Can the EU Go Net-Zero Without Hurting Its Economy?

The European Union (EU) wants to reach net-zero greenhouse gas emissions by 2050 and become a global leader in climate action. This goal, central to the European Green Deal, aims to make the EU the first climate-neutral continent.

However, open criticism is growing, even among EU officials who disagree on whether aggressive climate policies boost the economy or harm key industries.

The debate escalated after Kurt Vandenberghe, the Commission’s Director General for Climate Action, claimed that the EU’s strong green laws “may turn out to be a great asset to attract investment” – especially as the U.S. pulls back on climate action.

The statement sparked a sharp response from Jean-Luc Demarty, former head of the Commission’s trade and agriculture departments. He dismissed the idea, arguing that these policies could weaken Europe’s competitiveness rather than strengthen it. A Politico article further amplified the discussion, exposing deeper divisions within the EU on balancing climate ambitions with economic realities.

And since ignoring potential issues is far from a wise strategy, we decided to go deeper into the details of the discussion.

A Divided EU: Growth vs. Green Net-Zero Policies

As explained in the intro, the division with those who disagree on whether aggressive climate policies boost the economy or harm key industries got a face with two protagonists, Kurt Vandenberghe and Jean-Luc Demarty. Let’s see what these EU-officials stand for.

Kurt Vandenberghe: Climate Action as an Economic Opportunity

As the Director-General for Climate Action, Vandenberghe argues that strict environmental rules attract investment in clean technology. He believes the EU’s strong commitment to cutting emissions will make Europe a leader in the global green economy.

According to him, the European Green Deal will help modernize industries, making them more competitive and resource-efficient. By 2050, he envisions an economy with no net greenhouse gas emissions.

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Jean-Luc Demarty: Protecting Traditional Industries

Demarty, the former Director-General for Trade, disagrees. He warns that the EU’s aggressive climate policies could hurt major industries like car manufacturing and agriculture. Since the EU produces only 6% of global greenhouse gas emissions, he questions why it should impose strict policies while other major economies do not. He argues that these rules could put European businesses at a disadvantage without making a real difference in global emissions.

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The Economic Impact of Net-Zero

At its core, the debate over the EU’s climate policies centers on their economic impact. Supporters argue that ambitious environmental regulations drive innovation, attract investment, and position Europe as a leader in the green economy. They believe that early action on sustainability will create long-term economic stability, reducing future costs linked to climate-related damages and outdated industries.

On the other hand, critics warn that aggressive climate policies could undermine key industries like automotive and agriculture, increasing costs and driving businesses out of Europe. They question whether the EU should impose strict regulations when major global competitors, such as the U.S. and China, take a more lenient approach. For them, the risk of economic decline outweighs the potential environmental benefits of unilateral action.

Let’s look at some statistics.

Substantial Investments Needed on the Long Term to Achieve Net-Zero

According to reports from McKinsey, the transition to a low-carbon economy will require substantial investments, estimated at an average of $9.2 trillion annually, which is $3.5 trillion more than current spending. This increase represents about half of global corporate profits and a quarter of total tax revenue as of 2020.

Still according to the same report, in terms of employment, the shift towards net-zero is expected to create approximately 200 million jobs while potentially displacing around 185 million by 2050. The net effect on employment is relatively balanced, but the transition will necessitate workforce reskilling and support for affected workers.

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The International Monetary Fund (IMF) weighs in and says that despite the significant upfront costs, an orderly transition to net-zero could boost global gross domestic product (GDP) by 7% compared to maintaining current policies.

Energy Impact Risks

The economic impact of net-zero policies may vary across different income groups. An Arxiv study analyzing the distributional effects of deep decarbonization policies in the United States found that while direct energy expenditures for many households are likely to decline over time, the relative increase in energy expenditures could be higher for lower-income households.

The European Union (EU) and the United Kingdom (UK) are in the meantime reducing reliance on fossil fuels and transition to renewable energy sources. However, in the past decade green parties across Europe were pushing an agenda where nuclear energy was considered to be fossil fuel energy, a stance which is scientifically completely nonsense. It has resulted in a return (Belgium) or continuation (Germany) to ‘real’ fossil fuel energy like coal and gas.

Up until yesterday, green politicians (in the video below the green politician Bart Dhondt) continued to spread this disinformation.

But things might change. Where Belgium initially planned to phase out nuclear energy by 2025, by now they look into all kind of options to at least delay this phase-out by a decade. This decision came after the new government (without green parties) understood the need for nuclear power in maintaining energy security and reducing carbon emissions.

Estonia to Explore Nuclear Energy with Small Modular Reactors for Green Transition

In Germany the policy of phasing out nuclear power, culminated in the closure of its last nuclear power plants in April 2023. Despite a record output of renewable energy, the country still relies on coal use, something which would have been completely avoided if they hadn’t closed their net-zero nuclear centrals.

The UK government in the meantime has implemented measures such as the Capacity Market, investing over £12.5 billion from energy bills into fossil fuel power plants over the past decade to ensure backup power during peak demand periods. On top the country never gave up on nuclear energy and is going to build more capacity. The government’s strategy includes both large-scale nuclear power plants and the development of small modular reactors (SMRs). Currently under construction in Somerset, Hinkley Point C is the UK’s first new nuclear power station in a generation.

The experiences of the UK, Germany, and Belgium illustrate the complex decisions involved in transitioning to sustainable energy systems. It also showed that a large public still seems to be very uninformed about nuclear energy.

Below you can see that there is still a very long way to go globally to cut down on fossil fuel.

Decline in Green Investments

Things are not as shiny as it looks in all these forecasts. Recent data shows a decrease in green investments within Europe with a 6.5% decline in low-carbon investments in the EU and a 12% drop in the UK, attributed to policy uncertainties and infrastructure challenges.

Additionally, investments aimed at decarbonizing industries have fallen by 25%, influenced by unclear policy directions.

These trends are rather concerning, especially when considering global investment patterns. While Europe remains a significant player in green investment, its investment as a percentage of GDP (2% in the EU) lags behind countries like China, which invests 4.5% of its GDP in low-carbon initiatives.

Some EU member states and industries advocate for reducing bureaucratic red tape, arguing that current requirements impose excessive burdens.

Can Europe Balance Net-Zero Climate Goals with Economic Growth?

The EU’s climate-neutral goal offers both opportunities and risks. On one hand, leading the green transition could boost innovation and create jobs in new industries. On the other, shifting too fast could weaken existing industries and require massive investments as explained in this article.

The debate between Vandenberghe and Demarty is a clear illustration of this struggle. The answer depends on how well policymakers design regulations that protect both the climate and industry.

The European Commission therefor already launched the Competitiveness Compass, a plan to cut red tape, simplify regulations, and boost investment in key industries. This initiative aims to help the EU compete with China and the U.S. while keeping its climate policies of net-zero on track. It also supports emerging sectors like green tech, artificial intelligence, and quantum computing.