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1、Escaping the Permanent Suez:Navigating the Geopolitics of European DecarbonizationBen Judah,Shahin Valle,and Tim SahayAtlantic CouncilEUROPE CENTERAtlantic CouncilGLOBAL ENERGY CENTERAtlantic CouncilGLOBAL ENERGY CENTERThe Europe Center conducts research and uses real-time analysis to inform the act

2、ions and strategies of key transatlantic decisionmakers in the face of great power competition and a geopolitical rewiring of Europe.The Center convenes US and European leaders to promote dialogue and make the case for the US-EU partnership as a key asset for the United States and Europe alike.The G

3、lobal Energy Center develops and promotes pragmatic and nonpartisan policy solutions designed to advance global energy security,enhance economic opportunity,and accelerate pathways to net-zero emissions.The Atlantic Councils Transform Europe Initiative is an exciting new body of work housed within t

4、he Councils Europe Center working in close collaboration with the Global Energy Center.Based on the lessons of the Kremlins war on Ukraine,the Transform Europe Initiative aims to strengthen European security against petro-aggression and climate change.The initiative aids in the development of struct

5、ural reforms and expedited but practical solutions that promote Europes decarbonization and defenses against climate change.EUROPE CENTEREUROPE CENTERAtlantic CouncilGLOBAL ENERGY CENTERISBN:978-1-61977-299-1Cover:Power-generating windmill turbines are pictured at the Amrumbank West offshore windpar

6、k in the northern sea near the island of Amrum,Germany September 4,2015.REUTERS/Morris Mac Matzen.This report is written and published in accordance with the Atlantic Council Policy on Intellectual Independence.The author is solely responsible for its analysis and recommendations.The Atlantic Counci

7、l and its donors do not determine,nor do they necessarily endorse or advocate for,any of this reports conclusions.January 2024EUROPE CENTEREUROPE CENTERAtlantic CouncilGLOBAL ENERGY CENTEREscaping the Permanent Suez:Navigating the Geopolitics of European DecarbonizationBen Judah,Shahin Valle,and Tim

8、 SahayEscaping the Permanent Suez:Navigating the Geopolitics of European DecarbonizationIIATLANTIC COUNCILCONTENTSINTRODUCTION 1CHAPTER 1:EUROPES PERMANENT SUEZ 5CHAPTER 2:EUROPES CRITICAL CHOICES 12THE FISCAL PROBLEM 12THE HOSTAGE PROBLEM 15THE COLLECTIVE ACTION PROBLEM 17THE JUST TRANSITION PROBLE

9、M 18THE INDUSTRIAL PROBLEM 20CHAPTER 3:THE GREEN WORLD ORDER 25THE DEATH OF THE OLD ORDER 27CLASH OF THE GLOBAL INDUSTRIAL POLICIES 31THE CLASH OF THE GLOBAL MINING WEBS 33THE MINING STATES STRIKE BACK 34FUNDING A GLOBAL TRANSITION 41CONCLUSION AND RECOMMENDATIONS:EUROPES RESPONSE TO THE GREEN WORLD

10、 ORDER 43MAKING THE UNION FIT FOR PURPOSE 43MAINTAINING GLOBAL COOPERATION 44EUROPE,THE UNITED STATES,AND CHINA 45POLICY RECOMMENDATIONS 47ABOUT THE AUTHORS 49Escaping the Permanent Suez:Navigating the Geopolitics of European Decarbonization1ATLANTIC COUNCILINTRODUCTIONIn Europe,you can already see

11、the future.Fly over the North Sea to Britain or take a leisurely train across cen-tral Spain and view the array of white wind turbines dot-ting down below or the scale of glinting blue panels stretching over the dry and dusty Spanish landscape as far as the eye can see.Though these signs of progress

12、 herald the early leadership of Europe in the quest for net zero,the continent faces a geopolitical predicament in this industrial revolutionmade more evident in the shadow of the war in Ukraineand with high stakes in an intensifying global competition in general and for green technology and clean e

13、nergy in particular.While decarbonization will eventually offer Europe some level of respite from the geopolitics of energy shocks and pipeline blackmail at the hands of authoritarian suppliers,of which Vladimir Putins Russia is only the latest iteration,the more secure and prosperous future promise

14、d by the clean energy revolution is by no means guaranteed.The transition has become itself a source of geopolitical competition,with its own dependencies that must be managed cautiouslyfrom nuclear fuel to critical raw materials.The global balance of power is shifting as a result and could put Euro

15、pe in a newly precarious situation.Success in this endeavor is critical:it will define Europes economic future and place in the world.Europe will,how-ever,need to first look inward:the European Union must overcome major internal blockages,revolutionize its fiscal policy,and take a stand on a critica

16、l range of policy and political trade-offs.This will not only involve rationalizing its energy and environment policies at the EU level,but better coordinating this endeavor when it comes to the initiatives of national governments.Then the bloc will have to look outward:the global landscape is defin

17、ed by the decay of the old trading order,authoritarian energy suppli-ers,emerging mining powers,and especially the huge risk that rising superpower competition between the United States and China will derail decarbonization.Model of natural gas pipeline and Russian flag,July 18,2022.REUTERS/Dado Ruv

18、ic/IllustrationEscaping the Permanent Suez:Navigating the Geopolitics of European Decarbonization2ATLANTIC COUNCILTo understand this journey,we begin with a historical over-view,situating Europes current painful predicament as part of a wider pattern defining its geopolitical experience of the oil a

19、nd gas age.The first chapter focuses on how energy and power are fundamentally related in history.It only takes a glance at a map of the coaling stations of the British Empire,stretching out to Hong Kong,to realize that.It is not an accident that the British and French built great empires in the coa

20、l age,when both countries had Gulf-level deposits of what powered their day.We argue that the transition to the oil age was brutal for Europe.Simply put,the soil and seas of the European states do not have enough oil and gas to power themselvesthis fact has left it at a historic disadvantage.As coal

21、s winners declined in the mid-twentieth century,oils winners rose:chiefly the United States,Russia,and the Gulf monarchies.And in the twenty-first century the United States has been rising further only due to the shale gas revolution that turned the nation into a net hydrocarbon exporter through the

22、 2010s.Europe has been caughtin various relationships of dependency and vulnerabilitybetween these three energy powers.Even to this day,this fundamental underlying condition hasnt changed.Russias assault on Ukraine,triggering its energy war and the massive inflationary shock that has rolled over its

23、 consumers,has driven European trea-suries deeper into debt.In 2022,just like in 1973 when it was hit with the Arab oil embargo,Western Europe found its fundamental vulnerability exploited over a war on its periphery.Though wrong in his ethics and execution,the historical record has shown that Briti

24、sh Prime Minister Anthony Eden was right to perceive the Suez Crisis and the passing of European hegemony in the Middle East as a critical turning point:its prosperity ever since has been punctuated by the kinds of authoritarian blackmail he feared.1 This is what this report identifies as the per-ma

25、nent Suez.Effectively,this report argues that Europes energy imports,and especially hydrocarbon addiction,has made its vulnerability worse.European energy transition and decarbonization,if success-ful,can therefore benefit both security policy,removing the Russian state companies Gazprom and Rosneft

26、 from its crit-ical suppliers,and also foreign policy,removing European funding for these oppressive,interventionist regimes.This future would be in stark contrast to the year 2022,which 1 DR Thorpe,“What We Failed to Learn from Suez,”Telegraph,November 1,2006,https:/www.telegraph.co.uk/culture/3656

27、288/What-we-failed-to-learn-from-Suez.html.2 Jessica Aizarani,“Leading Supplying Countries of Liquefied Natural Gas(LNG)to the European Union(EU-27)in 2020 and 2021,”Statista,January 2023,https:/ Charlie Cooper and Antonia Zimmermann,“Qatar Scandal Gives Europe a Big Gas Headache,”Politico,December

28、19,2022,https:/www.politico.eu/article/qatargate-germany-european-parliament-qatar-corruption-scandal-gives-europe-a-big-gas-headache/.3 Jeff D.Colgan,Alexander S.Gard-Murray,and Miriam Hinthorn,“Letting Europes Energy Crisis Go to Waste:The Ukraine Wars Massive Fossil Fuel Costs Fail to Accelerate

29、Renewables,”Brown University Watson Institute of International and Public Affairs,Climate Solutions Lab,August 1,2023,2,https:/watson.brown.edu/files/watson/imce/news/ResearchBriefs/2023/WI_Europe_s%20Energy%20Crisis_MP-3574_Final%20%281%29.pdf.saw a FIFA World Cup being celebrated in Qatar while it

30、s government was accused of bribing European parliamen-tarians,and Russia,despite all of Europes sanctions,still receiving billions of dollars a day in payments for energy supplies,such as natural gas,oil,and nuclear fuel,which the continent acutely needed.2 This is an omen of the future even amid a

31、n energy transition:Gulf states,now major cap-ital exporters and players in Europe in their own right,will be empowered by this process for many decades as their share of global oil output rises as a result.We argue that the capacity shown in Europe in 2022 in reducing reliance on Russian energy sho

32、uld be a tem-plate for the future:to reduce the democratic continents broader reliance on these energy consolidated autocra-cies.Not only does Europe have the financial capacity,but it has the incentives given how much it is paying today for not moving faster on decarbonization and for ignoring its

33、natural gas dependency on Russia.Since the wider war in Ukraine began,Europe has incurred more than 1 trillion($1.11 trillion)in extra fossil fuel costs,including both market costs from high prices and related government spending or announcements:this sum could have covered 57 per-cent of the cost o

34、f a year of spending necessary to achieve a rapid clean energy transition.The extra fuel costs also are more than ten times larger than its aid to Ukraine.3 The second chapter focuses on Europes geopolitical vi-ability in this transition.The outcome,we argue,will de-pend on it overcoming a series of

35、 internal blockages that hamper its ability to act to resolve a number of challenging trade-offs.Domestic,foreign,and energy policies cannot be disentangled in the geopolitics of the transition to net zero.The European Unions political system will have to overcome five fundamental internal challenge

36、s related to energy,fiscal,industrial,and foreign policy in order to nav-igate effectively.The first is the fiscal problem,which is that the blocs fis-cal rules and its ineptly small EU budget limit the neces-sary financing for such an endeavor.The second is the hostage problem,which is that nationa

37、l politics have been held hostage by domestic anti-transition forces and interests.The third is the collective action problem,with national veto players at the European level able to hold back collective EU policy.The fourth is the just transition problem,exemplified by the Gilets Jaunes(Yellow Vest

38、s)Escaping the Permanent Suez:Navigating the Geopolitics of European Decarbonization3ATLANTIC COUNCILmass protest movement in France,which showed the risk of a lack of popular legitimacy for an anti-redistributive transition when emissions are known to be caused mostly by the richest countries and s

39、ocial groups.The fifth is the industrial problem,which is that Europes industrial base is eroding and successful industrial policy is hard,prone to white elephants,and getting harder as climate change and geopolitical competition disrupt supply chains.Addressing these fundamental questions and these

40、 difficult trade-offs is essential for Europe to take the necessary leap out from its permanent Suez crisisor see it worsen.In our third chapter,we conclude there is no escape from geopolitics.Temporarily obscured by the pandemic and the war in Ukraine but vastly more significant in the long term is

41、 the fact that the planks of a new green world order,where countries compete for green technology leadership,for critical resources,and the benefits of lower and stable energy prices,are all falling into place.The first element of this is the emergence of two competing regimes of green industrial po

42、licy.Xi Jinpings 2020 net zero pledge and Joe Bidens August 2022 Inflation Reduction Act(IRA)mark,at least in principle,a turning point where each superpower is competing through subsidies to dominate the decar-bonized industries of the future in sectors such as wind,batteries,and carbon capture and

43、 access to the vast mate-rial resources required to build them.The question now is whether Europe can become a third superpower in decar-bonization.While the original European Green Deal in 2019 built out a broad range of regulatory policies,it needs to be substantially upgraded and fiscally backed.

