The European Green Deal—and with it climate policy and the forthcoming Circular Economy Act—has faced mounting criticism in recent months, primarily from right-wing political parties. It almost feels as if “climate mitigation” has become a dirty word. We fear that economic miscalculations, lobby interests, timidity and tactical retreat risk causing Europe to abandon the socioeconomic transformation it sought to lead only a few years ago. Should this happen, it would represent a massive economic and social loss—not only for Europe but for the world.
The main critique centres on a misunderstood concept of European industrial competitiveness and the cost of living for European citizens. Critics suggest that ambitious climate and environmental policies will hurt both European businesses and consumers. In reality, the opposite is true, provided the EU implements the core components of the policies underpinning the Green Deal.
We must remember that Europe is a continent with a large and vulnerable population and landscape. Population density ranks among the highest globally. Furthermore, Europe stands among the continents most severely impacted by climate change. Southern Europe already suffers badly from extreme weather events—unprecedented heatwaves, droughts and flooding—while food production faces serious threats.
The biosphere—our life-supporting system—forms the foundation of our economies in all their various forms. Without a thriving environment, there can be no thriving economy. The terrifying numbers on biodiversity loss, land degradation and water stress—alongside accelerating global warming—send strong warning signals of impending economic losses, societal breakdown, climate-induced refugee flows and political upheaval. We simply cannot continue pushing the evidence aside and avoiding confrontation with vested interests that block decisive action.
We must assume responsibility as European citizens, both for the immediate impacts and for the long-term consequences of an increasingly unstable climate and degraded ecosystems.
The pragmatic path forward
The policy measures proposed within the Green Deal are both sensible and pragmatic. The overall objective seeks to curb greenhouse gas emissions while reducing costs and pressure on nature. The benefits for society emerge distinctly and clearly. First, the risk of accelerating climate change diminishes. Second, pressure on nature and natural resources lessens. Third, the quality of air, soil and water improves, while city environments become cleaner, quieter and more liveable overall.
Avoiding damages and costs for European citizens and economies represents an important goal of the Green Deal, but this is not the only benefit for our societies. What critics often short-sightedly underestimate is the value of transforming European manufacturing into green technology leadership. Global demand for “green tech”—encompassing resource efficiency and circularity, energy efficiency, renewable energy systems, sustainable mobility, sustainable forestry and agriculture, and water management—exceeded one trillion euros in 2022. This market has grown on average by 7.3 per cent annually from 2010 to 2022, a growth rate more than double the global GDP growth of approximately 3.1 per cent per year.
Green technology not only flourishes in global markets but is urgently needed to reduce unnecessarily high material costs within EU member states. The reason is simple: in industrialised economies, material costs constitute the highest portion of manufacturing companies’ cost base. Data from Germany show that material costs (including energy) in the manufacturing industry account for an estimated 43.9 per cent of gross production value in 2021, compared to wages making up between 17 per cent in 1993 and 19.2 per cent in 2021. Moreover, material costs have, if anything, increased in recent years. If a cost ratio around 45 per cent prevails in Germany, there is good reason to believe that a comparable pattern exists across Europe.
Material efficiency trumps labour cuts
Sector-specific variations in the material cost share are considerable, naturally. However, on average, we can assume that significant reduction in material costs through improvements in material efficiency and circular economy strategies would contribute far more to overall economic competitiveness than the usual attempts to reduce labour costs. Ernst Ulrich von Weizsäcker aptly coined the memorable slogan: “Make tonnes and kilowatt-hours redundant, not people.”
In our view, the vast majority of European companies will benefit from moving towards a more resource-efficient and circular economy. A systemic and cost-effective approach to absolute and ambitious reduction of raw material demand—such as Raw Material Consumption (RMC)—through to 2050 would meaningfully contribute to strategic autonomy, reducing dependence on global supply chains and minimising risks from geopolitical shocks. Security of supply would strengthen—the EU depends heavily on imports from the rest of the world for metal ores and fossil energy materials—while companies would contribute to reducing carbon emissions and biodiversity loss.
The move towards a resource-efficient and circular economy will require proactive industrial policies and framework conditions that ease the transformation to a fully decarbonised economy with resource-light products and processes. But that is the essence of the Green Deal.
The evidence from numerous studies has clearly demonstrated that, on average, a more resource-efficient and climate-neutral economy—where today’s linear production model gives way to a circular model—will benefit European citizens and companies alike.
Peter Hennicke is Senior Advisor at the Wuppertal Institute, member of The Club of Rome, and author of over 200 papers and books on green energy economy, energy and climate policy.
Anders Wijkman is Honorary President of the Club of Rome.
