IEEJ： May ©IEEJ 2024
Special Bulletin
A Japanese Perspective on the International Energy Landscape (690)

May 21, 2024

Attention-Attracting EU Parliament Electionand Future of Decarbonization Policy
Ken Koyama, PhD
Chief Economist, Senior Managing Director
The Institute of Energy Economics, Japan
From May 16 through 20, I had opportunities to have discussions with energy industry
stakeholders and experts in London on a wide range of energy issues. However, our discussion focusedon the upcoming European Parliament and British parliament elections and the future of Europe's
decarbonization policy. In the following, I would like to summarize my personal view on the future ofEurope's decarbonization policy, based on the London discussion.
Europe or the European Union has played an important role in leading the decarbonization
policy around the world, taking the initiative in announcing a carbon neutrality target by 2050. In thissense, Europe's decarbonization policy has always been the center of global attention. The Ukraine
crisis, which broke out in 2022, has brought about unprecedented difficulties for Europe, which hasbeen heavily dependent on energy supply from Russia, prompting the EU to give top priority to energy
security. In the midst of the crisis, European countries implemented emergency measures thatprioritized a stable energy supply, without hesitating even to use coal-fired power generation. However,the EU formulated and strongly promoted the so-called "REPowerEU" policy to not only enhanceenergy security (phase out dependence on the Russian energy supply) but also to pursue
decarbonization. Regarding today's important challenge to balance energy security withdecarbonization, Europe has attracted global attention.
In fact, however, Europe has suffered from soaring energy prices, with its economy andindustry facing heavy burdens and difficulties. Energy subsidies were introduced, demonstrating that
European society and economy are vulnerable to rising energy costs. It is noteworthy that European
countries last year took measures to avoid energy cost hikes, such as the postponement of a ban onsales of new internal combustion engine vehicles, indicating the so-called “green backlash.” Even so,
however, EU initiatives to promote decarbonization more ambitiously have been seen. In February
this year, the European Commission issued a recommendation that the EU should aim for a 90%
reduction from 1990 in greenhouse gas emissions by 2040 following the "Fit for 55" policy package
to cut GHG emissions by 55% from 1990 by 2030. Although it may not be easy for the EU to achieve
the 2030 target, the recommendation demonstrates the attitude of promoting decarbonization
initiatives more ambitiously under a higher target for 2040 to achieve carbon neutrality by 2050.
Under these circumstances, the European Parliament election to be held on June 6-9 isattracting global attention. This is because the results of the election will determine the new lineup of
the European Commission and future EU policies. Election results in European countries since lastyear have demonstrated the growth of right-wing forces, leading observers to forecast a similar shift
to the right through the European Parliament election. Of course, the environment-focused politicalforces that promote stronger climate action and decarbonization have a strong base in Europe,
indicating that their mainstream position may remain unfazed. At the latest discussion in London,1IEEJ： May ©IEEJ 2024
however, I frequently heard that if right-wing forces with populist claims grow, the European
Parliament may become more cautious about promoting decarbonization policies that entail costly
burdens. In this sense, the extent to which right-wing forces will grow will be a major issue.
At the same time, however, I frequently heard that regardless of the outcome of the election,
the EU's policies or the European Commission’s stances would continue to emphasize extremely
ambitious decarbonization initiatives. This is because it is difficult to predict that the promotion ofdecarbonization, which is considered to be a key “raison d'être” for the European Commission, will
be easily changed or reversed. Incidentally, the next British general election is expected to lead theLabor Party to replace the Conservative Party as a ruling party. Even in this case, the emphasis on
climate change measures is expected to remain unchanged or even be enhanced. However, we will
have to closely watch the results of these key European elections and their impacts that would exert agreat influence on the international political situation and the world’s energy and decarbonization
policies.
However, what left a stronger impression on me through the London discussion was theview that political, economic, and social realities in European countries in addition to the coming
elections will have greater impacts on the future decarbonization policy. Even in Europe, national
governments play greater roles and exert greater impacts than the EU or the European Commission inimplementing policies or taking specific measures. Given national realities, I felt that the pace ofprogress in decarbonization is perceived as likely to slow down at least in the immediate future for thefollowing reasons:
The first reason behind the belief that the pace of decarbonization may fail to be as fast as
expected or may slow down is that the European economy and industry are facing harsh realities, withsociety being vulnerable to energy cost hikes, which was mentioned earlier. In the face of sucheconomic and social realities, policy initiatives that involve likely rising costs may tend to be stalled.
However, it has been pointed out that there are other factors that may have an additional significant
influence.
Second, many at the London discussion cited the severity of fiscal constraints in Europeancountries. While private sector companies invest in the promotion of decarbonization, public support
from governments and policies is inevitable for them to respond to externalities such as climate change.
Public support needs to be backed financially. However, fiscal constraints are believed to have become
extremely severe in European countries due to significant spending growth for enhanced
decarbonization measures, countermeasures to combat the COVID-19 pandemic, fiscal stimulus for
economic recovery from the COVID-19 disaster, support for Ukraine, and energy security measures.
Under these circumstances, these countries are required to allocate fiscal resources to various measuresin the future while considering the abovementioned first reason.
Third, how to deal with China in the future will also be a factor that will affect Europe’sdecarbonization policy. Maximizing the use of Chinese-made electric vehicles and solar panels can be
the lowest-cost and quickest way for decarbonization due to their superior cost competitiveness.
Recently, however, European countries have grown more cautious of using Chinese products from theperspective of economic security and concerns about the impact of Chinese products on theireconomies, industries, and employment. If the use of Chinese products is restrained, the promotion ofdecarbonization will be costlier and slower.
Fourth, it has been pointed out that strengthening security measures against Russia has2

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emerged as a new important priority for European countries, leading to defense spending growth forthemselves as well as Ukraine, which will be coupled with the abovementioned fiscal constraints toaffect decarbonization. There are significant differences among European countries in the approach tosecurity against Russia. However, the need to strengthen security is pervasive. If Donald Trump wins
the November U.S. presidential election, Europe may have no choice but to push forward to enhance
its own security. Under these circumstances, I feel that although progress will be made in
decarbonization in each European country, the speed of decarbonization may not be as fast as expected.
Developments in Europe, along with those in the United States regarding the presidential election, will
have major impacts on Japan and the rest of the world. These future developments will attract attention.

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