European green deal and its impact on EU imports and exports

The European Green Deal is a comprehensive plan that aims to make the European Union's economy sustainable and carbon-neutral by 2050. The European Green Deal was introduced in December 2019, and it was adopted in 2020. This ambitious initiative is expected to have a significant impact on EU imports and exports, as it will drive changes in trade patterns, production methods, and consumer preferences. Particularly during the 1990s, concerns about greenhouse gas emissions, climate change, and global warming have gained attention on the international agenda. To address these issues, numerous research is conducted on a regional or global scale. 

'Buy-Build-Use-Throw' is no longer a viable linear economy model. This concept, which emerged during the Industrial Era and has gained significant traction up to this point, is in opposition to the notion of a clean environment. It is evident that shifting to a circular economy is best for the environment, and many nations are following suit.

The circular economy is a strategy that promotes reuse, incorporates recycling, and seeks to minimize the number of resources used in activities like production and consumption. Nearly all nations have committed to reducing greenhouse gas emissions and global warming since the Paris Climate Agreement was signed in 2015. The European Union (EU) is the frontrunner that inspires other nations in this regard. The consensus's primary goal is to make the world greener and more sustainable. The actions that must be taken for this are also included. By signing this agreement, the EU hopes to achieve its goals of having net-zero greenhouse gas emissions by 2050, independence from external economic growth sources, and global development—not only in a single nation or area but throughout the entire planet. In this article, we will explore the key aspects of the European Green Deal and its implications for the EU's trade relations.

Key objectives of the European Green Deal

• Achieving net-zero greenhouse gas emissions by 2050
• Increasing the share of renewable energy sources
• Promoting circular economy principles
• Improving energy efficiency in buildings and transport
• Protecting biodiversity and promoting sustainable agriculture

Who Did the Green Deal Affect?

This deal has significant implications for all nations with financial, political, and geographic ties to the EU, not just its member states. The agreement covers publications issued by international organizations as well as those in the public and commercial sectors. The EU's ties with all other governments, institutions, and organizations are governed by the European Green Deal. Companies that don't fit the required requirements won't be allowed to join the EU market. This implies that businesses that sell their goods primarily to EU nations will stop exporting if they don't take the required steps. The agreement establishes uniform standards for all goods and services with economic value rather than focusing on a particular good or category of goods like previous regulations did.

What Trade Effects Does the European Green Deal Have?

With 80 countries, the EU has the greatest export market in the world. 16% of import and export activity is conducted with EU countries. Trade between the EU and other nations has a significant impact. Thus, to maintain solid and long-lasting ties with the European Green Deal, non-EU nations must carefully and accurately study the memorandum. In a short amount of time, the EU intends to complete all import and export operations under a new international trade within a new environmental system. The EU assists developing nations in improving their socioeconomic conditions and achieving the Sustainable Development Goals (SDG) by 2030.

What was altered following the Green Deal?

The Carbon Border Adjustment Mechanism, which refers to the pricing, or taxes, of carbon in goods exported to the EU to reduce greenhouse gas emissions, is one of the most significant aspects of the European Green Deal. Employing this law, the European Union attempts to ensure that its commercial stakeholders take on the responsibility of decreasing carbon emissions. Businesses and governmental and private sector institutions that shirk this duty will be forced to leave the EU market. However, it seeks to drastically alter how businesses and consumers behave. Companies must now invest in and offer sustainable products if they want to continue operating in the EU market and grow their market share. To guarantee this under the new economic order, the EU uses price tools like taxes and strives to maintain a stable market equilibrium while meeting the ultimate climate targets. On June 24, 2021, the EU Climate Law was approved by Parliament, establishing a legally obligatory goal to reduce emissions by 55% by 2030.

What impact does the Green Deal have on EU exports and imports?

It is anticipated that the lack of access to information will persist for an additional two years, posing challenges for businesses in the EU and outside of it. After the European Green Deal (EGD), it will become more expensive to adopt new technologies and systems and change the manufacturing environment. Restricting the production regions that contribute significantly to carbon emissions is the first guideline that should be implemented to stop them. In other words, industries requiring a lot of energy are impacted. The European Commission predicts that by 2030, carbon leakage at borders may happen in some export sectors in reaction to this. Coal, iron, steel, cement, aluminum, textiles, chemicals, synthetic rubber, glass and glass items, ceramics, paper pulp, and some agricultural goods are some of these industries.

