EU needs to invest 1% more of GDP per year to reach climate targets by 2030 – Last Minute

The European Union (EU) should spend 1% more annually of its Gross Domestic Product (GDP) to ‘green’ public investments to reduce polluting emissions by 2030 and reach carbon neutrality, indicates a study released this Friday.

Jason Lee/Reuters

“The need for additional public investment needed to meet the European Union’s climate goals is between 0.5% and 1% of GDP annually during this decade,” reveals Brussels-based think tank Bruegel. , in a study that the Lusa agency had access to. The document on “A green fiscal pact: climate investment in times of fiscal consolidation”, which will be presented this weekend at the meeting of EU Economy and Finance Ministers (Ecofin), in Slovenia, reads that “the percentage public financing depends, from the outset, on the willingness of the public sector to tax emissions”.

Therefore, the think tank suggests that “EU countries should tax emissions more, so that investment in climate infrastructure becomes more profitable for the private sector, alleviating the public purse”.

“However, given the public goods nature of some of the necessary investments and policy choices that exist, our best estimate is that public spending will still have to increase by around €100 billion a year,” adds Bruegel, admitting a “major fiscal effort that will have to be financed”.

The European Commission has stipulated as targets to reduce 55% of polluting emissions in the EU by 2030 and to reach carbon neutrality, that is, zero greenhouse gases, in 2050.

And, to achieve this, “an immediate expansion of annual investment in the use of clean and efficient energy and in transport by around 2% of GDP” in the EU is needed, says Bruegel in the study, also referring to private initiatives.

Using the impact assessment carried out by the community executive, Bruegel also points out “an additional annual investment needs of 360 billion euros on average, with the annual investment needing to increase to 1,040 billion euros on average (at 2015 prices) ), above the €683 billion invested annually over the last decade, in order to reach the interim target of a 55% reduction in emissions by 2030 compared to 1990”.

Still, the think tank admits that this need for investment may be hampered by the current economic situation in the EU, as countries try to recover from the crisis generated by covid-19, warning that “during the next phase of fiscal consolidation, decision makers policymakers must be mindful of the pace and composition of public spending.”

“Previous episodes of consolidation have resulted in big cuts in public investment, while now there is a need for a big increase in investment,” notes Bruegel.

This specialized structure therefore suggests the introduction of a “green golden rule”, the “most promising option” in his view, which involves “relaxing the rigor of the EU’s budgetary framework” to ‘green’ bets.

Concretely, this would mean “excluding net ‘green’ public investment from deficit and debt calculations under EU fiscal rules”, allowing for a “more flexible application of existing fiscal rules”.

Still, Bruegel admits that “the uncertain impact of growing ‘green’ public spending and the risks to growth stemming from climate change create ‘trade-offs’ [conflitos de escolha] difficult in the weaker countries from a budgetary point of view”, and therefore suggests a better regulatory policy and a higher price of polluting emissions as a way to encourage ‘green’ private investment and reduce public costs.

Source: SÁBADO by www.sabado.pt.

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