Why Brussels’ reform tsar wants a mindset change in EU capitals

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Good morning. News to start: Ukraine’s agriculture minister has warned in an interview with the Financial Times that a Franco-Polish push to expand restrictions on Ukrainian food imports into the EU risks prolonging Russia’s war against the country by hitting Kyiv’s revenues.

Today, our competition correspondent interviews the European commissioner in charge of member state reform efforts, and our climate correspondent brings you gloomy new research into the gap between green targets and progress.

Mindset

The EU’s commissioner in charge of pushing capitals to enact reforms — from those to boost competitiveness through to supporting the green transition — says the change that’s most needed to beat rivals such as the US and China is in people’s heads, writes Javier Espinoza.

Context: Brussels provides technical help to countries that need it to implement reforms, often in exchange for financial support. Since the Greek financial crisis, the European Commission’s assistance has expanded to more than 1,500 reform projects to help countries enforce policy reforms in every major policy area — from digital to green.

But there is one reform that matters the most, says Elisa Ferreira, commissioner in charge of EU reform and cohesion funds: a shift in mindset. “Europe is much more aware that it cannot be a passive player in the global framework and has got to have a strategic approach in the open, globalised market,” she told the FT.

“Competition is very, very high with the US and China. We are much aware that Europe has got to have an objective of strategic autonomy, which is something that had disappeared for quite a while,” she said.

Her comments come ahead of a commission report to be published today outlining new technical support projects that have been launched to support member states.

Ferreira, the Portuguese commissioner, said the bloc was more conscious of the need to be less dependent on external supply chains, particularly in China. She spoke of the need for Europe to be “more proactive in securing supply chains to build real competitiveness”.

She stressed: “Europe has got to remain open, but Europe is less naive when playing the game that everyone else is also playing.”

Ferreira also said the EU needed to get better at complying with new green laws as it sought to avoid “greenwashing” by companies or countries claiming they are becoming more sustainable even if they are not.

“We are worried,” she added. “When the classification is very complex and you have to give trust to the market that what you are doing is adequate and so the interpretation and how to implement it is critical.”

Chart du jour: Crude awakening

As global oil prices continued to rise on sustained demand, the US and EU have again failed to agree on the future of fossil fuel subsidies at the latest round of OECD talks.

Green cash crunch

European companies are falling far short of what is needed to decarbonise but that’s mainly because of a lack of ready capital, according to new research seen by Alice Hancock.

Context: the EU has set some of the world’s most stretching greenhouse gas emissions reduction targets, starting with a 55 per cent cut by 2030 compared with 1990 levels. But now the goal is in place, the challenge of reaching it has become scarily apparent.

More than half of heavy-emitting companies in Europe said that access to capital was the biggest hurdle to decarbonising, while electric utilities are likely to fall €285bn short of the investment needed in renewables by 2030, a new joint study by CDP, the non-profit charity that pioneered corporate environmental disclosures, and the consultancy Oliver Wyman has found.

Other less-than-heartening findings are that commercial business models to make the green transition a reality “remain under-developed” and “government policy has not yet shifted the economic landscape decisively enough in favour of greener products”.

That shows in the car industry, for example. Almost 60 per cent of the industry’s aggregate research and development budget over the next five years is going into electric vehicles, which currently only account for 13 per cent of sales.

On the positive side, 90 per cent of companies now offer some form of low-carbon product, Sherry Madera, CDP’s chief executive, told the FT: “Policymakers, companies and financial institutions alike are moving from defining the ‘what’ and ‘by when’ of their climate goals urgently on to the ‘how’.”

Businesses faced a chicken-and-egg situation, she added. They “need the support of financial institutions to bring projects to commercial scale [but] the finance sector also needs proof that such initiatives can operate sustainably at this level”.

Most companies spend less than a quarter of capital on green projects, according to CDP.

That does not bode well given that EU climate commissioner Wopke Hoekstra said yesterday that 2040, let alone 2030, was “almost around the corner”.

What to watch today

1. Meeting of EU agricultural ministers

2. French President Emmanuel Macron visits Brazil.

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