EU’s Green Shift Under Threat as the Hit to Consumers Gets Real

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(Bloomberg) — The European Union unveiled its Green Deal five years ago with the goal of making it the cornerstone of the bloc’s growth and setting the agenda for the world. Fault lines have now replaced fanfare, and risk handing leadership of the clean industrial era to the US and China. 

Despite the intensifying climate crisis, a right-wing shift in European politics has stirred opposition to the plans and threatens to stall progress. The target of the pushback is on transport and heating policies, which will touch the bloc’s 450 million people more directly than anything that’s come before. 

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That’s an opening for some member states and Europe’s embattled auto industry to demand changes that would put the EU’s emissions targets all but out of reach and leave the region a laggard. 

“The biggest challenge by far for the new commission is proving that it is putting people in the center of the energy transition,” said Krzysztof Bolesta, deputy climate minister for Poland, which takes over the EU’s rotating presidency in January. “We are expecting real adjustments, not rebranding.”

As she starts her second term in office, European Commission President Ursula von der Leyen has vowed to stay the course on the goal to reach climate neutrality by 2050. At the same time, she has indicated that she’s open to adjusting the overhaul to help industry and vulnerable households. That’s already been evident in the EU’s move to postpone a landmark law to tackle global deforestation, and opponents are seeking more. 

Just how far Europe’s green ambitions have been toned down was evident in the city of Brussels. Authorities in the EU’s capital this month made a u-turn on a plan to gradually phase out diesel engines. 

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A campaign from local politicians cited the concerns of owners of some 35,000 vehicles, and the city council sided with them over air-quality issues for hundreds of thousands of people. As a result, one of the most affluent regions in Europe agreed to delay enforcement of restrictions on older diesel vehicles from a low-emission zone by two years to 2027.

Alongside Slovakia and the Czech Republic, Poland is balking at implementing steps that have already been agreed on, setting up a potential showdown with Brussels. The fronts are hardening as key deadlines approach, making the coming months crucial.

At stake is not only meeting the EU’s 2030 goal of cutting greenhouse gas emissions by 55% from 1990 levels, but the bigger issues of competitiveness in the global race for clean technologies — as well as credibility. 

The bloc’s green reforms span the entire economy and loosening policies in one sector would require tighter restrictions elsewhere. Such horse trading would open new rifts and undermine the legal certainty demanded from investors. 

In the EU’s early phase of climate overhaul, the bloc focused on companies, but the next steps get trickier. The Green Deal includes expansion of carbon-pricing instruments that will affect consumers — already squeezed by post-pandemic inflation and a spike in energy prices related to Russia’s war in Ukraine. 

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That eventual pain is supposed to be offset by a stronger EU economy. But the hoped-for benefits, such as new jobs and a future-proof industry, remain elusive amid unsettling news like plans for job cuts and factory closures at former stalwarts like Volkswagen AG. 

Against this backdrop, any policy perceived as another burden is open to attack, according to Linda Kalcher, executive director at the Strategic Perspectives think tank in Brussels. 

The new emissions trading system, known as ETS2, is a prime target. It will impose a pollution price on road transport and heating fuels from 2027. That will inevitably impact regular people, even if it comes with a dedicated fund to shield the most vulnerable — estimated to be at least €87 billion ($95 billion) from 2026 through 2032.

“Almost half of EU countries have elections when the ETS2 starts and that poses the risk of another wave of backlash against green measures,” Kalcher said.

Out of the 27 member states, only Austria managed to meet an end-June deadline to introduce domestic measures for the new carbon market. Although it’s part of European law, some are demanding changes.

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Poland’s Bolesta said he hoped the EU will discuss the measure again before making “a mighty European blunder.” Czech Prime Minister Petr Fiala told his country’s parliament that he will try to get the ETS2 postponed. Slovakia’s Environment Minister Tomas Taraba last month called on the commission to reconsider the measure and indicated he planned to seek a broader coalition on the issues. 

Patriots for Europe has also proposed a repeal of the extension to motor fuel and buildings to protect consumers, according to Silvia Sardone, the lead lawmaker of the right-wing Patriots for Europe group in the European Parliament’s environment committee.

“The European Union’s green strategy should not only be revised, it should be completely overturned,” she said. “Targets and timelines need to be revised in line with competitors in international markets and, above all, sustainable for companies and families.”

Emissions from road transport account for almost a quarter of Europe’s total and remain stubbornly high. Labeling to help people choose cleaner vehicles has made little impact. The EU is about to get tougher, but there’s pushback here too. 

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The block’s goal is to sell only zero-emission new cars by 2035, effectively putting an end to the combustion engine. As part of the pathway, emissions standards are set to tighten as of 2025. But the plan, which comes on top of ETS2, is now triggering appeals by auto companies for a delay. Germany’s manufacturers are especially under pressure.

Based on current rules, carmakers would have to either halt production of about 2 million cars or be exposed to fines that could reach €13 billion, the European Automobile Manufacturers’ Association said in a draft informal document seen by Bloomberg last month.

While carmakers blame tepid EV demand and unfair competition from Chinese producers for their trouble meeting regulatory demands, some policy makers and environmental researchers point to short-termism, with the industry seeking to sell SUVs and other high-margin models to maximize profits before tougher targets kick in. 

The Transport and Environment think tank expects all automakers to boost their offerings of electric vehicles, projecting sales rising to 24% of the market from 14% in the first half of this year.

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Still, the industry carries weight and its concerns are likely to reverberate through the European Parliament when it starts hearings of nominees for new EU commissioners next month. The ground is being prepared for a fierce battle.

The center-right European People’s Party, the biggest political group in the assembly, called for a revision of the 2035 ban on the combustion engine, arguing that the measure threatens automotive jobs and will make driving unaffordable for some. Sardone of the Patriots for Europe called the EU’s electric-car strategy “economic suicide” for the region. 

Caving into the anxiety and diluting climate policies weakens the signal that companies need to make the clean transition a priority, according to Julia Poliscanova, senior director at Transport and Environment.

That’s not just about meeting local regulations, but being in better position to compete with global rivals, she said, adding that politicians would be better served tapping EU funds to reward clean manufacturers and promote greener mobility options.

“It’s also a matter of mindset and the world is constantly changing,” Poliscanova said. “These things need planning ahead and that’s what I think is missing.”

—With assistance from John Ainger and Daniel Hornak.

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