44、Simply put,the EUs Green Deal currently lacks the financial backing to realize its decarbonization aims.The second element of this green world order concerns critical raw materials.Given that an electric vehicle(EV)currently takes six times more minerals to make than a tra-ditional combustion engine

45、,and given the broad industrial needs of electrification beyond transport,decarbonization will be defined by long and energy-intensive mining and minerals processes.Once again,Europe is not minerally endowed with these resources and will be forced to ex-tract them from resource-rich allies and partn

46、ers,of varying types,and from a myriad of less-developed states.The geo-political contest ahead for accessing these resources will be daunting and will bring fundamental choices to Europes political leadership including stark choices between the United States and China,but also a new relationship wi

47、th critical mineral producers in less-developed states.Because China has built a global mining regime of interests,access,4 Mary Hui,“Europes Latest Energy Security Tactic:Hoarding Chinese Solar Panels,”Quartz,July 20,2023,https:/ William Alan Reinsch and Sen Arrieta-Kenna,“A Dark Spot for the Solar

48、 Energy Industry:Forced Labor in Xinjiang,”Center for Strategic and International Studies,April 19,2021,https:/www.csis.org/analysis/dark-spot-solar-energy-industry-forced-labor-xinjiang.and extraction through financial largesse and opportunis-tic state lending that back government initiatives,the E

49、U is now playing catch-up.The central questions here are unre-solved:Should the United States and the EU jointly form a market-changing critical raw materials club?To what extent would Washington use such a club as a tool against China?Or would the United States focus on itself,locking down the reso

50、urces of Australia and Canada with their cooperation to fuel its transition without working with the EU?This means the round-the-world trips of EU and German leaders sourcing new green deals herald a new problem:that of the relationship with the mining states,many of which are less-developed countri

51、es.Brussels and Berlin must recognize that unless fairer trading relationships are developed,the risk is not only of acute shortages of critical raw materials but also geopolitical blowback.This could take the form of an OPEC-like cartel of states,many of which feel historically wronged by Europe,ab

52、le to wrest concessions or elicit a more compelling offer from China.The risks of a fragmented world crystallizing on the ques-tion of access to critical raw material are considerable,and already emerging to some extent.However,Europe needs to tread carefully to avoid tones or tactics that smack of

53、neocolonialism and hypocritical relationships;or again fund support for consolidating authoritarian regimes.The value chains of the future are the third element of this green world order.These competing regimes of industrial policy and raw materials will define who dominates these growth sectors and

54、 which societies capture much of the wealth they produce.This means Europe risks widespread deindustrialization if its green industries are uncompetitive.Both America and China pose fundamental problems in in-dustrial policy.Europes erratic superpower ally is designing its industrial policy with lit

55、tle care for its impact on the EU,as clearly illustrated by the original 2022 Inflation Reduction Act,at the same time as it is seeks Europes alignment re-garding policy toward China.Meanwhile,China,the global autocratic superpower trading partner,has already stormed ahead of supposedly cutting-edge

56、 Europe.China is the world supplier of key green components such as wind tur-bines and electrolyzers,and has up to a 90 percent share of the European market for solar panels,many of which were made with slave labor in Xinjiang.4 This is an import-ant threat to Europes competitive edge in the tools a

57、nd machinery of the clean energy revolutionand also in the car industry,where China is becoming the EV global leader and export champion.However,Europe cannot achieve its decarbonization goals without China or the United States.Escaping the Permanent Suez:Navigating the Geopolitics of European Decar

58、bonization4ATLANTIC COUNCILThe fourth element in the green world order is financing the energy transition in less-developed countries.Advanced economies,even if they fully decarbonize their own so-cieties,need the assistance of less-developed states to do the same,as that is where emissions are proj

59、ected to rise the fastest,accounting for half of global emissions by 2030.However,less-developed states need help to fund,finance,and transfer technology in what is an incredibly costly endeavor for these developing societies.The rise of China as a development and finance player and lender of last r

60、esort offers these states another avenue,and that role has diminished the influence of the World Bank and the International Monetary Fund,which are in need of profound and potentially unachievable reform.The EU,however,has in principle enough influence in the Bretton Woods institutions and global fi

61、nancial architecture to un-lock considerable development financing and advocate for reform.But current progress on reforming international fi-nancial institutions is discouraging,instead fueling distrust from developing economies.We conclude that decarbonization has only just started,but Europe is e

62、ntering this new world order from a po-sition of weakness.Internally,the European Union will have to take dramatic steps to integrate fiscallywith an expanded budget and its own taxing powersin order to achieve decarbonization.Externally,the EU must nav-igate a difficult path,working with both the U

63、nited States and China and fostering cooperation in this combined race to net zero emissions and green geopolitical power.This balancing act requires diplomacy to avoid serious confrontation between the two superpowers,which would have catastrophic consequences for the global climate goals and emiss

64、ion reductions targets.Europe must be wary of the geopolitical spillovers from this de-carbonization race.Moreover,it must resist the tempta-tion to free ride and let others undertake the cost of the transition.This is a matter of the European interest,as there are also exclusive benefits of taking

65、the lead in the transition regarding industrial capacity,energy indepen-dence,and access to critical resources.5 Nina Lakhani,“$700m Pledged to Loss and Damage Fund at Cop28 Covers Less than 0.2%Needed,”Guardian,December 6,2023,https:/ address this tension,this report proposes that the European Unio

66、n should work with the United States on a critical raw materials club with two conditions:an essential agreement not to weaponize the club against China,hypothetically risking its access to such necessi-ties,and an offer to Beijing to reduce limits on what can be imported from China under its Net Ze

67、ro Industrial Act(NZIA)transition plans,which are unrealistic and likely to be missed in any case.This constructive approach to both China and the United States provides the needed balance.But Europe should not grant this for free.In exchange for Chinas deep and meaningful cooperation on climate cha

68、nge,for example at the Conference of the Parties,or COP sessions,and elsewhere,Brussels should reassure Beijing and be willing to negotiate about the depth and pace of its economic derisking strategy.Meanwhile,facing the developing world,the European Union should push for fairer mineral ties to stab

69、ilize prices and to avoid shortages and a new OPEC-style hostile car-tel,which would guarantee Europe long-term purchasing orders and incentives.In international institutions,the EU must work and lean heavily on the United States to reform international financial institutions to unlock funding for d

70、e-carbonization for the developing world,such as boosting the capital for the World Bank and easing regulations out-lining borrowing restrictions for climate financing including unlocking IMF special drawing rights.Furthermore,the EU should champion and seek to build a global spending-tar-get coalit

71、ion that is committed to annual spending based on a percentage of gross domestic product(GDP)and related to progress on global emissions.This aspect will not be easy,especially when looking at the discouraging progress of discussions on establishing a loss and damage fund at the COP27 and COP28 clim

72、ate summits.5 However,these measures are necessary if Europe is to answer in the affirmative the question haunting it as it enters the transi-tion:is it to beor not to bea pole in the emerging green world order?Currently,the European Union,like postwar Britain before it,is on a path toward industria

73、l decline and geopolitical marginalization in this new age.Escaping the Permanent Suez:Navigating the Geopolitics of European Decarbonization5ATLANTIC COUNCILCHAPTER 1:EUROPES PERMANENT SUEZ 6“Aneurin Bevan 18971960 British Labour Politician,”in Oxford Essential Quotations,ed.Susan Ratcliffe(Oxford:

74、Oxford University Press,2016),https:/ British Empire,”New York Times,June 20,1897,https:/ Ralph Waldo Emerson,“Wealth,”in The Conduct of Life,accessed March 21,2023,https:/ Helen Thompson,Disorder:Hard Times in the XXIst Century(Oxford University Press,2022).10 John Urry,“The Problem of Energy,”Theo

75、ry,Culture&Society 31,no.5(2014),https:/ Jonathan Kuiken,“Caught in Transition:Britains Oil Policy in the Face of Impending Crisis,19671973,”Historical Social Research/Historische Sozialforschung 39,no.4(2014):276.12 Mohamed Sassi,“The Emergence of the French Oil Industry between the Two Wars,”Busin

76、ess and Economic History On-Line 1(2003):13,https:/thebhc.org/sites/default/files/sassi.pdf.13“When Oil Became Black Gold,”Harvard Gazette,January 1,2005,https:/news.harvard.edu/gazette/story/2005/01/when-oil-became-black-gold/.It was the Labour politician Aneurin Bevan who in May 1945 memorably qui

77、pped that Britain was an island made mainly of coal and surrounded by fish.6 Like many jokes,the future cabinet members remark spoke to a deeper truth.Britain had steamed itself to unparalleled global domination in the nineteenth century on the back of coal rather than Victorian martial virtues or a

78、ny specific genius in the“Anglo-Saxon race,”contrary to the widely held beliefs of imperial elites at the time.This was the Britain of Bevans birth in 1897:a global en-ergy superpower.Imperial Britain had the best capacity to exploit the energy resources of its time and became the Saudi Arabia of co

79、al.On the eve of World War II,the country was the worlds largest producer and exporter of coal.This innate geological advantage,the literal scene of Bevans childhood as the son of a coal miner,had inflated his islands manufacturing and imperial ambitions to such heights in 1897 that The New York Tim

80、es had talked of the United States as“belonging”in a wider sense to a global order that was the British Empire.7 It was a transcontinen-tal political system that could be mapped by the coaling stations that supported its fleet from Halifax and Aden to Singapore.The geological conditions that found t

81、hemselves so ex-traordinarily favorable to British power were also to be found in France,Belgium,and Germany,where the easily accessible coal of the Pas de Calais,Wallonia,and the Ruhr also drove industrialization,expansionism,and,ultimately,imperialism in Africa.It was not an accident that Western

82、Europe,self-sufficient in the resources behind nine-teenth-century modernity,would enjoy what Berlin official-dom once called its“place in the sun.”The geological basis upon which power at the time was built and projected was widely appreciated by contemporaries.The American phi-losopher and poet Ra

83、lph Waldo Emerson once remarked:“We may well call coal black diamonds.Every basket is power and civilization.and with its comfort brings its industrial power.”8 However,it was a new scientific revolution that would slowly set in motion Europes demotion from the geopolitical pin-nacle.Simply put,coal

84、 cannot be burned easily in internal combustion engines,which require the higher caloric val-ues of oil,diesel,and kerosene to generate energy.And once these engines had reached a sophistication that would allow them to revolutionize both transport and warfare,the writing for Europes energy ascendan

85、cy was on the wall.9Europes looming energy problem was clearly visible by the eve of World War I,10 recognized by none other than Winston Churchill,then the first lord of the Admiralty.When making his fateful 1914 decision to switch the Royal Navy from sluggish coal to faster oil propulsion,thanks t

86、o the in-ternal combustion engine,Churchill realized how exposed Britain would be,with no known oil reserves at home.It was clear to him that these resources were outside of Europe and that meant Britain needed to hold onto them through a new form of Middle Eastern energy empire,lead-ing him directl

