Home
Expressions by Montaigne
Green Deal Geopolitics and Global Implications

Institut Montaigne features a platform of Expressions dedicated to debate and current affairs. The platform provides a space for decryption and dialogue to encourage discussion and the emergence of new voices.

09/03/2022

Green Deal Geopolitics and Global Implications

Energy

Print

Share

Green Deal Geopolitics and Global Implications

Author

Edouard Michon

Senior Strategist at Allianz

Author

Lilly Höhn

Policy advisor for international climate policy at the G7/G20 group

After two years of reflecting on the social, economic, and geopolitical dimensions of the European Green Deal, the Genshagen Foundation and Institut Montaigne organized the 9^th edition of the Genshagen Forum, bringing together selected experts to develop concrete recommendations around the challenges of the Green Deal. This paper presents the conclusions on its geopolitical dimension, led by rapporteurs Edouard Michon, Senior Strategist at Allianz, and Lilly Höhn, International Climate Policy Advisor, project group G7/G20 on behalf of the German Federal Ministry for Environment and Consumer Protection.

The European Green Deal aims to achieve carbon neutrality by 2050. To secure this goal, the EU is hoping to reduce its net greenhouse gas emissions by at least 55% by 2030. As almost 70% of the EU energy mix is based on fossil fuels which are, for the vast majority, imported, the ambition to decarbonize will have major implications for Europe’s international energy producing partners and the world’s current geopolitical landscape.

This shift implies new geopolitical risks associated with Europe’s energy security - already under pressure with the Ukraine war - as well as new dependency on raw materials needed for the green transition. On the other hand, it represents an opportunity for EU member states to rethink international partnerships and trade relationships through a more sustainable framework.

In a context of multiple crises, Germany and France should coordinate their responses and develop a common strategic vision on how to ensure Europe’s energy security in the future and how to balance out the "winners" and "losers" of changing value chains.

The Green Deal Consequences for Europe’s oil and gas producing neighbors

Today, the European energy mix is based on largely imported petroleum products (35%) and gas (24%). The oil and gas import bill represented €296 bn in 2018. In 2019, total imports of crude oil to the EU amounted to 507.2 million tons. Top supplier countries included Russia (27% of the 2019 EU import), Iraq (9%), Nigeria (8%) and Saudi Arabia (8%). For natural gas imports, the main EU trading partners in 2020 were Russia (44%), Norway (20%) and Algeria (12%).

In 2021, Europe was hit by a major energy crisis, revealing the extent of this dependency on imports. The 2021-2022 winter season saw the situation worsen, leading to an unprecedented raise in European household electricity and gas bills. High gas prices have driven power prices up across Europe, raising concerns about the EU’s supply security and dependency on gas imports. Simultaneously, the crisis has highlighted the need for future energy systems to become more resilient to external price shocks.

The move away from fossil fuels will certainly not be linear. Gas demand could even increase in the short-term. Nevertheless, between 2030 and 2050, EU oil and natural gas imports are expected to decrease dramatically.

New dependency risks and energy security concerns

Today, the EU’s energy security relies on its ability to ensure a sufficient oil and gas supply at an affordable price. In this context, one of the EU’s primary energy security concerns is its high dependency on Russian gas, which makes up about 45% of EU gas imports. The Green Deal represents an opportunity to reduce such dependencies, and replace them with new energy partnerships.

In early February 2022, the European Commission confirmed its version of the EU Taxonomy framework, which establishes a list of environmentally sustainable economic activities, classifying them from low-carbon, transitional, to enabling. The latest announcements confirmed nuclear energy and gas count as ‘transitional’ activities under the "green" category, with strict conditions attached. This classification includes activities that cannot be immediately replaced by low-carbon alternatives, that "do contribute to climate change mitigation" and have "the potential to play a major role in the transition to a climate-neutral economy". However, Germany and France do not share the same view on the place of nuclear power in the energy transition. While Germany advocates phasing out nuclear power, France supports further investment.

