Global | US and EU, geopolitical decarbonization?

Summary

In recent years, public policies to foster decarbonization have become cornerstones of the political agenda in the US and Europe, with the aim not only of achieving decarbonization but also of ensuring energy security and driving short- and long-term economic growth.

Key points

• Key points:
• Both the US and the European Union (EU), which has led global climate action over the last 20 years, have set challenging environmental goals, with both seeking to achieve carbon neutrality by 2050 and significantly reduce their emissions by 2030.
• The US will triple the spending with climate aims over the next decade, combining several complementary instruments in a complex geopolitical context with tensions with China.
• The EU has reacted with the Green Deal Industrial Plan which promises a more agile regulatory framework and public financing on top of the ambitious programs approved previously (Multiannual Financial Framework 2021-2027, NGEU and REPowerEU). The financing that the EU plans to release for climate change (around 4% of GDP) is similar to that of the US (between 2.5% and 4% of GDP).
• However, there is room for improvement in the climate policies adopted by the US and EU. The fiscal policies and discretionary funding for decarbonization targets run the risk of achieving a less efficient reduction in emissions.
• Carbon pricing should be the main decarbonization instrument. Moreover, the coordination of climate policies and international cooperation are key for achieving an orderly, foreseeable and just transition.

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