87、y to purchasing a 51 percent stake in the Anglo-Persian Oil company.11Western Europes new vulnerability was made visible by war.Only three years later,French Prime Minister Georges Clemenceau sent a telegram to US President Woodrow Wilson including this line:“France must possess the gaso-line that w

88、ill be necessary as blood in tomorrows battles.”12 The fact that the Entente did and Wilhelmine Germany did not was as crucial to the outcome of the war,in their favor,as the introduction of tanks,which would run over the trenches on oil anyway.The energy dimension to power was perfectly clear to no

89、nesuch a Victorian figure as Lord George Nathaniel Curzon of Kedleston,the former foreign secretary and iconic viceroy of India,who observed:“The Allies floated to victory on a wave of oil.”13 The trouble ahead was that little of the fuel of the armies,fleets,and automobiles of the future was in Wes

90、tern Europe.Europes bad luck in the emerging oil world was clear by WWII.Germanys oil starvation had contributed to its defeat,Escaping the Permanent Suez:Navigating the Geopolitics of European Decarbonization6ATLANTIC COUNCILFigure 1:A Brief Timeline of Europes Energy Vulnerabilities2022:Russia lau

91、nches its invasion of Ukraine,once again exposing Europes reliance on Russian hydrocarbons.111990:Iraq invades Kuwait,triggering the First Gulf War as the international coalition expels the Iraqi military from Kuwait and restores oil exports from the region.Over the following year,the USSR collapses

92、,and post-Soviet Russia steadily increases its pipeline infrastructure with Europe for the next few decades101979:The Iranian Revolution overthrows the Shah and installs the Islamic Republic,disrupting global oil supplies again and causing economic upheaval.91973:Arab states impose an oil embargo on

93、 the United States,Canada,and much of Western Europe due to their support of Israel in the Yom Kippur War.This increases European searches for other sources of oil,such as from the USSR.The first oil shipments via Europe-Soviet pipelines begin as well.81953:MI6 and the CIA overthrow Iranian PM Moham

94、mad Mosaddegh after his government attempts to nationalize the Iranian oil industry.71947:Two years after the end of WWII,amid the emerging Cold War,the Truman Doctrine is officially revealed while the Aramco agreement,which opens Saudi Arabia up to US energy firms,is signed.61939:World War II break

95、s out.Over the course of the war,the Axis powers repeatedly attempt but fail to gain control over oil reserves across the Middle East and Caucasus,contributing to their eventual defeat.Meanwhile,the British Empire and United States increase their military presence in the region,with the UK and USSR

96、jointly occupying Iran to secure its oil supply while US military support for Saudi Arabia grows.51932:Standard Oil of California strikes oil in Bahrain,increasing foreign interest in the Arabian Peninsula for oil.Shortly after,the Kingdom of Saudi Arabia is proclaimed following the merging of the K

97、ingdoms of Hejaz and Nejd.41918:WWI comes to an end.The British Empire cements its influence over much of the Middle East,particularly Iraq.31914:After First Lord of the Admiralty Winston Churchill authorizes the Royal Navy to switch from sluggish coal to faster oil-powered combustion engines,the UK

98、 government acquires a 51%stake in the Anglo-Persian Oil Company.World War I breaks out shortly after.21893:Rudolf Diesel invents an internal combustion engine that bears his name.1Escaping the Permanent Suez:Navigating the Geopolitics of European Decarbonization7ATLANTIC COUNCILwith the two real vi

99、ctors,the United States and the Soviet Union,the worlds largest and second-largest oil producers,respectively.14 Nobody knew this better than Europes des-perate immediate postwar treasury officials.They already knew their lack of oil put it in what would be a lasting finan-cial disadvantage:not only

100、 in the immediate postwar years was oil the single largest item in most European countries budgets,but between 1948 and 1952,about 10 percent of the Marshall Plan aid was used to buy it.15Meanwhile,on the other side of the Atlantic,it was already clear to Washington strategists that in the emerging

101、Cold War,Western Europe would be dependent on outsiders,squeezed by three oil centers of power.In 1945,the US State Department noted that Saudi Arabian reserves would,if developed,constitute“a stupendous source of strategic power,and one of the greatest material prizes in world history.”16 And as a

102、result,US Senator Owen Brewster surmised in 1947,“Europe in the next ten years may shift from a coal to an oil economy and therefore whoever sits on the valve of Middle East oil may control the destiny of Europe.”17This was not lost on the Western Europeans themselves.While Britain had no problem in

103、 letting go of rebellious territories of its old colonial empire like Palestine and India in 1947,it was ready to fight to defend its new energy empire of stakes and intereststhe one which Churchill himself had initiated with the 1914 Anglo-Iranian purchase.Therefore,the first European postwar strat

104、egy to deal with its oil vulnerability was trying to directly control the key junctures of the Middle East.This can most clearly be seen in the logic behind British involvement in the coup that overthrew the democratically elected Iranian government of Mohammad Mosaddegh in 1953.18 14 Keith Martin,“

105、The Big Inch:Fueling Americas WWII War Effort,”National Institute of Standards and Technology,March 26,2018,https:/www.nist.gov/blogs/taking-measure/big-inch-fueling-americas-wwii-war-effort;and Frederick Phillip Hellin,“Russias Oil and Hitlers Need,”Atlantic,June 1942,https:/ David S.Painter,“The M

106、arshall Plan and Oil,”in Cold War History 9,no.2(2009):159175,https:/ Foreign Relations of the United States:Diplomatic Papers,1945,Volume VIII,The Near East and Africa(Washington:Government Printing Office),Document 20,https:/history.state.gov/historicaldocuments/frus1945v08/d20.17 Edward H.Shaffer

107、,The United States and the Control of World Oil(Milton Park,United Kingdom:Taylor&Francis,2016),143.18 Vanessa Thorpe,“MI6,the Coup in Iran that Changed the Middle East,and the Cover-up,”Guardian,August 2,2020,https:/ Press for New Oil Deal,”New York Times,October 6,1964,https:/ Mossadegh was overth

108、rown,AIOC never regained full access over Iranian oil.AIOC,which was later renamed British Petroleum Amoco in 1954,was made to join a US-dominated consortium and gained only a fraction of Iranian oil afterwards.See“Iran Tells Oil Consortium Pact Will Not Be Renewed,”New York Times,January 24,1973,ht

109、tps:/ Mary Ann Heiss,“The United States,Great Britain,and the Creation of the Iranian Oil Consortium,1953-1954,”International History Review 16,No.3(August 1994),51135,https:/www.jstor.org/stable/40107317.20 Dennis Merrill,“The Truman Doctrine:Containing Communism and Modernity,”Presidential Studies

110、 Quarterly 36,no.1,Presidential Doctrines(March 2006),2737,https:/www.jstor.org/stable/27552744.21“Contract Let for Big Oil Pipeline in Arabia,”Pacific Maine Review 44(March 1947),1145,https:/archive.org/details/pacificmarinerev4447paci/page/n294/mode/1up.22 Merrill,“The Truman Doctrine.”23 Robert O

111、.Collins,“In Search of the Nile Waters,19002000,”in The Nile:Histories,Cultures,Myths,ed.Haggai Erlich and Israel Gershoni(London:Lynne Rienner Publishers Inc.),2567;Charles B.Selak Jr.,“The Suez Canal Base Agreement of 1954,”American Journal of International Law 49,no.4(October 1955),4878,https:/ww

112、w.jstor.org/stable/2194417;and Jean Edward Smith,Eisenhower in War and Peace(New York:Random House,2013),692.Very quickly,this proved to be an unsustainable European strategy.Neither British intervention in Iran nor French desire to retain direct control over the oil resources of the Algerian Sahara

113、 succeeded midterm.19 Prefigured by Mosaddegh,postcolonial Middle Eastern states were already accruing agency to challenge their old overlords.International poli-tics,much to the worry of the aging Churchill,was already sharply bipolar,between the nuclear-armed American and Soviet camps,leaving litt

114、le room for maneuver.These two trends had met,at the very start of the Cold War,in Saudi Arabia,with help from the United States.20 It was no accident that the 1947 Truman Doctrine was an-nounced within weeks of the launch of the Trans-Arabian Pipeline,dramatically opening up Saudi production to the

115、 world.21 Washington,keen to pursue its own energy empire of stakes and interests,had secured with King Abdulaziz to have its own oil companies exploit the buried treasure prospected for across Saudi Arabia.British and French firms were absent from this bonanza.Lacking domestic and international pet

116、rodollars at scale,European states balance of payments remained precariousa key source of vulnerability.22These were the trends which would conspire in Europes world historical crack-up in the 1956 Suez Crisis.Rising Middle Eastern agency,this time personified by the Egyptian leader Gamal Abdel Nass

117、er,was visible as Cairo nationalized the British-French-owned Suez Canala di-rect act of defiance against the European strategy of re-taining control of regional infrastructure critical to energy economies.But it was not Arab resistance that called off the British-French expedition,in collusion with

118、 Israeli forces,which swiftly and effectively seized the canal,but the crushing dynamics of Cold War bipolarity.23Escaping the Permanent Suez:Navigating the Geopolitics of European Decarbonization8ATLANTIC COUNCILWashington,fearing for its own geopolitical and energy interests in the Middle East,dip

119、lomatically pummeled Britain and France.Against a backdrop of Soviet threats,US Ambassador to the United Nations Henry Cabot Lodge Jr.was able to push for a cease-fire to prevent further es-calation by the UK-French campaign.24 Europes intertwined energy and fiscal weakness in the new regime proved

120、its undoing:while it had prepared for Saudi Arabia impos-ing an oil embargo,it had not expected the United States to threaten to sell British sterling bonds.Consequently,London had no choice but to call off the invasion or face fiscal calamity.This dynamic was abundantly clear to President Dwight D.

121、Eisenhower himself;after preventing American oil companies from rerouting oil to the French and British,he mused:“Those who began this operation should be left to work out their own oil problemsto boil in their own oil.”2524 Michael Seiler,“Henry Cabot Lodge Jr.,Ex-Senator,Dies at 82:Was Ambassador

122、to South Vietnam and to United Nations,”Los Angeles Times,February 28,1985,https:/ David A.Nichols,Eisenhower 1956:The Presidents Year of CrisisSuez and the Brink of War(New York:Simon and Schuster,2011),188274.Later,the leader of the British opposition,Hugh Gaitskell,explained the ramifications of

123、the Suez Crisis:The Suez Canal is blocked for many months,we are in great difficulties over oil supplies,we face fi-nancial and economic crises at home,we have lost any influence that we had in the Arab States,we have thrown the Arab States wide open to Russian influence,we have created very grave d

124、ivisions in the Commonwealth,we have created a breach in the Anglo-American understanding which used to exist,and we have very seriously damaged our reputation abroad for fair-mindedness,honesty and support for the United Nations.29 Europes first strategy for the oil ageexternal controllay in ruins

125、and Prime Minister Eden,who spearheaded the Smoke rises from oil tanks beside the Suez Canal hit during the initial Anglo-French assault on Port Said,November 5,1956.Wikipedia/Imperial War Museums(https:/en.wikipedia.org/wiki/File:Port_Said_from_air.jpg).Escaping the Permanent Suez:Navigating the Ge

126、opolitics of European Decarbonization9ATLANTIC COUNCILill-fated Suez operation,would find himself written up as a fool in European history.Downing Street had failed to fully grasp the big picture of the continents new predic-ament in the oil age.Europe,in oil-fueled bipolarity had neither the politi

