Can Europe discover climate realism?
Brussels’ embrace of green planning has been outcompeted by Beijing’s industrial planning and by Washington’s dominance in hydrocarbons. Europe’s energy intensive industries face a Russian energy crunch, Chinese dumping and American tariffs, all on top of Europe self-enforced decarbonisation costs.
‘Enhancing the Union’s competitiveness, bolstering its resilience, and advancing the green transition are mutually reinforcing objectives that must be pursued together.’ Thus the article of faith expressed by Europe’s political leaders at the EU-summit in Brussels last week. But such faith in a holy trinity of ecology, economy and security has a timing challenge. 2040 comes too soon, as leaders have yet to agree on its targets for emission reduction. 2050 is still the Green Deal’s carbon neutrality dream, equally adopted as a ‘new growth strategy’ based on European technological leadership. That was 2019. Since then, reality has shifted.
The war in Ukraine has robbed Europe of Russian natural gas as a cost-effective transition fuel, while dramatically increasing the price of fossil energy across the board. The United States first turned pro-green nationalist under President Biden and now anti-green mercantilist under Donald Trump. China has leapfrogged everyone else in green tech and dominates its global supply chains from the raw materials upwards. Brussels’ embrace of green planning has been outcompeted by Beijing’s industrial planning and by Washington’s dominance in hydrocarbons. Europe’s energy intensive industries face a Russian energy crunch, Chinese dumping and American tariffs, all on top of Europe self-enforced decarbonisation costs.
If Europe’s competitiveness cannot be restored it will turn green by losing the very industries it is counting on for its economic and technological resilience in the new geopolitical order. To turn this mutually self-destructive dynamic into the mutually reinforcing one desired by Europe’s political leaders, something has to give.
The first option is to do green protectionism, shielding European companies from outside competition as they grind towards carbon neutrality. The second option is to massively support industries with subsidies and other advantages. The third is to ditch the Green Deal. Remarkably, Europe is doing all of the above and none of the above at the same time.
The EU is keen to protect its market and impose its standards on other jurisdictions, deforestation and sustainability reporting among them. It is preparing a carbon border adjustment tax and has the toolkit to counter unfair dumping and tariff practices. However, the geopolitical reality and its own political and economic weaknesses are such that Europe simply does not have the hard power to impose the soft power of its norms on others. Pressure from the US, China and other trading partners will be effective enough to delay or deflect.
Enter state subsidies. The Green Deal was always an incentive scheme on top of a regulatory one. Now, under the moniker of the Clean Industrial Deal, it is also a byword for state aid. But it is mostly domestic state aid flying in the face of the free market principles upon which the EU is built, not a shared Brussels scheme to do a concerted China in Europe.
Scrapping the Green Deal would violate European political dogma. But its piecemeal erosion appears imminent, as testified by the growing discussions on emission reduction targets, the future of the internal combustion engine, and the next round of emission pricing and trading. In lieu of a transparent level playing field with legal certainty, yet another mosaic of preferential treatments seems looming.
The European Union has boxed itself into a corner it can only escape by accepting reality. The inconvenient truth in 2025 is that Europe stands alone as the only major economy truly dedicated to net zero, that 2050 will not see carbon neutrality, that energy transition has meant energy addition through AI and other growth markets, and that Europe’s own emission trajectory will be of marginal significance to global warming.
If the Green Deal’s original philosophy as a new growth strategy is to survive, Europe should focus on developing industries and technologies that can support its prosperity while enabling emission reduction as best in class globally. Some have called this the Green Draghi, in reference to the landmark report advocating a massive European investment push. The alternative of forced net zero will be less growth in Europe and less sustainability worldwide, as dirtier non-European industries will win. Perhaps such realism is upon us. In the new EU-plans for rearmament and defence in Europe, no formal climate goals are to be found. There, Europe apparently goes for industrial and technological renaissance proper. Call it silent climate realism, European style.
