The European Green Deal and its Significance for Georgia

Discussions regarding the need for a green transformation date back to the 1970s. The Club of Rome[3] was the first to raise the issue of the planet’s dwindling resources, and the negative impact it could have on the increasing needs of the growing global population. These issues were reinforced first by the Bruntland Report (1989),[4] then reflected in the so-called Three Rio Conventions, including the Convention on Climate Change and, later, the Sustainable Development Goals. The Green New Deal was the centerpiece of a new US policy package back in 2007, which unfortunately was not strong enough to overcome the 2008 financial crisis.[5] This was followed by several individual attempts, which were reflected in the Paris Framework Convention on Climate Change and in the associated political documents reinforced by this new approach. It was in Paris where it was decided to prepare a special report called the IPCC-1.5 a special report led by an international climate change panel comprised of leading scientists in the field. The report reflected the 1.5 degree Celsius rise in temperature in all regions of the world and the efforts that countries would need to undertake to halt this rise in temperatures at that point. The report clarified the need for immediate climate change mitigation, adaptation actions, and a systemic green transformation.[6] This global agreement and the subsequent guidelines framed the basis for discussions that emerged simultaneously in the US and the EU pertaining to the Green Deal,[7] which, despite some differences, address important commonalities and establishes a path to achieve a systemic transformation. The Green Deal envisages three policy areas: environmental, fiscal, and industrial.[8] The EU reinforced the agreement in the 2019 Action Plan.

The 2019 Green Deal includes four components:

• Energy: The supply of clean, safe, affordable energy
• Buildings: Build and renovate with energy-efficient means
• Mobility: Accelerate the transition to sustainable and smart mobile systems
• Food: Creating a fair, healthy, and environmentally friendly food system “from farm to fork.” [9]

This systemic change must be implemented via the appropriate environmental and financial initiatives. As it relates to environmental change, this means mobilizing production through a cleaner and more circular economy, and strengthening the EU’s fight against climate change by 2030. Beyond that date, there will be a need to preserve ecosystems and biodiversity and to achieve zero pollution in a non-toxic environment. Of course, achieving these goals is unattainable without leveraging the proper financial tools and resources. To this end, the Green Deal envisions financial initiatives which include additional investment from the public and private sectors, the development of a sustainable investment taxonomy,[10] as well as growth in labor-intensive economic activities. The strategy envisages establishing a fund, especially for carbon-intensive regions and sectors, to make this economic transformation fair.[11] However, according to experts, the budget, which envisages mobilization at a cost of over 1 trillion euro over the next ten years, is not enough to achieve such an ambitious transformation.[12]

In conjunction with the European Green Deal, the European Union has developed a Climate and Energy Plan to ensure that the Paris Agreement meets its 2030 obligations. It should be noted that many experts do not consider this plan to have the power to make significant changes, as it only integrates the issues previously scattered among various documents and allows for them to be managed jointly.[13] This plan is also reflected in the Energy Union action documents, which include energy security, the internal energy market, energy efficiency, decarbonization, research, innovation, and competitiveness.[14] Although the 2030 European Climate and Energy Framework and the Energy Union’s incentives are different, they are legally compatible and therefore important for Georgia as a member of the Energy Union. The 2030 Framework Agreement maintains the basic principles of the EU climate and energy laws for individual purposes, for greenhouse gas reductions, renewable energy, and energy efficiency.[15] However, it does not reflect the required amount of greenhouse gas reductions, nor does it address the issue of climate neutrality by the mid-twenty-first century, or the constantly updated trajectory to achieve this goal. Consequently, the Green Deal adopted in 2019 is expected to ensure that the gaps in the framework document are addressed, with a specific goal in the law to reduce climate neutrality and greenhouse gas emissions.[16]

Green Deal: Challenges

The Green Deal's significance lies not in its premise to hamper economic growth (degrowth) but in breaking the linkage between economic growth and emissions (decoupling) through increased investment in renewable energy and energy efficiency.[17] Although the EU’s Green Deal is one of the bloc’s most ambitious projects and has even been dubbed “Europe’s Man on the Moon”, some experts say it faces several legal and financial challenges – both inside and outside the EU. [18]

Some believe that the EU can only achieve carbon neutrality if it transports the environmental problem beyond its territory. For example, under the provisions of the Green Deal, the EU plans to produce a quarter of its agricultural products organically by 2030, reduce consumption of fertilizers and pesticides by 50%, plant three billion trees and restore an ecosystem that maintains a minimal amount of pollutants. Unfortunately, the same goals are not found in the EU’s trade relations. One-fifth of the EU's goods originate from countries where there are few if any environmental measures established to regulate agriculture or industry. In addition, according to the Paris Agreement, carbon emissions are counted from national production and not from imported consumed products, which creates the risk of shifting environmental problems to developing countries. Therefore, it is crucial to maximize the application of the standards adopted by the EU to international trade relations and increase production on its own territory, as well as reduce consumption of meat and dairy products.[19] This is also important in the context of the EaP countries. The expansion of a similar set of standards – especially within the agricultural sector – could stimulate the wider application of organic and smart agricultural practices, which would especially benefit the EaP countries with greater agricultural potential like Ukraine and Georgia.