127、cal nor the financial independence to defy Washington.This was the lesson that London would take to heart.However,viewing Nasser as a fascist-like irreden-tist figure,26 Eden was right about one thing.Warning that the dictator“cannot be allowed to have his thumb on our windpipe,”27 he was correct to

128、 identify Europes future as one where neighboring authoritarians would repeatedly blackmail it over energy.This possibility has remained ever since:the permanent Suez.Europes history has since been an attempt to escape from this situation.Following the debacle over the canal,the leading European cou

129、ntriesBritain,France,Italy,and Germanyeach pursued energy strategies to secure their supply through privileged partnerships with authoritarians.London,with British Petroleum in the lead,built privileged relationships with the Gulf monarchies of Kuwait,Oman,and the United Arab Emirates,which gained i

130、ndependence from the British Empire in the 1960s and 1970s.Italy,mean-while,turned south,with its state-owned oil company,later known as ENI,offering very generous profit-sharing deals to corner concessions in North Africa,especially Libya.France similarly focused on West Africa with the likes of El

131、f,which following a merger is now known as TotalEnergies.Meanwhile,West Germany looked east toward the massive hydrocarbon discoveries taking place in the USSR.28At first,cheap oil flowed in the postcolonial days,but Edens fears would quickly materialize when a war in Europes periphery triggered blo

132、wback on the European powers.Amid US assistance to Israel in the 1973 Yom Kippur War,King Faisal in Riyadh and the Organization of Arab Petroleum Exporting Countries(OAPEC)announced an oil embargo.Taking the form of country-specific export bans and production decreases,the main targets were the Unit

133、ed States,Canada,Britain,and the Netherlands.But,as was well known to King Faisal,the economies and the 26 DR Thorpe,“What We Failed to Learn from Suez.”27 Ian Black,“How We Failed to Learn the Lessons of Suez,”Guardian,September 30,2006,https:/ James Onley,Britain and the Gulf Shaikhdoms,18201971:T

134、he Politics of Protection(Washington:August 18,2009),1016,https:/www.files.ethz.ch/isn/110431/CIRSOccasionalPaper4JamesOnley2009.pdf;Silvio Labbate,“Italy and Its Oil Dealings with Libya.Limits and Obligations of a Dependency:The Difficult 1970s and 1980s,”Middle Eastern Studies 56,no.1(June 2019),8

135、499,https:/ R.Frears,France in the Giscard Presidency(Boston:George Allen&Unwin,1981),109127;and Arthur Sullivan,“Russian Gas in Germany:A 50-year Relationship,”Deutsche Welle,March 9,2022,https:/ Robert Lacey,The Kingdom:Arabia&The House of Saud(New York:Harcourt Brace Jovanovich,1981),413;and Offi

136、ce of the Historian,“Oil Embargo,19731974,”US Department of State(website),accessed February 22,2023,https:/history.state.gov/milestones/1969-1976/oil-embargo.30 Giuliano Garavini,“Thatchers North Sea:The Return of Cheap Oil and the Neo-liberalisation of European Energy,”Contemporary European Histor

137、y(2022):116,https:/doi.org/10.1017/S0960777322000686.31 Valrie Lehmann,Valrie Colomb,and Bernard Motulsky,Communication et grands projets:les nouveaux dfis(Qubec:Presses de lUniversit du Qubec,2013),141.32 Frank Bsch,“Energy Diplomacy:West Germany,the Soviet Union and the Oil Crises of the 1970s,”Hi

138、storical Social Research/Historische Sozialforschung 39,no.4(2014):165185,https:/www.jstor.org/stable/24145532.energy systems of all Western European countries would be collateral.Saudi Arabia was joined by every Arab state except Iraq and Libya,leading to as much as a 70 percent drop in Middle East

139、ern oil exports to Western Europe.The oil price rose by 300 percent,pushing European countries into stagflation.This was the first historic blowback in the permanent Suez,and accelerated Europes efforts to seek petroleum elsewhere,such as in Norway and West Africa.29 The search for energy security w

140、ould be redoubled post-1973 as Europes great quest.Initially,in a great reversal of the vision of the world held by Eden and his French part-ner in the Suez debacle,Prime Minister Guy Mollet,Britain and the members of the European Economic Community would all mollify their politics toward the Arab w

141、orld.But in the aftermath,the paths of the European Big Three would diverge.Prompted by the higher prices,Britain threw itself into developing its own discovery of North Sea oil.30 France,lacking such resources,would seek its own escape through the Messmer Plan.Named after French Prime Minister Pier

142、re Messmer,the massive build-out of fif-ty-six nuclear power plants was popularized under the slo-gan:“In France,we do not have oil,but we have ideas.”31 However,it would be principally the decisions around hy-drocarbons taken in Bonn,piloting the largest European economy,which would eventually rein

143、force the vulnera-bility to blackmail inherent in the permanent Suez,as the Federal Republic of Germany turned to Russia.The year 1973 was a turning point not just in European oil but also gas.Just as the Arab oil embargo was forcing Britain,Germany,Italy,Switzerland,and Norway to ban fly-ing,drivin

144、g,and motorboating on Sundays,the first Soviet pipeline gas was beginning to flow into West Germany.This was the result of the decisive 1970“gas for pipes”deal,in which Bonn agreed to exchange crucial pipelines building know-how for this energy.These Cold War-era German and Italian deals with the US

145、SR roused consistent US ire.32In Ally Versus Ally:America,Europe and the Siberia Pipeline Crisis,published in 1987,a young and rapidly rising Escaping the Permanent Suez:Navigating the Geopolitics of European Decarbonization10ATLANTIC COUNCILWashington scholar spoke for the Beltway establishment in

146、lamenting European hopes that“expanded economic relations will produce positive change in the Kremlin for-eign and domestic politics,”calling it“wishful thinking.”His name was Antony“Tony”Blinken and he now serves as secretary of state in the Biden administration.His book can be summarized neatly as

147、 follows:authoritarian and geo-political risk meant Russia was no escape for European economies from the permanent Suez.33It would speak to the deeper,material,and energy bases of European geopolitics that the same author would find himself crisscrossing Europe as Bidens top diplomat as Russia unlea

148、shed a broad attack against Ukraine.Just as Blinken had warned,Putin,attempting to be the King Faisal of 2022,would choose to weaponize Russian energy,choking off gas supplies to prevent Europe from building up reserves for the winter.Despite decades of institutions and capacity building,from the cr

149、eation of the International Energy Agency(IEA)to guide smart investments in energy efficiency to the development of strategic petroleum re-serves ensuring states store a fuel buffer against energy crises,Europe found itself back in the situation it had faced in 1973:a war on its periphery had result

150、ed in energy blackmail and an inflationary shock.3433 Antony J.Blinken,Ally Versus Ally:America,Europe and the Siberia Pipeline Crisis(New York:Praeger Publishers,1987).34 Stephen G.Gross,“What Europe Can Learn From the 1973 Oil Shock,”Foreign Policy,November 3,2022,https:/ Lauri Myllyvirta,“Septemb

151、er Update on Russian Fossil Fuels:EU Imports Cross EUR 100 Billion Since the Beginning of the Invasion,”Centre for Research on Energy and Clean Air,October 4,2022,https:/energyandcleanair.org/september-2022-update-on-russian-fossil-fuels/.European history is not cyclical,but each energy age brings w

152、ith it a certain existential predicament for states and economies.Nowhere better illustrates that than Europe,which fell from imperial coal hegemony into sub-ordinate oil and gas vulnerability in the leap from one age to another.Europes eventual emergence as a political and economic union began as a

153、n energy project,the European Coal and Steel Community in 1951,yet the very fact that the same role prophesied by Eden could be reprised in 2022 is damning.Once again,an authoritarian had a“thumb on our windpipe.”But the difference today is that clean en-ergy offers Europe at least partial escape.De

154、carbonization could be Europes greatest security and democracy policy if they develop the supply chains for it.Otherwise,they will supplant on energy vulnerability with another.This history casts a long shadow on todays energy networks and de-pendencies and explains Europes current vulnerability to

155、energy-rich autocracies.Indeed,despite Russian throttling of its energy supplies and extensive Brussels-led sanctions and diversification,the European Union was still spending 260 million on energy a day for much of 2022,adding up to 100 bil-lion in payments to Russia during the first seven months o

156、f the conflict.35 Decades of energy ties with the Kremlin had Burning oilfield during Operation Desert Storm,Kuwait,1991.Photo by Jonas Jordan,United States Army Corps of Engineers.Escaping the Permanent Suez:Navigating the Geopolitics of European Decarbonization11ATLANTIC COUNCILtranslated directly

157、 into a buildup of strategic corruption in-side Europe,which even the war in Ukraine and sanctions regime could not eliminate.These dependencies extend far beyond Russia and fossil fuel.They are fundamental to Europes current energy predicament.For the record,the European Union member statesFrance,i

158、n particularcontinue to import nuclear fuel from Rosatom,which has not been put under sanction.In Southern Europe,depen-dencies on the oil fields of Gabon,Republic of the Congo,or Equatorial Guinea or the natural gas of Algeria and Libya have been at the heart of intense games of two-way toxic polit

159、ical influence.Europes vulnerability is structural in this energy age.Essentially,Europes energy addictionboth fossil and nuclearhas created strong streams of funds for a wide variety of authoritarian regimes with resource deposits.In the immediate neighborhood,these snake down from Russias Yamal pe

160、ninsula,round the Urals,go through the Caspian Sea,then into the Persian Gulf,with more in North and Central Africa.Sitting along these seams,Russia,Kazakhstan,Iran,Qatar,Saudi Arabia,Libya,36 Dan Reiter and Allan C.Stam,“Why Democracies Win More Wars than Autocracies,”Washington Post,March 31,2022,

161、https:/ Desha M.Girod,Megan A.Stewart,and Meir R.Walters,“Mass Protests and the Resource Curse:The Politics of Demobilization in Rentier Autocracies,”Conflict Management and Peace Science 35,no.5(2018):503522.Algeria,Gabon,Republic of the Congo,and Niger might all have very different political cultu

162、res,but they all form a single regime type:energy resource autocracies.Facing these energy resource autocracies,Europe has a stability problem across its immediate neighborhood and beyond.Research shows that autocrats are more likely to start warsand are more likely to lose them.36 Research also sug

163、gests that energy autocrats then have the added ad-vantage of being more resistant to international sanctions regimes.37 This means that comparisons between Putins Russia and Saddam Husseins Iraq or the Islamic Republic of Iran are pertinent and the influence of key energy re-source autocracies will

164、 persist during the first few decades of decarbonization.This is a tough strategic picture.However the clean en-ergy revolution offers Europe an opportunity to diminish its vulnerabilities through decarbonization.European states together have the technical ability to greatly reduce their reliance on

165、 energy resource autocracies through a mas-sive expansion of clean energy.In this,2022 was also a turning point.Escaping the Permanent Suez:Navigating the Geopolitics of European Decarbonization12ATLANTIC COUNCILCHAPTER 2:EUROPES CRITICAL CHOICES 38 Sebastian Mang and Dominic Caddick,“Beyond the Bot

166、tom Line,”New Economics Foundation,April 28,2023,https:/neweconomics.org/2023/04/beyond-the-bottom-line.39“Communication from the Commission to the European Parliament,the European Council,the Council,the European Economic and Social Committee and the Committee of the Regions,”European Commission(we

