Brussels Economic Forum 2024
European Commission, DG ECFIN
16-05-2024, Square Brussels Convention Centre
The Von der Leyen Commission has made important commitments and placed great emphasis on the green transition. As we are approaching the next European elections, speakers agree that there is still a lot left to do in this regard. On the one hand, the EU has been facing several other challenges, such as the Covid pandemic and the Russian aggression of Ukraine, that have required the Union to shift its attention towards other matters. On the other hand, achieving meaningful results in the green transition doesn’t have a cheap cost and those who are bearing this cost are increasingly manifesting their discontent. There is a common understanding that a large level of investment is needed from the EU, while also managing to leverage private investment. The bottom line is that we can’t afford to backtrack on the green transition and we must act together and in coordination.
Introduction
Maarten Verwey (Director General for Economic and Financial Affairs)
The EU is enduring many challenges, including climate change, the loss of its competitive edge and the Russian aggression of Ukraine. The imperative is working in an efficient, united and coordinated manner.
Keynote speech
Ingrida Šimonytė (Prime Minister, Republic of Lithuania)
Lithuania is among those countries that joined the EU 20 years ago, where there was a great deal of criticism towards enlargement. These fears were unfounded and the EU is stronger now. Geopolitical realities make us look for new policies and decisions. We’ve been focusing on digital and green issues, but the energy issue and external threats require us to change paradigm. The transition that is required now is the one towards a resilient and secure EU. This requires us to focus on the reform of the Recovery and Resilience Facility, strengthen our energy supplies as well as supply chain of critical materials, strengthen the internal market competitiveness, create a banking union, strengthen the European defence industrial base and facilitate access to financing for defence enterprises. At the same time, we need to keep our door open because enlargement can be truly beneficial.
Tommaso Padoa Schioppa address
Nadia Calviño (President, European Investment Bank)
Together we are stronger, so therefore we need to act united and in a coordinated manner. EU institutions have frequently demonstrated an integrated and united response to crises like the Covid pandemic and the Russian aggression of Ukraine. Ensuring that the economy thrives in the green and digital transitions is another challenge. It requires supporting key sectors and the social infrastructure, investing in skill development and mobilising private investment. The EIB plays a key role in this effort in eight fundamental ways:
- Consolidating its role as EU climate bank
- Supporting digitalisation
- Stepping up investment in the defence and security industry
- Increasing cohesion, since opportunities are not equally distributed
- Support innovative financing in sectors like agriculture
- Investing in skills and in the social infrastructure
- Focusing on EU external impact in instances like EU enlargement, rebuilding Ukraine and addressing pandemics in Africa
- Widening financial instruments with the aim to create a European capital union.
The green transition in election times: fair policies for people and the climate
- Paolo Gentiloni (Commissioner for the Economy)
- Kostis Hatzidakis (Minister of National Economy and Finance, Greece)
- Hilary Cottam (Honorary Professor, UCL Institute for Innovation and Public Purpose)
- Tea Jarc (Confederal Secretary, European Trade Union Confederation)
- Adélaïde Charlier (Climate and social justice activist)
Main questions: can the green transition survive the wave of discontent from different social categories? Is the EU Green Deal still fit for the challenge or should we reconsider our common approach? How can we support the green transition?
When we consider the wave of protests towards EU actions aimed at supporting a green transition, a distinction has to be made between legitimate concerns and the role of populist movements in fuelling protests (Hatzidakis). The environmental dimension is not alone, there is also a geopolitical one and three points have to be highlighted: (1) in some areas we need to reassess the pace of transition, (2) we need to give the means to adapt to people mostly affected by decarbonisation, and (3) criticism towards the EU green agenda is often the result of the fact that EU action is not matched by other countries in the world (Hatzidakis).
Failing to act on climate change will be unforgivable, so therefore it is mandatory to go faster and not ease the pace (Cottam). Those people that will be more affected by the consequences of climate change are the same who are already affected by high inflation, low salaries and unemployment (Cottam). The same welfare protection that proved essential in shifting from agricultural societies to industrial ones is equally essential for the green transition we are undergoing now, it is a question of infrastructures supporting the transition (Cottam). The bottom line is ‘how should we renew the social contract together?’ (Cottam).
Many are asking themselves if we should regret the decision to have the EU Green Deal as the centrepiece of the Von der Leyen commission, my answer is no (Gentiloni). Things have been moving and the Commission has achieved results in this regard, but (1) the EU accounts for a limited share of emission globally, and (2) the cost of the green transition is not cheap (Gentiloni). Calculations concerning the level of investment needed to implement a transition of this magnitude amount to thousands of billions (Gentiloni). Even though public investment has significantly surged, private investment is relatively stable in this regard (Gentiloni). The bottom line is that we need to act in a pragmatic and efficient way, but we cannot backtrack on this commitment (Gentiloni).
The EU and its policy-making must address popular concerns but not fall for populist demands or for providing simple answers to complex questions (Jarc). Huge investment is needed to undergo the green transition and European countries didn’t prepare adequate plans in this regard (Jarc). Furthermore, citizens have to be included in this transition (Jarc).
There is a fundamental gap between what young generations perceive and what the policy-makers are doing to address climate change (Charlier). If people are mobilising and protesting, it means that they feel excluded (Charlier).
