Europe must overcome these 3 challenges to seal the European Green Deal

The global fall in both CO2 emissions and levels of air pollution has been one of COVID-19's few silver linings. It has been estimated that the world could now be on course for the biggest ever annual fall in greenhouse gas emissions.

This presents what many see as an opportunity to accelerate the transition to a more sustainable future. The European Green Deal, announced last December by the European Commission, is the ambitious plan for Europe to become carbon-neutral by 2050. Since the spread of the pandemic, a growing number of businesses and industry leaders are now calling for the themes of the Deal to be placed at the heart of the region’s recovery. As one author explained for Agenda last month, the Deal could be a “framework for tackling short-term economic needs with long-term sustainability goals”.

The European Commission has also stressed the importance of this approach. Last month, the commission’s vice-president, Frans Timmermans, pledged that “every euro” invested in post-COVID-19 recovery measures “must flow into a new economy rather than old structures”.

So far, so good. But thanks to the pandemic, a range of challenges stand in the way of these bold plans. Here are a few of the challenges that must be understood and managed.

1. A new downturn: As the world enters a severe recession, some fear that countries hit hardest by the coming downturn might begin to see climate-friendly policies as less of a priority.

The crisis has put a hole in the finances earmarked for the Green Deal, too. The EU’s economy commissioner, Paolo Gentiloni, has warned that an expected shortfall of €800 billion in private investment over the next two years, caused by the currently unfolding economic crisis, would have been spent getting the Green Deal off the ground. Going even further, he said that an uneven recovery could pose an “existential threat” to the EU itself.

2. Different visions, priorities: The European Green Deal’s success will depend on a massive collective effort from the EU’s 27 member states - but countries’ responses to the pandemic have begun to drive wedges through the centre of the bloc. Within the Eurozone, the crisis has exacerbated divisions between richer countries and their less affluent neighbours over what form a recovery package should take. In broad terms, Eurozone's southern members recommend a transfer of funds to the hardest-hit countries, while many northern countries have expressed support for a loan scheme.

As in so many areas, the COVID-19 crisis is forcing policy-makers to confront questions today they would perhaps rather put off until tomorrow. The Eurozone debt crisis - itself catalysed by another global emergency, the 2008 financial crash - exposed the difficulties and imbalances inherent in a currency union between countries with such varied economies. Today, those same challenges exist, and must again be confronted. Greater fiscal union in the form of a common debt instrument (the much-discussed 'coronabonds' that have been called for by nine Eurozone countries) - in effect, a pooling of member states' debt - has been floated as a possible solution. As CNBC has reported, some countries are apprehensive about issuing debt with highly leveraged nations. Such moves could be a hard sell to voters - a global recession notwithstanding.

3. Few strings attached: Efforts by countries to focus on their own economic and physical health during the pandemic was essential - but focusing too squarely on national interests in the long term could put a dent in the bloc's environmental goals.

The EU usually enforces a strict set of rules about state aid - how much governments are allowed to offer financial support to businesses - since the single market means such moves could give some countries an unfair advantage. In March, the Commission suspended these rules to give members greater leeway as they responded to the pandemic.

To-date, the Commission has approved around €1.8 trillion in state aid for companies struggling as a result of the crisis - but there are concerns that countries are jeopardising the EU's zero-carbon goals by not attaching green strings to these payouts. The worry from some is that without any environmental conditions, this spending will set back the bloc's zero-carbon aims - while the hits to states' coffers will make it harder to raise the investment necessary to fund the Green Deal.

As one commentator told Reuters: "You can spend public money only once."

The European Green Deal is expected to cost around €1 trillion in public and private investment over the next decade. It will take an unprecedented collective effort, too - but uncertainty spreading through the EU alongside COVID-19 may have made that more challenging.

But there are reasons for optimism. EU member states have put together some of the most generous stimulus packages in response to the crisis (see chart above) - and these funds offer a real opportunity to kickstart the Green Deal. And it has also been true in the past that when faced with an apparently existential crisis, the EU has found a way. Heated discussions between member states in April about how to help countries cover the costs associated with the crisis in April led to predictions of the bloc’s imminent demise, only for ministers to agree a €540 billion recovery package. Climate change represents an existential threat to much more than just the EU - so it will be no surprise that the EU could find a way through that crisis, too.