Winds of change in the European Commission

The clash between commercial reality and sustainability dreams

At the recent AFC Leaders’ Summit Europe, Richard Knubben, Director General of Leaseurope, delivered a thought-provoking presentation entitled “Winds of Change in the European Commission: What Happens When Commercial Reality Clashes with Sustainability Dreams.”

In his address, Knubben highlighted the shifting dynamics within the European Commission and their implications for the Green Deal, a cornerstone of the EU’s sustainability strategy.

From Green dream to crumbling deal

Knubben began by reflecting on the initial optimism surrounding the European Green Deal, a comprehensive plan comprising 70-80 pieces of legislation aimed at making the EU climate-neutral by 2050. “About a year ago, we were living the Green Deal; living the green dream,” Knubben noted. The European Commission set ambitious targets, and the market followed suit, overcoming obstacles with determination.

However, the past six months have seen significant changes. According to Knubben, “the Green Deal house has been crumbling down.” This shift has been driven by a complex interplay of political and economic factors. As elections have taken place across Europe, there has been a notable shift to the right, fuelled by public backlash against the rising cost of living associated with various green measures, including farming, electric vehicles (EVs), and heating.

Political shifts and legislative challenges

Knubben observed that many member states and political parties initially supported the Green Deal to avoid being labelled anti-Green. However, recent local election results have revealed an “incredible shift to the right,” leading to a trend that is expected to continue in upcoming parliamentary elections. He predicted that while the European People’s Party (EPP) might hold their ground, the socialists and greens will lose significant support, resulting in a parliament with more representation from right-wing and potentially resurgent communist parties.

This new political landscape poses challenges for passing ambitious sustainability legislation. Knubben questioned whether the EU’s Corporate Sustainability Reporting Directive (CSRD) would have passed under the current circumstances, suggesting that it probably wouldn’t have in its current form.

The European Commission’s pragmatic turn

In response to these changes, Ursula von der Leyen, President of the European Commission, and her team are re-evaluating their approach. According to Knubben, the Commission is now shifting from an ambitious Green Deal 2.0 to a strategy where environmental targets are underpinned by solid business cases that support the European economy. This pragmatic turn is necessary to maintain political support and ensure the re-election of commissioners aligned with the Green Deal’s objectives.

The role of the leasing industry

A significant portion of Knubben’s presentation focused on the leasing industry’s role in Europe’s green transition. He criticised the European Commission’s approach to the Green Corporate Fleets initiative, which aims to mandate leasing companies to purchase a certain number of battery electric vehicles (BEVs) by specific dates, leading to 100% by 2030. Knubben argued that this approach demonstrates a fundamental misunderstanding of the leasing industry’s dynamics and the market’s readiness for a one-to-one BEV replacement.

He emphasised that, while the leasing industry can play a crucial role in electrification, it requires the right conditions, including affordable and fit-for-purpose assets, robust infrastructure, and a viable second-hand market for BEVs. Currently, many of these preconditions are lacking.

Infrastructure and regulatory needs

Knubben also highlighted the inadequacies in the current infrastructure, pointing out that the Alternative Fuels Infrastructure Directive (AFID), which mandates charging stations every 60 km along highways, fails to address the need for high-voltage points across each country. Additionally, he stressed the need for smarter regulation that takes into account the leasing industry’s unique characteristics and contributions.

Future outlook

Looking ahead, Knubben emphasised the need for a thriving economic model to fund the transition to a greener reality. “We need businesses that make money in order to generate profit to fund lots of things we need to make this newer greener reality a reality,” he asserted. Economic activity and sustainability efforts must go hand-in-hand to secure Europe’s place in the global economy and achieve the Green Deal’s goals.

European Parliamentary Elections and beyond

The results of the European Parliamentary Elections in June 2024 underscored the changing political landscape. While the European People’s Party led by Ursula von der Leyen won the most seats, pro-EU centrist, liberal, social democrat, and environmentalist parties suffered losses, with right-wing populist parties making significant gains.

This shift does not imply an outright rejection of climate action but suggests a potential slowdown and a move towards less ambitious legislation.

Concluding remarks

Richard Knubben’s presentation at the AFC Leaders’ Summit Europe illuminated the evolving interplay between commercial reality and sustainability dreams within the European Commission.

As Europe navigates these winds of change, the challenge will be to balance economic vitality with the ambitious goals of the Green Deal, ensuring a sustainable and prosperous future for all.