Yesterday, the EU reached a provisional agreement on the European Climate Law. In case there were any doubts, the objectives are explicit: To provide predictability to investors and to ensure that the transformations generated by the Green Deal in industries and capital markets are irreversible. Moreover, in concrete terms, the European Climate Law represents an acceleration in the speed of change. No one is unaware of the reason behind the rush: U.S. and China at odds for virtually everything else, are about to turn the Biden summit into the staging of a two-way split of the capital markets they hope to revive.
In this article
- What is the European Climate Law?
- How will it impact on member countries?
- How will it affect workers
- How will it affect competition with other countries
- What do the new hurries have to do with the US and China?
What is the European Climate Law?
The European Climate Law is the blueprint for a series of five-year plans through which EU member countries will reduce CO2 emissions by transforming their production apparatus and transport systems. To this end they are turning the capital market upside down, systematically altering industrial and energy production costs through the emissions trading market and rolling back the ban on direct subsidies to companies.
All this is about mobilizing gigantic masses of capital and increasing its profitability by changing the legislative framework. That’s why the regulation of investment taxonomies (the listing of which investments are considered green, which are transitional and which are not) that was expected to come out of the same meeting – although it has been delayed – was as long-awaited or more so than the law itself.
How will it impact on member countries?
The European Climate Law sets mandatory minimums for each and every country and makes its control mechanisms mandatory. Each state must incorporate it in its entirety. This means, for instance, that the Spanish Climate Change Law, recently approved by Congress as a matter of urgency, will have to be reformed at full speed to incorporate the new European targets for 2030.
How will it affect workers
The whole Green Deal is about increasing the return on capital. Unlike previous major changes in energy production and use, this time physical productivity is being reduced, not expanded. The same hours of labor will produce less, not more. This means that it is not enough for capital to take a bigger percentage share in the distribution of rents through wages. It needs to transfer rents from labor in absolute terms. That is to say, of the same wage there will be less – if anything – left over once basic necessities are paid for: food, energy, water, housing and transport.
This movement which has already begun to be felt in the energy bill and which can already be sensed in the price of electric cars and public transport, will be all the more drastic the faster the goals of decarbonization are accelerated… which is what happened yesterday with the European Climate Law.
How will it affect competition with other countries
To drive technological switchover in factories and transport, the EU is forcing European companies to pay CO2 emission allowances, which are logically incorporated into the price. In principle, this would make all kinds of imported products more competitive, especially those that are very energy intensive (steel, aluminum, etc.). So the EU has created a tariff barrier to level the playing field, the border emissions adjustments, basically a tariff punishing sensitive industrial products from countries that the EU considers are doing little to reduce emissions. And in particular… China.
But China is not the only victim. France and other livestock-producing countries have backed out of ratifying the association agreement with Mercosur on the grounds of Bolsonaro’s Amazonian policies. Arguments against the importation of meat from Argentina or Uruguay based on more or less twisted emissions calculations have replaced soccer as the favorite sport of Brussels bureaucrats. And the application of emissions standards and costs to merchant ships docking with goods in the EU threaten to increase the costs of imported goods.
The more ambitious the European targets and the greater the speed at which they seek to achieve them, the greater the restrictions on competition will be. The European Climate Law is an important step in this direction: it will accelerate the closure of markets and aggravate the violence of imperialist competition.
What do the new hurries have to do with the US and China?
The arrival of Biden to the US presidency has meant a U-turn in the policy of US capital on the Green Deal and has direct consequences on the global imperialist balance.
Biden’s Green New Deal is in principle good news for European capital, which has welcomed and encouraged it. Above all, it means that the U.S. capital markets will be moving in a similar direction and that European investment destinations will therefore, in principle, have more suitors at their disposal. For large electricity and engineering companies, it also means the opportunity to bid for gigantic contracts and public tenders in the USA. And even for automotive companies like Volkswagen, it means increasing the scale of the potential markets for their new electric vehicles.
But… The U.S. isn’t the only one to make a substantial turnaround in recent months. China confirmed with laws during the last Two Sessions the announcement Xi Jinping had made a few months ago to join the Green Deal. U.S. capital obviously sees much more profitable destinations in the future in Chinese industry than in European one. And Biden has been quick to engage his rival in a joint strategy to open up investment opportunities for them.
Imperialism is like that: it is about obtaining markets and placements for capital and cannot help but be contradictory. So at the same time that Biden’s delegates were provoking Chinese power in Taiwan, his special envoy for climate change, John Kerry, was walking down corridors in Beijing, looking to bring China into his own climate summit with an eye on an investment deal.
But the contradictions are not just on the U.S. side. China sees the opportunity there to attract the new capital it needs…to compete with the U.S. and Europe and seems to have jumped on board of the proposal with some enthusiasm.
The EU, which had jumped on the US-driven China sanctions bandwagon and gave up on its own investment agreement with Beijing – laboriously hatched by Merkel over two years – suddenly found itself betrayed and dependent on its American friend.
To be able to compete with China in attracting capital, it only had one resort left: speed up the Green Deal to stay ahead of China at least for a few years. The European Climate Law approved today in draft, means that despite the Baltic and Eastern countries, some tied to the Russian electricity grid, others to coal, and despite the difficulties of capital in Italy, Greece or Spain, the strategy is already set. The Green Deal can only speed up and will not be reversed.