The EU‘s Green Deal and its increasingly ambitious transition policies cannot be limited to its member states, writes Marc-Antoine Eyl-Mazzega at the IFRI Centre for Energy & Climate. For its emissions targets to be met in a meaningful way the EU needs to ensure its neighbours to the east and in North Africa follow. The danger is that carbon intensive industries simply shift to those neighbours, and their products get imported back in. Already, their governments are under pressure to build new large affordable rapidly deployed electric capacity – in other words carbon-intensive – for their growing populations. Eyl-Mazzega runs through the numbers, the issues and the possible solutions. To start with, the climate policies of those neighbours are weak. Investment in clean energy and infrastructure is low. They need strategic clean energy investment from the EU and policy assistance. Emissions penalties, where necessary, should not be so harsh the neighbours disengage. Eyl-Mazzega notes that if lowering high-carbon neighbour emissions is cheaper than lowering them at home per tonne of CO2, it would be wise and economical for the EU to do so.

The European Union (EU)’s Green Deal is a game changer with attention so far focused on forthcoming actions plans, the Climate Law, financial resources, the revision of the 2030 targets and of the emissions trading system (ETS). Its ambition and scope stand in contrast to the insufficient policies of many Member States and its implementation will be an immense challenge.

The Green Deal will have an external dimension that should not be under-invested as it will be critical to its success. It will need to focus on: important technological competitors (China, the United States (US), Japan and South Korea); super polluters by volume and/or capita (the US, China, Russia and India, Middle Eastern oil producers, Australia); suppliers of tomorrow’s low carbon energy and environmental resources (decarbonised hydrogen, ammonia, low carbon electricity, critical metals, carbon sinks).

Specifically, it will also focus on Sub-Saharan Africa and the EU’s neighbouring countries. The EU must now rethink its external energy and climate actions, notably in its neighbouring vicinity, and the upcoming German Council Presidency will be crucial.

Neighbours: higher emissions than the EU, and growing

The EU’s neighbours on its broader eastern borders (Belarus, Ukraine, Russia, Moldova, Georgia, Armenia, Azerbaijan and the Central Asian states), as well as in south-eastern Europe (the Balkans) account for ≈301 million inhabitants in 2020 and generated 2,630 million tons (Mt) of CO₂ emissions in 2018 (7.2% of the world total). Neighbours in the southern Mediterranean (Turkey, Lebanon, Israel, Egypt, Libya, Tunisia, Algeria and Morocco) account for a similar population and caused 1,060 Mt of CO₂ emissions in 2018 (2.9% of the global total).

Combined, the EU’s eastern and southern neighbours therefore have a population that is greater than the EU-27’s by 35% (EU-27 ≈445 million) and their CO₂ emissions were 20% higher in 2018 than the EU-27 standing at 3,690 Mt.

Moreover, electricity demand in the southern Mediterranean could triple by 2040 and emissions could grow by 36% within a business as usual scenario (according to calculations by the Observatoire Méditerranéen de l’Énergie –OME).

Hydrocarbon imports to EU will decline

The EU’s trade ties with some of these countries are significant: gas, liquid hydrocarbons and coal imports from Russia totalled EUR 102 billion in 2018. Hydrocarbon imports from Algeria accounted for EUR 11.2 billion in the first half of 2019. Gas exports to the EU are starting from Azerbaijan and Egypt. Ukraine, Belarus, Georgia, Morocco, Turkey, Moldova and Tunisia (by ≈ order of importance) are also key transit countries for hydrocarbons to the EU.

All in all, over the next 30 years, these trade relations will progressively diminish. If the EU’s energy imports, totalling EUR 378 billion in 2018 are reduced by 30% by 2030, at 2018 prices, this would represent EUR 113.7 billion in savings, i.e. 0.006% of the EU’s 2018 gross domestic product (GDP).

