What’s next for the European Green Deal?

As the dust settles after the 2024 European elections, an air of uncertainty surrounds the European Green Deal, which aims to make Europe the first climate-neutral continent by 2050. Launched in 2019, the initiative has led to dozens of new green laws, updating climate and energy targets and the instruments needed to achieve them. But cracks have begun to show as Europe struggles to cope with multiple challenges: addressing the climate crisis, protecting and strengthening its industries, and ensuring an equitable energy transition.

In the last couple of years, there has been a backlash against environmental policy across the bloc, with stakeholders such as farmers protesting against national and EU laws. That, in turn, has largely halted progress on EU agricultural legislation. Measures to restore at least 20 percent of the EU’s land and sea areas by 2030 and all ecosystems in need of restoration by 2050 were approved in February by the European Parliament – but only by a small margin. Other green policies have also seen pushback across Europe, including the rollout of energy infrastructure and the decarbonisation of road transport and heating.

Europe’s traditional and clean technology industries are calling for more support in the face of international competition. Steel and chemicals companies are battling higher energy prices than their overseas rivals, while clean technology faces competition from markets like China and the United States. In this context, the need to address energy prices and support Europe’s industrial decarbonisation is all the more pressing.

These tasks are complicated by a challenging political landscape for green policies. One of the consequences of the European Parliament’s recent rightward shift may be less ambitious action on climate change, with environmentalists voicing concerns that existing legislation could be weakened. Bas Eickhout, co-head of the Greens in the European Parliament, has also warned that passing new environmental laws will be more difficult after the elections.

The shift is also visible in the strategic agenda provided by the European Council to help guide the next five years of policy. While in 2019, the agenda contained a section on ‘Building a climate-neutral, green, fair and social Europe’, this time the priorities (the need to boost competitiveness in clean technologies, secure affordable energy supplies, ensure a just transition to a sustainable economy and address the climate crisis) have instead been integrated into the broader aims for a more secure and prosperous Europe.

Centre-right strengthens its hold

The future of Europe’s green policy will partly be shaped by the makeup of the next European Commission and the political alliances formed in the European Parliament. The recent elections brought a clear reshuffling of forces: the centre-right European People’s Party (EPP) gained nine seats, while the Greens lost 17 and the centrist Renew Europe lost 21 compared to 2019. The Socialists and Democrats (S&D) maintained their position as the second-largest group in the European Parliament.

One of the most notable changes is the rise in far-right parties, which are now represented by two groups: Patriots for Europe and the more radical Sovereigns for Europe (the Sovereigntists). Together, these hold 109 seats, a vast increase on the 49 held by the previous far-right group, Identity and Democracy (ID).

Meanwhile, the European Conservatives and Reformists (ECR), which occupies the ground between the EPP and the Patriots, gained nine seats. The group has criticised green policy for seriously undermining EU competitiveness with a ‘harmful mix of excessive red tape’ and costly investments to meet new requirements. The Patriots and the ECR now form the third-largest and fourth-largest groups respectively, ahead of Renew.

The upshot of all this reshuffling is that it will be impossible to form any majorities at committee level in the new parliament without the participation of the EPP, explained Linda Kalcher, executive director at the pan-European think tank Strategic Perspectives. This will allow the group to be more assertive and place greater focus on its priorities than in the last parliamentary cycle, she added.

The EPP’s dominance spells uncertainty for green policy. The European Green Deal was championed by EC president Ursula von der Leyen, who called it the EU’s ‘man on the moon’ moment. Von der Leyen, who was re-elected to the Commission’s top job on 18 July, admits that plenty remains to be done to achieve the commitments set out in the Green Deal.

However, there are concerns that von der Leyen is too willing to compromise with right-wing governments like Giorgia Meloni’s in Italy. She is also accused of not doing enough in her previous term to defend policies like the Nature Restoration Law when it came under fire from her own group, leaving Green Deal chief Frans Timmermans to do the heavy lifting.

Similarly, the EPP has a mixed record when it comes to backing green legislation. While the group has helped negotiate many climate and energy laws, it was rarely the most ambitious and worked against some policies, including initiatives on nature and agriculture. Now, with its hand strengthened, the EPP wants to adjust certain elements of the European Green Deal.

