Europe’s green delusion

The European Union likes to think of itself as the unrivalled champion of eco-governance but, argues Derrick Sutter, it is far from living up to its image.

In the face of China’s waxing importance on the international stage, the European Union has desperately sought to assert its strategic relevance by boasting its green leadership credentials. Since 2007, the EU has established targets for a 20% increase in energy efficiency, a 20% reduction in greenhouse-gas emissions and an expansion of renewable energy sources to account for 20% of total energy production, all by 2020.

The EU Emissions Trading Scheme (ETS) signifies an ambitious effort to harness market forces in the fight against global warming and Europe has emerged as a fountainhead for green innovation, hosting some of the largest renewable-energy companies in the world, which are conducting groundbreaking research into solar panels, carbon-capture systems, geothermal energy and wind turbines.

But how strong are the European Union’s green credentials really? Europe’s trumpeted success in reducing domestic carbon emissions has been undercut by the sheer magnitude of its consumer imports. As globalisation has facilitated the migration of consumer-product and heavy industries from the developed to the developing world, Europe has outsourced a considerable portion of its carbon emissions overseas, essentially cancelling out its carbon reductions at home.

Furthermore, the greater carbon intensity of energy infrastructure in the developing world increases the carbon weight of products manufactured abroad for sale in the European market. A report by the United States’ Carnegie Mellon University estimated that, in 2005, 1.7 billion tonnes of China’s carbon-dioxide output – approximately 6% of total global emissions, the equivalent of the combined output of Germany, France and the United Kingdom and one third of China’s total annual emissions – were attributable to the export sector. Determining who should bear responsibility for this pollution has been a point of contention between the European Union and China and has eroded the symbolic effect of the EU’s environmental soft power.

The implosion last December of the highly-anticipated Copenhagen summit on climate change humiliated European leaders and prompted fears of perceived EU weakness in an area where it had considered itself an undisputed leader. Despite a rhetorical barrage by European decision makers pledging strong action towards a binding global agreement to reduce greenhouse-gas emissions, the final product was a diluted, nonbinding document recognising mutual commitment to limiting the rise in global temperatures.

Moreover, the European Union has been loath to utilise its one tool of diplomatic leverage in pursuit of its policy goals: trade policy for the world’s largest marketplace. In the lead-up to Copenhagen, French president Nicolas Sarkozy broached the idea of placing carbon tariffs on goods imported from countries that had not adopted concrete measures to reduce emissions. Proponents argued that such a move would coerce laggard countries into signing a binding international accord on climate change, protect European companies that could face unfair competition from overseas competitors not saddled with environmental-compliance costs and derive valuable tax revenues that could be reinvested into clean energy projects.

Detractors complained that tariffs reeked of domestic protectionism and risked igniting a trade war with China, thereby achieving little in the way of advancing the interests of international cooperation. So far, free-trade advocates seem to have won the debate and the new European commissioner for trade, Karel de Gucht, has shunned the notion of carbon tariffs.

The international appeal of the touted EU climate model is dubious at best. Europe’s cap-and-trade emissions regime allocates a restricted number of emissions credits, which diminish annually, to polluting industries. Companies that pollute beyond their budget may purchase credits on an open market, theoretically incentivising firms to invest in more efficient green technologies to undercut emissions targets. However, critics have questioned whether such an elaborate administrative system has actually helped to further the goal of emissions reductions. The initial phase of implementation from 2005 to 2007 drew accusations that individual member states had over-allocated credits to protect entrenched national industries.

Currently, with industrial production sagging in Europe due to the financial crisis, a glut of emissions credits on the market has drastically reduced the financial pressure on corporate polluters. Administrative oversight is another pressing issue. An investigation by Europol, Europe’s criminal intelligence agency, revealed systemic fraud within the emissions-trading regime, with up to 90% of the exchange-market volume in some countries spurred by illicit activity.

Having designated a “strategic partnership” with Beijing, Brussels has sought to vitalise its relationship with China by emphasising energy and climate security as a focal point for cooperation. Whether such an environmental partnership will go beyond buoyant diplomatic communiqués and cursory planning workshops is doubtful. A plan for a joint EU-China Institute of Clean and Renewable Energy seems to be the most promising endeavour so far. Despite calls from the Chinese side for greater technological cooperation, in the face of China’s weak record on intellectual-property protection, European renewable firms are understandably reluctant to collaborate on high-tech ventures.

Meanwhile, European alternative-energy companies are struggling to defend their market share in the European Union from a flood of cost-competitive Chinese imports, while languishing in their efforts to penetrate the booming Chinese market. In European business circles, accusations are rife of unfair competition wrought by subsidised state loans to Chinese firms. In such an atmosphere of distrust, meaningful technological assistance appears unlikely.

Within the media and public discourse, Europe’s accomplishments are increasingly overshadowed by China’s rapidly expanding green-tech sector. A study by US non-profit organisation The Pew Charitable Trusts found that, in 2009, China became the world’s leading investor in renewable technologies, spending over US$34.6 billion (236 billion yuan) on clean technology. China has succeeded in cultivating green national champions that are globally competitive, such as Suntech Power, one of the world’s largest producers of photovoltaic modules. And the country’s colossal stimulus package yielded generous allocations for green infrastructure. Talk of a “Chinese model” – state-directed capitalism which allows top policymakers to prioritise potential growth areas into which to channel capital and expertise – has won cautious admiration in international policy circles.

By contrast, Europe’s pioneering use of feed-in tariff legislation, which guarantees a fixed electricity price for a set period of time to promote installation of renewable-energy technologies, has met with mixed success. On the one hand, this indirect subsidy has rapidly increased renewable-energy output in Germany and other countries with only a slight increase in power prices for consumers. On the other hand, Spain’s unsparing tariff guarantees created a green- tech bubble, engendering over-capacity and saddling the government with an enormous bill.

Beyond grandiose press statements and inflated administrative targets, Europe’s best hope for demonstrating genuine global leadership in tackling the environmental problems of the twenty-first century may rest in strengthening its educational apparatus. In a 2009 ranking of the world’s best higher-education institutions by Shanghai Jiao Tong University, Europe claimed just10 places in the top 50. Europe’s public universities, with their discounted tuition-pricing, paucity of defence-related research funding and reliance on allocations by debt-strapped governments, are struggling to compete in terms of capital-intensive scientific and engineering research. Pooling resources to build world-class educational and research institutions would go a long way towards facilitating the growth of Europe’s clean-tech sector while boosting the European Union’s potential as a green global leader.

Derrick Sutter is an Alexander von Humboldt Foundation German Chancellor Fellow and a visiting researcher at the
Global Public Policy Institute in Berlin and the Otto Suhr Institute for Political Science at the Free University of Berlin.
Homepage image from the European Parliament shows its president, Jerzy Buzek.