Climate Leadership Coalition (CLC) welcomes the European Commission’s communication on Stepping up Europe’s 2030 climate ambition – 2030 Climate target plan. The communication gives several positive signals for low carbon investors and can be strengthened by a carbon budget.
The plan recognizes the enormous upfront energy-related investment needs and estimates that to achieve the new 55% target by 2030, the EU will need to invest annually €350 billion more during the next decade than it did during the previous decade. The cumulative additional investment need for 2021 – 2030 would thus be €3,500 billion. Most of the investments will need to come from the private sector and public funds can accelerate the pace. For example, by using 37% of the €750 billion NextGenerationEU funds as proposed by the Commission, €277 billion will be spent directly on the European Green Deal objectives contributing about 8% to the additional investment needs for the next decade.
In order to attract private investments, corporate decision-makers and company boards need to have positive answers to these questions:
- Will there be sufficient demand and markets for the new products and will the new products be acceptable?
- Will the new investment lead to profitable business?
- Is there adequate public support to develop new products or industrial processes on time?
Demand for new products. The plan emphasizes the need to develop policy actions for demand-based support for zero- or very low-carbon technologies and the creation of markets for low-carbon products. CLC views this to be very important and timely due to the multitude of new products created for example by hydrogen/Power-to-X- solutions and bio-materials.
In addition, CLC proposes to use public procurement as a demand driver for new products and to develop carbon-footprint-based procurement requirements. Carbon footprint information would be vitally important also in consumer products and would further drive the demand for climate-friendly products and services.
Business profitability. The plan illustrates the pivotal role of the carbon price and its robustness as a driver for immediate change and as a strong signal for low carbon investments and present actions and considerations to extend the EU Emission Trading System (ETS). In addition, the plan illustrates how emissions trading revenues can be re-invested in the economy, thereby accelerating the transition, supporting low-income households and possibly leading to a reduction in labour taxation with positive effects on employment. Throughout its existence, CLC has consistently signalled that the carbon price, and its robustness and predictability, is and would be the main driver. CLC fully supports the proposals.
To strengthen the predictability, close to 100 companies, cities and universities, business networks and associations called on the EU to set a binding carbon budget – the total remaining quantity of greenhouse gas emissions as CO2 equivalent that could be emitted until 2050 – as well as “net-zero” for 2050 and the alignment of the 2030 and 2040 targets. The carbon budget would create a natural foundation for the right amount of emission allowances within the widening ETS, clarifying the long-term view of carbon markets and thus strengthening the role of EU ETS role as a cornerstone policy instrument.
Investment decisions depend on the private sector’s trust in the robustness of the decisions taken by European institutions. A transparent carbon budget would strengthen the mutual trust between the private sector and EU institutions. We were pleased to see the carbon budget as a part of the proposal by the Committee on Environment, Public Health and Food Safety (ENVI) of the European Parliament and we call on the EU Commission, European Council and full EU Parliament support for this.
Support the development phase. There are many existing and new ways – such as the Horizon Europe, the Innovation Fund, the InvestEU programme, the Modernisation Fund, Just Transition Fund, the European Regional Development Fund, the Cohesion Fund and the European Social Fund Plus in addition to the NextGenerationEU funds – to support the research, development and commercialization. CLC views that these arrangements cover the early development phase relatively well, but due to the size the change, this area need further strengthening as well.
In addition, there is an increased need to speed up building commercial scale industrial solutions. For this, CLC proposes new mechanisms like Carbon Contracts for Differences to be considered and, if applicable, to be used widely.
The 2030 Climate Target Plan includes also many other excellent proposals. One area that CLC has addressed is the role of land-use and the bioeconomy. The sector is an important contributor before 2050 and will have a dominating role post 2050, when a majority of both greenhouse gas emissions and sinks are coming from this sector.
The plan sees merit in the creation of an Agriculture, Forestry and Land Use sector with its own specific policy framework covering all emissions and removals of these sectors and to become the first sector to deliver net-zero greenhouse gas emissions. The sector will also help the EU to go “net-negative” post 2050. As key actions, the plan mentions improved and enforced forest protection, more sustainable forest management, re- and afforestation, improved soil management, dietary changes and a shift towards growing woody biomass on cropland including as a feedstock for sustainable biogas and biofuels. In addition, the plan proposes a certification system for carbon removals and the development of incentives for carbon sequestration. CLC warmly supports all these proposals. Due to long lead times in the land use, these mechanisms need to be developed in the near future.
In addition, the plan proposes a certification system for low-carbon basic materials based on greenhouse gas performance. CLC views the development of Life Cycle Assessment (LCA) for materials is very important since biomaterials will have great substitution potential and CLC proposes also incentives for material substitutions.
Finally, the plan makes it clear that the EU should continue leading by example and it must also use its leverage to promote a global change and will seek mutually beneficial alliances. The EU’s position as the world’s largest trading block provides significant opportunities in this respect. CLC fully supports this.
One view that is not present is the EU’s “total climate impact”. As we have – in addition to our territorial emissions – the carbon footprint impact of the products we buy from outside and the impact of the products we sell to international markets, more often even climate positive – carbon handprint – we should lead and also report this whole transformation more systematically. CLC proposes that this topic be addressed as a part of Green Deal planning and reporting.
To summarize our view, CLC thinks that this 2030 Target Plan is excellent and we congratulate the EU Commission on understanding the needs of private investors. Their decisions within the next decade will resolve whether the EU will achieve its climate and green deal targets. We are only one investment cycle away from 2030. CLC will support driving this plan forward in collaboration with the European Commission, Parliament, and all other interested parties. As climate change proceeds at an alarming rate, this is likely to be the last chance to get the policies right.
Read more about CLC policy proposals here.
More information: Jouni Keronen, CEO, Climate Leadership Coalition jouni.keronen@clc.fi, tel. +358 50 453 4881.
Climate Leadership Coalition (CLC) is a non-profit organization committed to the pursuit of carbon-neutrality through the sustainable use of natural resources. The purpose of CLC is to promote the sustainability of businesses, city planning strategies and activities of research organizations towards more sustainable and resource efficient models. CLC enhances its members’ ability to respond to the threats posed by climate change by sharing information, ideas and best practice solutions. We make proposals to governments and other stakeholders to harness the market economy in a more sustainable direction and to attract sufficient investments for such a transition. CLC believes that green transition can be economically beneficial, and therefore financeable, and that early adapters can benefit and become more profitable. CLC currently has 73 organizational members that employ 400,000 people worldwide.
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