Neighbours’ insufficient climate policies

Climate change is no longer an abstract issue: summers are already much warmer and longer in the southern Mediterranean; the water stress is spreading. In the East, droughts, extreme flooding and fires alongside accelerated thawing of the permafrost in the Arctic are worrying trends with direct economic and social implications. Yet most of the EU’s neighbours have not developed a comprehensive decarbonisation strategy. Targets and policies are often insufficient.

At best, they are working on deploying solar and wind power installations to promote electricity-mix diversification, combined with some efforts in the field of energy efficiency. Russia, Kazakhstan, Belarus, Algeria and Uzbekistan have not reaped the benefits of cheaper solar and wind resources.

Overall, energy efficiency is a little or absent priority yet its potential is often large, with much low-hanging fruit still available at low cost.

Decarbonising the transport or industry sectors is showing little progress. Fossil fuel subsidies are significant in several of these countries, while only a few have started phase out policies (notably Ukraine, Moldova, Georgia, Morocco and Egypt). Air pollution is a critical issue in many cities, notably in Russia, Ukraine, Serbia, and Egypt. China is often involved in energy projects in these regions, not least as part of its Belt and Road Initiative, but with rare green credentials.

…and need for large affordable new electric capacity, rapidly deployed

South of the Mediterranean, neighbours share structural challenges, such as the need to ramp up electricity supply capacities in emergencies to meet higher peak loads and demand from a rising populations and economic growth. Governments must secure quickly available, large and affordable new capacity.

In the East, they also need to address infrastructure modernisation (especially for hydro, nuclear and transmission and distribution), replacement (for coal), as well as governance and regulation (corruption, lack of competition, insufficient institutional capacity and weak rule of law).

…and investment

The European Bank for Reconstruction and Development (EBRD) is a powerful tool for transformation (except in Russia and Algeria). The Energy Community Treaty has become a regulatory transformer in Ukraine, and to a lesser extent in Serbia, Georgia and Moldova, where there is local resistance.

The EU’s foreign direct investments (FDIs) to these regions showcase the untapped potential: 237 billion euros in the period 2013-2017, or about 9% of yearly FDIs by the EU, compared to 33% to the US alone!

A strategy for re-engagement: carrot + stick

The EU’s strategy should be both pro-active and dissuasive, in stressing the climate emergency and calling for an end to marginal adjustments and complacency. Not effectively aligning with the Paris Agreement must have consequences and carry costs. Aligning and taking effective actions should bring rewards. Overall, a 60% reduction in greenhouse gas emissions by 2050 should be pursued.

The EU should avoid carbon leakage with the return of carbon-intensive industries in its bordering countries, especially in Ukraine (Association agreement) or Morocco for example. But also imports of carbon-intensive electricity (especially from Ukraine, Moldova and Morocco) or carbon intensive goods (agriculture, steel, cement and fertilizers) need to be avoided while the transformation of industries in the neighbourhood must be accompanied.

Yet the destabilisation of these countries due to falling fossil fuel export or transit revenues, or the closure of access to the EU market because of their insufficient climate policies, is not in the EU’s interest.

The priority should be to improve the investment climate to facilitate investments by European companies in partnership with local actors and environmental policies in general, in view of pursuing alignment with the Paris Agreement and addressing urgent threats.

…tech neutral energy sources

To be acceptable and efficient, the EU’s new approach must be technologically neutral (nuclear energy and gas-fired electricity generation notably can be part of the toolbox). A combination of renewables deployment and gas to offset intermittency, or a push for liquefied natural gas (LNG) in the heavy duty road or maritime transport segments, should be favoured. The EU should deploy a comprehensive toolkit for integrating renewables, managing peak loads and making cities more sustainable.

…identify priority countries, sectors

Effective action also requires setting a new list of priority countries and sectors. Lead countries would be: Ukraine, Egypt, Lebanon, Tunisia, Jordan, Serbia and Morocco. For their part, Russia, Turkey, Algeria, Kazakhstan and Uzbekistan require a steady engagement given their importance, although prospects for rapid changes are limited. Other countries have lower carbon footprints or represent excessively big challenges for change: the focus should be narrowed to identify specific opportunities and ongoing efforts by the EBRD.

