Six SDG Transformations for the EU

Part 3

The von der Leyen Commission refers to the SDGs in mission letters to new Commissioners and put the SDGs at the centre of EU policymaking:

“[The SDGs] will guide our work across all sectors, both in our internal and external action, and will show our commitment to sustainable development at home and abroad. As part of this, we will refocus the European Semester by integrating the Sustainable Development Goals and put forward our approach to the overall governance and implementation of the goals.” (European Commission, 2020f)

As discussed in the previous section, the SDGs are timelier than ever, because they also provide a roadmap out of the COVID-19 crisis. Yet the 2030 Agenda for Sustainable Development has not (so far) turned out to be the new Commission’s visible framework for policymaking.

The EU has legislative and policy tools in place, or in preparation, to address most SDG challenges, but even seasoned observers can get lost in the plethora of instruments. The recent Staff Working Paper on the SDGs (European Commission, 2020c) provides a useful grouping of activities, but it can be difficult to discern SDG priorities in EU policy processes. For this reason, the EU needs to further strengthen and simplify the narrative for how the SDGs can and will be achieved inside and outside the Union. Combined with public education and outreach, this will help sustain and expand popular support for the SDGs, the European Green Deal (“Green Deal”) and the other headline ambitions announced in President von der Leyen’s political Guidelines.

The concept of SDG Transformations, introduced in the 2019 ESDR (Box 5), can help frame a narrative that is operational and easy to communicate. By grouping major synergies as well as trade-offs, the transformations focus attention on the greatest implementation opportunities and challenges. As we show below, these priority transformations are fully consistent with the initiatives under the Green Deal and other policy instruments related to the SDGs.2

Box 5. Proposals for six SDG Transformations

The 17 SDGs and their 169 targets describe objectives to be achieved by 2030, but they do not lay out how the EU and Member States might organise themselves to achieve them. Several groups have proposed broadly consistent sets of six transformations that together could achieve the SDGs. These include The World in 2050 (TWI2050, 2018), Sachs et al. (2019b), and the UN Independent Group of Scientists appointed by the Secretary-General (2019). For this report we draw on all three frameworks to propose six “SDG Transformations” that align well with the EU’s signature policy initiatives, including the Green Deal. These six SDG Transformations will help the EU map out an operational strategy that ensures key synergies and trade-offs are addressed; reduces complexity by focusing on six priority areas; and supports stakeholder engagement around each transformation. They are important tools for strengthening policy coherence across EU instruments and among Member States (Section 4.3).

The European Commission was astute in not launching a separate SDG strategy process for the Union, as the key elements of an EU SDG strategy are already in place. These are addressed in the Commission President’sPolitical Guidelines (von der Leyen, 2020) and in the Commission’s annual work programmes (European Commission, 2020c). Gaps can be identified and filled – notably through the Green Deal – without an additional overarching strategy process. Yet the EU does need to follow an integrated and comprehensive approach towards implementing the SDGs, and it must communicate clearly on them (Box 6).

As we argued in the 2019 ESDR, an integrated approach to the SDGs must tackle several challenges in implementing the SDG Transformations. For one, the EU and its Member States must develop a clear operational approach. This will include a range of policy and investment instruments at the EU level and in Member States, as reviewed in Section 3.1. The objectives of key policy priorities including the Green Deal align well with the SDGs, and so the focus must now be on their implementation, including the progressive alignment and harmonization of EU policies and those of Member States through the European Semester and other coordination mechanisms.

The second challenge, reviewed in Section 3.2, is to use the EU’s diplomacy, global leadership and development cooperation to promote the SDGs globally and to advance the objectives of the European Green Deal and other policy instruments towards achieving the SDGs. Xi Jinping’s pledge to achieve carbon neutrality before 2060; similar recent commitments by Japan and South Korea; and the election of Joe Biden to the US presidency have all profoundly changed the international landscape for EU diplomacy, offering a window for increased multi- and bilateral Green Deal diplomacy.