167、bsite),February 1,2023,https:/commission.europa.eu/system/files/2023-02/COM_2023_62_2_EN_ACT_A%20Green%20Deal%20Industrial%20Plan%20for%20the%20Net-Zero%20Age.pdf.Few European countries like to admit it,but almost seventy years since Edens blunder in the Suez Canal,the ability to marshal true global

168、 geoeco-nomic influence can only be found in Brussels,when the EU acts together,not in Berlin or Paris,when members act alone.Individually they are declining medi-um-sized powers.However,the EU is a unique political creature:mixing both federal and national actors into a supranational body that is n

169、ot quite a state,not quite a federation,and not quite an international organization.This sui generis nature gives it incredible strengths,as the worlds largest trading bloc,but also considerable weak-nesses.The path for Europes continued relevance lies in addressing these weaknesses rapidly and effe

170、ctivelyand the energy cum climate crises offer a historical opportu-nity to do so.The EUs policies emerge today through a complex interplay of the European Commission,national governments,and the European Parliament.With its power siloed,distributed,and actualized for the most part through consensus

171、,and hampered by veto players,this makes the complexity of decarbonization more challenging for the EU than for unitary actors.The simpler days of Churchill decid-ing energy policy are long gone.To succeed,Europes leaders face five critical choices:First,the fiscal problem,given that current EU fisc

172、al rules and the EU budget are holding back the necessary invest-ments for decarbonization.Second,the hostage problem,as powerful carbon-intensive vested industries can hold legislatures and governments hostage.Third,the collec-tive action problem,given that the system has so many veto playersnation

173、al or even regionalthat any individ-ual government can derail or hold back the EU altogether.Fourth,the just transition problem,given that if a transition lacks legitimacy and fairness,then social consequences,protest movements,or populists can derail it.Fifth and last,the industrial problem,because

174、 Europes industrial base is eroded and industrial policy is hard and often fails.These are Europes interlocking blockages which will raise critical challenges to its polity and politics.Europe will have to find a way to overcome its crippling fiscal con-servatism,control its entrenched carbon sector

175、s to drop their backwater oppositions,find ways to bring onboard carbon-heavy regions and governments,assuage public fear and discontent by linking climate transition with social cohesion,and get the hard task of picking and supporting winners in a worsening climateand do all of the above while enco

176、uraging and achieving the highest possible de-gree of international cooperation.THE FISCAL PROBLEMEuropes Fiscal Straitjacket Harms Decarbonization It has often been said that all European politics come back to the politics of collective debt.This is nowhere more true than when it comes to climate p

177、olicy.As it stands,Europe will not be able to achieve rapid decarbonization without relaxing its fiscal rules and vastly upgrading the EU bud-get with a common borrowing facility and its own tax rais-ing powers.Currently only four EU countriesDenmark,Ireland,Malta,and Swedencan meet their national c

178、li-mate goals without breaching the existing rules.38 Europe therefore has an ambitious plan for decarbonization with-out the public financing to get there.The European Commission estimates that the EU will have to spend some 600 billion per year to achieve the ob-jectives set in its Green Deal Indu

179、strial Plan climate policy package,including existing spending,which will have to come in part from public sources.39 To achieve its decar-bonization and climate goals,Europe will therefore need to loosen its fiscal rules.Politics however,is standing in the way.Deep and flawed perceptions of nationa

180、l interest,es-pecially in countries with more“frugal”outlooks,will have to change in order for the plan to be implemented and for decarbonization to succeed.There are,however,some rea-sons for optimism.Today,unlike in the Eurozone debt crisis which followed the 2008 financial crash,European lead-ers

181、 are proving more flexible.In addition,the perception of geopolitical existential risks in Ukraine is helping to mobi-lize political will for more ambitious action.Indeed,over the past year,European countries have nationalized utilitiesincluding in Germanyplowed money into green invest-ments,and tax

182、ed the windfall profits of energy companies.Fiscal rules have now effectively been suspended or bent for several years,and once-ridiculed policies like price caps have been experimented with across Europe.However,if real progress is to be sustained,such long-term fiscal ob-stacles will have to be pe

183、rmanently lifted.This challenge Escaping the Permanent Suez:Navigating the Geopolitics of European Decarbonization13ATLANTIC COUNCILis key to the next European Commissions work program when it shepherds the Multiannual Financial Framework(MFF),which began in 2021 and will conclude in 2027.Unlocking

184、Europes path to this new economy will require change in Germany.Germanys own efforts in ramping up renewables,such as building out liquefied natural gas(LNG)terminals and infrastructures to move away from Russian gas,were impressive.40 However,it does not amount to a real European energy policy resp

185、onse,and is primarily reactive instead of proactive.For real and sus-tained decarbonization over the medium term,Berlin will have to play more collaboratively,enabling a real European energy policyand requiring profound compromise with competing visions but also shared resources behind a common visi

186、on.In turn,unless Europe is prepared to settle for structurally higher and more volatile energy prices than that of the United States or China,it will face serious eco-nomic consequences.Compounding matters further is the need for considerable public resources that the EU budget currently lacks.This

187、 is why expanding Europes borrowing capacity appears inevitable in order to mobilize the nec-essary resources for an effective transition.This can hap-pen through joint mutual debt issuance on a large scale,modeled on the Next Generation EU(NGEU)Funda tem-porary economic-recovery response during the

188、 pandemic that includes green measuresand loosen its own do-mestic fiscal straitjacket.Germany,however,is so far keen to prevent further fiscal federalization.Having pledged a 200 billion energy package for its own citizens and companies,backed in part by new borrowing,the country is now insisting t

189、hat it will oppose further joint EU debt issuance or any softening of fiscal rules that would enable other countries to raise debt.41 This goes against loud calls from other member countries,the European Commission,and even the IMF for more joint debt issuance.42 Worse still,a strict constitutional

190、rule prevents Berlin from running a budget deficit.This resistance is rooted in the Schuldenbremse,or debt brake introduced in 2009 and which has become a totemic fixture of the German political 40“Germany Builds Up LNG Import Terminals,”Reuters,September 20,2023,https:/ Parliament Approves 200 Bill

191、ion Euro Fund to Tackle Energy Crisis,”Reuters,October 21,2022,https:/ Guy Chazan and Sam Fleming,“Germany Rejects Push for Fresh EU Borrowing to Battle Energy Crisis,”Financial Times,October 30,2022,https:/ Jan Strupczewski,“IMF Calls for EU Fiscal Capacity,Rules to Be Linked to Risk,”Reuters,Septe

192、mber 5,2022,https:/ Hung Tran,“Germanys Debt Brake Isnt Working,”Econographics(blog),Atlantic Council,December 7,2023,https:/www.atlanticcouncil.org/blogs/econographics/germanys-debt-brake-isnt-working/.44 Tran,“Germanys Debt Brake.”45 Shahin Valle,Jrmie Cohen-Setton,and Dominik Buhl,“Germanys Debt

193、Brake and Europes Fiscal Stance After COVID-19,”DGAP Policy Brief,German Council on Foreign Relations,May 5,2021,https:/dgap.org/en/research/publications/germanys-debt-brake-and-europes-fiscal-stance-after-covid-19.46 Benjamin Wehrmann and Julian Wettengel,“Q&AWhat the German Top Courts Debt Brake R

194、uling Means for Climate Policy,”Clean Energy Wire,December 5,2023,https:/www.cleanenergywire.org/factsheets/qa-what-german-top-courts-debt-brake-ruling-means-climate-policy;and Shahin Valle,“Germany Has Narrowly Swerved Budget Disasterbut Its Debt Taboo Still Threatens Europe,”Guardian,December 13,2

195、023,https:/ since.43 However,these rules have been consis-tently circumvented and the German Constitutional Court is now pressing the German government to end its bend-ing of the rules.Indeed,a Constitutional Court decision in mid-November 2023 ruled the German Climate and Transition Fund unconstitu

196、tional and sent a shockwave through Germanys political system.Germany is now short of some 60 billion to underwrite its climate policy,and there might be more pressure ahead.44 This should force a serious political conversation about a new domestic fis-cal architecture,but the resistance remains hig

197、h and any political changes will be slow.Nevertheless,the reality is that Germany modifies its con-stitution often and finds a way to summon the political will to create fiscal space whenever necessary:in the 2015 European migration crisis,with record levels of asylum seekers,federal regions and mun

198、icipalities needed more financial transfers;and in 2022,Berlin agreed to create a new 100 billion off-budget defense fund.45 The current German government coalition has decided to avoid the issue altogether for now.But it will come back to haunt it,not only because of the EU but also because its own

199、 constitutional court argued in a historical ruling in 2021 that the government is not meeting its climate policy objec-tive.46 This should create profound internal tensions that can eventually only be addressed by constitutional reform and a fiscal breakthrough but this may have to wait for the Ger

200、man elections in 2025.In Brussels,meanwhile,the current negotiations to reform European fiscal rules are surely a step in the right direction,albeit a small one.In reality,the new proposed approach is more flexible than the current one,but does not guarantee that member states have all the fiscal sp

201、ace and incentives they need to finance the transition.A more ambitious re-form than the one proposed by the Commission is both possible and necessary and is only achievable as part of a broader deal that includes reform of national fiscal rules,a larger EU budget,new taxes for the EU budget,and a c

202、learer commitment to safeguard green investments.Escaping the Permanent Suez:Navigating the Geopolitics of European Decarbonization14ATLANTIC COUNCILRecently,however,the fiscal problem deepened when the EU decided to embark on a bold response to the US IRA and embrace green industrial policy.While g

203、reening industrial policy was an integral part of the EUs original green deal in 2019,the European Commission took time to change its doctrine on trade,competition policy,and state aid to make it viable.But the financing to underwrite this green industrial policy remains limited at the European leve

204、l,which means that it will be constrained or,even worse,will feed intra-Eu-ropean competition that is already visible between France and Germany on issues surrounding electricity-market re-form and subsidies for the nuclear energy industry.Both countries have chosen different energy strategies and a

205、re concerned that the other will gain a structural competitive advantage over the other.As a result,Germany is obstruct-ing efforts by France to subsidize its electricity generation via nuclear power and France is undermining Germanys attempt to subsidize energy prices for its energy-intensive secto

206、rs.47 This turf war is illustrative of the challenges of green industrial policy that is insufficiently Europeanized in its design and in its financing.It raises profound risks for its effectiveness and for internal European cohesion.These challenges have only emerged recently and are therefore not

207、addressed properly by the existing policy infrastructure.Notably,the Fit for 55 legislative packageadopted in April 2023 and with all the elements in effect by the end of Junecontains policies ranging from regu-latory measures to taxes,both broadening and sharpening Europes green policy.It also enco

208、mpasses trade policy,47“Ajustement lobjectif 55,”Conseil Europen(website),July 25,2023,https:/www.consilium.europa.eu/fr/policies/green-deal/fit-for-55-the-eu-plan-for-a-green-transition/.48“State Aid:Commission Adopts Temporary Crisis and Transition Framework to Further Support Transition Towards N

209、et-zero Economy,”European Commission,March 9,2023,https:/ec.europa.eu/commission/presscorner/detail/en/ip_23_1563.such as the new Carbon Based Adjustment Mechanism(CBAM)tariff to enable the EU to achieve a reduction of its emissions of 55 percent by 2023,compared to 1990.Still,the main shift on indu

210、strial policy really happened much later in 2023,as a result of Europes burning desire to fis-cally respond in kind to the US IRA.As a result,European climate policy is increasingly tentacular and ambitious,but it lacks financial firepower,in sharp contrast to the US IRAs potentially unlimited tax c

