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The Council of the European Union failed to agree policy for the
EU's long-term climate strategy on 18 October, postponing the issue
until the EU's December summit. In June, the council had similarly
failed to adopt a policy stance given the opposition of Czechia,
Estonia, Hungary, and Poland to the EU Commission's proposed
net-zero emissions target for 2050.
This is backed by many EU countries, including France, Germany,
and Finland, but others oppose it due to their heavy reliance on
fossil fuels. Poland claimed that significantly increased funding
would be required to reach a climate-neutral economy, especially
for poorer member states. Earlier in October, the EU's
environmental ministers also failed to agree to increase the carbon
emissions reduction target for 2030, given opposition from 10
member states, including Greece and Romania. Currently, the EU aims
to reduce emissions by at least 40% from 1990 levels by 2030.
Significance
EU member states are currently negotiating the EU's next budget
framework for 2021-27, with budget talks very likely to be tightly
interlinked to climate targets. Eastern and southern EU states will
press for increasing outlays on energy transition including raising
the proposed Energy Transition Fund (ETF) for fuel-dependent
regions in the 2021-27 budget framework, currently planned at EUR5
billion.
Since many western member states, including France, Sweden, and
Finland are sensitive to climate-change issues and given the strong
"green" focus in the European Parliament, alongside external
lobbying by environmental organizations for energy transition, IHS
Markit expects eventual EU consensus to expand funding for
modernizing carbon-intensive assets and infrastructure, benefiting
Poland, Czechia, and Estonia. In-principle, agreement to increase
EU environmental taxes is also likely, potentially involving a
carbon levy, electricity tax, and/or plastic-waste tax, while
phasing out fossil fuel subsidies. However, the latter change
appears potentially slow-moving.
If Germany takes a stronger position favoring carbon neutrality
at the December summit, this would indicate greater scope to agree
concrete policies, including support for energy transition, while
facilitating adoption of the 2021-27 budget framework, probably by
the end of first-half 2020: further inability to agree would
indicate a slower and harder budgetary timeline.
Posted 25 October 2019 by Petya Barzilska, Senior Analyst – Europe and CIS Country Risk, IHS Markit