The effects of renewable energy development on energy security will largely depend on the progress made in energy storage technology (e.g. green hydrogen). Otherwise, intermittency, which prevents solar and wind farms from consistently generating energy at all hours of the day, will need to be compensated for with backup resources capable of providing electricity on very short notice. To foster its energy security, especially when replacing all molecules in the system with "green" molecules, the EU will therefore still need external energy supplies in the future. The EU should, however, not overlook the opportunities that are offered by non-intermittent renewable sources such as biomass.

Europe may develop major solar and wind energy imports from neighboring regions, especially North Africa.

What does this mean from a global strategic perspective? Europe may develop major solar and wind energy imports from neighboring regions, especially North Africa. The Sahara desert has immense potential to generate large amounts of renewable energy, and Germany is already partnering with several countries, such as Morocco, to develop Africa’s first industrial plant for green hydrogen exports. France, which could harness its strong regional networks to supply external hydrogen, has been reluctant to take advantage of its close ties with North Africa.

Instead, it continues to privilege domestic supplies of hydrogen. France and Germany should make hydrogen supply a key priority of their bilateral talks.

Meanwhile, EU countries should proceed cautiously with their MENA partners, ensuring diversification to mitigate new geopolitical risks. The trend of renewable energy imports from the Middle East, North Africa and other regions may accelerate in the next decades, prompting new energy security concerns. New strategic partnerships could provide unique opportunities to proactively restructure the current geopolitical landscape.

Furthermore, a greener Europe requires major imports of critical raw materials and products needed for solar panels, wind turbines or EV batteries from foreign suppliers like China, that are often produced in unsustainable ways. The development of clean energy and clean technologies therefore requires substantial imports of raw materials, causing further rises in emissions, or other forms of pollution, in remote territories. In the long run, the EU’s current energy dependence on Russia could switch to a dependency on China, one of the few real winners of the Green Deal transition amongst the EU international partners.

Climate change mitigation & transition support: key to a European strategy

The EU’s role as a leading energy importer has shaped our geopolitical landscape for decades. Furthermore, by aiming to set norms and standards regarding the CO₂ footprint of products (e.g. Carbon Border Adjustment Mechanism/CBAM), European institutions could significantly shape the rules of global trade.

The Green Deal will affect supply chains worldwide, and there will inevitably be winners and losers as a result. Energy trade relations will need to change from fossil fuels imports to carbon-free energies (this also includes imports of renewable molecules such as green hydrogen).

Persisting trade relationships with oil and gas producing countries could have stabilizing effects on political relationships. In the case of the EU's relationship with Russia, for example, cutting the economic ties of gas deliveries will intensify the risk of cutting channels of dialogue with the Eastern power house - although it remains to be seen how the Ukraine war will impact that dialogue.

It is crucial for Europe to coordinate a progressive transition with its neighboring countries, otherwise there could be profound political consequences for global peace and stability (rise of political tensions at borders, diplomatic crises, migration surges etc.). Energy alternatives are thus crucial to avoiding further destabilization in affected regions.

It is crucial for Europe to coordinate a progressive transition with its neighboring countries.

Besides the risks related to changes in global trade and political stability, the so-called Global South is more vulnerable to the impacts of climate change. This is why, when changing its trade behaviors, the EU will have to adapt its external action strategically, by helping oil and gas importing countries to transition towards alternative economic activities and implementing climate change mitigation and adaptation measures. The EU will only be able to turn risks into opportunities if it anticipates these developments, acts providently, and implements a coherent, energy-driven foreign policy.

Why EU diplomacy matters: creating a partnership of equals

There is a key parallel between the climate crisis and the Covid-19 pandemic: it can only be solved on an international level. Mitigating these crises will require solidarity between rich and poor countries, as well as between traditional oil and gas exporting and importing countries. Balancing out winners and losers requires an inclusive approach based on multilateralism. Establishing international energy cooperation will have to provide mutual economic, social and environmental benefits for the EU, its member states and developing countries. This will reinforce overall geopolitical stability, prosperity and peace, and support a cost-efficient implementation of the Paris Agreement and UN-Sustainable Development Goals (SDGs).

