Sustainable policy slippage: learning lessons

EU leaders met on Thursday in the European Council to talk about the bloc’s green transition and how to align climate goals with economic priorities. The key focus was the EU’s new 2040 emissions target, which could cut emissions by 90% relative to 1990 levels: a decision on this had already been postponed from September. But several other potentially difficult environmental issues were also raised by individual countries.

The result of the meeting was classic EU diplomacy – a carefully worded document that offered some reassurance without formal endorsement. Leaders will now meet again to cast a vote on the 2040 target at a November 4 meeting.

The conclusions document from last Thursday’s meeting “talks the talk” on the need to boost EU competitiveness, digital transformation, and simplification of regulation. In relation to the 2040 target, the statement talked about the importance of assessing the “realistic contribution” of carbon removals to overall emissions reduction, contributing to global emissions in a way that is “both ambitious and cost efficient” and the need for a “revision clause” – so some wriggle room.

Policy slippage is already happening in specific areas. Last week, the EU decided to postpone its new anti-deforestation law (EUDR) for the second time. EUDR would, if implemented, require importers of many commodities – e.g., cocoa, coffee, dairy, palm oil, soy, timber – to prove that they do not come from deforested land. The EU says that the delay is caused by non-readiness of IT systems necessary to process data from commodity importers. But even if IT systems can be fixed, planned EUDR have already been criticised by major EU trading partners and commodity suppliers (e.g. Brazil, Indonesia and Malaysia), with the US asking for special treatment.

Policy slippage is not, of course, limited to the EU. Just before the EUDR delay, the International Maritime Organization (IMO) had voted to postpone an expected carbon emissions agreement on shipping for a year. The agreement, initially agreed with a vote back in April of IMO members, would have required larger international vessels to increase their use of less carbon-intensive fuels or pay penalties based on the amount of CO₂ emissions from burning oil. One estimate suggested that the agreement could reduce shipping’s carbon emissions by 8% by 2030 – still short of the IMO’s existing 20% target. Shipping currently accounts for around 3% of global carbon emissions.

The IMO saga shows how policy disagreements can play out at a global level. The April vote for the so-called Net Zero Framework did not resolve underlying differences between major oil producers (e.g., Saudi Arabia and Russia), enthusiasts for the scheme (e.g., the EU) and others (e.g., many small island states) who thought that the agreement did not go far enough. Differences re-emerged in October, with the US pressing hard to end the deal, and talks last made no headway. In late October, Saudi Arabia proposed a year-long adjournment, and this gathered a slim majority of support. Notably, the EU states split on the issue, with Greece and Cyprus abstaining.

Media commentary on these EU and IMO policy postponements has focused on the politics, but has acknowledged the hard economics too. The IMO delay, for example, has been ascribed to the US and other suppliers wanting to sell more oil and major shipping nations’ desire to hold down operating costs. This might appear like a particularly egregious example of short-termism – given the long-term environmental damage – but the economic factors can’t be ignored. One estimate from the World Economic Forum, for example is that alternative fuel sources could be 3-4 times as expensive as diesel; they may also not be widely available.

I take some heart from the corporate reaction to the IMO and EUDR postponements. Some major EU users of commodities covered by the EUDR, and commodities traders, protested to the EU environment commissioner that the postponement “puts at risk the conservation of forests worldwide”. Firms have pointed out that EUDR postponement could erode trust in EU leadership on sustainability, as well as penalize firms that have already invested in compliance. There is also a sense that policy reversal will favour the “laggards” – not firms and farmers who have had the foresight to prepare for change. On the IMO agreement, some shipping firms had expected that the accompanying regulatory framework would help encourage investment in modern ships and alternative fuels – the implication is that delay here will benefit the “laggards” too. In short, these two postponements may make many corporations’ operational planning more difficult, not easier. Policy predictability has value.

I think we should all be worried by such policy delays, which could be both widened and extended. I hope that the imminent COP30 can help restore some forward momentum in environmental policy, although this cannot be guaranteed. But we should learn lessons from the IMO and EUDR incidents too. What they make clear is that, in the current realities of international politics and economics, carefully developed policies and commitments can be quickly overturned by opportunistic intervention, particularly if economic issues have not been properly addressed.

This article is also published on LinkedIn. illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.

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