211、redits.The panic over loss of competitivenessfor the green technology sector and more broadly for all energy-inten-sive industries and the EV sectorhas caused an existen-tial crisis in Europe that compelled fiscal action,but only at the national level.As a result,it is nowhere near enough to fully f

212、inance the transition.Positively,the EU has decided that the temporary state aid framework established during the height of Europes energy crisis will essentially relax constraints weighing on individual governments to support their green industries.In particular,the EU agreed to intro-duce“matching

213、 exemptions”to its state aid rules,which allow member states to match aid provided by a foreign country to European competition in order to maintain eco-nomic activity in their country.48 These were steps encour-aged by European corporations threatening to relocate their production to the United Sta

214、tes,at the expense of their investment plans in Europe.Promisingly,these ideas were decided alongside a discussion about creating a European sovereignty fund to finance the green transition,which for the first time was mentioned by Commissioners Green Deal Industrial PlanSimplified regulatory enviro

215、nmentFaster access to fundingEnhancing skillsOpen trade for resilient supply chainsLoosening of state aid rulesXNet Zero Industry ActXXCritical Minerals ActXXSource:AuthorsTable 1:Europes Green Deal Industrial PlanEscaping the Permanent Suez:Navigating the Geopolitics of European Decarbonization15AT

216、LANTIC COUNCILThierry Breton and Paolo Gentiloni in October 2022.49 The ambition was for this fund to become the primary fiscal re-source for the EUs green transitionbut European leaders did not agree to adopt it.When Europes Green Deal Industrial Plan surfaced in February 2023,the sovereignty fund

217、had vanished,in large part as a result of a short-termist pact between President Macron and Dutch Prime Minister Mark Rutte,50 which involved a French concession to use currently avail-able money and later work on a sovereignty fund.This ef-fectively killed any effort to Europeanize the design and f

218、unding of Europes green industrial plan.As a result,de-spite very ambitious targets set in the NZIA for domestic production of electrolyzers,photovoltaic(PV)devices,and 49 Thierry Breton and Paolo Gentiloni,“Germanys Latest Response to Energy Crisis Raises Questions,”Irish Times,October 3,2022,https

219、:/ European Sovereignty Fund for an Industry Made in Europe I Blog of Commissioner Thierry Breton,”European Commission,September 15,2022,https:/ec.europa.eu/commission/presscorner/detail/en/STATEMENT_22_5543;and an interview with senior French officials by the authors,August 2023.50 Clea Caulcutt,“M

220、acron,Rutte Agree to Disagree on European Response to US Subsidies,”Politico,January 30,2023,https:/www.politico.eu/article/macron-rutte-agree-to-disagree-on-european-response-to-us-subsidies/.wind turbines,the EU is short of policies and funding for its green industrial revolution,and will therefor

221、e be a lot more reliant on Chinese technology and suppliers than it likes to admit.THE HOSTAGE PROBLEM Carbon-Intensive Industries Hold Parliaments HostageEuropean decarbonization risks being stalled or delayed by vested interests.This hostage problem,where power-ful carbon-intensive industries(star

222、ting with oil companies)can exercise undue influence over legislative or govern-ment agendas,is best exemplified by the stalling actions Exterior of the German Bundestag.Photography by Ralf Steinberger.Flickr/Ralf Steinberger(https:/ the Permanent Suez:Navigating the Geopolitics of European Decarbon

223、ization16ATLANTIC COUNCILof both the German automobile industry and the Dutch agribusiness.Decisive action on decarbonization will re-quire European politics to cut through this obstruction of confusing long-term national interests for short-term firm-level interests,especially when these firms are

224、typically no longer a source of profit and jobs in a growing industry but locked into a declining industry.The German automobile industrys influence is visible on every autobahn,where you see no speed limits.For decades,the nations environment ministers have tried to pass autobahn speed limits,with

225、the environmental agency estimating that a national speed limit of 130 ki-lometers per hour would reduce its carbon emissions by two million tons per yearyet that action has proved im-possible.The power of the automakers lobbying group,Verband der Automobilindustrie(VDA),which vigorously opposed suc

226、h speed limits,is credited with successfully blocking them.51 Earlier in 2023,the German government made a stunning reversal in its position on phasing out the combustion engine.After the EU celebrated an agreement in October 2022 to ban the sale of new internal combus-tion engine(ICE)vehicles in th

227、e EU by 2035,Germany(ini-tially)single-handedly asked to reopen the legislative file,and was soon joined by other EU countries including Italy,Poland,and Bulgaria in expressing reservations about the law.52 This dispute was settled in March 2023 on a new EU-wide agreement that effectively allows ICE

228、 vehicles to be sold beyond 2035 provided they run on“clean fuel”with stricter CO2 emissions.It is particularly striking that such corporate lobbying was allowed even under a coalition government with the German Green Party.The so-called Dieselgate scandal,which began in 2015,is another clear exampl

229、e of the hostage problem.After German automaker Volkswagen(VW)was found to have been cheating on emissions tests,the reactions of US and European systems diverged.In the United States,officials did not let VW,whose US market presence was slight 51 Kim Mackrael,William Boston,and Georgi Kamtchev,“Ger

230、many,EU Reach Deal on Combustion-Engine Plan,”Wall Street Journal,March 25,2023,https:/ Jorge Liboreiro,“In Win for Germany,EU Agrees to Exempt e-fuels from 2035 Ban on New Sales of Combustion-engine Cars,”Euronews,March 28,2023,https:/ Roger Parloff,“How VW Paid$25 Billion for DieselgateAnd Got Off

231、 Easy,”ProPublica,February 6,2018,https:/www.propublica.org/article/how-vw-paid-25-billion-for-dieselgate-and-got-off-easy.54 Lawrence Carter,“Power of Brussels Car Lobby Revealed,”Unearthed,Greenpeace UK journalism project,September 25,2015,https:/unearthed.greenpeace.org/2015/09/25/power-of-brusse

232、ls-car-lobby-revealed/.55“ARC ExclusiveAuditors Heavily Criticise Commissions CAP Plans,”ARC2020(Agricultural&Rural Convention),October 31,2018,https:/www.arc2020.eu/arc-exclusive-auditors-heavily-criticise-commissions-cap-plans/;and Kate Abnett,“EU Farming Policy Failing to Fight Climate Change,Aud

233、itors Say,”Reuters,June 21,2021,https:/ Hans J.M.van Grinsven et al.,“Benchmarking Eco-Efficiency and Footprints of Dutch Agriculture in European Context and Implications for Policies for Climate and Environment,”Frontiers in Sustainable Food Systems 3(March 11,2019),https:/www.frontiersin.org/artic

234、les/10.3389/fsufs.2019.00013/full.57 Erik Stokstad,“Nitrogen Crisis from Jam-packed Livestock Operations Has Paralyzed Dutch Economy,”Science,December 4,2019,https:/www.science.org/content/article/nitrogen-crisis-jam-packed-livestock-operations-has-paralyzed-dutch-economy.58 Lukas Kotkamp,“Political

235、 Animals:Dutch Parties Stuck Over Livestock,”Politico,November 15,2021,https:/www.politico.eu/article/livestock-netherlands-cows-pigs-chickens-farming-agriculture/.59 Stokstad,“Nitrogen Crisis.”but growing,off the hook.Authorities forced VW to pay$25 billion in compensation for the 580,000 diesel ca

236、rs it sold in the US market.53 In addition,VW was forced to help speed up the transition to clean energy.Strikingly,the California Supreme Court ordered VW to pay$2 billion in fines to set up new EV charging stations and to pay for pollution cleanup in the most affected communities in the United Sta

237、tes.In Europe,where VW had influence,officials were much less tough.Though VW sold eight million nitrogen ox-ide-spewing diesel vehicles that flouted European environ-mental laws,the company escaped paying fines until 2021.Worse still,in France and Germany its market strength was partially due to th

238、e fact that the auto industry,regulators,and lobbyists had promoted diesel cars as green and fuel efficient since the 2000s.54 A more vivid illustration of the hostage problem is found in the Netherlands.EU auditors found that despite$100 billion in agricultural subsidies being labeled as“climate sp

239、ending”since 2014,the Common Agriculture Policy funds had“little impact on agricultural emissions.”55 This caused a particular scandal in the Netherlands,an agri-cultural superpower,whose exports in this sector bring in roughly$30 billion per year.56 This small country runs an extraordinarily intens

240、ive agribusiness sector,with Dutch farms containing four times more livestock per hectare than the EU average.57 However,the counterpart of those ex-ports and efficiency is worsening nitrogen emissions from manure produced by 3.8 million cows,twelve million pigs,and 102 million chickens.58 Eventuall

241、y,Dutch courts found farmers in breach of EU nitrogen legislation and the Dutch government proposed a budget of$25 billion,with pol-icy levers including culls in animal numbers,land buyouts,and even expropriations.59 These policies faced growing opposition among farmers who threatened to break frag-

242、ile legislative coalitions.Large-scale protests paralyzed the Dutch economy in 2019,as farmers blocked highways Escaping the Permanent Suez:Navigating the Geopolitics of European Decarbonization17ATLANTIC COUNCILand drove tractors toward the Hague.60 Countries across Europe will soon face similarly

243、hard choices.THE COLLECTIVE ACTION PROBLEM Carbon-Intensive Regional Interests Hold Europe BackEuropes political system hands huge influence to car-bon-intensive regional interests.Because the EU is made up of individual states negotiating either with or through common institutions,this semifederali

244、zed system can turn carbon-intensive nations or regions into veto players or stallers who need to be placated at a minimum to make progress.This state of affairs is the result of legacy national energy choices and the byproduct of geographical and mineral endowments.The case of the Polish coal indus

245、try is a perfect example of the collective action problem that repeatedly slows decarbonization.Even though Poland was already making plans to diver-sify and invest in nuclear energy,it initially pushed against European decarbonization in the strongest terms.“There is no plan to abandon coal in Pola

246、nd,”President Andrzej Duda told statesmen at the 2018 United Nations climate conference in Katowice:“Coal is our strategic raw material.We have supplies for two hundred years and it is difficult for us to give up coal,thanks to which we have energy sovereignty.”61 This strong feeling reflected the c

247、ountrys resource base with coal powering over 70 percent of Polands electricity.This corresponds to strong regional and business interests inside the Polish political system,turning Warsaw into a staller.Brussels,with money,thought it had the answer.However,this has come at the cost of deprioritizin

248、g other pressing issues.The European Commission offered Poland 3.9 billion of its specially created Just Transition Fund(JTF),created against the backdrop of the negotiations to cre-ate the European Green Deal,between 2019 and 2021.The JTF is specifically aimed at carbon-intensive regions that are h

249、eavily dependent on fossil fuel extraction,and 60 Eline Schaart,“Angry Dutch Farmers Swarm The Hague to Protest Green Rules,”Politico,October 16,2019,https:/www.politico.eu/article/angry-dutch-farmers-swarm-the-hague-to-protest-green-rules/.61 Piotr uk and Kacper Szulecki,“Unpacking the Right-populi

250、st Threat to Climate Action:Polands Pro-governmental Media on Energy Transition and Climate Change,”Energy Research&Social Science 66(August 2020),https:/ by EVP Timmermans,Commissioner Ferreira and Commissioner Simson at the Just Transition Platform Launch Event,”European Commission,June 29,2020,ht

