WHEB Commentary

Ty Lee

Recovery plan for Europe…and the environment


‘Never waste a good crisis’. In response to the COVID-19 pandemic, the European Union (“EU”) has proposed a €750 billion recovery plan to repair the economic and social damage. But this recovery plan has green strings attached. 25% of the recovery spending is set aside for green investments.

This is consistent with the EU’s ambition to use the European Green Deal as its future growth strategy. The European Green Deal is a longer-term roadmap for transforming the EU into a sustainable economy.  With this promising backdrop, there are several areas that particularly interest us in the recovery plan.

One of the critical areas of focus in the plan is on building energy efficiency.  This is unsurprising: energy use in buildings accounts for roughly 40% of total energy consumption in the EU.[1] To combat climate change, we need to boost building efficiency technologies.  The critical areas are insulation, heating, ventilation and air conditioning (HVAC) and lighting. This includes improving the existing stock of buildings.  The European Commission aims to increase renovation rates from below 1% today to 3%.

In the recovery package, the Commission prioritizes public buildings.  We actually see more energy savings opportunities in residential buildings. We have already seen a spike in household energy use during the pandemic as more people work from home. This is likely to endure, in our view, as more people work from home post COVID-19. So the economic and environmental case for improving residential building efficiency is stronger than ever. Happily, energy efficiency in residential buildings is not totally neglected in the recovery plan. “Green” mortgages may be offered for private residential buildings to encourage renovation.

After the outbreak of COVID-19, one might wonder about the prospects for rail investments. Will people still have confidence getting on public transport? How can a railway operator make money with all these social distancing measures in place? The EU is not deterred.  The environmental case for rail is too strong to be written off. According to the European Environmental Agency, rail accounts for 0.5% of total transport emissions.  Contrast this with road transport, which accounts for 71.7%. This explains the strong support for rail in the form of a €40 billion package, focused on key corridors where passengers and freight transport can be shifted to rail.

Given those huge emissions from road transport, we have long been bullish about the shift towards electric vehicles (“EVs”). Unsurprisingly, the recovery package also includes incentives to promote the adoption of EVs. It includes €20 billion on EV purchase incentives and funding for 2 million charging points by 2025. To put it in context, these 2 million charging points are more than the estimate of 1.2-1.3 million required by 2025 according to the green campaign group Transport and Environment.[2]

Nevertheless, the recovery spending is only half of the story. To maximise the positive environmental impact, the European Commission plans to raise taxes from polluting industries to finance the recovery plan. It has proposed a series of new EU taxes. They include a carbon border adjustment mechanism, and a tax on non-recyclable plastics.

The recovery proposal is not set in stone. EU leaders will meet on 18-19 June to discuss the proposal. All 27 member states must also agree to the EU budget and the recovery fund.  If it survives these negotiations, the EU’s green approach to stimulate its economy is unquestionably very welcome. However, we have yet to see similar responses from other key countries like China, India and the USA.  Climate change is a global issue. It needs a global response.

[1] Source: European Commission

[2] Source:  www.transportenvironment.org/sites/te/files/publications/01%202020%20Draft%20TE%20Infrastructure%20Report%20Final.pdf

Recent posts

  • Investing in breakthroughs
  • “If you think education is expensive, try ignorance.”
  • Is it time to jump on the hydrogen bandwagon?
  • “This world… belongs to the strong, my friend!”
  • Improving investor confidence in impact investment
  • Boohoo and the drunkard’s search for ESG meaning
  • A Tale of Two Revolutions
  • Addressing Ethnic and Racial Diversity
  • From Just in Time to Just in Case
  • Recovery plan for Europe…and the environment
  • Archive

  • October 2020 (3)
  • September 2020 (1)
  • August 2020 (2)
  • July 2020 (3)
  • June 2020 (2)
  • May 2020 (1)
  • April 2020 (3)
  • March 2020 (1)
  • February 2020 (2)
  • January 2020 (1)
  • December 2019 (1)
  • November 2019 (2)
  • October 2019 (3)
  • September 2019 (1)
  • August 2019 (2)
  • July 2019 (3)
  • June 2019 (2)
  • May 2019 (3)
  • April 2019 (1)
  • March 2019 (1)
  • February 2019 (2)
  • January 2019 (3)
  • December 2018 (1)
  • November 2018 (2)
  • October 2018 (4)
  • September 2018 (2)
  • August 2018 (4)
  • July 2018 (1)
  • June 2018 (1)
  • May 2018 (1)
  • April 2018 (2)
  • March 2018 (2)
  • February 2018 (1)
  • January 2018 (1)
  • December 2017 (3)
  • November 2017 (1)
  • July 2017 (3)
  • June 2017 (1)
  • May 2017 (1)
  • April 2017 (1)
  • February 2017 (2)
  • November 2016 (1)
  • August 2016 (1)
  • July 2016 (1)
  • June 2016 (1)
  • May 2016 (1)
  • April 2016 (2)
  • February 2016 (1)
  • December 2015 (1)
  • November 2015 (3)
  • October 2015 (1)
  • September 2015 (1)
  • July 2015 (2)
  • April 2015 (2)
  • February 2015 (2)
  • December 2014 (2)
  • November 2014 (3)
  • October 2014 (4)
  • August 2014 (1)
  • July 2014 (3)
  • June 2014 (1)
  • April 2014 (2)
  • March 2014 (2)
  • February 2014 (3)
  • January 2014 (4)
  • December 2013 (4)
  • October 2013 (5)
  • September 2013 (3)
  • July 2013 (4)
  • June 2013 (2)
  • May 2013 (4)
  • April 2013 (2)
  • March 2013 (4)
  • February 2013 (6)
  • January 2013 (2)
  • December 2012 (3)
  • November 2012 (1)
  • October 2012 (4)
  • September 2012 (2)
  • August 2012 (1)
  • July 2012 (3)
  • June 2012 (3)
  • May 2012 (6)
  • April 2012 (4)
  • March 2012 (5)