However, these views and recommendations are not yet widely embraced, as the Green Deal itself is still quite new. Moreover, the world remains preoccupied with its fight against the global pandemic, which began its spread globally soon after the Green Deal was adopted.

However, many among Europe’s political left are not happy with the Green Deal, believing that its goals and benchmarks fall far short of ensuring the adequate protection of the planet and society. They call on Europe to abandon neoliberal policies and instead realize the continent’s historical responsibility for the consequences of climate change. They worked out ten demands regarding the Green Deal – demands that primarily focused on fulfilling the obligation set out in the Paris Agreement that seeks to maintain a temperature rise to 1.5 degrees Celsius. Convinced that the objectives set out in the Green Deal will not achieve this goal, they have called for emissions to be reduced by 70% by 2030, and want the EU to register a negative carbon balance by 2050. They also demand a ban on private jets, as well as a transfer of 30% of the EU’s lands to Natura 2000,[20] a climate bank with 0% interest rates. [21]

There is another threat to the green transformation. Given the global COVID-19 pandemic and its social-economic effects, economic development might be given priority over environmental goals. However, several EU institutions have promised that the economic recovery package would have an environmental focus in the post-COVID-19 period. Simultaneously, the European Commission has recognized that the period following the 2008 financial crisis represented a missed opportunity to start this transition, which would have been possible with less cost and less effort. As an alternative to overcoming the crisis, the European Commission has developed a number of budget measures, including increasing a Just Transition Fund of up to 40 billion euro.[22]

The Green Deal and the Eastern Partnership

The twenty goals of the Eastern Partnership that were set up in 2017 ended in 2020. These deliverables defined four key areas: stronger economy, stronger governance, stronger connectivity and stronger society. The post-2020 period is now focused on greater resilience. In 2020, the EU published its new framework document for EaP policy: Reinforcing Resilience: An Eastern Partnership that Delivers for All. Ultimately, these goals will be finalized at the Eastern Partnership Summit in March 2021. However, the policy document continues to take a common approach, this despite the fact that the development and transition of EaP countries over the last ten years has not been uniform. They have different cooperation instruments with the European Union, such as Association Agreements and DCFTAs with three countries (Georgia, Moldova, Ukraine), while others do not have the same framework of cooperation with the EU. Hence, despite the common approach, the introduction of the Green Deal principles for Georgia, Moldova and Ukraine should be impacted by their cooperation agreements. However, there has been no official assessment expressed on the impact of the Green Deal on the region and bilateral agreements by any of the EaP country governments, including Georgia. As noted previously, the main goal of the Green Deal is a carbon-neutral Europe by 2050. Therefore, it will have the greatest impact on national environmental and climate change policies in Eastern European countries. It will also affect the strategies of the industrial sector – envisaging the transition to a circular economy, the elimination of pollution, and the efficient use of natural resources. The Green Deal's communication document mentions that the concept of the circular economy will be promoted in the Eastern Partnership countries in the fields of production of electronics, batteries, packaging, textiles, and construction materials. The issue of biodiversity is also important. The EU declares zero tolerance for illegal, unregulated, and non-transparent fishing, which may be reflected in Georgia’s policies in this area.

The Green Deal will be of particular importance for Georgia and Ukraine. Their greenhouse gas emission goals are not in line with EU requirements, and reduction of the emissions is not expected in the future. It will be important for these two countries to bring their goals closer to the EU and choose the right form of cooperation. As for the EU’s foreign trade, Georgia’s share in it is very low, and it is unlikely the Green Deal will have a significant impact on trade relations between these two parties.

A plan is also in place to strengthen sustainable cooperation through the International Platform for Sustainable Finance (IPSF). In terms of energy, the EU will continue to support the Southern Gas Corridor, which will deliver gas from Azerbaijan to the EU. The Energy Union agreement will be renewed, which servs to achieve a sustainable energy future for its member states. The EU has also expressed its readiness to invest in renewable energy, energy-efficient technologies, and waste management. The Management Tool for the Black Sea will be the common naval agenda for the Black Sea.