‘For me, it’s very clear that the Green Deal is not to be abolished. It’s here to stay. But we want to emphasise the deal part, and that’s why some targeted modifications are necessary’, Peter Liese, the EPP’s environmental spokesperson stressed, adding that some changes need to happen ahead of scheduled policy reviews. However, the European Parliament is powerless to act until it has a green light from the European Commission.

Changes on the radar

One of the laws the EPP wants to roll back is the ban on sales of new cars with combustion engines, a move also supported by the ECR. The EPP had never been happy with the law. When the European Parliament voted on it in 2023, lawmaker and EPP member Jens Gieseke said that ‘banning combustion engines will make new cars more expensive, cost thousands of jobs and lead to the decline of a core European industry’.

Liese emphasised that the foreseen changes would not affect environmental targets for cars and vans, which aim to fully eliminate carbon emissions by 2035. Instead, the group wants to introduce the concept of technology neutrality – the idea that all technologies should be treated equally. This could open the door for e-fuels and biofuels that are compatible with combustion engines. While some car manufacturers are looking into using these, the idea has been criticised by environmental groups and energy experts.

And while the European Association of Automotive Suppliers has criticised the phase-out of the combustion engine, battery manufacturers and electricity power companies have called on lawmakers to uphold the move. It is also important that businesses make the transition away from fossil fuels in a stable regulatory environment, raising questions about the wisdom of reopening debate on the issue.

The EPP also wants to revise a law ensuring the consumption of deforestation-free products  in the EU, which is the second-largest contributor to global deforestation after China. The legislation was heralded by environmental groups and the lawmakers who supported it as ‘historic’, and certification groups, like the Forest Stewardship Council (FSC), are already working on implementing it. However, the law has received international backlash, including from Indonesia and Malaysia, who have described it as protectionist and discriminatory. While Liese backs the law, he warns that in its current form it could do more harm than good.

The strengthening of the EPP and rise of the ECR in the European Parliament could also have an impact on agricultural policy. In the previous parliament, both groups worked against measures for green agriculture, like the Nature Restoration Law, and proposed legislation on the sustainable use of pesticides.

According to Liese, however, it was never the EPP’s intention to have no agricultural legislation agreed in the last parliament. He favours a more positive, technology-orientated approach, with a focus on rewarding farmers and putting the onus on retailers to help drive change. This is echoed by the ECR, which wants more innovation and the prioritisation of food security – an argument used against policies like the Nature Restoration Law in the previous parliament.

On top of this, there is pressure to act under the growing threat of climate change. Europe has already witnessed serious impacts from extreme weather events, including droughts in Mediterranean countries that have affected harvests. Any new legislation has to face up to this reality, said Strategic Perspectives’ Linda Kalcher.

‘The climate impacts affecting the agricultural sector are coming faster down the line than anyone would have expected’, she explained. ‘And then I think, especially in the next five years, if people talk about an emission trading for agriculture or an adaptation law and the CAP, it all needs to be a bit rearranged around the real risks and real threats to the sector and not only those that are voiced louder’.

Uneasy alliances in a new parliament

While the EPP’s dominance in the European Parliament gives it a strong hand in policymaking, it will need allies to pass legislation. Liese sees such an alliance forming around the centre, with the S&D, Renew and the EPP at its core.

Parliamentary groups such as The Greens, The Left and the right-wing European Conservatives and Reformists (ECR) could be added into the equation to ensure more votes. The elections have shifted the EU Parliament to the right, potentially opening the door to greater influence for the ECR. The precise implications of this for green policy are unclear, but in the last parliament it was typically left-wing groups that drove more ambitious policy, while the ECR sometimes moved to block laws.

For his part, the EPP’s Liese sees a role for the ECR in future decision-making. ‘We want to continue to work with [the] ECR’, he said. ‘Of course, they are bigger. We are bigger. [The] Greens and Renew are smaller. So that should be reflected also when it comes to the negotiations’.

However, collaborating with the ECR could cause headaches for the EPP when it comes to getting the S&D and the Greens on board. ‘All far-right forces are bad. For us, this includes the new Patriots, the new Sovereigntists and the ECR’, an S&D spokesperson specified.He added that the clear way forward is to form a progressive majority of pro-European and democratic forces, adding these are the only ones who can address citizens’ most urgent needs, including pressing ahead with the European Green Deal.

