original host of the conference, declined to hold it because of the ongoing civil unrest in the country, Spain stepped in. The December summit will now take place in Madrid, under Chile’s presidency.

This solution, devised against the clock, symbolizes the political will and collaborative spirit with which we must face the climate crisis. When it comes to the collective challenge of decarbonization, three unequivocal truths have emerged: we have a long way to go, we are not progressing as fast as necessary, and the only way to reach our objective is if every country plays its part.