Europe needs a green deal

This post has been contributed by Daniele Archibugi (CNR IRPPS, Rome, and Birkbeck), Andrea Filippetti (CNR Institute for the Study of Regionalism, Federalism and Self-Government, Rome), Marion Frenz (Birkbeck)

The United States’ decision to send men to the moon was driven by questions of strategic competition and national prestige. But the Apollo programme went on to deliver huge economic and technological benefits reaching across the economy. We believe a green mission can do the same for Europe.

A transition to environmental sustainability is an ethical and social imperative in its own right. But such an effort could bring wider benefits, by unlocking innovations powerful enough to restore economic growth and social prosperity in Europe.

The Covid-19 emergency will leave Europe needing an economic boost more than ever. Commission president Ursula von der Leyen has already proposed making the next EU budget a stimulus programme. The green deal must form the framework for postpandemic policy.

A green mission can tap into large and neglected scientific and technological opportunities that can pave the way to a new and better stage of economic and social development.

In a recent paper, we argue that to unlock these opportunities and spur broad economic growth Europe needs a bold programme of public investment. The Juncker investment plan, designed to aid recovery from the 2008 crash, and the proposed Horizon Europe research and development funding programme are models for such an effort.

In terms of both political momentum and social need, the green deal proposed by the Commission in December, which promises to mobilise some €100 billion, is the most feasible first draft of such a programme.

Green industries and services could become an immense source of innovation, productivity growth and job creation for the future. It is vital for the EU to be a world leader in those sectors.

There is some catching up to do. China is already the largest producer of photovoltaics and solar thermal energy. The expertise, value chains and market share of its companies could provide a head start for the next generation of technologies.

Taking the lead

But there are opportunities too. The current US administration is indifferent towards climate change and sustainability. This gives Europe a greater responsibility to take the lead; it also offers a competitive advantage.

The consultancy EY compiles an index measuring different countries’ attractiveness for investment in renewable energy. In 2019, China, the United States and India shared the podium, followed by Germany and France. If the green deal is successful, EU nations should place at the top of this ranking.

Rising to the challenge of mitigating climate change involves a wide range of green technologies. These rely on a marriage of industrial fields: advanced manufacturing, knowledge-intensive services and digital technologies.

These industries are vital for the advanced economies of the EU, and the bloc holds a competitive advantage in them over emerging countries. This advantage is likely to endure, as these technologies involve non-tradeable capacities and are not exposed to international competition—even relatively lowtech industries such as recycling and double glazing require local capabilities. Here is where future well-paid jobs can be created.

A green transition requires investment in R&D. The EU lags behind the US, Japan and South Korea—which last month announced its own green deal programme—in research spending as a proportion of GDP, and risks being overtaken by China.

Delivering a European green deal will require a surge in public and private R&D. Where science and technology are nascent and too uncertain to attract business investment, public investment must take the lead. In areas that are more developed and appealing to businesses, support for private R&D is important.

Besides supporting innovation, European policymakers need to ask who profits from it. The first answer will be those who will use the green new deal to build competences, skills, knowledge and value chains.

Can the EU do it? This will depend on the willingness of member countries and European institutions to uphold the aims of the deal and support the scientific and technological competences needed to sustain it.

European institutions have, so far, proven more powerful in financial and monetary policy than in implementing proactive measures for the real economy. It is time to change Europe’s priorities: the EU needs a council for the green deal that is authoritative and as powerful as its Economic and Financial Affairs Council and the European Central Bank’s executive board. Such a change would show the union addressing vital needs that national politics cannot.

This article appeared in Research Europe, 2 April 2020