The four pillars of European Green Deal diplomacy

The EU’s diplomacy on the European Green Deal will face real tests in the months and years to come. To meet the challenge, the union should focus on trade, climate finance, multilateralism, and domestic implementation of the deal.

Offshore wind farm

The Glasgow Climate Pact that countries signed on 13 November 2021 may have been the best compromise possible at that time, after two years of struggle against the covid-19 crisis. But it was insufficient.

To cut annual global carbon emissions from 52 gigatonnes today to around 25 gigatonnes by 2030, states will have to engage in much deeper, faster, and larger-scale decarbonisation than they committed to in the pact. This is the only way for them to have a reasonable chance of limiting global warming to 1.5°C above pre-industrial levels. Even with the additional measures they agreed to in Glasgow, annual carbon emissions are likely to be around 48 gigatonnes by 2030. Therefore, additional efforts to reduce greenhouse gas emissions by 2030 worth three times the content of the Glasgow Climate Pact are necessary to stay within the 1.5°C limit.

The key question for the European Union and the rest of the world is: how can they organise international cooperation – and competition – to accelerate global climate action? The EU should respond to the challenge by focusing on four pillars of European Green Deal diplomacy: trade, bilateral financial agreements, multilateralism through the United Nations, and domestic implementation of its Fit for 55 climate package.

Trade

The EU is yet to articulate a trade policy that would allow for the domestic implementation of the European Green Deal – or that would protect it against potential retaliation from its partners, competitors, or adversaries who are unhappy with its proposed carbon border adjustment mechanism (CBAM). The union has long discussed carbon border adjustments as a distant prospect. However, this is now a pressing issue. Most countries – rich and poor, large and small – view the CBAM as green trade protectionism. The EU should make it clear that the ultimate objective of the proposed trade measure is to avoid carbon leakage and competitiveness losses, not to perfectly level the carbon playing field (by imposing equal carbon border tariffs on all products and services with all countries and businesses). The union also needs to explain that, should the CBAM ever enter into force, the revenues it generated would support the countries and people who suffer most from the climate crisis.

The European Commission has proposed a version of the CBAM that is designed to be compatible with the rules and principles of the World Trade Organization (WTO). But legality is not the real test of such a measure. The EU and its member states need to prepare to face trade retaliation for the CBAM. When the bloc tried to include greenhouse-gas emissions from international flights in its emissions trading scheme, it quickly caved in due to threats by foreign buyers of Airbus aircraft. Due to this experience, the EU now understands that it cannot go it alone with its proposed carbon border tariff – it needs the support of the United States.

The US is warming to the idea of a border tax adjustment: Joe Biden referred to the concept in his run for the presidency, and his administration is now embracing trade as a tool for climate action. If the US designs a carbon border measure alongside the EU and perhaps other powers, it will do so with China in mind.

The EU has established an explicit carbon price through its Emissions Trading Scheme. And China has its own carbon market – which was inspired by the European one (but covers only power generation, not industry as well). In contrast, the US does not have such a market. Instead, the US will have to rely on public and private investment, norms and regulations, innovation, and implicit carbon pricing to achieve its ambitious target to reduce emissions by 50-52 per cent by 2030 (together with full decarbonisation of its power sector by 2035). As the WTO rules out border measures based on implicit carbon prices, this leaves the US with international environmental protection standards and other methods to turn trade into an instrument for green and decarbonised growth.

The US, the United Kingdom, and the EU still fail to see that climate justice and efficiency in dealing with the global climate crisis are two sides of the same coin

Ultimately, climate-related trade measures will be judged by their ability to create a positive dynamic of deep global decarbonisation. This is something that other EU policies might achieve, especially a proposal on deforestation in global supply chains and the prospect that only electric vehicles will be sold on the EU market after 2035. They will fail if they derail the global economy by sparking a mutually destructive trade war between Western powers and China (as well as other countries).

Climate finance

On finance, the Glasgow Climate Pact did not provide the international solidarity needed to support the countries and people who are least responsible for the climate crisis but suffer most from it. International public finance was in short supply at COP26 (the 26th Conference of the Parties to the United Nations Framework Convention on Climate Change). Rich countries went to the conference thinking that the trillions of dollars in private investment that had come through voluntary carbon markets would somehow compensate for their failure to provide the $100 billion per year of private capital mobilised by public finance to developing countries – a commitment they made in 2009. Above all, the United States’ failure to make any meaningful public finance contribution to the Glasgow Climate Pact resulted in an underwhelming compromise, as it gave China and other large developing countries political cover to avoid doing more.

While the EU is the world’s largest provider of public climate finance, it did not use its credibility to build bridges with developing countries – a role that UN Secretary-General Antonio Guterres raised as an expectation during his trip to Brussels in June 2021. This remains an issue beyond COP26: as it pursues strategic autonomy amid the intensifying rivalry between the US and China, the EU is badly neglecting countries and people who it could otherwise turn into strategic and trade partners at the forefront of the global race to net-zero greenhouse gas emissions.

Wealthy Western powers such as the US, the United Kingdom, and the EU still fail to see that climate justice and efficiency in dealing with the global climate crisis are two sides of the same coin. The UK hosted COP26 just a few months after significantly cutting its development aid budget. And the EU and its member states continue to punch below their weight politically, by failing to coordinate their financial assistance packages to support countries and businesses that are committed to the energy and climate transitions. They should replicate initiatives such as the $8.5 billion package that the EU, the US, and the UK provided to support South Africa’s transition from coal to renewable energy. At the EU-Africa Summit in February 2022 and COP27 in Sharm-el Sheikh in November, more African and other developing countries should receive such packages – be it ones targeting coal or other aspects of the decarbonisation and adaptation processes.

Multilateralism

In a world of differing carbon prices and decarbonisation speeds, multilateralism is crucial to creating fair and effective climate coalitions. Vulnerable countries in south-east Asia, Africa, central and Latin America, the Caribbean, and Oceania have long since stopped simply begging for money: some of them are taking the lead in the global race to net zero.

These nations should be at the centre of European Green Deal diplomacy. The EU needs to use a blend of public and private finance deals to support African countries including South Africa, Senegal, Ivory Coast, Nigeria, Egypt, Kenya, and Morocco, as well as small island states such as Barbados, the Marshall Islands, and the Maldives. The union should see this form of European Green Deal diplomacy as an investment rather than a cost.

Domestic implementation of the European Green Deal

The EU is proud to proclaim its credentials as a global climate champion. But it now needs to demonstrate this status through its implementation of the European Green Deal at home. By putting climate action at the centre of its economic recovery, the EU would demonstrate its intent through action and not just words.

The next six months of the French EU presidency and the ten months until COP27 abound with milestones in the pursuit of the 1.5°C target. As it stands, the taxonomy proposed by the Commission – its list of environmentally sustainable activities – sends a weak and mixed signal on the acceleration of the energy transition, within and outside Europe. The EU will have many opportunities to show what it really stands for through trade, public-private finance deals, UN diplomacy, and alliances with and support for vulnerable countries. The union has decarbonised its economy more than most wealthy Western powers. But the EU will only face the real tests of European Green Deal diplomacy in the months and years to come.

Emmanuel Guerin is executive director for international affairs at the European Climate Foundation.

The European Council on Foreign Relations does not take collective positions. ECFR publications only represent the views of their individual authors.

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