251、tps:/ec.europa.eu/commission/presscorner/detail/en/speech_20_1220.63 Alina Pogoda,“Poland May Irretrievably Lose Half of Its Funds for a Just Transition,”Just Transition(blog),March 23,2021,https:/www.just-transition.info/poland-may-irretrievably-lose-half-of-its-funds-for-a-just-transition/.64 Alek

252、sandra Krzysztoszek,“Poland to Slow Coal Phase-out Process,Maintain 2049 End-date,”Euractiv,November 8,2022,https:/ Carolina Kyllmann,“German Coal Region Brings Phase-out Forward to 2030 but Refires Lignite Short-term,”Clean Energy Wire,October 4,2022,https:/www.cleanenergywire.org/news/german-coal-

253、region-brings-coal-phase-out-forward-2030-refires-lignite-short-term.66 European Commission,“Medium Term Guideline for Coal 1975-1985,”Official Journal of the European Union C22(1975),118.67 OECD,“East-West Technology TransferThe Case of Poland,”OECD Observer,no.3(1983),https:/doi.org/10.1787/observ

254、er-v1983-3-en.the Commission hopes to financially induce an embrace of the transition.Then-European Commission Executive Vice-President Frans Timmermans noted in 2020:“As we rebuild our economies and our societies we will have to resist falling into the trap of rebuilding old structures.We simply ca

255、nnot afford paying to go back to business as usual and then paying again to transform.”62 In the case of Poland,Brussels initially sought to make the deal con-ditional on improvements regarding the blocs terms on the rule of law.But in the end,the Commission was forced to drop these demands and hand

256、 over nearly a quarter of the fund to a single member state.63 The energy crisis that followed Russias invasion of Ukraine stressed the coal phaseout plans in both Poland and Germany.While Poland is maintaining its current plan to close all coal mines by 2049,no new closures are expected to occur un

257、til 2033 at the earliest.64 Germany,meanwhile,has a more ambi-tious plan to phase out coal by 2038,with a further goal of reaching it by 2030 at the earliest,yet it restarted two coal power plants as a stopgap measure to make up for lower natural gas supplies from Russia.With uncertainty over the fu

258、ture of the EU climate and transition fund,all of these commitments might be put to serious test.65 This ex-poses the reality that the Just Transition Fund and the EUs coal phaseout commitments are going to be undermined if not abandoned altogether in the absence of the required compensatory transfe

259、rs.Poland should not merely be seen as a“bad”actor ex-torting a“good”one.European policy choices deliberately built Poland as a coal producer.Following the 1973 energy crisis,it was the European Commissions own new energy security rules that greatly boosted coal.On the one hand,in Western Europe,the

260、se policies resulted in countries building more than 115 coal-fueled plants to no longer rely only on their oil-fired ones,including in states with no pre-vious history of coal power like Denmark and Finland.66 On the other hand,in then-Sovietized Eastern Europe,this pol-icy enabled states like Pola

261、nd to become large westward suppliers,greatly expanding coal mining in regions like Upper Silesia as a result.67 It was this cheap energy that made Poland so attractive to German,French,and Italian Escaping the Permanent Suez:Navigating the Geopolitics of European Decarbonization18ATLANTIC COUNCILin

262、vestors after the country joined the EU in 2004,with auto engine and parts production in Poland nearly quadrupling between 2000 and 2008.68 Energy has been a key thread in knitting Poland into the West and the European Union.Brussels needs to make the transition just as important and attractiveor ri

263、sk having collective action stall attempts to make Europe clean.68 Janusz Buliski,“The Automotive Industry in Poland,”Economic Information Department,Polish Information and Foreign Investment Agency S.A.,October 2010,2,https:/www.paih.gov.pl/files/?id_plik=14305.THE JUST TRANSITION PROBLEMDecarboniz

264、ation Risks Public BacklashEuropean elites risk the rejection of decarbonization by the electorate,particularly by an emerging coalition of industrial interests as well as people in lower income 020406080100120140160180200GermanyPolandCzechiaBulgariaItalyNetherlandsRomaniaSpainGreeceFranceDenmarkSlo

265、veniaFinlandHungaryIrelandCroatiaSlovakiaAustriaCAPACITY BY TERAWATTS-HOURSCARBON EMISSIONS BY MILLIONS OF TONS ANNUALLY020406080100120140160GermanyPolandCzechiaBulgariaItalyNetherlandsRomaniaSpainGreeceFranceDenmarkSloveniaFinlandHungaryIrelandCroatiaSlovakiaAustriaFigure 2:Germanys Coal Backslidin

266、gSources:Ember and Global Energy Monitor(GEM)data,as shown in“Europes Clashes Over Coal May Extend Well beyond Poland,”Reuters,June 20,2023,https:/ the Permanent Suez:Navigating the Geopolitics of European Decarbonization19ATLANTIC COUNCILbrackets who rightly feel the weight of an unjust burden for

267、the adjustment,while contributing the least to emis-sions.The poorest are the most energy cost-burdened.Consequently,right-wing populist parties across Europe are repositioning themselves as climate skeptics partly because their voters tend to live in poorer areas whose economies are carbon-dependen

268、t.This is the risk exempli-fied by the 2018-19 protesters known as the Gilets Jaunes,known for their signature high-visibility yellow vests,which are mandatory for drivers in France.Triggered by a carbon tax on fuel,the protest movement rocked the Macron gov-ernment,forcing an about-turn and leading

269、 to a broader reluctance to advance decarbonization initiatives.Their most popular slogan“Paradise for the rich,not a radish for the rest”was a disaster for the framing of European decarbonization.European elites should worry about the Gilets Jaunes prefiguring a broader backlash:with the con-tinent

270、s poor already the most-energy burdened in terms of the percentage of income spent on fuel or with livelihoods immersed in carbon-heavy industries or work patterns,69 69 Jorgelina Do Rosario,“Rising Energy Prices Could Fuel Social Unrest across Europe This Winter,”Reuters,September 1,2022,https:/ mo

271、vements or populists could easily derail the roll-out of regressive decarbonization.The loss of industrial jobs due to decarbonization could actually considerably heighten this risk,providing a per-fect alliance between corporate vested interests and poor workers.This is,in fact,what is already fuel

272、ing a tacit alli-ance between far right populists and pro-business conser-vative parties,both of which are challenging the European Green Deal.They are together liable to become a central political force in the next European Parliament and even the Commission,and this has not been countered yet by a

273、n alternative policy package that can create broad soci-etal support for decarbonization.Europes climate transi-tion therefore hangs on the ability to arrange a socially just transition to enlist broad popular support for a policy that is today highly regressivewhen emissions are largely the result

274、of privileged individuals and energy-intensive cor-porations.In fact,according to the IEA,the 10 percent of the US and EU publics in the highest income groups had A burning newsagents shop is seen during a demonstration by the“yellow vests”movement in Paris,France,March 16,2019.REUTERS/Philippe Woja

275、zerEscaping the Permanent Suez:Navigating the Geopolitics of European Decarbonization20ATLANTIC COUNCILmedian carbon emissions three to five times that of the median individual emissions and sixteen times higher than the median emissions of the poorest 10 percent.70European populists are building an

276、 arc of reluctance and consistently position themselves as not just opposed to im-migration,as in earlier incarnations,but as climate skeptics.In Germany,the Alternative for Germany(AfD)has pitched itself as a pro-diesel party,opposing various phaseouts.This has proved a winning strategy for the par

277、ty,which has won support in deindustrialized areas suffering from pov-erty,low investment,and population decline,and where decarbonization is sometimes viewed as a burdensome and imposed luxury.Tellingly,in the last European elections the AfD received the partys largest share of the vote in the coal

278、-rich regions of Brandenburg and Saxony.This is part of a pan-European trend.In the Netherlands,as we have seen,Dutch populist and conservative parties have pro-tested the ammonia tax imposed on the nations livestock.In Italy,figures in the ruling hard-right League and Brothers of Italy coalition ha

279、ve denounced EU decarbonization poli-cies as hurting both consumers and industries,with Deputy Prime Minister Matteo Salvini blasting EU green policies in 2022 as“a danger to the competitiveness of businesses and the lifestyle of Italian citizens.”In France,Marine Le Pen,who ran for president as the

280、 National Rally candidate in the last election,is fighting against diesel taxes and for greater energy subsidies.The danger is therefore that these parties help crystallize an anti-climate policy coali-tion in the next European Parliament after June 2024.We are already seeing signs of this dynamic i

281、n the European Parliament with the highly contested passage of the Nature Restoration Law,which nearly failed due to an ad hoc alli-ance between the right and the far right.71 The socioeconomic risks inherent in the transition are not lost on European leaders.In the energy crisis of 2022,European go

282、vernments chose to subsidize citizens energy bills while also cutting fuel taxes on an enormous scale of between 0.5 percent and 7.4 percent of national GDP.72 Looking ahead,the European Council is pairing its post-2025 plans for carbon pricing of fuels for transportation and homes with a newly crea

283、ted“social climate fund”that will distribute nearly$60 billion to vulnerable households between 2025 and 2030.73 What European leaders do not seem prepared for is a permanent level of transfers to 70 Laura Cozzi,Olivia Chen,and Hyeji Kim,“The Worlds Top 1%of Emitters Produce over 1000 Times More CO2

284、 than the Bottom 1%,”International Energy Agency,February 22,2023,https:/www.iea.org/commentaries/the-world-s-top-1-of-emitters-produce-over-1000-times-more-co2-than-the-bottom-1.71 Ajit Niranjan,“EU Passes Nature Restoration Law in Knife-edge Vote,”Guardian,July 12,2023,https:/ Colgan,Gard-Murray,a

285、nd Hinthorn,Letting Europes Energy Crisis Go to Waste,2;Giovanni Sgaravatti et al.,“National Fiscal Policy Responses to the Energy Crisis,”Bruegel,June 26,2023,https:/www.bruegel.org/dataset/national-policies-shield-consumers-rising-energy-prices.73“Deal on Establishing the Social Climate Fund to Su

286、pport the Energy Transition,”European Parliament,December 18,2022,https:/www.europarl.europa.eu/news/en/press-room/20221212IPR64528/deal-on-establishing-the-social-climate-fund-to-support-the-energy-transition.74 Susi Dennison,Rafael Loss,and Jenny Sderstrm,“Europes Green Moment:How to Meet the Clim

287、ate Challenge,”European Council on Foreign Relations,April 20,2021,https:/ecfr.eu/publication/europes-green-moment-how-to-meet-the-climate-challenge/.enable an effective transition.In reality,Europes climate policy paradigm is highly technical and engineered without accounting for social concerns.Th

288、e task ahead requires deep and sustained engagement with the public.However generous,subsidies alone cannot prevent a backlash.No matter how attractive the hypotheti-cal future clean energy economy,no matter how generous the buyouts offered by governments bent on transition,the sudden energy transit

289、ion also is a rupture with public un-derstanding and could be perceived as a betrayal of trust or violation of the social contract.Peoples entire way of lifefrom how they heat their homes,what cars they drive,and how their cities lookwill need to be transformed in a way that could be felt to be deep

290、ly upsetting and unsettling,especially for lower-income and less-privileged people.The unfairness of the energy transition is made plain when carbon taxes exempt aviation fuel and private jets,and taxes are cut for the wealthy,while ordinary people face higher carbon taxes for heating and transporta

291、tion fuels.The political vision of modernity sold to European elector-ates over generations has been centered on the carbon economy.Legitimizing decarbonization requires political leaders to convince their electorates they have a new and better vision for modernity itself,not just pain.The fight ove

