Vladimir Putin’s war of aggression against Ukraine has shown more clearly than ever that Europe has become too dependent on other regions – both economically and militarily. For too long we have ignored the strategic gaps that have opened up over the past decades. Europe could have been better prepared. These omissions are now costing us dearly:
In view of rising national debt, there is a growing urge in Germany and the other “frugal states” in Northern Europe to limit government spending. In the past, saving usually meant cutting back on investments. But to fall into a state of shock now would be a big mistake. Instead, we should see the crisis as a wake-up call to close the strategic gaps. Europe must become independent of Russian energy supplies as quickly as possible. Because no one knows whether Moscow will turn off the gas supply only to Poland and Bulgaria in the course of the war.
The danger is that we are paying too little attention to investments in long-term energy security, climate protection and global development. However, we can only close our strategic gaps if we invest heavily. In times of the energy crisis, that must first mean channeling money into the construction of green energy infrastructure, i.e. into the expansion of solar and wind energy, into electricity grids, into storage and LNG terminals, which can later also be used for green hydrogen.
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EU members should not act alone
All of this is about radically accelerating and optimizing processes: building in “Tesla time”, as Economics Minister Robert Habeck said, referring to the car factory on the outskirts of Berlin, which was built in record time. Luckily, we are not on our own: The entire EU is facing similar challenges to Germany.
Therefore, not every EU member should act alone. United rather than fragmented, the EU is a much stronger purchasing power vis-à-vis suppliers. In addition, everyone benefited from greater connectivity of the power grids, for example to be able to import wind power during regional lulls.
Building in “Tesla time”, as Economics Minister Robert Habeck said, referring to the car factory on the outskirts of Berlin, which was built in record time.
(Photo: AP)
Europeans should also invest heavily in energy efficiency. This not only reduces our dependency on imports, it also helps protect the climate. It would make sense to skilfully combine grants for the mostly expensive start-up investments and long-term loans. Promotional banks such as the European Investment Bank have many years of experience in this area.
Even more devastating effects of the climate crisis than before can only be avoided if humanity makes great strides in decarbonization by 2030. If this does not succeed, floods like last summer with 134 deaths in the Ahr valley alone will not remain an exception. Delayed investments in the green transformation are likely to prove to be an expensive oversight. Without huge amounts of green hydrogen, climate change will not succeed.
Combination of private and government investments
For more energy-efficient hydrogen production, however, a combination of private and government innovations is needed to reduce costs. Luckily, the conditions for green breakthrough innovations in Europe are actually very good: Europe is the leader in technologies that combine climate protection and digitization: There are 50 percent more patents for green technologies here than in the USA.
Right now we have to have the courage to put a lot of money into our hands – and accept that part of it can be lost. Not every investment in new vaccines at the beginning of the pandemic was successful. Nevertheless, our early investments in the company Biontech show that it was right not to make the uncertainty about the chances of success of different technologies an obstacle to investment. The same must apply today when it comes to investing in climate innovations.
The focus should be much more than in the past on the clever combination of public and private investments. New, lucrative business models will emerge from the climate-friendly restructuring of the energy sector, indeed of the entire economy. State aid is necessary here, but the private sector must not shift all investment risks onto the taxpayer.
Putin attacks liberal values
In the end, productive, innovative and sustainable growth is also the best way to restructure national budgets, as Germany showed in the boom before the pandemic. Companies are also doing themselves a disservice if they delay investments out of uncertainty about the global consequences of the Ukraine war – and give their competitors an innovative edge. On the contrary: If we finally want to take the strategic autonomy of the European Union seriously and want to preserve our values, we have to invest in basic skills and infrastructure, unlike in the past.
The EU now accounts for nearly 20 percent of global research, development and patenting activity, but lags behind countries like Australia, Canada, Japan, South Korea and the US in private research investment. The EU’s capabilities in the modern cross-cutting technologies of artificial intelligence, big data and robotics are comparable to those of Japan, but not to those of the leading countries USA and China. The same applies to quantum technology. Here, too, the current crisis offers the opportunity to finally act.
>> Read here: Europe and Africa must move together
The tasks that war, pandemic and climate change confront us with are global. Europe must stand together all the more. Fortunately, Putin’s attack on Ukraine, which is an attack on Europe’s liberal values, has brought the West closer together. However, the energy price crisis can quickly put Europe to the test: the recent presidential elections in France have shown just how much populist forces can use the crisis in their election campaigns.
Europe must act boldly now
The more the EU countries now jointly invest in sustainable infrastructure, green energies and digital innovations, the better they will hold their own in global competition. However, strategic autonomy must not be confused with striving for self-sufficiency and isolation. Europe’s energy transition will not succeed without close cooperation with regions such as Africa, for example in building industrial production capacities for green hydrogen.
In the system competition between autocracies and democracies, Europe must not give up its claim to convince people in as many countries as possible of the value of freedom. We must not give autocrats and warmongers like Putin any room, anywhere. Europe must now act boldly – together, with foresight and globally.
The author: Werner Hoyer is President of the European Investment Bank (EIB) in Luxembourg.
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