European nations agree to $572 billion climate plan

Deal covers everything from electric cars to renewable energy and agriculture.

European governments approved the most ambitious climate change plan to date, agreeing to pour more than $572 billion into everything from electric cars to renewable energy and agriculture. 

At a marathon five-day summit in Brussels, heads of government reached a deal on an unprecedented economic rescue plan and seven-year budget for the region worth $2 trillion. Almost a third of that is earmarked for climate action, offering the bloc’s 27 nations a chance to develop clean energy resources, stimulate the market for emissions-free cars, invest in budding technologies, and promote energy efficiency.

“Never before, has so much of an EU budget been allocated to combating climate change,” said German Environment Minister Svenja Schulze. “The commitments to climate action and environmental protection are important and necessary, but the distribution of funds must reflect that.” 

The plan is part of Europe’s bid to become the world’s first climate-neutral continent by 2050, putting it ahead of other major emitters such as the U.S., China, and India in the global fight against unstoppable temperature rise. The proportion of the European package earmarked for climate projects illustrates that contrast dramatically. Only $54 billion of the trillions of dollars of recovery funds pledged globally will be channeled into green policies, while $697 billion has been allocated for carbon-intensive sectors such as air travel and fossil fuel extraction, according to a Bloomberg NEF report released prior to the EU’s stimulus deal.

Germany’s recovery plans are among the greenest so far, with about a third of the $145 billion recovery budget going into areas such as public transport and development of green hydrogen. Significantly, for a country where car manufacturing represents a significant part of the economy, no funds were directed toward fossil fuel cars. Subsidies to buy electric vehicles in Germany are so generous that some Renault models can be acquired for free.

The U.K.’s plan has fallen short of previous climate-related promises and is far behind its European neighbors’. The country has so far announced $6.8 billion in measures such as boosting green homes and supporting carbon capture technology. China will invest $1.4 billion in electric vehicle chargers and will support new renewable energy plants, though it has also cleared the way for new coal projects.

None of the $3.6 trillion in stimulus approved by the U.S. so far specifically targets low-carbon parts of the economy. In April, President Donald Trump’s administration issued a rule that weakened carbon dioxide emissions caps. Negotiations are currently underway in Congress to deliver further stimulus, but that’s unlikely to contain any green provisions.

“There is no doubt this is the world’s greenest stimulus plan,” said Simone Tagliapietra, a researcher at Bruegel, a Brussels-based economic think tank. “Member states should now put forward sensible green national recovery plans, prioritizing those policies that have a triple dividend: economic growth, greening, equity.”

The EU’s ambitious Green Deal will require hundreds of billion of euros of annual investment. The environmental clean-up is already under way. The European Commission, the EU’s executive arm, is considering raising its 2030 emissions-reduction target to as much as 55% from its current 40%, a move that would affect every sector of the economy from energy to agriculture and trade. Under the deal struck early July 21, the objective will be revised by the end of this year.

The deal didn’t come easy, and talks came close to collapse at several points because of clashing national interests. But the fact that there was little or no controversy around raising the budget’s target on climate from an initial 25% to 30%, or that it included a clause committing EU members to doing no harm on climate goals, shows how far EU governments and their voters have gone in embracing climate policies. 

“There’s no getting around the fact that climate now has an essential role in EU politics,” said Johanna Lehne, a policy adviser at E3G, a Brussels climate think tank. “There are caveats on how it will be put to practice, but that’s still a massive investment in a better recovery.”

In the U.S., a group of 40 investment managers representing about $1 trillion in assets joined with sustainability-themed nonprofits to send letters to regulators and authorities, urging them to become more active on addressing climate threats, and help lead a path to net zero emissions.