By Merlin Piscitelli, Chief Revenue Officer, EMEA
In July, two years after the European Commission launched its European Green Deal, the European Union unveiled the most ambitious set of policy proposals yet to help the bloc achieve carbon neutrality by 2050.
The “Fit for 55” package of measures is aimed at cutting carbon emissions to 55% below 1990 levels by 2030 and has the potential to affect all industries from transport to agriculture to energy. The raft of proposals includes the introduction of the carbon border adjustment mechanism (CBAM), carbon-related import tariff, as well as an expansion in fossil fuel levies on the maritime and aviation industries.
These legislative proposals are expected to encounter opposition and negotiation among the bloc’s 27 member countries as well as in the European Parliament. But even though the Fit for 55 package has not been ratified, they are a demonstration of the scale and ambition of the EU’s approach to achieving carbon neutrality and businesses should take note. The plan’s architect, Frans Timmermans, has said he expects industries like steel, transport, energy, and agriculture to experience “tectonic change” as a result of these proposals.
Big change, big money
Change at this scale will be expensive—the EU has stated that it expects the Green Deal to cost at least €1tn over the coming decade, with around two-thirds coming from the EU and member states and €279bn from the private sector. Private lenders and businesses are to be encouraged to take on green investments thanks to guarantees backed by the European Investment Bank (EIB).
Targets for investment will be plentiful, however. Not only will renewable energy—already an area in which the EU is a leader—continue to attract money, investment is needed in developing better battery storage so that surplus green energy can be stored and released at peak demand times, as well as in research into hydrogen fuels.
Nor is generational change limited to the energy sector. The Green Deal will have profound implications for food and agriculture, as agri-businesses will be encouraged to grow food more sustainably, and for transportation, as the new proposals will effectively ban the production of new fossil fuel vehicles by 2035.
Encouraging greater sustainability can and will promote greater business efficiency and thus higher profit margins and better productivity. The process of change will be disruptive—especially for businesses that have not prepared for this transition.