Is the EU using the Ukraine Crisis to Facilitate its Climate Change Policies?

The EU27 is an extremely large importer of fossil fuels, a situation being exacerbated by the closure of the Dutch Groningen gas field in 2022, significant falls in German production and closure of the latter’s remaining nuclear powered electricity generating facilities. The EU27 UN FCCC emissions target for 2020 was a 20% reduction relative to 1990. It did achieve that, even if the COVID lockdown impacts on emissions in 2020 are backed out. EU27 emissions fell at a rate of 1% per annum over those 30 years, and at a 2% rate in the past decade. These reductions did benefit from both the destruction of the carbon-intensive Eastern European heavy industries after the fall of the Soviet-bloc and the ability to offshore emissions through deindustrialization. Without the latter, EU27 emissions would have increased from 1990-2010. Also, the “low hanging fruit” of coal-fired electricity generation was a major area of emissions reduction; to a significant extent simply replaced with natural gas that emits half as much carbon at the point of incineration (with fugitive methane emissions treated as significantly invisible).

With these one-off possibilities and low hanging fruit gone, it would be hard just to keep up the current 2% per annum rate of emissions reductions. Instead, the EU27 has given itself a target of a 55% emissions reduction by 2030, with respect to 1990 levels. This will require a drop of 40% over ten years (2021-2030), approximately 4% per annum. Assuming the same GDP growth as the past decade of 1.5% that’s a greater than 5.5% yearly rate of decarbonization, a significant leap from the past ten years pace of 3.5% (2% emissions reduction and 1.5% growth). Such a rapid change brings with it many challenges to embedded industrial groups, such as European car manufacturers that are lagging behind their Chinese and Tesla competitors. Currently, further reductions in EU passenger car and van GHG emissions are delayed until 2025 (15% below 2021 levels) and 2030 (37.5% below 2021 levels); allowing for an extended transition period for internal combustion engine (ICE) vehicle manufacturers. Also, a real estate industry that will have to move from natural gas to electricity for heating and greatly improve insulation levels, and a coal industry that still provides half of Poland’s primary energy needs. Germany may even have to revisit its painfully worked out agreement to phase out its coal industry by 2038.

One way to force the issue would be to massively increase fossil fuel prices, an action that would cause most pain to the lower economic classes and fossil fuel intensive manufacturers such as automobile manufacturing and petrochemicals. This is exactly what the European sanctions against Russia, together with the previous refusal of European nations to engage in long-term contracts with Russian natural gas providers, have produced; record natural gas and oil prices. The result will be the more efficient usage of fossil fuels by the poorer classes through less heating (reduced natural gas usage) and less food (reduced natural-gas derived fertilizer needs) and less personal transport usage (less oil usage), and also indirectly through reduced consumption generally as inflation far outstrips wage rises. In addition, new car sales will swing even more heavily toward electric vehicles – a move that will force major losses on European car manufacturers through lost market share (to Tesla and Chinese manufacturers) and the writing off of major internal combustion engine car manufacturing plants. Without offsetting import tariffs, German and European industry in general will be directly undercut by nation’s benefitting from much lower energy prices provided by cheap Russian natural gas, discounted oil imports, and domestic coal (e.g. China), forcing a new level of deindustrialization.

But if you can blame “Russia” for all of this and call for “solidarity with Ukraine” perhaps the anger at the pain can be redirected and the critical voices silenced. No wonder the Green Party leader is turning out to be a Russia-hating neoconservative! I absolutely support Europe’s emissions targets, but what is being driven is a neo-liberalized restructuring where the poorest in the nations will pay the highest price for decarbonization. The rich and their courtiers, such as von der Leyen, will hardly be discomfited. The leaders also seem to lack a real understanding of how modern industrial societies operate, and the fundamental reliance of European industry upon Russian cheap energy. By making oil and especially natural gas so expensive, they may also drive individual nations such as Poland to heavily resist any curtailment of their use of cheap locally-produced coal; the UK has already delayed the closure of its remaining coal-fired power stations and is attempting to extend the life of its nuclear power stations.

The result of the Russia-sanctions driven rise in fossil fuel prices will not be some miraculous clean energy take-off in Europe; that takes the kind of industrial policy that China has taken for the past decades. Instead, there will be islands of success in the middle of a declining industrial power, an immiserated bottom 80%, and intra-EU27 strife as some nations (Hungary, Poland?) strive to protect their industries and citizens. The EU27 may meet that 2030 emissions reduction target, but at a cost far higher than was required. All because the elites don’t want to pay their fair share of the costs and redirect resources away from wasteful consumption and financial thievery and corruption toward a new low carbon economy beneficial to all. On top of that will be all the extra resources wasted on overpriced and underperforming US weapons of war and higher food prices.

In 2014 I remember being served by Portuguese staff desperate for work, in my hotel in Reykjavik, Iceland. Perhaps in the 2030s I will find young Europeans working in the hotels of Crimea? At the same time the US and European oligarchs will be happily picking up juicy morsels at low prices in the wreckage of what was once a proud and prosperous Europe, while Novosti Rossiya prospers. It will certainly be a warmer world, with the Mediterranean resorts perhaps a little too warm and tinder-dry for the holidaymakers.