How to Make EU Fiscal Rules Compatible with Net Zero

Summary:

Businesses, households and governments in the EU must invest more in green energy, infrastructure and energy efficiency to meet Europe’s climate goal of net zero greenhouse gas emissions by 2050. That will require additional annual investment of around 1.7-2 per cent of GDP. If big extensions to public transport networks are needed, the investment figure will be higher still. There is little hope that these large spending needs can fit into the EU’s current fiscal rulebook. At the same time, some countries are highly indebted and cannot increase debt much further. A compromise could see a country-by-country EU review process that allows some green investment to be exempted from the EU’s rules, and some financed by higher taxes or cuts to other spending.

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