Europe’s Green Deal must reach beyond its borders

This opinion piece was originally published in the Financial Times.

Ursula von der Leyen has made climate change a top priority for the European Commission, proposing a European Green Deal that would make Europe climate neutral by 2050.

This is good for Europe and for the world.

It is good for Europe because deep decarbonisation represents a historic occasion to revitalise Europe’s economy and provide purpose and meaning to the common project.

It is good for the world because it shows that pursuing climate neutrality by 2050 is not only technically and economically possible, but also politically rewarding. This is of paramount importance, as early deployment of low carbon technologies is key to making them globally competitive with high carbon technologies.

Even so, a European Green Deal focused only on Europe itself would not do much to mitigate climate change, as the continent produces less than 10 per cent of global greenhouse-gas emissions. The only way for Europe to exercise global leadership on decarbonisation is to move beyond its own borders. The European Green Deal should go global. To make that possible there is a pressing need to consolidate and streamline the EU’s development finance and climate activities outside Europe, which are today divided between the European Commission, the European Investment Bank, the European Bank for Reconstruction and Development and individual European member states.

Take the example of Africa. The EU and its member states have created a myriad of initiatives to promote electrification and decarbonisation on the African continent. But this fragmentation limits Europe’s leverage regarding credible energy sector reforms and, therefore, does little to promote the much-needed private investment in African countries. In the labyrinth of initiatives, understanding who is doing what is challenging even from an EU perspective, let alone from an African one, especially when China offers to finance coal plants in a far more coherent way.

Europe’s fragmented system creates overlaps, inefficiencies and greater transaction costs. European taxpayers’ money would be far better spent if channelled through a single facility, aimed at co-ordinating the initiatives of European institutions and member states.

The EU should combine the current instruments into a single sustainable development finance entity, such as a European Climate and Sustainable Development Bank — as proposed last year by the High-Level Group of Wise Persons on the European Financial Architecture for Development.

A European Climate and Sustainable Development Bank could become the external investment arm of the European Green Deal, pushing it beyond the continent’s borders. Such an approach would represent a triple win for the EU.

First, it would help to meet Europe’s climate-finance obligations and unlock the conditional emission-reduction commitments provided by most developing countries under the Paris Agreement. Second, it would enable European industry — which is competitive in many low carbon technologies — to find new markets. And third, it would help economic development in partner countries, providing an invaluable foreign policy dividend for Europe.