Thirdly, and closely related, the EU must tackle adverse spillover effects on other countries to ensure coherence between its internal SDG objectives and its external action and development cooperation in support of the SDGs globally. This applies in particular to trade in agricultural and forest commodities and to international finance. We will turn to spillovers in Section 3.3.

Below we review the domestic, external and spillover challenges to identify gaps in instruments and proposals submitted by the European Commission to date. Part 4 then reviews critical instruments and levers for implementing the Green Deal and other SDG Transformations. Again, we will refrain from attempting to review all instruments under discussion and instead focus on what we consider to be the greatest gaps and opportunities for strengthening implementation.

Box 6. Re-committing, communicating and tracking an EU-wide approach to SDG implementation

As reviewed in Sections 3 and 4, many proposed and existing EU policies aim to achieve the 2030 Agenda, even though they may not be explicitly framed in terms of these internationally agreed goals. But while there is no need to launch a new EU-wide SDG strategy process, there is a pressing need to maintain strong political commitment to the Goals, to track progress, and to communicate (to Europeans and others) how the EU and Member States are working to achieve them. These priorities are echoed by the European Commission (2020e).

The COVID-19 pandemic, along with unprecedented pressures on multilateralism and a rules-based international order, threatens the visibility and viability of the SDGs as the world’s shared goals for sustainable development. Therefore, and as a first priority, the three pillars of EU governance – the European Council, the European Parliament, and the European Commission – should issue a shared political commitment to the 2030 Agenda and to the 17 Goals. The President of the European Commission should report annually on progress towards these Goals: to the European Parliament, at a dedicated SDGs session; and to a dedicated meeting of the European Council, that takes stock of Member States’ progress. The EU should also report its progress through the annual Eurostat SDG Monitoring Report and at the UN High-level Political Forum on Sustainable Development.

Second, the Commission should describe and regularly update – perhaps in the form of a Communication – a roadmap for how the EU and its Member States will pursue the SDGs. The recent staff working paper (European Commission, 2020c) is an important step in this direction. As we argue in the present report, our six SDG Transformations provide a useful and science-based framework in which to organise existing policies into a cohesive SDG strategy (for example, policies under the European Green Deal, the New Industrial Strategy or the European Education Area). They group the large number of policy instruments into categories that Europeans and citizens around the world can relate to easily, which will in turn support communication and public engagement as well as international cooperation. Indeed, the SDGs can help the EU frame a clear and easily communicable political narrative that integrates the economic, social and environmental dimensions. The Communication could also show where existing policies need to become more ambitious and where additional policies are required.

Third and as reviewed further in Section 4.6, the EU and its Member States need to track the distance they need to travel to meet the SDGs across all major policy areas and discuss their findings, including in the annual State of the Union address by the President of the European Commission. This will require quantitative targets and interim milestones for all SDG priorities, against which each Directorate-General should report annually. The present annual ESDR is a tool for such tracking, which can promote accountability, serve as a management tool, and – most importantly, mobilise support from the population and other European stakeholders for the changes needed to implement the SDG Transformations. National distance-to-goal analyses should also be considered as part of the European Semester and other coordination mechanisms for national and EU policies (Section 4.3).

3.1 Priority SDG Transformations inside the EU

The Green Deal has become a critical vehicle for achieving the SDGs, particularly in the areas of climate change, ecosystem degradation, nutrition, and promoting a circular economy, areas in which the EU presents its greatest shortfalls in progress towards the SDGs (Part 2). But the Green Deal must also be a social deal that leaves no one behind (EESC, 2020a). The EU must also transform education, skills development, and innovation across Europe; accelerate digital transformation in all EU Member States; and address the glaring disparities within and among them. Furthermore, as discussed in section 2 on COVID-19, the EU needs to overhaul public health and disease preparedness, to contain COVID-19 and to prevent similar outbreaks in the future.