Michael Bloss, the Greens’ spokesperson on climate policy, mentioned that, despite having fewer members, his group will continue to cooperate on the Green Deal, but would reconsider working with the EPP if it works with ‘anti-European’ groups, like the ECR. ‘The reason why this group exists is to take away competence at the European level and give it back to the member states, but they are really missing the point of these times’, he said, explaining that EU economies need to work together to stand up to international competition or risk undermining each other and lowering the competitiveness of the whole bloc.

What is clear is that far-right blocs such as the Patriots for Europe and the Sovereigntists will be shunned by other groups, limiting their potential influence.

Industrial policy to the fore

When it comes to new Green Deal policy, the focus is likely to be on supporting Europe’s industrial competitiveness. The EU has historically shied away from industrial policy, but in light of growing international competition, the energy crisis, difficulties with supply chains and economic troubles, there is now a general consensus among EU countries, parliamentary lawmakers, industry groups and environmental organisations that it is needed – though visions of what this might look like vary.

The fear is that otherwise the EU could lose out on the growing clean technology market and lose traditional industries, such as steel and chemicals, to other key competitors, like the US and China, resulting in job losses and economic woes.

The need to strengthen European competitiveness is reflected in EU countries’ priorities for the next five years, which read: ‘On our path to climate neutrality by 2050, we will be pragmatic and harness the potential of the green and digital transitions to create the markets, industries and high-quality jobs of the future. We will provide a stable and predictable framework and create a more supportive environment for scaling up Europe’s manufacturing capacity for net-zero technologies and products’.

Work to develop EU-level industrial policy got underway in the previous parliament, with a package of legislation in 2023 that included support for net-zero technologies, reforming the electricity market and targets to secure the critical raw materials needed for the digital and green transition. This work is now expected to continue.  In her recent speech to the European Parliament, von der Leyen announced her plan for a Clean Industrial Deal that would channel investments into infrastructure and industry, particularly energy-intensive sectors.

Electrification is also expected to be in the spotlight over the next five years, with EU countries highlighting the need to prioritise investment in grids, storage and interconnections in their goals for 2024-2029. Demand for electricity will significantly increase between now and 2050 as the EU economy shifts away from fossil fuels, requiring improved infrastructure and capacity.

Investing in a green future

As the EU recovers from the COVID-19 pandemic, Russia’s invasion of Ukraine, the energy crisis and economic troubles, it needs to invest in a socially just energy transition that has clear benefits for voters to prevent them from becoming disconnected from green policy. EU countries have called for this in their strategic agenda, arguing that the energy transition should bring an improvement in living standards for all EU citizens by boosting real income and purchasing power.

The finance needed to support industrial policy, the social transition and other tools to address the climate crisis could be a sticking point. Parliamentary groups, including the Greens and the S&D, have called for an investment agenda to drive an EU-wide approach and address social, economic, climate and security challenges.

However, questions remain over the source of the funding for this. The next five years will see a discussion on the next seven-year budget, a process that regularly gets bogged down in age-old debates between EU countries who want to limit spending and those who want to do more. As Linda Kalcher points out, the budget is unlikely to get any bigger, and there will be increased competition for funding from other issues, such as defence and support for Ukraine and other countries looking to join the EU.

Another idea could be to simplify access to finance from the different EU funds that invest in the energy transition, providing this does not come at the cost of environmental or human rights. According to Kalcher, it is difficult for companies – and even countries – to understand the difference between the many funds.

In their strategic agenda, EU countries pointed to an enhanced role for the European Investment Bank and the completion of the Capital Markets Union to help boost private finance. However, according to Vincent Hurkens, programme lead for EU politics and climate governance at the climate think tank E3G, this would not fully cover the investment gap and leaders would inevitably need to look to the seven-year budget to fill that.

The need to get green legislation right

The EU has a huge amount of work to do across the board to reach its goal of becoming the world’s first climate neutral continent by 2050. This includes securing EU industry and jobs, reducing emissions and developing environmental laws that are both ambitious and socially acceptable.

Whatever the European Commission chooses to work on, it will have to do so in a context which is undeniably more difficult than it was in 2019. While the European Green Deal itself seems safe, there are elements, particularly regarding agriculture and where it begins to limit individual choices (by phasing out combustion engines, for example), that are on shakier ground. The European election results show pushback against green legislation, with many voters now siding with forces who have criticised it and are more likely to vote against it in parliament.

Despite all this, the urgency of the climate crisis and the challenge to build a sustainable, thriving economy within the EU’s borders demands ambitious, socially acceptable and well-funded action. It is now up to a new set of politicians to help bring that about.