[Insight & Opinion] Europe in Chaos Too... What Should Be Done About Climate Policy?

Europe has always been attractive. Its lifestyle, values, and systems, differentiated from those of the United States, have been recognized as alternatives that complement the weaknesses of American-style capitalism. Since the launch of the European Union (EU), policies on climate change, environment, and energy transition have been regarded as exemplary cases demonstrating what humanity must do for the future. The EU’s policies related to climate change and energy have been considered the future we should follow. However, the situation in Europe in 2023 is chaotic.

Germany has been suffering from a rapid increase in energy costs since it could no longer use cheap Russian natural gas after the Ukraine war. German companies, including the chemical firm BASF, are actively pursuing overseas relocation. The burden on German households is also increasing. From January 2024, the installation of gas boilers in new buildings will be banned in Germany, and heat pump installation will be mandatory. The German government’s goal is to reduce the annual carbon dioxide emissions from buildings from 112 million tons to 67 million tons by 2030. Installing a heat pump requires about 25,000 euros (approximately 35 million KRW). Since heat pumps operate on electricity, a large-scale increase in heat pumps will place a significant burden on the power grid. Questions have been raised about whether stable power supply will be possible. Although the German government promises subsidies, including covering 30% of heat pump installation costs, opposition is growing, and support for the ruling coalition, including the Green Party, is declining, while support for the far-right party Alternative for Germany (AfD) is increasing.

The UK government, which had been enthusiastic about expanding renewable energy and the emissions trading system, announced that from 2024 to 2027, it will provide additional emission allowances equivalent to 53.5 million tons, or 50% of the annual emission plan, to emissions trading participants. It is also allowing oil and gas drilling in the North Sea for 100 companies, reversing the trend toward phasing out fossil fuels. The UK’s emission allowances are trading at about 47 euros per ton, which is 40% cheaper than the EU’s. This change by the UK government aims to reduce soaring electricity bills, lessen the burden on households and businesses, ease inflation, and promote corporate investment.

In March, in the Netherlands, the newly formed party ‘BoerBurgerBeweging (BBB)’?the Farmer-Citizen Movement?emerged as the leading party due to public backlash against the government’s policy to reduce livestock by one-third by 2030 to cut nitrogen emissions. In France, President Emmanuel Macron has called for a temporary suspension of environmental regulations to secure manufacturing competitiveness. These developments differ from the Europe we once knew.

Unprecedented heatwaves are awakening all citizens to the impacts of climate change. We are realizing that adaptation and response to climate change are no longer issues of the distant future. However, Europe’s case shows that we must also consider how to harmoniously manage the economy and jobs. It is time to reconsider what climate policies are suitable for South Korea, which faces the world’s highest population density, urbanization rate, and manufacturing share, while confronting the most rapid decline in birthrate and aging population.

Choi Jun-young, Specialist, Yulchon LLC

This content was produced with the assistance of AI translation services.