Why does the EGD matter for the Foreign Policy of the incoming EU Executive [Promoted content]

The political and policy-driven nature of this revolution needs to set up manageable implications for all, everywhere. The EU cannot separate its EGD from its foreign policy as its consequences will reverberate well beyond its borders.

Margherita Bianchi, Head, Energy, Climate and Resources Programme – Istituto Affari Internazionali (IAI); Pier Paolo Raimondi, Researcher, Energy, Climate and Resources Programme – Istituto Affari Internazionali (IAI); Nicolò Sartori (Senior Researcher, Enel Foundation); Maria Lelli (Researcher, Enel Foundation).

As in few weeks the European Parliament elections will take place, the future of the Green Deal is the focus of unprecedented attention. In the last five years the EU has identified climate change as the major challenge of our time, embarking on its energy transition journey and aiming at leading the way globally. Despite the pandemic and the Russian aggression of Ukraine, the legislative process has progressed and the bloc’s green ambitions have increased – as evidenced by the additional resources that have been invested in the decarbonization and electrification process and by the upward revision of targets.

Internally, the Green Deal implied an impressive set of regulations to be reviewed, new tools and policies, as the outcoming Commission identified the expansion of RES and the strengthening of power grids as key pillars for action. The work is still in progress though. Indeed, the new executive should accelerate the process by further accelerating the decarbonization of power generation, to both boost climate action and achieve greater energy independence; by expanding, modernizing, digitalizing and strengthening the power grid infrastructure thanks also to electricity market design reform and a funding system earmarked for climate resilience efforts;  by unlocking the potential of electrification of residential and public buildings, road transport and industry; as well as  by enabling consumers to play a key role as protagonists of the energy systems.

Externally, the EGD was recognized as having a significant influence in a globalized and connected world, impacting hydrocarbon-producing countries and global trade patterns (which should increasingly consider the carbon component of its products) – think of the impact of the CBAM or of the EUDR. Industrial competitiveness, and the related opportunities and challenges, also come into sharp focus in 2023, with several new proposals to better connect it to the Green Deal.

If there was one lesson to be learnt from these past five years is that the political and policy-driven nature of this revolution needs to set up manageable implications for all, everywhere. The EU indeed cannot separate its EGD from its foreign policy as its consequences will reverberate well beyond its borders. This also means the EU cannot decarbonize itself while others don’t – otherwise risking internal backlash as well as isolation at the international level.

The new Commission, therefore, will need to remain committed to global dialogue on a multilateral and on a plurilateral basis, in particular with the US and China. Despite the obvious relevance of the relations among the three superpowers, key would be the promotion of a stronger integration of global energy and climate needs into a more comprehensive global governance architecture, as the current fragmented one does not embrace the complexities of the transition. Bilateral and mini-lateral relations should also play a stronger role, e.g., through climate clubs, which could boost the energy transition through a positive competition among economies.

To be safely put in place, the energy transition needs to consider its effects on the most vulnerable and fragile inside and outside borders. On the latter aspect, the EU and the other superpowers must increase their financial support to encourage the transformation of those countries being the most exposed to climate change despite being poorly equipped to respond, listening to their demands and concerns. The EU can also lead the global decarbonisation benefitting from an important dimension of its power that has remained unaffected by previous crises: its ability to regulate global markets – a valid ally to scale up sustainable investment in the EU and implement the EGD.

The key pieces of legislation put forward at the end of von der Leyen’s first term however signals a focus on industrial competitiveness – crucial for sustainable societal and economic well-being in Europe – is coming and much of the upcoming debate revolves around the attempt to strengthen European strategic autonomy and maintain industrial competitiveness. In parallel, a complex trade-off has emerged for Europe on how to balance decarbonization, strategic autonomy in green supply chains, and fiscal discipline, something the new Commission should deal with. A much more informed debate should take place over how to secure on time and in a cost-effective way our climate targets. This should be pursued by avoiding conflictual confrontation with superpowers (i.e., the US and China) while moving fast in those key sectors where Europe can be competitive internationally (solar, grids, batteries, heat pumps), with benefits both in terms of energy transition and socio-economic performances.

This exercise needs to be supported by the key priority to create sustainable global supply chains, showcasing commitment to collaborative international relations and mutual progress in the sustainable energy sector, but avoiding subjugation to global players. Higher environmental, social and governance (ESG) standards and non-price criteria are essential elements to be promoted by the Commission vis-à-vis third countries as to guarantee Europe, its companies, and its products to be competitive in the transition race.

Strategic autonomy concerns apply also to critical raw materials, a key component for the EU attempt to develop a strong local green industry. In this context, international dialogue and superpowers’ engagement become fundamental for establishing cooperative and transparency frameworks, universal standards and global markets mechanisms, keeping in mind that critical raw materials are subject cycles that need to be understood and managed accordingly.

Last, but not least, the incoming European Commission should focus on scientific and technological cooperation, education, and skilling efforts both as a factor to strengthen industrial capacity internally, but also to support advancements globally (specifically in partner countries). Only by reinforcing the European technological edge and securing its workers’ skills the EU and its private sector can effectively aspire to play a pivotal role in the implementation of the energy transition on a global scale.

There is therefore an incredibly complex set of actions for the incoming European Commission. There are all the premises to put this ambitious yet vital approach in place.  A coherent and just framework is needed, to the benefit of European citizens and companies, as well as a way stronger climate mainstreaming into EU’s foreign policy ecosystem in order to consolidate the global role of the EU in this strategic domain.