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A new Green Deal between Europe and the US

Digital format, 09/12/2020, Aspenia

The European Union has finally taken a vanguard position on green energy and climate change, approving major steps by other nations, such as China, Japan, South Africa, South Korea and the United States. The election of Joe Biden to the White House and the appointment of John Kerry as special climate envoy strongly suggest that transatlantic cooperation on the Green Deal, among other things, will be relaunched.

Europe’s position of leadership has allowed its businesses to equip themselves more rapidly and effectively for sector competition, where the forward push is being shared with other major international economic actors. Thus, the technology fundamental to steering the green transition is going to play a strategic role, but what is really going to count is replacing transition technologies such as gas with the most stable and advanced alternatives. On the other hand, according to some participants, the US gas industry’s continued growth is responsible for the country’s reduced emissions. Maintaining the process of decarbonization will be particularly important if Europe is going to meet its strategic climate neutrality goal.

This will also be the case for the United States. Indeed, the US may choose – and the Biden administration will surely work in this direction – to make green energy an identity factor even more than an economic one. Still, the fact remains that the US energy system has changed radically over the last decade: the country has become energy independent, with the shale gas revolution, and has increased its storage capacity 80-fold. The impact of this development on the geopolitical picture and on the policy decisions of both Barack Obama and Donald Trump has been clear, especially in the Greater Middle East. Renewable sources now account for 18% of US energy production and steady growth in that sector is also explained by some strictly economic factors: green energy costs less and, with adequate investment, can generate many jobs. Finally, it would be well to recall that the digital evolution of networks offers no end of possibilities for US Big Tech firms, among others.

The Green Economy is not currently afflicted with problems in attracting financial resources, as it has been in the past. In both the United States and Europe the world of green finance looks favorably upon the sector; not only are we seeing a rise in the issuance of green bonds, but sustainability criteria are finally being seen by major investors as business indicators rather than obstacles. What markets are demanding is sector transparency and clear action plans. The energy transition calls for well-defined business models that the financial market is ready to support. The pandemic has actually made it easier to access funding and interest rates are still very low – almost paradoxically, Covid-19 has contributed to making the green transition even more attractive. Furthermore, the financial community is increasingly favorable to leaders who opt for sustainability. Despite this rosy outlook, however, not all private businesses are capable of scheduling major investments; the crisis triggered by the pandemic still stings and the European Commission is working on creating preferential channels for new government investments in the sector.

One key factor will be the speed of the process, especially with regard to Italy. Despite its recent efforts, Italy lags behind in the use of renewable energy. The country is hampered above all by administrative/bureaucratic minutiae; at the same time, the financial system is still not entirely prepared to take advantage of green investments that should be viewed as opportunities rather than barriers.

Some positive results have been registered in the 90% reduction in photovoltaic costs and a 31% increase in energy efficiency: this proves that aiming for sustainability is an economic choice that leads to concrete corporate results. Italy could play an important role in terms of storage, as well, given that within the framework of the recent European accord the country was assigned the task of handling battery recycling.

Overall, for both Europe and the United States, the combination of energy efficiency and use of renewable energies has revealed a potentially vast horizon for the energy ecosystem, in addition certainly to being the fastest route to decarbonization. However, the sector’s appeal is not an exclusively transatlantic phenomenon; on the contrary, the center of gravity is shifting towards Asia. In addition to China, many emerging nations – aiming to satisfy their energy needs with renewable sources – are following Europe and the US down the path of a Green New Deal.