Only The EU Can Lead The Green Transition
Europe finds itself in “an extraordinary period,” said Paolo Gentiloni, European Commissioner for the Economy, at the Brussels Economic Forum 2020. He was not just speaking about the Coronavirus crisis, but also the unique moment Europe finds itself at, with a Green Deal and social transition within reach.
Moves towards a Green Deal, together with a €750 billion Next Generation EU Coronavirus recovery package, and the partial suspension of the fiscal Stability and Growth Pact, have all come together to build an “extraordinary” response to health and environmental crises, he said.
The European Green Deal is a package of measures designed to make Europe climate neutral by 2050. EU governments gave the deal their backing at the end of 2019.
The Stability and Growth Pact meanwhile includes EU limits on government deficit and debt levels. The Pact was temporarily suspended in 2020, to give countries more room to respond to the Coronavirus crisis.
The moves were “inevitable” and “desirable” if Europe hopes to save jobs and restart economies after the Coronavirus pandemic, Gentiloni said during an interview at the Brussels Economic Forum about on a social and green reboot after the pandemic.
“But I need to add, it is also challenging,” he said. “We need to facilitate public investment.”
The Next Generation EU recovery package, approved in July, was “an extraordinary agreement,” he said. The package earmarks €750 billion in grants and loans to help the 27 countries of the EU deal with the impact of the pandemic. “The first task is now implementation,” he warned.
Gentiloni said a carbon border tax would be “crucial” to ensuring that the recovery is green. He added that “now is the time” to also consider setting a minimum wage at EU level.
Coronavirus response measures “should not disrupt the level playing field of the single market, whilst at the same time they must respect the different strengths of different markets,” he added.
Asked more generally about the role of taxation in the Green and Digital transitions, he said “in general I think this will be very important.” Tax is likely to be used to recoup the cost of the common debt incurred with the Recovery Package, set to run up to 2056. “How will we repay this? Will we ask member states to repay or will we be able to create new resources with a digital and green tax? I think the first scenario is a failure for the EU, the second a success,” Gentiloni said.
Asked how long the new fiscal and aid rules will be in place, the commissioner said “we will of course go back to common rules.” But it will be “crucial to avoid going back to tighten rules too soon. We need in 2021 to keep a positive fiscal stance in economies.”
The commissioner was challenged to defend the cost of making a Green transition, particularly one supported by a Digital transition for EU tech companies.
The European Commission has estimated that achieving the current 2030 climate and energy targets will require €260 billion of extra investment every year, or about 1.5 percent of the bloc’s GDP at 2018 levels. Fully unlocking the digital potential of industries across Europe meanwhile has been given a price tag of €3.6 trillion.
A better way to look at the cost would be to compared it to the Marshall Plan, Gentiloni said.
It is now Europe’s turn to rise to the international challenge of climate change and environmental degradation, Gentiloni said. “I think the task is very, very hard, but European leadership is absolutely necessary. Who else? What other international actor apart from the EU could play a leading role in the green transition?”