In the wake of the COVID-19 pandemic, the European Union (EU) could very well be confronted with the greatest recession that it has known for a century. In this context, the European Commission presented, on 27 May 2020, a proposal of the recovery plan ‘EU Next Generation’. This plan proposes to hinge the recovery on a double transition: ecological and digital. Without a doubt, if it is supported by the Member States, this document will be a landmark in European history, so ambitious are its proposals and, in some cases, unprecedented. For example, the adoption of this plan would allow the Commission to go into debt by borrowing 750 billion euros on the financial markets. In addition, one of the fundamental components of the recovery plan is the relocation of the production of certain key goods to within the EU. The health crisis has revealed the risks of having a great dependence on third countries for the supply of goods such as medical equipment and devices.
The document takes up many of the key elements of the Green Deal including, among others, the necessity of bringing about an ecological transition that is ‘socially just’. In this respect, the Just Transition Fund should see its budget reserves increase from 7.5 billion euros (as foreseen in the initial proposal) to 40 billion euros. At the same time, the Commission has confirmed that it is working on the elaboration of proposals aimed at strengthening the future mechanism to facilitate loans to the public sector under the Just Transition Mechanism.
With this document, the Commission clearly seems to be opting for the adoption of counter-cyclical measures. However, basing the recovery strategy on the achievement of a double transition (digital and economic) involves many constraints and contradictions. In fact, the process of transition demands long-term political strategies and gradual adjustments. This is, moreover, the spirit in which the Green Deal was drafted. On the other hand, the socioeconomic crisis created by the health crisis demands immediate responses to protect Europeans from precarity and to combat a wave of bankruptcies and a collapse in demand.
Two irreconcilable dimensions
The intention of the EU and, more broadly, of all the Member States seems clear; to organise, as quickly as possible, an economic recovery to absorb, as much as possible, the economic shock caused by the health crisis. While the prospects of a ‘V’ recovery – meaning a very fast and simultaneous recovery of supply and demand – now seems unlikely, the objective of the ‘EU Next Generation’ plan is to ensure a gradual yet strong recovery.
However, the urgent necessity of providing political, social and economic responses has led the European institutions to adopt decisions that tend to do a disservice to one of the two fundamental pillars outlined in the recovery plan – namely, the ecological transition. The NGO Greenpeace has denounced the fact that the European Central Bank (ECB) has injected 7.6 billion euros into the fossil fuel sector since the beginning of the health crisis. However, the ECB has no intention to change its strategy in this area, despite the numerous appeals from civil society. Along the same lines, the European Commission has authorised several state aid payments to the aviation industry as a temporary measure to alleviate the economic consequences of the pandemic (see, for example, the state aid granted to Air France as well as several Swedish airlines).
Furthermore, the EU Emissions Trading System (EU ETS) was particularly affected by the pandemic, as the price per tonne of CO2 collapsed due to the drop in demand. This phenomenon risks making sustainable investment less attractive to private investors and will also considerably reduce the revenues generated from this scheme. Yet a part of these revenues is supposed to constitute an integral part of the Sustainable Europe Investment Plan.
At the same time, it is likely that the coal sector will never recover from the drop in the energy demand caused by the pandemic, which has led suppliers to increasingly turn towards cheaper, renewable energies. However, the European Commission estimates that around 237,000 people are working in activities linked to coal mining, 10,000 in activities linked to peat extraction, and around 6,000 in the oil shale sector. Moreover, these figures do not take into account all the jobs indirectly related to these sectors. This is all the more worrying as certain countries do not yet have a plan for phasing out coal.
While the Green Deal is based on a long-term approach, notably as regards the training and retraining of workers, the urgent need to mitigate the socioeconomic consequences of the health crisis means Europe’s back is against the wall. If the EU refuses to come to the aid of the most polluting economic sectors, there is a great risk of the Member States for whom these sectors represent the pillars of their economies opposing the recovery plan head-on. On the contrary, supporting highly polluting sectors without any binding guarantee of their long-term environmental commitment would go against the very foundations of the ‘EU Next Generation’ plan. Reconciling these two political dimensions, if at all possible, will inevitably lead to compromises between, on one hand, the necessary direct socioeconomic support to the European productive base and, on the other hand, the achievement of an ambitious environmental policy. In other words, the post-health crisis recovery puts the concept of ‘just transition’ to the test.