The EU’s Green Deal – on its Macroeconomic Potential

The announcement of a Green Deal by Commission President von der Leyen has created a noticeable momentum in favour of a wave of climate measures and packages. Nevertheless, in its current form this Deal very much appears as a technical exercise that sums up sector-based measures. The headlines have very much been around the headline figure that the deal will mobilize – the famous trillion euro. This has been broadly welcomed as a positive development, but it also needs to be financed. In countries like Germany, this has led to concerns about the cost of this deal for ordinary people and businesses.

All of this pleads for an exploration of how to make the Deal more tangible and economically more impactful. This framing paper is meant to identify the broad macro-economic dimension of the pact as well as the potential for ECF and the Forum to help and amplify its potential. We tried to answer the question of the impact of the deal and what will be necessary to make it come to fruition? The paper serves as complementation of our Green Deal seminar hosted on the 18th of February. You will find several other articles on it in the coming days on our website.

The analysis of this paper is otherwise informed by work that ECF/the Forum New Economy has commissioned in the past (study by Cambridge Econometrics, former Green Deal workshop 2014), as well as by the Paris workshop on the economics of a Green New Deal in September 2019 and the preparation of the coming seminar on the economics of the EU’s Green Deal in Berlin (18^th February 2020).

Our bottom line is that the currently quoted sum of €1trn overestimates the potential macroeconomic impact of the deal. There are instruments to be explored in more detail that could amplify the effort and help to make the exercise more tangible for ordinary people and hence more viable politically.