292、r climate policy is about creating domestic political co-alitions to support investment,good jobs,and affordable green goods.That vision of the seductive,attractive,and convivial low carbon life,will have to be tailored to national circumstances,and worryingly for Europe as well as for the United St

293、ates,it is in this public debate where elites have come up short.More than half of the respondents in a recent European Council on Foreign Relations survey said that there is no debate on the European Green Deal in their national media.74 While this may change quickly,the current state of affairs do

294、es not bode well.THE INDUSTRIAL PROBLEM Industrial Policy Is HardDirigisme is difficult,especially in more decentralized con-texts where industrial interests are diverse,institutional structures and practices are different,and welfare models Escaping the Permanent Suez:Navigating the Geopolitics of

295、European Decarbonization21ATLANTIC COUNCILdiverge.When it comes to decarbonization,European of-ficials risk relearning several bad practices of the past that have long confounded industrial policy without addressing two emerging ones.Picking winners is hard and supply chain coordination is complex.I

296、ndustrial policy needs to be European but national contexts and instruments will probably need to differ,thereby creating uncertainty over the level-playing field.This is only going to become more difficult with time as Europes industrial base erodes in the context of higher and more volatile energy

297、 prices in a changing climate landscape.The pitfalls of picking winners is best exemplified by that great failure of the last age of state-driven industrial policy:the Concorde,the Anglo-French supersonic jet withdrawn from service in 2003.Billed as a brilliant new innovation drastically cutting fli

298、ght times between Europe and the US and opening the way to European leadership in aviation,the project eventually failed after an accidental and deadly Concorde crash.Expensive to operate and extremely noisy,blocked by regulators from the US domestic market as a result,the Concorde was a symbolic wh

299、ite elephant.75 Politicians,driven by the need for shiny national flagships like Concorde,do not have the best track record as inves-tors of public funds.However the challenge ahead is not only the risky business of picking winners,but the price of inaction as key industries gradually get undermined

300、 by foreign competition,be it Chinese or American.Moreover,Europes challenge of an eroded industrial base is well illustrated by the state of the French nuclear indus-try or the decay of the German auto sector in the EV space or the chemicals industry.These are both creating critical industrial cris

301、es and fueling industrial policy reactions that are actually undermining cooperation rather than fueling a shared European industrial policy.Indeed,France is en-gaged in a furious battle to repair,expand,protect,and subsidize its nuclear industry despite challenges that seem financially and technica

302、lly overwhelming.And Germany is facing a profound crisis that is fueling an all-out subsidies race that is perhaps best epitomized by the recent bail-outs of its gas utilities or the 10 billion subsidy to locate 75 Peter Thomas,“How the Next Supersonic Jets Can Succeed Where Concorde Failed,”CNN,Jun

303、e 10,2021,https:/ to Offer Aid Only to Strategic Sectors After Intel Subsidy,Minister Says,”Reuters,June 21,2023,https:/ Liz Alderman,“Half of Frances Nuclear Plants Are Off-Line,”New York Times,November 15,2022,https:/ Daniel Gremillet,Jean-Pierre Moga,and Jean-Jacques Michau,“Nuclaire et hydrogne:

304、lurgence dagir Nuclear and Hydrogen:The Urgency to Act”,Rapport dinformation n 801,Senate of France,July 20,2022,https:/www.senat.fr/rap/r21-801/r21-8010.html.79 Alderman,“Half of Frances Nuclear Plants Are Off-Line”;“French Parliament Votes Nuclear Plan with Large Majority,”Reuters,March 21,2023;an

305、d“French Government Wins Court Approval for EDF Nationalisation,”Nuclear Engineering International(website),accessed August 19,2023,https:/ Kate Abnett,“Germany,Spain Push to Keep Nuclear Out of EU Renewable Energy Goals,”Reuters,March 16,2023,https:/ Kate Abnett and Julia Payne,“EU Countries Consid

306、er Scrapping Part of Energy ReformsDocument,”Reuters,October 2,2023,https:/ new Intel chip manufacturing plant in Germany.76 In both countries,there are not only doubts that these industrial policies can work but also growing signs that they are fun-damentally incompatible on a European level.In Fra

307、nce,home of the Messmer Plan,more than twenty years have passed since a new nuclear reactor was built.This aging nuclear fleet requires profound maintenance,but many skilled welders have left the industry and the highly trained workforce has not been replenished.As a resultdespite nuclear energy pro

308、viding a million jobs and more than a quarter of the blocs electricityacute staff shortages led to maintenance backlogs and shutdowns in the 2022 energy crisis,requiring US and Canadian engi-neers.77“Due to a lack of coherent policy and investment this energy is in structural decline,”said a recent

309、report for the French Senate.78 Other headwinds hampering French nuclear energy capacity include higher temperatures and lower river levels that create problems for the water cool-ing systems.Exhibiting a general approach of“whatever it takes”to achieve a nuclear revival,Macrons government this year

310、 passed legislation to build six new nuclear plants and won court approval to regain control of EDF,which is re-sponsible for Frances nuclear energy production.79 It also seeks to count nuclear energy toward renewable energy targets.80 This headlong rush with subsidies leads to con-flicts with other

311、 EU members:saving the French nuclear in-dustry at all cost conflicts with the EUs Renewable Energy Directive and with electricity market reform,as France es-sentially seeks a right to provide a permanent subsidy to the French nuclear fleet.81 This would not only save the economics of the nuclear in

312、dustry but also essentially pro-vide low energy prices to the French economypotentially providing a durable and distortive competitive edge over other EU members national economies.Meanwhile,Germany is also pursuing its own industrial strategy.Robert Habeck,the federal minister for economic affairs

313、and climate action,has proposed introducing a tran-sitory energy price cap for the energy-intensive sector;in Escaping the Permanent Suez:Navigating the Geopolitics of European Decarbonization22ATLANTIC COUNCILaddition,the German government has applied for the larg-est amount of state aid under the

314、temporary framework introduced by the Commission,in response to the IRA,fueling fears that Germany would essentially deepen its industrial lead over the rest of Europe and aggravate ag-glomeration effects.82 These fears have materialized with the intense lobbying and heavy subsidies that the German

315、government was prepared to arrange for Intel,which has committed to building two chip plants in Germany,83 and for Tesla to invest in Germany,although Tesla has since scaled back its investments in Germany due to a feeling that the IRA provided better benefits.8482“Germany Considers Electricity Pric

316、e Cap to Support Industry,”Deutsche Welle,May 5,2023,https:/ Friederike Heine,Supantha Mukherjee,andAndreas Rinke,“Intel Spends$33 Billion in Germany in Landmark Expansion,”Reuters,June 19,2023,https:/ Victoria Waldersee,“Tesla Scales Back German Battery Plans,Won Over by U.S.Incentives,”Reuters,Feb

317、ruary 22,2023,https:/ Duncan Kushnir et al.,“Adopting Hydrogen Direct Reduction for the Swedish Steel Industry:A Technological Innovation System(TIS)Study,”Journal of Cleaner Production 242(January 2020),https:/doi.org/10.1016/j.jclepro.2019.118185.The rollout of green steel is another case.Despite

318、Swedish companies like SSAB having long innovated renewably powered hydrogen-based direct reduction of iron ore,their entire production matrix had to change.85 Innovation alone was not enoughit required multiple forms of co-ordination.First,the huge demand for renewable electric-ity to feed electrol

319、yzers meant new renewable-powered power lines had to be coordinated between SSAB and electricity suppliers.Second,the cost of installing the new electrolyzers required coordination on government sub-sidies to make green steel profitable.Third,to create a market,it was necessary to assure green steel

320、 producers French President Emmanuel Macron listens to a Renault worker talking about the Kangoo electric car,during his visit to the site of the future factory of Japan-based battery maker Envision AESC group,where Renault SA develops an electric-vehicle manufacturing hub,in Douai,France,June 28,20

321、21.Ludovic Marin/Pool via REUTERSEscaping the Permanent Suez:Navigating the Geopolitics of European Decarbonization23ATLANTIC COUNCILof guaranteed demand from automakers like Volvo and BMW via pre-purchasing orders.86 Finally,to stop imports of cheaper carbon-heavy steel made in a blast furnace from

322、 states like China or Turkey,it was necessary to de-sign the EUs trade tariff policy as such.The blocs CBAM had to be designed and put in place to make them too expensive to import.87 Such a matrix is not easy to create,let alone maintain.Successful industrial policy is fraught with the issue of coo

323、rdination,which is only made deeper in the European context.The sheer complexity and interconnectedness 86 Alejandro de la Garza,“The Worlds Steel Comes at a Steep Climate Cost.A Swedish Company Is Trying to Change That,”in Time 2030:How to Build a Sustainable,Equitable World(a project of Time Magaz

324、ine),April 28,2022,https:/ David E.Bond et al.,“The EU Agreement on a Carbon Border Adjustment Mechanism,”White&Case,March 16,2023,https:/ decarbonization requires the state to drive this,but the EU doesnt have the full prerogatives of an economic planner and has often been forced to concede to the

325、am-bitions of individual member states.The task of greening electricity,transport,industry,buildings,and agriculture simultaneously is an immense challenge,and treating problems and bottlenecks in isolation rather than holisti-cally makes matters worse.And the more siloed the ap-proach,the slower th

326、e process.The Net Zero Industrial Act is a case in point:it sets a number of extremely am-bitious objectives for Europeanizing supply chains in green technologies(e.g.,PV panels,electrolyzers,wind Figure 3The EU used to import electric vehicles from the US but now mostly imports from China and South

327、 KoreaROW=rest of worldNotes:The CN codes are 87038010 and 87038090 in 201723 and 87039010 in 2016.Trade values are converted to US dollars from euros using end-of-month USD/euro spot exchange rates from Federal Reserve Economic Data(DEXUSEU).Source:Eurostat.Figure 3:Chinas Automobile Revolution Pet

328、erson Institute for International Economics.Source:Chad P.Bown,“Industrial Policy for Electric Vehicle Supply Chains and the US-EU Fight Over the Inflation Reduction Act,”Working Paper 23-1,Peterson Institute for International Economics(PIIE),May 2023,https:/ the Permanent Suez:Navigating the Geopol

329、itics of European Decarbonization24ATLANTIC COUNCILturbines)but lacks the policy tools and fiscal resources to achieve these targets.88Illustratively,EU policies meant to encourage widespread EV adoption have already had unintended consequences to the detriment of European sovereignty.In 2021,the EU

330、s Fit for 55 package included a date banning new ICE vehicles in Europe in 2035,as mentioned above.But the EU,lacking proper financing for its transition arrangement,failed to give European automakers incentives and to set up European supply chains.Consequently,a large num-ber of these companies mov

331、ed EV production to China,where such supply chains are much better established and costs are lower.The result:a surge of Chinese EV ex-ports to Europedriven in part by EU companies.German automotive foreign investment accounted for a third of all European foreign investments in China from 2018 to 20

332、21,the period of the European Green Deals introduction.By 2021,German automotive companies investments ac-counted for 42 percent of EU foreign direct investment in China,and Chinese EV imports to the EU started to balloon to concerning levels.89Worsening matters,climate breakdown means the nat-ural

333、environment is already making this even harder.Notwithstanding the frightful geopolitics,the summer of 2022 saw unprecedented and unpredictable new risks throw up new challenges.Hot weather led to nuclear power plants going offline in France due to a lack of cool-ing water.This triggered lower French energy exports,88 Zsolt Darvas and Guntram B.Wolff,“A Green Fiscal Pact for the EU:Increasing Clim