The European Union’s (EU) executive Commission today unveiled an ambitious plan for a green economic recovery from the covid-19 pandemic. The package is worth €750 billion and is designed to help each of the 27 member states deal with covid-19’s economic fallout through grants and loans.
However, it will need the backing of all member countries for the plan to be ratified and implemented. Next Generation EU, as the plan is called, has been eagerly awaited for the past few days, especially since a draft was leaked a week ago.
Announcing the plan, Ursula von der Leyden, Commission President, said, “The recovery plan turns the immense challenge we face into an opportunity, not only by supporting the recovery but also by investing in our future: the European Green Deal and digitalization will boost jobs and growth, the resilience of our societies and the health of our environment. This is Europe's moment."
The aims of Next Generation EU are in line with the European Green Deal, which was proposed in December and received the approval of the European Parliament in January. The Green Deal aims to reduce EU’s greenhouse gas (GHG) emissions by half (compared to 1990 levels) by 2030 and go completely carbon neutral by 2050.
However, soon after the vote of confidence, the pandemic struck. Many of the worst affected countries like Italy were already suffering from massive debts and the economic impact of pandemic lockdowns have made the economic outlook of some of the “southern" member states worse.
The Commission has proposed €500 billion in grants and €250 billion in loans to the member states. While some richer countries have shown reluctance to take on the debt of economically poorer member countries, Next Generation EU proposes to raise the money by borrowing from capital markets. This money will be paid back by 2058 through a carbon tax, a digital tax and a tax on non-recycled plastics.
The Next Generation EU proposal is an important one in the global context as well. Every country has been badly hit economically by the pandemic, and the fear is that when efforts are made to re-start economies, thoughts of GHG emission mitigation and climate change in general will be put on the backburner. Already, through the pandemic lockdowns, countries as different as the USA and India have been either diluting environment safeguards and regulations, or granting environment clearances to industry in a hurry.
On top of that, the crucial COP26 climate summit, which was slated to be held in Glasgow in November, has been shifted to early 2021. Rumours are that it may get further postponed to late 2021. In light of such worries, the EU plan at least provides an alternate way.
The Green Deal had a much discussed mechanism called the Just Transition Fund (JFT). Budgeted at €7.5 billion, the JFT basically helps regions and communities working in the fossil fuel sector transition to green energy jobs. The Next Generation EU proposes that the JFT be strengthened to the tune of €40 billion. It also proposes an extra €15 billion to help rural communities make farming changes in line with the Green Deal which emphasises on biodiversity and Farm to Fork strategies.
Simply put, these initiatives, if successfully implemented, hold important lessons for all countries. Before the pandemic came along, the need of the hour was to transition as quickly away from fossil fuels as possible to stop climate change. Despite the pandemic, that should still remain the primary goal, even as regaining economic stability is important.
“A green recovery is economically beneficial, but also the only option when the alternative means further carbon lock-in and fuelling the climate crisis for decades to come. Carbon-intensive companies that receive financial support should be required to implement climate change transition plans consistent with the Green Deal and Paris Agreement," says Stephanie Pfeifer, CEO, Institutional Investors Group on Climate Change (IIGCC), an international consortium of asset managers and institutional investors.
Now it’s up to the EU’s member states to decide.