The von der Leyen Commission, the European Parliament and the European Council have made great strides in developing and operationalizing the Green Deal – a commitment that has been maintained in spite of the COVID-19 pandemic. The Green Deal is rightly framed as a new growth strategy that aims to increase the competitiveness, prosperity and social cohesion of Europe. Yet there is a real risk, as indicated in recent Commission documents, that the explicit link between the Recovery and Resilience Plans and the SDGs may be weakened.

Viewed through an SDG lens, the Green Deal covers four SDG Transformations: towards sustainable energy; sustainable food, land, and ocean use; sustainable communities, mobility, and housing; and a clean and circular economy with zero pollution. These transformations will help advance many SDGs. They are closely related and must be coordinated, but they are also sufficiently distinct to be designed and implemented in parallel.

The Commission, Parliament and Member States all emphasise rightly that the key transformations under the Green Deal must achieve ambitious environmental targets as well as strengthening social cohesion and fairness inside the EU, enhancing competitiveness, and increasing prosperity. The social and economic dimensions of the Green Deal are critical for success in pursuing the SDGs and must be pursued with a view towards leaving no one behind (Box 7). Bespoke strategies are needed for regions and sectors that will likely undergo major changes under the Green Deal, including but not limited to the coal sector, automotive and heavy industry, and parts of agriculture. The EU Just Transition Fund, along with national mechanisms as proposed for the coal sector, can play a role in supporting a fair transformation. As described below, the transformation of education, skills development and innovation – as well as digital transformation – are important tools to ensure that no one is left behind by the Green Deal.

Box 7. Leave no one behind

Our index tracking the EU’s progress towards the foundational principle of the SDGs and the 2030 Agenda to leave no one behind (Section 2.2) shows rising levels of inequality and poor access to services within and across some Member States. Many countries are falling back on “leave no one behind”, so the EU’s SDG strategy must place emphasis on strengthening social inclusion for all people living in its territory and make it a guiding principle for implementing the SDG Transformations. This requires attention to three broad areas (Stainforth et al., 2020):

Within-country equity: Putting equity and well-being for all at the centre of the Green Deal and other SDG Transformations. Policy options might include the distribution of pollution dividends or carbon pricing to European citizens by eliminating fossil fuel subsidies, shifting taxation from labour to activities that pollute and degrade the environment, and targeting the poor and marginalised in the design of SDG Transformations. In addition, equitable investments in education and skills (Section 3.1.1) can lower inequalities.

Equity across EU Member States: Harnessing investments in the Green Deal and other SDG Transformations to promote cohesion and solidarity across Member States. Specifically, EU policies should support convergence in living standards across countries and regions and make the protection of Europe’s commons (water, seas, land and air) a key pillar of the European project. In particular, this will require aligning cohesion programmes, investments in priority sectors under the Green Deal, and the New Industrial Strategy to foster development in depressed regions and less well-off countries.

Intergenerational equity: Fostering intergenerational solidarity that includes equitable burden and benefit-sharing among age groups and generations. To achieve such solidarity, the following ideas could be explored: “future proofing” infrastructure investments within economic recovery plans; integrating intergenerational justice in the framework of the new Climate Law and into policies under review, such as the Farm to Fork Strategy and the Common Agricultural Policy (CAP) reform, better regulation and the semester process; or creating an EU Future Generation’s Ombudsman.

3.1.1 Education, skills, and innovation

Ensure top education including lifelong learning for all Europeans and strengthen innovation in strategic technologies and industries.

The first principle of the European Pillar of Social Rights is the right to quality education and lifelong learning. Yet close to a quarter of 15-year-olds fail to complete basic mathematics, science and reading tasks, according to the OECD PISA study (OECD, 2018). Education outcomes are linked to socio-economic status, with students from disadvantaged backgrounds overrepresented among underachievers. Education outcomes in rural areas in particular are falling behind, and overall outcomes have deteriorated in many countries since the 2008 financial crisis.

