Economy

The world’s richest countries must invest in effective, cheap technologies to tackle climate change

There is a case to encourage European production of strategically important goods to guard against restrictions from other countries

Europe is dominant in civil aircraft and should invest in greening aviation. Photograph: iStock

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John FitzGerald
Fri Apr 26 2024 - 06:00

Tackling climate change has never been more urgent. Europe is warming faster than anywhere else, and the dangers of a hotter world are growing for all. And progress in tackling it remains too slow.

A decade ago the EU was leading the way, recognising the urgency of decarbonising our world, although implementation of suitable policies lagged well behind aspirations. Many more countries began taking climate change seriously following the 2015 Paris Agreement, but for most delivery also lags way behind.

It’s going to be expensive to reach net zero, with investment needed in energy infrastructure, transport, industry and retrofitting of buildings. While Europe and the US, being rich, can afford this, it’s much harder for developing countries, although these are the most impacted by climate change. Poorer countries can’t afford to invest in green energy and other green technologies unless these are the cheap option.

Effectively, this means that the world’s richest countries will need to invest in developing effective and cheap technologies to tackle climate change, which poorer countries can then afford to adopt. And because we share the one planet, all countries must act to curb greenhouse gas emissions, and the pace needs to step up.

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EU car manufacturers made a bad call a decade ago. They moved too slowly to develop the new technologies

Going back 10 years, the EU was worried that countries such as China were ignoring the climate crisis, and that their dirty production, at low prices, could squeeze out greener EU industries. The EU response is to impose a tax on imports of key materials such as steel and aluminium produced using dirty methods. This is appropriate.

Now, perversely, there is widespread concern in Europe that China has been too successful in developing the green technologies the world needs – cheap electric vehicles, cheap solar panels and cheap windmills. As a result, many in Europe and the US want to put taxes on such ‘clean’ imports from China, as they are seen to undercut European and US competitors.

This is surely the wrong response by an EU that wants to see the world decarbonise rapidly. Cheap green technology, wherever produced, is the key to mass adoption, and to scaling up the response to climate change.

There is a case to encourage production within the EU of strategically important goods, to ensure that we won’t be vulnerable to restrictions by other countries on the supply of these key products. The pandemic, and the war in Ukraine, have brought home the risks of being cut off from supplies of vital products. There is a precautionary rationale to subsidise or protect relevant EU manufacturers. But it’s fuzzy thinking to apply this logic to electric cars or solar panels.

Rather than protecting its domestic car producers, Europe should play to its strengths, and invest in greening aviation

These are not strategic products. If China cut off supply of electric cars to the EU, European manufacturers would cheer China on and step up supply. Furthermore, China’s reputation as a reliable supplier would be destroyed. None of these green products, which are produced more cheaply in China, are key strategic items where we must protect domestic supply.

EU car manufacturers made a bad call a decade ago. They moved too slowly to develop the new technologies. They compounded this error, in the case of cars, by concentrating on high-end vehicles with bigger profit margins. As a result, they now find it very difficult to compete in producing smaller, cheaper electric cars, where China has stolen a march.

The panic in Europe about being undercut by cheap Chinese cars reminds me of similar fears in the 1980s because of a flood of cheap Japanese cars. European carmakers worried that Japan would dominate world car production, and would go on to dominate in other sectors. Clearly this didn’t happen – European industry was able to respond. Volkswagen, Peugeot and Renault continue to compete with Toyota and Nissan, and other brands.

Similarly, fear today of Chinese dominance is probably overblown. Rather than rage against the machine, European makers need to up their game, and produce cheaper models that can compete with Chinese imports. Even if China provided subsidies to help kick-start their manufacturers, they cannot afford to subsidise the world indefinitely.

Europe may have missed a trick on electric cars and solar panels. But Europe is dominant in civil aircraft, helped by many missteps at Boeing. This is the transport sector that has made least progress in decarbonising. Rather than protecting its domestic car producers, Europe should play to its strengths, and invest in greening aviation. That would cement the EU’s technology lead, and should prove highly profitable in the long run. It could also make a big contribution to a greener world.

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