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Ambitious EU climate efforts could increase emissions in the rest of the world

May 18, 2020

The EU has an ambition of being climate neutral in 2050. It is hoped that this can be achieved through a green transition in the energy sector and CO2-intensive industries, as well as through altered consumer behavior such as food habits and travel demands among the EU population.

However, should the EU implement its most ambitious decarbonization agenda, while the rest of the world continues with the status quo, non-EU nations will end up emitting more greenhouse gases, thereby significantly offsetting the reductions of EU emissions. This is the conclusion of a new policy brief prepared by economics experts at the University of Copenhagen's Department of Food and Resource Economics.

For every tonne of CO2 emissions avoided in the EU, around 61.5% of that tonne will in that case be emitted somewhere else in the world. This carbon leakage, as it is known, will result in a global CO2 savings of 385 kilos only. The policy brief is based on the conclusions of a purposely-built economic model. The model, part of the EU Horizon 2020 project EUCalc, seeks to describe various pathways to decarbonizing the EU economy.

"Obviously, the EU's own climate footprint will be significantly reduced. But the EU's economy is intertwined with the rest of the world through trade relations, which would change as we implement a green transition in our energy sector, industries and ways of life. Part of the emissions that Europe "saves" through an extensive green transition could possibly be 'leaked' to the rest of the world through, among other things, trade mechanisms, depending on the climate policy of other countries," according to economist and brief co-author Professor Wusheng Yu, of the University of Copenhagen's Department of Food and Resource Economics.

"If the world beyond the EU does not follow suit and embark on a similar green transition, the decline in global greenhouse gas emissions will effectively be limited and well below the level agreed upon in EU climate policy," adds co-author, economist and Yu's department fellow, Francesco Clora.

Less exports, more imports

In the most ambitious 2050 scenario as calculated by the EUCalc model, the EU pulls all of the green levers for production and consumption in various sectors, including the industrial and energy sectors.

In this scenario, a green transformation of CO2-intensive industries (e.g. concrete, steel and chemicals) will incur new costs for new green technologies, which in turn, will increase the price of products. This could impact the competitiveness of EU products on the global market and be advantageous to China and the United States, who would be continuing their production of similar, yet cheaper goods. The prediction is that fewer goods would then be manufactured in Europe, which would lead to an increase in new imports to satisfy consumer and commercial demand.

Similarly, a phase-out of fossil fuels by the EU would lower global demand, thus making them cheaper. In response, non-EU countries would be likely to import and consume larger quantities of fossil fuels.

Finally, more climate-friendly consumer behaviour in the EU could end up pushing part of the saved CO2 out into the rest of the world as well. For example, while a decrease in red meat consumption by Europeans may reduce imported feed grains such as soybean, it may also result in increased imports of food grains and other plant-based foods the latter of which would increase CO2 emissions in the rest of the world.

So what should the EU do?

Should Europe simply throw in the towel and drop its high ambitions for a better global climate? Certainly not. But we must make sure not to go it alone. Professor Wusheng Yu explains:

"A green transition in the EU alone cannot significantly reduce global CO2 emissions. We need to find ways to get others on board. Otherwise, the impact of our efforts will be largely offset by increased emission elsewhere, making it impossible to meet the Paris Agreement targets in time."

Therefore, Professor Yu says that it is essential for the EU to formulate green strategies for each sector and every member state, while taking these economic mechanisms into account and carefully evaluating their impact, when it comes to encouraging other countries to pursue similar decarbonization strategies.

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University of Copenhagen

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