Europe’s long-term prosperity and inclusion can therefore only be achieved through greater investments in innovation, educational quality and skills for lifelong learning – including investing in digital skills for all. Quality early childhood education and targeted efforts in socio-economically deprived areas can reduce inequalities in education outcomes. Investments need to focus particularly on EU regions that score low on metrics related to educational performance, innovation, patents activity and tech-based startups.

The European Education Area is committed to upgrading educational quality and fostering skills for lifelong learning, and to promoting digital skills for all. If European companies are to compete with cutting-edge enterprises from China, Japan, South Korea, the United States and elsewhere, the EU must ensure that every worker, and every college and university graduate, is equipped for the new sustainable economy.

Commission proposals for the establishment of a new European Education Area by 2025 have identified critical education challenges across the EU that must be addressed. Benchmarking education outcomes annually will also help identify shortfalls and promote the sharing of lessons across Member States. More ambitious EU-wide education standards (including degree programmes) and trainings for teachers can help raise education standards throughout the Union. The proposals also rightly underscore the geostrategic dimension of international education exchange programme with non-EU Member States, as they strengthen long-term international relationships and trust

Cutting-edge higher education goes hand-in-hand with world-leading research. Horizon Europe is the largest research funding programme in the world. It must be closely aligned with addressing the innovation challenges and developing technologies to achieve the SDGs and implement the Paris Climate Agreement. The four “Green Deal Missions” (adaptation to climate change, oceans, cities, and soil) are a promising model for delivering high-impact innovation well aligned with the six SDG transformations. The Horizon Europe investment programme could also be an important tool to strengthen innovation systems in Member States with weaker R&D systems, and to foster leading European companies to develop digital technologies, including artificial intelligence, as well as other sustainable technologies.

3.1.2 Sustainable energy

Promote energy efficiency, achieve zero- carbon power generation, decarbonise industry, and create new jobs.

A central pillar of the Green Deal is the decarbonizing of power generation and transmission, mobility, buildings, and industry. The electricity grid is critical for this transition; the bulk of the necessary decarbonization will occur through a combination of energy efficiency measures and the electrification of point sources with zero-carbon power – alongside expansion of hydrogen power and a modest uses of biomass – using smart grids. For this reason, each component of the energy transformation requires dedicated EU and national policy instruments, including the “renovation wave” for buildings and the Strategy for a Sustainable and Smart Mobility, discussed under the Transformation towards Sustainable Communities, Mobility and Housing (Section 3.1.1).

This transformation towards sustainable energy provides important opportunities for green stimulus investments to support the COVID-19 recovery and to generate new jobs (Hepburn et al., 2020). Like other SDG Transformations, it can be a major driver for economic recovery.

The Green Deal rightly emphasises the need for an integrated power system for the EU, and several technical analyses exist, such as the European Commission’s “A Clean Planet for All”. As discussed in Section 4, such long-term pathways are critical methods for problem solving for each transformation, which is why the legislative focus on “Trajectories for Achieving Climate Neutrality” (Art. 3 of the proposed European Climate Law) is so important.

However, investments in power generation and transmission systems do not yet reflect the European vision, as they are dominated by national considerations and too little emphasis is placed on burden-sharing and competitive advantages across the EU. For example, southern Member States have an advantage in generating solar power and could supply electricity to their northern partners, and smart integrated European grids will reduce the need for additional power-generation capacity. Such opportunities must be pursued systematically under the Green Deal. The Trans-European Network-Energy Regulation, announced as part of the Green Deal, must therefore play a central role in the Energy and Jobs Transformation. It will also strengthen cohesion across the EU.

The energy transformation also needs clear mid- to long-term policy signals and accompanying research and development measures to accelerate key technical transitions. The Green Deal focuses extensively on the important issues of carbon pricing, including the European Emissions Trading Scheme. Yet too little headline attention is placed on benchmarks for the technological and systems changes needed to transform energy systems in line with the Paris Agreement’s objective of limiting global temperature rises to 1.5 degrees Celsius above pre-industrial levels. Such benchmarks have strong scientific support and play a critical role in driving industrial strategy and sector transformations (Kuramochi et al., 2018).

