What does Green Deal 2.0 look like?

By Sofia Leinonen, Junior Consultant, Rud Pedersen Public Affairs Finland. Sofia works mainly with energy, industry, and ICT clients. Her expertise and professional interests focus on energy and climate policy as well as EU policy.

Many of the legislative proposals in the Fit for 55 package have yet to be implemented, and already the EU must turn its attention towards the 2040s. The next Commission and Parliament will face a critical test: can Green Deal 2.0 maintain the same level of ambition, and what will the path to the 2040 emission reduction targets look like?

A preview of the next Commission's work program was given in February 2024, when the Commission published its communication on the EU's 2040 emission reduction targets. The EU aims for a 90% net emission reduction compared to 1990 emissions. In its announcement, the Commission emphasised increasing investment security for the green transition, so the climate policy of the next Commission is expected to be more industry-oriented than the current one.

This is likely also based on the expectation that the Parliament is predicted to shift to the right.

The electoral landscape favours the right
The elections will take place in a very different Europe compared to 2019. Back then, Greta Thunberg's Fridays for Future climate movement gained significant momentum, especially among the youth, which was reflected in the election results – the Greens gained 22 new seats in Parliament. Political commentators called the elections as the "first climate elections." The election outcome was instrumental in creating the ambitious Green Deal program.

Now the situation is different. The coronavirus pandemic and Russia's war of aggression in Ukraine have diverted political attention from climate change - Europe's competitiveness as the competition for state aid tightens, strategic autonomy, and defence capability carry more weight for many voters at the ballot box.

What is in store for the next parliamentary term?
Green Deal 2.0 will reflect changes in political power dynamics . There will be setbacks in some matters but leaps forward in others. A lot also depends on whether the current President of the Commission, Ursula von der Leyen, gets another term, which seems very likely.

It is already known that a lot of expectations have been placed on carbon management technologies to achieve emission reductions. In connection with the Commission's communication on Europe’s 2040 climate target, a piece on an industrial carbon management strategy was published, which aims to create legislative and financial incentives for technical sinks. A technical sink is formed, for example, when carbon dioxide is captured from an industrial process and stored permanently. In addition, the preparation of the first EU-level certification framework for permanent carbon removals , carbon farming and carbon storage for long-lasting products is nearing completion.

On the other hand, in order for the Green Deal 2.0 to be able to maintain the same level of ambition as five years ago, it must meet the challenges in sectors where the green transition is perceived to be the most challenging to implement – for example in agriculture. Agricultural producers are the ones who feel most betrayed by the Green Deal. Throughout the spring, farmers from the Czech Republic, Germany, Poland, and Slovakia have widely protested against the reforms brought by the Green Deal. According to the protesters, the tightening of environmental requirements increases the prices of agricultural products, which weakens the competitiveness of EU countries compared to external producers.

Instead, the "easier" exercise will be in sectors where the transition is already well underway - such as decoupling electricity production from fossil fuels. The capacity for clean electricity production is growing rapidly, and the next step is to ensure that we have enough electrified industry to utilise it and infrastructure to transmit and store electricity. Significant investments in the green transition require predictable regulation from the EU, functioning electricity markets, and EU-level support mechanisms to make risky innovations commercially viable.

How to prepare?
The preparation of the next commission's work program is already well underway, even though the new commission will not be elected until after the parliamentary elections.

While not underestimating the significance of the composition of the Parliament, the word of the new Commission will carry more weight as the initiator of legislative proposals. Led by Ursula von der Leyen, the green transition is not being reversed, but compromises must be found increasingly to rally all member states and party groups behind common goals.

The importance of member states should not be overlooked in this context either. The rotating presidency of the EU Council, composed of ministers from member states and changing every six months, has the power to slow down or accelerate progress. Additionally, the European Council, composed of Heads of States and governments, primarily determines the political direction regarding the 2040 goals. While wealthier industrialised countries envision technical sinks and hydrogen plants, many Central and Eastern European countries prioritise ensuring that the transition is fair to all parties - including those where the transition is slower and where it costs more as traditional industries like coal plants decline.

From a business perspective, it's crucial to consider messages for EU advocacy from a broader perspective. Green Deal 2.0 will be climate, nature and energy policy as much as social, industrial and security policy. It's therefore advisable to promptly engage with Commissioners and civil service keeping in mind the aforementioned topics and concerns.