The European Green Deal announced in 2019 set a new agenda. By 2050, Europe is to become the first climate-neutral continent in the world. At the same time, the Green Deal is to become the EU’s new growth strategy. However, in 2020, the COVID-pandemic caused an abrupt change in our everyday life and turned entire economies and value chains upside down. The full extent of the crisis and its socioeconomic impact still remains to be seen. A decline in economic output in Germany of up to six percent can no longer be avoided. The pandemic also dramatically impacts energy markets. Due to the sharp drop in demand, fossil energy prices and the CO2-price are currently facing a sharp downward trend, increasing pressure on the climate policy control instruments that have been developed over a long period of time. The short-term slump in CO2 emissions comes at high socioeconomic costs and does not lead to the structural changes needed to decouple economic growth and emissions in the long term.

Combining "recovery" measures with future investments

In times of crisis, the economy, politics and society face a dilemma. Do we want to restore the pre-COVID level of prosperity as quickly as possible with existing technologies, or do we want to harness the disruptive shock to initiate a radical technological leap? The most sensible and realistic solution seems to be to adapt our strategies to the new circumstances and pay close attention to use our ever scarcer and precious resources in the most efficient way. The economic recovery measures and the European Green Deal do not necessarily have to contradict each other if they are intelligently combined and investments are made strategically and wisely. Therefore, a “Smart Deal” is needed that takes into account not only measures for effective and cost-efficient emission reduction but also the absorption capacity and real net output ratio of subsidies. It focuses, on the one hand, on reducing costs and regulation while on the other hand, promoting concrete investments. In this context, the EU’s Recovery Plan, including the new financing instrument "Next Generation EU", places green investment and the expansion of digital transformation high on the agenda. The exact structure and criteria according to which aid is allocated remain to be seen. During the German Council Presidency, the following priorities are central for crisis management and a future-oriented climate policy.

Predictability and security are the top priorities

First and foremost, policymakers must create framework conditions that support companies in managing the crisis. Reliable planning also includes adhering to set goals and ensuring long-term predictability for investments in future projects. In this difficult phase, any tightening of objectives must undergo a reality check/impact assessment in order to realistically adapt assumptions and parameters to the changed situation. Due to the so-called effort-sharing, the increase of the European climate target for 2030 to 55 percent equals a 70 percent target for Germany. Instead of ever new debates on new targets, predictability is needed by means of a set of finely tuned instruments. These include a functioning CO2-price system, research and innovation funding, massive support for pilot projects on industrial scaling and instruments for carbon leakage protection.

Creating short-term relief for companies

One of the biggest burdens on German industry has long been the high cost of electricity. Immediate and drastic relief from electricity costs is therefore a key factor for economic recovery and sustainable change. At the same time, the EU state aid guidelines must be adapted in a way so that targeted support for companies in their sustainable transformation can be provided. In this context, it is to be welcomed that the EU recovery measures explicitly provide for a reform of the state aid guidelines.

Think climate policy more pragmatically

Climate policy priorities should be set as pragmatically as possible in those areas where the cheapest and most effective emission reductions can be achieved and which make an effective contribution to short-term economic recovery. These areas should have a high degree of absorption capacity, contribute to the creation of new jobs and value added and improve Europe's overall competitiveness and resilience. The planned investments from the "Connecting Europe" facility and the "InvestEU package" in building and energy efficiency, energy and transport infrastructure measures, the expansion of renewable energies and future technologies such as electric mobility/batteries including the development of charging infrastructure and the development of a hydrogen economy are particularly suitable for this purpose. It will also be crucial to take a pragmatic look at all the technologically available options. This also includes reopening the debate on the use of efficient carbon cycles (CCS/CCU). Moreover, the potential of offshore wind energy has not yet been sufficiently developed in Europe. This requires a reliable European regulatory framework. The EU has a number of high-yield sites for offshore wind, particularly in the North Sea and the Mediterranean.