So far, transitions have been mainly accelerated by crises, the energy issue constitutes a fitting example (Gentiloni). The green transition needs to be a worker- or citizen-led transition where investment aims to avoid putting people in situations of distress (Cottam). Financing the green transition is not a cost, addressing the consequences of natural disaster caused by climate change is a cost; rather, financing the transition is an investment for new, efficient sectors (Cottam). Climate consequences are unequal, so therefore addressing climate change requires social policies (Charlier). The green transition is not only about social justice but also cohesion, since there is a great difference among countries (Jarc). Ultimately, public procurement is the EU’s way to decide where its financing goes and hence to play an active role in increasing cohesion (Jarc).
The level of public investment provided by the EU for the green transition is of large scale (Gentiloni). While for past crises like the financial one in 2008 the answer was austerity and cutting public spending, we are now committing more and more funds to address common challenges (Gentiloni). Some countries are more concerned about creating more debt, but there is a general agreement that we need to provide large amounts of public investment (Gentiloni). The bottom line is that we have come to the realisation that using common tools and funds to address common challenges is an imperative, we need investment but most of all common investment (Gentiloni).
EU Enlargement: Making the EU stronger and more cohesive
Istvan P. Székely (Principal Advisor, Directorate-General for Economic and Financial Affairs)
Julia Wörz (Head of the Central, Eastern and Southeastern Europe Section at the Economics Analysis and Research Department, Oesterreichische Nationalbank)
Reiner Martin (Executive Director, National Bank of Slovakia)
Main questions: what lessons can we draw from past EU enlargements? What is the current situation of prospect members?
The key for future enlargement is drawing from past’s lessons (Székely). Enlargement (1) offers a unique opportunity to prospect members to address geopolitical and geoeconomic challenges and (2) the prospect of EU membership bears huge potential for states before joining, especially concerning the quality of their institutions (Székely). Evidence highlights that improvements in this regard have traditionally been made before countries actually joined the EU, whereas after joining improvements have generally been more marginal (Székely). Economic improvement can translate into social improvements only if countries improve the quality of their institutions, while poor institutions likely result in unequal development (Székely). The bottom line is that the period leading to accession is critical and the focus should be on improving institutions, particularly controlling corruption (Székely).
The economic convergence of Central, Eastern and Southeastern Europe (CESEE) countries is progressing, but too slow (Wörz). The membership prospect can in fact have an influence on economic improvements by prospect states and their institutional reforms are not just important for them, but also for EU members (Wörz). While 2016 induced scepticism with Brexit and the Trump election, the Russian invasion of Ukraine has given momentum to enlargement (Wörz). The EU can contribute in three ways: providing financing, improving institutional quality and picking low-hanging fruits to produce tangible results (some little things, like including them in the roaming area, can leverage bigger achievements) (Wörz).
The financial sector can give two important messages concerning enlargement:
- The financial system is stable. We haven’t had major financial crises and even other crises like wars and pandemics haven’t unsettled European markets;
- There is a huge difference between EU and prospect members when it comes to the banking system. The Eu might not necessarily be the model to follow, but the banking system within prospect members is weak and lagging behind. There, the share of corporations that have enough internal funds is too low and even a much larger share of corporations don’t even try to apply for funds. It is hard to find financing to grow in smaller enterprises and there are no alternative ways to grow (Martin).
Economic security in election times: Can Europe maintain its competitiveness while leading on the green transition?
- Kadri Simson (Commissioner for Energy)
- Peter Carlsson (Chief Executive Officer, Northvolt)
- Danuta Hübner (Member of the European Parliament)
- Olivia Lazard (Research Fellow, Carnegie Europe)
Main questions: are the targets set for the green transition still achievable? What are the main challenges in achieving these targets? What are currently the main green targets of the EU? How can we achieve them?
When it comes to energy, we have been able to reduce our dependence on Russia and switch to greener sources, but not thanks to the Green Deal (Simson). We have to be ambitious when it comes to the green transition, it is not a short-term crisis management issue but rather a long-term plan that will define our future (Hübner). There have been diverging achievements across Europe, but we still need to think about the EU as a whole, this policy crosses borders and sectors (Hübner). When it comes to the climate, we reached a tipping point and this will have enormous implications on the economy (Lazard). Therefore, decarbonising the economy is a must, but there are also other pressing questions like digitalisation that impact climate change (Lazard). The main problem of the EU Green Deal is a geopolitical one: it relies on critical materials coming from outside of Europe (Lazard). It is crucial to invest to improve the geopolitical and geoeconomic position of the EU and be strategic in how we access critical materials (Lazard).
This is not the time to slow down, the EU has traditionally played a driving role and it needs to continue doing so in the green transition (Carlsson). Amid several security and economic challenges, it is crucial to make the EU an attractive market for capital investment coming from both inside and outside Europe, as well as to foster European champions (Carlsson).
Renewable energy sources have proven to be among the most cost-effective sources of energy, so this is a direction we should continue to focus (Simson). It is crucial to give predictability to the private sector in order to invest (Lazard). Key questions are: (1) where do we need to invest and what kind of coordination is needed? (2) what economic modelling might serve the interests of the EU model? (Lazard). Identifying champions is also extremely important, and industrial policy plays a great role in this (Lazard). Furthermore, we need to think about innovation, technology and the industrial ecosystem altogether, as a whole (Lazard). Capital investment funds can effectively go into the green transition, but the EU needs to pave the ground for that and provide the right conditions for them to operate in a market, the key is making the EU an attractive and predictable market to invest (Carlsson).
Networking
Kristjan S. Guri (Co-Founder and Head of Policy at 89 Global Consulting Services). No specific follow-up planned, but staying in touch to potentially bring partners together in the future
Noa Schumann (Euronews).