The new strategy should of course be enshrined with partner governments but should also increasingly seek to engage local actors, notably cities, and seek to support the private sector.

Sector priorities

Priorities for action should focus on sectors where: i) low hanging fruit can be harvested; ii) there is a risk of carbon leakage or carbon imports to the EU; and iii) emissions and environmental degradation are most significant. A few examples, by country:

• Russia: energy efficiency; reforestation; carbon capture and storage (CCS); decarbonised hydrogen; infrastructure modernisation (hydropower, transmission and distribution, district heating); waste to energy projects; sustainable transport; carbon market development; sustainable agriculture.
• Ukraine: same for Russia, plus the nuclear modernisation, education, research and development (R&D), innovation for digital and smart technologies; electricity system integration with the EU avoiding carbon leakage; sustainable agriculture.
• Egypt and Turkey: sustainable cities; sustainable transport; solar and wind power deployment, as well as technologies for system flexibility; energy efficiency; education, R&D, innovation; an emission control area in the Mediterranean (ECA), notably based on LNG and hydrogen for local ferries/boats; and adaptation, notably for water scarcity; sustainable agriculture; carbon market development.
• Algeria: the above priorities, plus a focus on solar deployment, the reform of subsidies, sustainable water desalination, interconnections with neighbours.
• Morocco: a focus on grid integration of renewables and technologies for system flexibility; and hydrogen.

Incentives

The EU toolbox and instruments should include:

• Dialogue at all levels on the climate emergency/local consequences, the Green Deal, the needed acceleration, the sectoral options and priorities.
• Communication about the EU’s action and instruments and conditions for increased engagement.
• Incentives: technical cooperation; project support; financial support (grants and loans); market access. Overall, financial support should be matched by local public and private commitments in order to maximise the multiplier effect.
• Disincentives: less market access; less visa facilitations; and less financial support (be it at the EU and bilateral level). A system of colours could be introduced, like for the EU fishery policies, to warn countries against harmful policies or insufficient action and ask for clarifications/effective changes. Ultimately, the carbon border adjustment mechanisms could be mobilised, hence why it should not remain an empty threat.

Credibility will be key: this requires full transparency of EU’s objectives and instruments while Members States must align and coordinate their bilateral policies with the EU strategy.

The way forward

The Green Deal cannot be and should not be an instrument for autarky. It should be an opportunity to re-engage in particular with key EU neighbours, to kick-start their own energy transition and avoid a situation where destabilising carbon walls are erected. These would leave us all losers: the fight against climate change would be weakened; there would be massive, missed investment opportunities; the economic and environmental stability of our neighbours would be at risk with potential implications for the EU (lower growth, migrations, crime, terrorism, weak or failed states).

Lastly and decisively, our transition effort could be more challenging: integrating these countries in our low carbon systems can provide economic and technical advantages. For these reasons, the geographical scope of EU low carbon energy systems being designed should include key neighbours. It is upon them to decide rapidly if they want to be part of that process.

Lowering neighbour emissions can be cheaper than lowering our own

Ultimately, if achieving carbon neutrality in the EU proves too costly, then joint investments in these countries where emissions can be cheaper to curb, with fairly-shared accounting of reductions, could offer a solution to bridge the emissions gap.

The new strategy should include a massive effort towards energy efficiency and sustainable cities, and should prepare for possible imports of low carbon electricity or decarbonised hydrogen/ammonia from Africa for example, or cooperating with Russia or Ukraine on carbon capture for example. Unprecedented efforts towards an improved business environment must be devoted in order to secure mutually beneficial economic opportunities in the long run, and widen the EU’s area of prosperity, stability and environmental preservation.

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Marc-Antoine Eyl-Mazzega is the Director of the IFRI Centre for Energy

This article is published with permission.