The Corner


Green New Dole (EU edition)

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While a V-shaped recovery was never really on the cards, insisting that a substantial percentage of the money pumped into the economy goes into green projects will turn the unlikely into the impossible.

Joe Biden has, of course, announced his $2 trillion clean energy & infrastructure plan, but that is still (at least) an election away.

The EU however is further along. Although its €750 billion recovery fund is still not a done deal, whatever shape it takes is likely to come with a green component.

Take this story, for instance, from Euractiv:

A cross-party group of lawmakers in the European Parliament – from the far-left to the centre-right – have penned a joint letter calling for the EU’s proposed €750 billion recovery fund to be closely aligned with the bloc’s climate goals.

The move comes as EU leaders prepare to meet on Friday (17 July) in a bid to broker an agreement on the EU’s proposed €1 trillion budget for the next seven years (2021-2027), as well as the bloc’s €750 billion recovery fund from the coronavirus crisis.

Both the budget and recovery fund will be submitted to the European Parliament for a vote of approval once leaders agree to it, giving MEPs an effective right of veto over the proposals.

“We all agree that the EU recovery plan should be enshrined in a very clear narrative: it should be the first recovery plan aligned with the Paris Agreement,” says the letter, sent to EU summit chair Charles Michel on Wednesday (14 July).

In particular, access to the EU recovery fund “shall be linked to member states’ commitment to a national objective of climate neutrality by 2050 and to contribute to achieving the Union’s new 2030 climate targets, which will be updated by the end of the year,” the missive states….

If EU leaders fail to attach green strings to the proposed recovery fund, named ‘Next Generation EU’, that will likely set them on a collision course with Parliament, which appears determined to enforce green rules.

Just talk?

I don’t think so.

From the Financial Times on Monday:

The price of EU carbon credits soared to its highest level in 14 years on Monday, gaining as much as 5 per cent as traders bet that politicians’ promises of a “green recovery” would increase demand for the instruments. The credits — regulatory allowances for carbon emissions that can be bought and sold by companies — surged above €30 a tonne for the first time since 2006. In afternoon trading, they came within 20 cents of the all-time high of €31 set in April of that year, according to Eikon figures.

The ‘market’ in carbon credits is, to a large degree, an artificial one, given how the ‘need’ for any sort of carbon credit is the product of regulation, and the supply too can be curtailed (or expanded) by political/bureaucratic fiat.

As is the case with most markets most of the time, no one can be sure why prices are moving in the way they are:

 “Theories about what is causing the rally continue to swirl around the market,” consultancy Energy Aspects said in a note on Monday, citing reports “blaming hedge funds and algorithm-based trading for the surge in prices.

Translation: Who knows?

But if I had to guess, the FT is right. Some traders, at least, are betting on a sharp green turn, which will not be the best news for the EU’s unemployed. That is not to say that all green spending would be, so far as economic recovery is concerned, counterproductive. Infrastructural spending, say, to toughen up low-lying cities’ coastal defenses makes sense, whatever one’s views on the threat posed by climate change and ought to be labor-intensive as well. But much of the money poured into a ‘green recovery’ will at best be wasted and, at worst, may even cost jobs.

And that is what’s (probably) coming.


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