As one example, the European Commission should consider a 2030 phaseout for the registration of new light-duty vehicles that are not carbon neutral, as has already been adopted by California as well as by Norway and a spate of other countries. Similar EU-wide time-bound standards are needed and under consideration for key industry sectors including steel, cement and the chemical industry, as well as the building sector. Most urgently, the construction of new fossil-fuel power plants, particularly those using coal, should stop immediately, and existing phase-out plans for coal power must be accelerated across most Member States. These time-bound benchmarks should be integrated into Europe’s New Industrial Strategy for the SDGs (Section 4.1). They also point towards opportunities and needs to reskill European workers (Section 3.1.1).

3.1.3 Sustainable communities, mobility, and housing

Strengthen cities and other communities to promote sustainable and smart mobility, renovate housing, ensure sustainable building standards, and support new jobs.

The SDGs and the objectives of the Green Deal have a strong territorial dimension. Communities across Europe – be they large metropolises, cities, small towns, villages or rural settlements – all need to become more liveable and more sustainable. This includes addressing mobility and housing, as well as the connectivity of each community to the rest of the country and to the European Union. Together, these challenges require a territorial European SDG for Sustainable Communities, Mobility and Housing that should be closely coordinated with the Urban Agenda for the EU.

Like the SDG Transformation for Sustainable Energy, this transformation provides important opportunities for green stimulus investments to support the recovery from COVID-19 and for generating new jobs (Hepburn et al., 2020). Sound investments in smart mobility and sustainable housing will also help Europe tackle some of the most challenging aspects of the Green Deal.

The announced Strategy for Sustainable and Smart Mobility should set out a roadmap for reducing transport emissions by 90% by 2050. Achieving this objective represents some of the greatest challenges under the Green Deal and Europe’s SDG strategy. Some zero-carbon technological alternatives are not mature for some settings (e.g. for long-distance heavy-duty trucks) or unavailable (e.g. for aviation). New models of mobility must be devised, particularly for thinly populated rural areas. The sustainability of the EU’s transport system goes hand-in-hand with harnessing digital technologies to deliver clean and smart mobility (Section 3.1.4). New smart mobility services that are accessible and affordable, as well as a seamlessly interconnected multimodal transport network extending to all regions and communities is also fundamental to social and economic cohesion in the EU.

Success will require a lot of experimentation and the piloting of promising approaches. The European industry has world-leading expertise, but efforts to trial new systems, such as electric buses, are woefully sub-scale compared with efforts underway in China. European countries will need to consider bolder steps, as part of the Europe’s New Industrial Strategy (Section 4.1), to drive new mobility solutions, which can then be sold on other markets.

The Commission rightly underscores the strategic importance of smart multi-modal transport solutions for inland and international freight that must be enabled through incentives to shift freight and passengers to rail and inland waterways as well as support for alternative transport fuels. The combination of smart traffic management, automated multimodal mobility, and an EU-wide infrastructure for electric and other low-carbon vehicles would reduce congestion and pollution. It would also reduce transport costs, helping to reconnect remote rural areas and small towns with European centres of economic activity. And, finally, smart mobility solutions will help absorb intermittent renewable power generation and increase the flexibility of Europe’s power grid (Section 3.1.2).

The EU also needs the proposed Renovation Wave of public and private buildings to at least double the annual rate of renovation of building stock. These investments increase energy efficiency, lower the long-term operating costs of buildings, boost SMEs, and create local jobs through the construction sector. As outlined in the Commission proposal for the Green Deal, a successful Renovation Wave will require better solutions to the financing for renovation, the lowering of per-unit costs, tackling national regulatory barriers, and special support measures for poorer households. To this end, the Commission proposes an open platform to bring together the buildings and construction sector, architects and engineers, local authorities, and national and EU development banks to jointly identify and address barriers to renovation.

