A new report paints a gloomy picture of EU countries’ battle against climate change. When it comes to ambition and progress, none of the 28 EU countries are on target to meet the Paris Agreement in 2030. Business must challenge the political deadlock in order to stay ahead and competitive in international markets.

14 pages. If those 14 pages were to land on any CEO’s desk, they should be worried. Worried for the growth, economy and stability of the company – for the company’s future existence.

What story do 14 pages tell? They tell us that 28 EU countries are far from meeting the Paris Agreement, neglecting to safeguard the climate, consequently jeopardizing economic stability and companies’ future growth. The new report is aptly titled ‘Off Target’ and has been compiled by Climate Action Network – Europe’s leading NGO coalition with over 150 member organizations from 35 European countries.

The report ranks the EU countries’ ambition and progress in fighting climate change. The conclusion is unambiguous and straightforward: not one of the 28 EU countries is ambitious enough, and not one is making the progress needed to meet the Paris Agreement goal.

The country getting closest is Sweden – but the nation is still only 70% on track. Sweden performs well in setting ambitious climate targets and meeting domestic climate and energy targets for 2020, but the country is still challenged by high energy consumption per capita. This represents a risk when it comes to meeting the domestic 2030 climate target, meaning that Sweden does not qualify as a top-performing country.

Businesses active on the European markets cannot afford to ignore the conclusions from the report. EU-based companies and EU markets are still very much in need of political ambitions, targets and regulations in order to make the transition to a cleaner industry – and to ensure that this happens fast enough and to the extent required for businesses and markets to remain competitive on an international scale. It is up to the European business sector to find ways of breaking away from this political inertia.

The price of inaction is great

A study from May 2018, published by the National Academy of Sciences, documents that there is a 35% risk that concentrations of emissions will exceed even the most severe scenarios projected, especially since we are producing and consuming more than was ever accounted for in previous forecasts.
The economic price of political inaction will undoubtedly be great. Although many have attempted to do so, it is still considered almost impossible to calculate how many trillions of dollars a temperature rise of 1, 2, 3, 4, 5 degrees would cost in real terms.
The Intergovernmental Panel on Climate Change (IPCC) suggests that “the likely costs of just 2°C of global warming would be of the order of 0.5–2% of global GDP by the middle of the century, even if strong adaptation measures are taken”.
However, many have criticized the IPCC estimates for being far too low. The reason is that many current projections including IPCC virtually ignore a very real possibility: that events such as the melting of the Antarctic ice sheet or the faster-than-expected thawing of Arctic permafrost could accelerate climate change astronomically.
One 2017 study projects that it will cost as much as $535 trillion to clean up the atmosphere by 2100, if we do not we start cutting carbon dioxide emissions soon. Thais figure is around seven times the size of today’s global GDP.

Climate front-runners are failing

Once upon a time, Denmark was a global green leader. This is now little more than history. Looking at today’s state of affairs, Denmark has lost its front-runner position. The analysis places Denmark in the middle of the pack at number 7, due to the country’s goals being “unambitious considering national circumstances”. The report points to the fact that Denmark has ditched its role as climate advocate, urging the country to join the “progressive EU member states calling for increased EU climate ambition” and again take up its role as a country working toward a more “ambitious European Parliament’s position on the 2030 energy policies.”

Denmark is just one example. The report clearly tells the story of an entire region that is losing momentum.

EU emissions grew by 1.5% in 2017, reversing some of the progress made in recent years. The primary reason for this increase was a robust growth in oil and gas use.

For a long time, the EU as a whole has been positioned at the very fore when it comes to addressing climate change. Furthermore, the EU has long recognized that investing in climate change mitigation and low-carbon societies is good for business. According to the EU there are already over 4 million jobs in companies that work in areas such as pollution management and control, waste collection and treatment, renewable energy and recycling. Investing in a low-carbon society and economy could create a further 1.5 million jobs by 2020.

So why is the region putting its strong position at stake? One major reason is that issues such as the immigrant crisis and Brexit have dominated political debate, taking over the EU agenda over the last couple of years.

A further reason is that many countries are still focusing on national economic interests when continuing to support country-specific “black” industries such as animal farming, the transport and building sectors. Countries are reluctant to favor incentives that work against the interest of these sectors.

World’s periphery coming to the fore

Looking at the events leading up to the Paris Agreement in 2015, strong EU ambition and diplomacy no doubt played a crucial and leading role for the accord’s success. Naturally, one might have expected the EU to have taken some of the biggest steps forward in terms of reducing emissions.

But this has not been the case. EU emissions grew by 1.5% in 2017, reversing some of the progress made in recent years. The primary reason for this increase was a robust growth in oil and gas use. Confirming this lack of ambition is a new EU agreement from June 2018. Raising the target for the share of renewables among EU countries from 27% to 32% by 2030 will not suffice.

While the EU (accounting for 9% of global emissions) is scarcely showing any climate leadership, other parts of the world are slowly but persistently coming into prominence as true trailblazers. Although still considered less developed countries, nations like Morocco, Costa Rica, India and Bhutan are moving forward.

China, the world’s largest single polluter, is in many ways now taking firm decisions to turn its back on fossil fuels. In 2017, China announced that it would phase out fossil dependence. The nation is already investing more than US$ 100 billion in domestic renewables every year and has scrapped plans to build 85 coal-fired power plants. 

Bringing the EU back on track: show it and tell it

There is no doubt that we are seeing an upsurge of EU-based companies wanting to become climate pioneers. These companies are acting on market trends, but need institutional support. As this support is evidently not on the cards, where does this leave them?

Firstly, EU companies could and should put immense pressure on policymakers, which to an extent they are already doing. Back in 2017, 21 companies who collectively represent over €300 billion in revenue wrote to the European Ministers of Environment, Climate and Energy, urging them to step up. Among the signatories were companies such as IKEA, Novo Nordisk, Philips and Unilever. “Europe must continue to show leadership on climate change. It needs to grow the innovative, efficient and low carbon industries of the future. Europe must embrace the opportunities that addressing climate change provides in order to promote economic growth, jobs and prosperity throughout the European Union,” the letter urged.

Many other companies are self-regulating their way to total carbon neutrality through committing themselves to an alliance like RE100.

Secondly, EU companies should innovate and comply beyond institutional deadlocks. In 2017, the private sector took historical steps when 279 investors such as Deutsche Asset Management, Folksam, HSBC Global Asset Management and PKA signed a five-year agreement establishing their commitment to drive 100 of the world’s largest corporate greenhouse gas emitters to improve governance on climate change, align their business plans with the goals of the Paris Agreement and curb emissions. Many other companies are self-regulating their way to total carbon neutrality through committing themselves to an alliance like RE100. Companies such as IKEA, Carlsberg, Burberry, Coca Cola (European partners) and Phillips are joining the alliance, with many of them already overachieving on their targets and running on 100% renewable energy ahead of time. With 70 companies coming from the EU out of a total 122, there is a clear predominance of European companies in this initiative.