Another important direction is the creation of a single digital market. The development of digital start-ups among Eastern Partnership countries will be encouraged.[23]

As mentioned above, 2020 is a year that will summarize how well the commitments made under the Association Agreement have been fulfilled and what goals should be set for 2020 and beyond. In this regard, especially on environmental and energy issues, it should be noted that new legislation has been adopted in Georgia. For example, the Law on Biodiversity, the Law on Environmental Responsibility, management plans for the two territorial units of the Emerald Network,[24] reports on air quality aspects, and management and monitoring plans for the protected areas. At the same time, Georgia continues working on a climate change adaptation plan, an energy and climate plan, a long-term low-emissions development strategy, and a climate action plan. However, the EU estimates that a lack of institutional and human resources will hamper these efforts. For their part, representatives of local civil society organizations question the rapid implementation of these laws and initiatives. The situation is more complicated within the energy sector, as the only requirement that is marked as fulfilled in the Energy Community’s report on Georgia is related to the Department of Statistics.  This is especially noteworthy, as the goals set by Georgia in terms of energy efficiency and renewable energy were already not ambitious enough.[25]

Prospects

What exactly the Green Deal can bring to Georgia is not entirely clear. It is very important to clarify whether or not Georgia is ready to be involved proactively in the process of correctly identifying the target topics within the Green Deal and the post-2020 EaP framework. The environment-related activities are two-fold: those that can generate economic gains from the start (such as waste utilization and innovative technologies) and the others, which require larger initial investments but offer longer-term financial benefits, such as savings on healthcare costs (e.g. eliminating air pollution), providing ecosystem services and so on. This is why it is important to define the role of the government and the private sector. The private sector would be more prone to invest in activities that bring about short-term benefits, while the government needs to act as a “guarantor” for the implementation of financially less attractive environmental projects, which in the long run, ensure societal welfare. In addition, the adoption and implementation of many commitments, strategic documents, or legislative acts in energy and the environment are required within the framework of the Association Agreement, which is quite complex with its current institutional arrangement and human resources.

Moreover, setting the Eastern Partnership goals for the post-2020 period, introducing the Green Deal into Georgia’s policies, and defining long-term carbon-neutral development, will not be possible without a proper energy system. Therefore, it is important that development plans pay particular attention to the increasing energy consumption and the resources from which this increased consumption is to be met, at least in terms of the development of new power generation capacity and renewable energy sources. According to the current documents, Georgia has relatively modest ambitions with regard to the renewables other than hydro and energy efficiency. For example, in the Georgian Power Generation Development Plan for 2030, the share of wind and solar power plants is only 18%. On the positive side, the plan does not envisage a significant increase in thermal power plants. It is also important to discuss the issue of replacing natural gas and its reflection in future strategic documents.

Georgia adopted the Law on Energy Efficiency in 2020, and the Georgian government is also obliged to submit an annual report on the yearly target rates to the Energy Community. According to the 2019-2020 report, energy savings can reach 13% among primary energy sources and 9% in the final energy consumption by 2025. This figure is 14% in primary energy source and 11% in final consumption compared to the business-as-usual development path for the year 2030.[26] However, the base year for calculation of the ‘business as usual’ scenario is not specified, though it should probably coincide with the base year (1990) defined in the Nationally Determined Contribution document. For comparison, according to the updated EU directive, the energy efficiency rate of primary energy sources should increase by 32.5 percent by 2030.[27]  Despite the significant differences in ambitiousness, the law can be considered a step forward especially, if we take into account the liabilities imposed for its non-compliance.[28]The law shall contribute to the decrease of the import of energy resources and number of potential positive changes: substituting technologies working on traditional primary sources with those that use renewables, choosing more efficient transport means and improving energy efficiency of energy distribution/transition/transformation networks.

The Green Deal may mean systemic transformation for Georgia, especially in the era of digitalization, which requires economic models to be rearranged based on it. An updated tool for Eastern Europe (EaP) can provide access to information, skills development, and financial support. It could redefine the focus of future development, especially in the context of the post-pandemic period, which made it even more evident that targeting and promoting just one sector of the economy is a mistake, and that countries need more resilient economies that equally consider investment in tourism and agriculture and are more self-sufficient, adaptable and diverse.

However, this requires the appropriate institutional preparedness, particularly increased investment in environmental management, policy planning and enforcement, and administration skills. It is also necessary to ensure the engagement of the civil sector and involve more people in public administration to set specific goals for long-term sustainable development. An appropriate monitoring system should be launched for this purpose. In turn, this system will make it possible to constantly update the trajectory of sustainable development, which will provide more green jobs.

The Green Deal is not just an environmental document: its goal is also to ensure social equality as much as possible, which, at the very least, should lay the foundation for the formation of equal and healthy societies.

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