Climate debate intertwined with cost-of-living concerns as EU elections loom

Shaken by several crises in the past five years, EU citizens voting in the bloc's elections in June will be doing so amid concerns over high inflation, rising energy costs and a war on their doorstep. Climate action could be a harder sell, and polls indicate a shift to the right.

A new European Commission will also have to forge a path forward through challenging geopolitical relations with China, a key manufacturer contributing to the EU's clean technology supply chains.

Voters go to the polls June 6-9 to elect members of the European Parliament for their countries and potentially a new commission president.

The current commission, led by President Ursula von der Leyen, who is once again standing for election, has ushered in a series of significant energy and climate laws since 2019, beginning with the European Green Deal, a pledge to make Europe the first carbon-neutral continent. On the way there, the bloc committed to reducing emissions by 55% by 2030, a plan known as "Fit for 55."

A strong emphasis on carbon neutrality was disrupted by the energy crisis which followed the invasion of Ukraine by Russia in early 2022. Through its REPowerEU plan, the bloc all but ended the receipt of Russian pipeline gas, replacing it with LNG from partners such as the US, Norway and Azerbaijan.

REPowerEU also sought to further accelerate clean energy deployment, and focused on key bottlenecks such as permitting and bureaucracy.

Meanwhile, the Net-Zero Industry Act, adopted April 25, aims to tackle a reliance on China for clean energy equipment such as solar panels and batteries.

Related story: Infographic: EU elections - Climate policies face populist backlash

Change in narrative

Rising energy costs and the war in EU neighbor Ukraine have shifted voter attitudes and the mood in Brussels. At the same time, stances on climate policy are front and center in the pre-election campaigns.

Political blocs advocating for climate action are set to see their representation shrink after the new parliament is formed, according to the latest polling. In particular, the Greens and the Renew Europe factions could suffer losses, while right-wing groups are set to gain seats.

"No party apart from the extremists would like to give away all of the work done under the Green Deal," said Maximo Miccinilli, senior vice president and head of energy and climate at Brussels-based communications firm FleishmanHillard. However, the narrative has changed, and parliamentarians are framing green policies as remedies for economic and security challenges.

"The agenda shifted from 'we need to decarbonize as much as possible' to 'hold on a second, we need to keep industry alive and we need to finance the future industry of the continent,'" said Miccinilli, whose team has worked on behalf of renewables companies and other industry players.

While the Von der Leyen commission brought in a series of ambitious climate and energy laws, the commission that will be elected in June needs to implement many of these laws and oversee their transposition into member state legislation.

One area where this has become obvious is the decarbonization of heating.

"It feels like the timing is not right for the introduction of mandates on consumers, unless the state can shoulder all the costs," said Coralie Laurencin, senior director in the power and climate policy team at S&P Global Commodity Insights.

Recent examples of this were a weakening of Germany's renewable heat mandate, France closing down conversations about a ban on gas boilers, and the UK -- no longer an EU member -- backtracking on a proposal to impose heat pumps on those using oil for heating, Laurencin said.

Renewables in focus

As part of its REPowerEU plan, the commission pledged to speed up permitting for renewables across the bloc, but here the implementation is lagging in some countries.

"Where a new [European Parliament] and a new commission may have an impact is on the regulations that impact consumers directly: the new carbon market for buildings and transport, the 2035 ban on internal combustion engine cars and possibly decarbonized heat," Laurencin said.

The new commission must also propose an emissions reduction target for 2040, Laurencin added.

While the new commission president is in charge of setting out the program for the next five years, its content needs to find support from the European Parliament and European Council.

"Views are very polarized," Hartstein said during a May 21 webinar organized by trade group SolarPowerEurope. At the same time, "I do not see a big majority backtracking on the targets that we have decided."

Still, parts of the renewables industry are now questioning whether a goal to produce 42.5% of power from renewables by 2030 is achievable.

"The mood is considerably less upbeat and this is not unexpected because the ambition is high and it will take some time to deliver," Laurencin said.

Overall, much has improved for the renewables sector over the past five years. Aside from the recognition of permitting challenges, installation targets were hiked and attitudes toward wind power have also warmed, with trade group WindEurope observing fewer objections to wind projects by local communities.

"Acceptance is not the same problem as it used to be. Both in terms of security and affordability, we are well-positioned," WindEurope spokesperson Christoph Zipf said in an interview about the group's approach to the EU election.

China relations

The geopolitical backdrop for energy supply chains has also shifted.

With the Inflation Reduction Act, the US has introduced a mountain of incentives for clean energy development and manufacturing that the EU is unable to match. Meanwhile, a trade ban on Chinese solar panels by the US is amplifying an oversupply of equipment in Europe, to the chagrin of local manufacturers who are folding in scores.

Another test of this will be the US tariff hike on Chinese electric vehicles and other clean technologies, recently introduced by the Biden administration.

"Europe is not energy-rich like the US and cannot afford to inhouse all manufacturing," said Laurencin, adding that the Net-Zero Industry Act, which focuses on diversifying the supplier base rather than advocating for a trade ban, is driven by an understanding that Europe needs to rely on imports.

In reality, "prohibitive" US tariffs will put the EU under pressure to apply its own, Brussels-based think tank Bruegel wrote in a May 16 paper.

The wind sector is also grappling with China. Europe's supply chain is struggling to produce the manufacturing output required to meet 2030 installation targets, Zipf said. Meanwhile, WindEurope lobbies against Chinese turbine manufacturers importing kit into the bloc, and also against such players setting up sites in Europe.

S&P Global Commodity Insights' reporter Camilla Naschert produces content for distribution on Capital IQ Pro.