3.1.4 Sustainable food production, healthy diets and biodiversity protection

Ensure sustainable agriculture and ocean use, promote healthier diets and behaviors, and protect and restore biodiversity and ecosystems with decent incomes for farmers and fishermen.

The Green Deal recognises key challenges related to food systems, land and ocean use in the EU. These include growing pressures on natural resources – the EU has not met its Aichi Biodiversity targets – and the climate; widespread diet-related diseases and food insecurity; massive international spillovers through trade in food and other soft commodities; and high levels of food loss and waste in supply chains. The Green Deal and its Farm to Fork strategy recognise that these challenges can only be addressed together. Siloed policies and instruments will not be successful.

Hence, the Farm to Fork strategy fills a critical gap in the Green Deal by integrating for the first time the sometimes-competing objectives of efficient and sustainable agricultural production, sustainable fisheries, nature conservation and restoration, curbing greenhouse gas emissions and strengthening resilience to climate change, food security and healthy diets, food loss and waste, and green international supply chains. The ambition of the Commission to integrate and transform such a large number of policy areas reflects that importance and complexities of food systems. All the components are essential, and none can be removed without undermining the policy objectives of Farm to Fork and the Green Deal. The critical question is how this integration will be achieved, as the Farm to Fork strategy currently lacks an effective governance mechanism (EESC, 2020b).

Farm to Fork proposes deep changes that will make major contributions to social, economic, and environmental SDGs. If implemented these changes would represent serious challenges for conventional, intensive agriculture, particularly in the livestock sector. Since the EU is the world’s largest importer and exporter of agricultural commodities and represents the largest seafood market, Farm to Fork will likely affect major soft commodity supply chains.

This then raises major challenges in terms of integration and policy coherence across a large number of different EU and national policies. These include but are not limited to the Common Agricultural Policy (CAP); the ambition of healthy food for all; the Common Fisheries Policy; new EU biodiversity and forest strategies; greenhousegas emission reductions and resilience under the European Climate Law; the proposed long-term vision for rural areas; the zero-pollution action plan for water, air and soil; and deforestation-free value chains. The new EU legal framework for a sustainable food system, scheduled for the end of 2023, will be an important tool for harmonizing the cross-sectoral implementation of Farm to Fork and for setting clear targets (particularly for sustainable diets).

In addition to its cross-sectoral approach, Farm to Fork also promotes a territorial dimension for policy design and implementation. This is particularly important for agriculture, fisheries, forests and biodiversity, where challenges are often locally specific and policy mechanisms can be devolved to sub-national levels. Another important innovation of both the Green Deal and its Farm to Fork strategy is that they constitute permanent policy frameworks: in contrast to the temporary CAP and associated regulations.

Farm to Fork and the Green Deal must go further, by developing and implementing a geospatial strategy for sustainable land use that manages competing needs with integration across agriculture, ecosystem services and biodiversity, climate, and other objectives. For example, the biodiversity strategy implies a level of land restoration that is currently not supported by provisions in the CAP. The different components for better spatial policies already exist, including biodiversity and eco-system services maps prepared under the EU Mapping and Assessment of Ecosystems and their Services (MAES) initiative (Maes et al., 2018). It is encouraging that the directorate-generals for Environment (DG ENV) and for Climate Action (DG CLIMA) have agreed to collaborate on land-use planning frameworks, but these are of course highly complex to implement – particularly given varying levels of subsidiarity for land use across the EU – and therefore need to become a core feature of Farm to Fork, the reformed CAP, and the Biodiversity Strategy (WBGU, 2020).