The Conference of the Parties (COP) 27, which will take place in Egypt in November 2022, will have to focus on climate finance, as well as the adaptation to, rather than mitigation of, climate change. Fossil fuel subsidies will most likely disappear from the agenda of developing banks. In addition, climate and energy partnerships should be established to reinforce developing countries’ capacity to implement sustainable energy transitions.

France and Germany could be pioneers in shaping a coherent vision for a strategic, sustainable, and peace-securing energy and climate foreign policy.

Building carbon-free energy projects presents opportunities for new value creation and new employment. This is why it is important to build equal partnerships which aim to dissolve traditional dependencies. When it comes to fulfilling individual Nationally Determined Contributions (NDC) there will be points leading up to 2050 climate-neutrality when some industrial countries will not be able to build any additional renewable energy capacities so that they will need to import carbon-free energy sources (also in the form of molecules). In addition, clean energy hydrogen partnerships open up new perspectives in terms of foreign and security policy.

Together, France and Germany could be pioneers in shaping a coherent vision for a strategic, sustainable, and peace-securing energy and climate foreign policy, despite their different national energy choices. In order to do so, the EU should give priority to coordinating the formulation and implementation of energy transition goals worldwide, in parallel with its external action. In the coming months, France and Germany will have vital opportunities to start discussions on these issues, with the French Presidency of the Council of the European Union and the German G7 presidency.

Perspectives of the French presidency of the Council of the EU and the Germany G7 presidency

In 2022, France and Germany are taking on crucial international roles, with the French EU presidency set for the first six months of 2022, and Germany’s G7 presidency. These respective responsibilities offer opportunities to accelerate the Green Deal implementation, requiring clear priorities to be set ahead and agreed on between the two countries.

The EU’s current geo-economic context continues to be shaped by the Covid-19 crisis and since more recently, by the war in Ukraine as well. This has delayed the implementation of the Green Deal agenda. The pandemic can, however, act as an accelerator of the energy transition if public aid flows into green recovery and sustainable technologies. In Germany, a new government has just been established, with a strong ambition to tackle climate change. The three coalition parties in power seem eager to push the Green Deal agenda, even on tricky topics like the CBAM. On the other hand, the French presidential election will occur in the middle of the EU presidency. In this regard, there is higher pressure for initial results to become apparent in the first three months of the EU presidency.

France’s presidency of the Council of the EU could represent a unique opportunity to leverage the political momentum of the new German government, and make major progress on the Green deal agenda.

In the middle to long-term, however, geopolitical implications should be at the core of top-level EU discussions. It is crucial that the EU defines a strategy on how to anticipate and handle the geopolitical implications of the Green Deal while maintaining the ambitions of an EU global green leadership.

Recommendations

Leverage the political momentum of the new German government to make major progress on the Green Deal agenda

Achieve major progress on the Fit for 55 package (including CBAM implementation)
Accelerate strategic projects in order to reinforce the European autonomy (e.g. battery, hydrogen)

Raise awareness on the geopolitical implications of the Green Deal at the EU level

Include strategic discussions on the geopolitical implications of the Green Deal in the EU council agenda

Design a strategy to anticipate and handle these geopolitical implications

Initiatives to mitigate geopolitical implications of the Green deal especially with oil and gas neighboring producing countries
Integrate sustainability footprint in global trade (reform WTO rules, bilateral trade agreement)
Improve the EU energy security of supply and energy autonomy

Reinforce EU global green leadership

Drive environmental norms & standard (e.g. hydrogen certification)
Set biodiversity protection at the forefront of the European ambition with clear and ambitious targets by 2030 and 2050

Copyright: John MACDOUGALL / AFP

Print

Share