Digitalization can help post-COVID European economies become greener

25 September 2020

In her first-ever State of the European Union speech last week, European Commission President Ursula von der Leyen made clear the European Union means business on its greenhouse gas reductions, putting forward a new and more radical target of a 55% overall cut in emissions within a decade as part a wider plan to achieve “climate neutrality” by the middle of the century. As von der Leyen told the European Parliament in Brussels: “For us, the 2030 target is ambitious, it’s achievable, and it is beneficial for Europe.”

The new target may seem bold, but EU countries have already reduced their emissions by 25% over the past three decades, even as the bloc’s economy has grown by over 60%. In the Commission President’s view, when sustainable practices are aligned with new technologies and political will, low-carbon pathways and more sustainable practices will follow.

First and foremost among those new technologies are renewable energies, whose large-scale adoption must be the building block for any significant cuts in emissions. The EU’s current target for renewables in its energy mix is 32%, along with significantly improved energy efficiency. As Kadri Simson, the EU’s Commissioner for Energy, stressed in presenting the European Commission’s new EU Renewable Energy Financing Mechanism: “To reduce Europe’s greenhouse gas emissions by at least 55% by 2030, we need to significantly increase the share of renewable energy.”

Yet even as Brussels takes commendable steps to emphasize renewable energy production, another policy ambition of the European Commission could be an additional gamechanger for Europe’s expanding decarbonization goals: digitalization.

Worldwide, the transition to a digital economy is regarded as a key front in the struggle for global CO2 reductions, with advocates of digital technologies pointing to their contributions to more sustainable economic models, new pathways for industrial growth, and far-reaching lifestyle changes. The Commission clearly ascribes to this view, with von der Leyen laying out her plans for a “twin green and digital transition” and the EU highlighting the various roles emerging technologies (including digital technologies) can play the decarbonization of energy systems, transport, and smart, climate-neutral communities.

As a Commission policy document earlier this year spelled out, digitalization will be a key factor in the success of the European Green Deal. Among other benefits, the document argued that “by tracking when and where electricity is most needed, we can increase energy efficiency and burn less oil or coal,” and that “with data gathered from devices connected through the Internet of Things, processes in construction and industry can be streamlined to use less resources.”

The ongoing coronavirus pandemic has brought the need for digitally driven lifestyle changes into even sharper relief. The confinement regimes implemented by many European governments earlier this year forced large areas of EU economic activity into the online sphere, where workers, educators, and companies relied on digital infrastructure to keep working, learning, and doing business. Rarely has the importance of technological development and innovation in the digital sector been so readily on display.

Yet in doing so, the pandemic also revealed deep inequalities in terms of both access to such technologies and their applications. The health crisis has exposed shortfalls impacting the EU as a whole, specifically the slow large-scale adoption of the 5G mobile networks needed not only for faster Internet connectivity, but also for the development of emerging technologies. Based on the Commission’s own telling, these delays have slowed both Europe’s economic digitalization and its adoption of greener practices.

The digital divide between northern and southern Europe, as well as between western and eastern European countries, has become particularly obvious. According to a recent study from the European Commission’s Joint Research Center and Euro found, the country with the highest ratio of “teleworkable” employment – effectively a measure of digital development and access – was Luxembourg (54%), followed by the Netherlands, Belgium, and Sweden; the lowest was Romania at just 27%. Italy, Spain, and Portugal scored better, but are still below the European average.

These trends are also reflected in the results of the EU’s Digital Economy and Society Index (DESI), which summarizes indicators related to digital performance, including connectivity, human capital, and the integration of digital technology, and uses them to measure the evolution of EU member states’ digital competitiveness. The Index makes clear that a number of southern and eastern European economies, including Italy, Romania, and Bulgaria – which in 2020 rank 25th, 26th, and 28th respectively out of 28 EU members, including the UK – have a long way to go in terms of digitalization. These discrepancies make the EU’s historic €750 billion “Next Generation EU” stimulus package a chance to prioritize investments which improve and expand digital infrastructure across the EU, including 5G and fiber optic networks.

Most importantly, the stimulus effort is a unique opportunity to help digital stragglers catch up to the rest of Europe, driving socioeconomic transformation at the precise moment EU economies need a fresh start. In the midst of the COVID-19 pandemic, unemployment rates remain consistently higher in southern Europe than in the northern part of the continent, in large part because countries such as Spain, Portugal, Italy, and Greece depend heavily on tourism and are especially vulnerable to crises such as this one. Economic restructuring along more sustainable lines, and with the aid of digital technologies, would boost regional resilience to future shocks.

Digital transformation could also provide a steppingstone to makes further gains in sustainability. 5G, for example, is an “exponential technology” in that its output per Euro is steadily accelerating. Expanding 5G networks will make possible the broader adoption of electric and self-driving cars and trucks, reducing the carbon emissions from a transport sector responsible for 21% of global emissions.

In the end, the Commission has clearly determined that reducing emissions and pursuing digitalization are mutually reinforcing goals. By directing overdue investments into the right areas, Brussels now finds itself in prime position to ensure Europe’s post-COVID future is smarter – and more sustainable.

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