By making individual expenditures to lower carbon emissions in manufacturing sectors, companies can more easily adjust to the new system. It will be simpler for businesses to adjust if they take various actions, such as making investments to cut emissions, utilizing alternative energy sources, and utilizing electric vehicles in manufacturing regions. Nevertheless, if we examine these investments' financial status, we will discover that they have significant supplementary charges. One of the primary factors of the European Green Deal is the suggestion to introduce a carbon border adjustment mechanism. This mechanism could impose a carbon rate on imports of positive merchandise based totally on their carbon footprint.

1. The carbon cost at the border is 478 million euros if the carbon cost per ton in the EU is 30 euros. This charge rises to 1085 million euros when additional products utilized in the process are included.
2. Emissions from finished goods come to 797 million euros under the EU's Border Carbon Regulation (SKD) and a carbon price of 50 euros. When more production-related commodities are included, this cost rises to 1809 million euros.
3. The extra sum that exporting enterprises must pay, based on whether the carbon price is 30 or 50 euros per ton, if they fail to consider these circumstances and persist in producing carbon:

• It is 13.2–22% in the cement industry
• 1.7–2.8% in the iron and steel industries.
• It is 1.1–1.9 percent in the chemical industry.
• The automotive industry's percentage ranges from 0.7% to 1.2%.

It is unclear to whom these charges will be allocated, but it could result in expensive production costs. EU-based businesses will benefit from EU subsidies and R&D initiatives, which will enable them to adjust earlier than other businesses. This is in line with the EGD plan, which calls for international cooperation.

Green Deal 06: European Parliament elections between June 6-9 2024 had a major impact

The rate of climate change has accelerated since the most recent EU election in 2019, with 2023 being the hottest year on record. The European Green Deal—a historic piece of legislation by the von der Leyen Commission that aims to make Europe the first climate-neutral continent in history by 2050—may not survive the June 6–9, 2024 European Parliament elections. The European Green Deal, which was introduced in 2019, was hailed as the EU's "man on the moon moment." Since then, the EU has taken several actions to meet these goals, including lowering greenhouse gas emissions, boosting the use of renewable energy sources in light of the ongoing conflict between Russia and Ukraine, and safeguarding biodiversity. To this goal, many initiatives were developed, including the Fit for 55 package and the REPower EU policy.

EU Trade: Biggest imports and exports of the EU

Total EU Imports in 2023 amounted to $7.60 trillion. The top 10 EU imports majorly include:

1. Mineral fuels and mineral oils (HS Code 27): $971.55 billion (12.77%)
2. Electrical machinery and equipment (HS Code 85): $859.90 billion (11.3%)
3. Nuclear reactors and machinery (HS Code 84): $832.70 billion (10.95%)
4. Vehicles (HS Code 87): $772.50 billion (10.15%)
5. Pharmaceutical products (HS Code 30): $389.74 billion (5.12%)
6. Plastics and articles thereof (HS Code 39): $268.52 billion (3.53%)
7. Optical, medical, or surgical instruments (HS Code 90): $229.50 billion (3.02%)
8. Organic chemicals (HS Code 29): $223.70 billion (2.94%)
9. Iron and steel (HS Code 72): $179.07 billion (2.35%)
10. Natural or cultured pearls, precious stones, and metals (HS Code 71): $146.14 billion (1.92%)

Total EU Exports in 2023 amounted to $7.47 trillion. The top 10 EU exports majorly include:

1. Nuclear reactors and machinery (HS Code 84): $986.49 billion (13.19%)
2. Vehicles (HS Code 87): $877.59 billion (11.74%)
3. Electrical machinery and equipment (HS Code 85): $697.71 billion (9.33%)
4. Pharmaceutical products (HS Code 30): $551.52 billion (7.37%)
5. Mineral fuels and mineral oils (HS Code 27): $482.70 billion (6.45%)
6. Plastics and articles thereof (HS Code 39): $276.37 billion (3.7%)
7. Optical, medical, or surgical instruments (HS Code 90): $275.82 billion (3.69%)
8. Organic chemicals (HS Code 29): $188.84 billion (2.53%)
9. Natural or cultured pearls, precious stones, and metals (HS Code 71): $171.45 billion (2.29%)
10. Iron and steel (HS Code 72): $169.62 billion (2.27%)

EU imports and exports in the last 10 years

Conclusion

The European Green Deal is a groundbreaking initiative that is set to convert the EU's financial system and trade partners. By promoting sustainability and carbon neutrality, the deal will drive modifications in EU imports and exports, as organizations adapt to new environmental standards and client possibilities. While there are demanding situations ahead, the European Green Deal also presents possibilities for European businesses to guide the transition to a greener and extra-sustainable destiny.

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