The European Green Deal will have profound geopolitical consequences

Last updated on February 16th, 2021 at 07:20 am

In 2019, the European Commission presented the European Green Deal, an ambitious package of policy initiatives that aim to make the EU economy environmentally sustainable and transform the European economy and consumption patterns.

This plan, a priority on the EU agenda, implies a fundamental revision of the European energy system. And for this reason, it is destined to modify the relations between the EU and its neighborhood and redefine European political priorities at a global level.

In the joint policy paper “The geopolitics of the European Green Deal”, the European Council on Foreign Relations (ECFR) and the Bruegel think tank confirm that “is, therefore, a development of European foreign policy with profound geopolitical consequences.” It deepens the international implications of the European Green Deal.

As Euractiv recalls, “Europe accounts for about 20% of global crude oil imports. The gradual farewell to fossil fuels will eventually drop prices further, reducing the main exporters’ income. Furthermore, an energy market in which renewables will have an ever-greater weight will be more dependent on imports of products and raw materials that serve as inputs for clean energy and clean technologies. For example, rare earths, of which China is the largest producer, are essential for the batteries production. Finally, the CO2 adjustment mechanism at the border, which Brussels is studying, could trigger tensions with the main trading partners, in particular, those that pollute the most, who will see a trade barrier in this system.”

The five authors of the report, Mark Leonard, Jean Pisani-Ferry, Jeremy Shapiro, Simone Tagliapietra, and Guntram Wolff, analyze both the effects of the initiatives implemented to export EU climate policy as well as unwanted collateral and also examine how other countries, such as the USA, China, Russia, Algeria or Saudi Arabia could interpret and react to the European Green Deal. According to ECFR and Bruegel, “the European Green Deal will not only transform the economy but will also have profound geopolitical repercussions.” 

It will affect the European energy balance and global markets, oil and gas producing countries in the European Neighborhood, European energy security, and world trade trends, especially through the carbon adjustment mechanism at the border. The EU should prepare to contribute to the management of the geopolitical aspects of the European Green Deal. In this context, relations with neighboring powers, such as Russia and Algeria, and global players such as the United States, China, and Saudi Arabia, are relevant.

ECFR and Bruegel also propose an external action plan as an integral part of the European climate strategy and underline that “To be successful, the EU must directly address the difficulties that the Green Deal could generate with its economic partners and neighboring countries. Only a proactive Union will help transform potential tensions into opportunities for renewed international partnerships.”

To manage the geopolitical aspects of the European Green Deal, the authors of the policy paper propose seven actions:

– Assisting oil and gas exporting countries in the European Neighborhood to manage the Green Deal’s repercussions. The EU must engage with these countries to foster their economic diversification, including renewable energy and green hydrogen production.

– Improve the security of stocks of critical raw materials and limit dependence, primarily on China. Key measures in this regard include greater diversification of supplies, an increase in recycling use, and the replacement of critical materials.

– Work with the United States and other partners to create a climate club whose members apply similar carbon adaptation measures at the border. – To become a global standard-setter for the energy transition, especially for hydrogen and green bonds.

– Requiring compliance with strict environmental regulations as a condition for accessing the European market will be a strong incentive for a green transition in third countries. 

– Internationalize the European Green Deal by mobilizing the EU budget, the European Recovery and Resilience Fund, and European development policies.

-Promote global coalitions to mitigate climate change aimed at financing measures to limit its melting.

-Promote a global platform on the new economics of climate action to share lessons and best practices.

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