As emphasised in the Green Deal, a major challenge lies in aligning the objectives of the new CAP with Farm to Fork. Current discussions on CAP reform fall short of the environmental ambition expressed in the Farm to Fork strategy. To accelerate integration, the Commission will recommend ways that Member States could address the nine CAP objectives in their national CAP strategic plans (CSPs) and establish national targets for CAP and Farm-to-Fork implementation. The CAP is already shifting away from simple compliance towards performance-based payments, including in relation to environmental outcomes, however progress remains too slow.

At the time of writing, several important elements of the Commission’s 2018 CAP proposals – particularly in relation to environmental priorities – were still under discussion. We see several immediate issues that require careful attention to make the CAP fit for the objectives of Farm to Fork (IEEP, 2020): (i) Ambitious eco-schemes to meet the environmental and climate objectives of Farm to Fork with robust standards environmental standards; (ii) Ring-fenced funds for eco-schemes, including the use of unspent funding for eco- schemes to address environmental objectives; (iii) Maintenance of strong baseline standards through conditionality; (iv) Strong safeguards against environmentally harmful spending (e.g. coupled payments); (v) accounting for the environmental and food security impacts of non-food crops, such as biofuels; and (vi) integrating standards for animal welfare and microbial resistance in the CAP Strategic Plan Regulation.

The proposed Biodiversity Strategy has also been favourably received. It lays out a compelling case for the value provided to society by biodiversity and ecosystem services, and aims to achieve the “30 by 30 target” on land and at sea, which the European Union advocates as a member of the High Ambition Coalition for the post-2020 biodiversity framework. The proposed restoration plan for the EU is notable and fills an important gap. The big challenge is of course implementation, particularly (i) the effective integration of biodiversity objectives into the CAP and Farm to Fork, (ii) greater clarity on how responsibilities and actions will be coordinated across EU, national and subnational levels, and (iii) improved management of the existing Natura 2000 network.3

Discussions of Farm to Fork have focused on the supply of food and must place greater attention to the demand side. European countries are experiencing high and rising rates of obesity (Section 2). Inadequate nutrition is not only the biggest driver of rising health system costs (FOLU, 2019), but it also undermines the environmental objectives of Farm to Fork. Therefore, Europe needs to promote shifts towards healthier diets with less animal protein, less starch, more nuts and vegetables. In particular, European countries should support more diverse protein mixes with emphasis on plant-based protein. This is an area that is rife with opportunities for technological innovation for possible consideration in Europe’s New Industrial Strategy (Section 4.1).

The 2020 SDG data for the EU once again demonstrate that the EU is far from achieving SDG 14 on marine ecosystems. Too many fisheries across the region and beyond are overexploited and the use of highly destructive fishing techniques remains widespread. Marine protected areas tend to be poorly managed, and some experience a higher incidence of destructive fishing techniques than do unprotected European waters (Dureuil et al., 2018). In the run-up to the 2021 UN Biodiversity Conference (COP15) of the Convention on Biological Diversity (CBD), the EU should take the lead in securing its marine ecosystems for future generations. It must also address major environmental spillovers and resulting threats to livelihoods in countries in West Africa and elsewhere caused by Europe’s long-distance fishing fleets and unsustainable demand for marine products. One option is to promote demand for sustainably produced marine products, such as farmed bivalves and seaweed.

3.1.5 Clean and circular economy with zero pollution

Curb pollution, reduce material consumption and minimise the environmental impact of European industry and consumers.

Europe has been a global leader in setting circular economy standards, including efficiency standards and standards for less waste and greater re-use. Yet as the proposed Circular Economy Action Plan makes clear in its introduction, the use of materials such as biomass, fossil fuels, metals and minerals and

associated water generation are projected to increase further. The new action plan therefore emphasises the need for faster action with a particular focus on key product value chains (electronics and ICT; batteries and vehicles; packaging; plastics; textiles; construction and buildings; and food, water and nutrients).

An expansive view of circularity might suggest that it comprises transformations towards sustainable energy and jobs as well as towards sustainable food, land and ocean use. While some overlaps are unavoidable, the Circular Economy Action Plan should prioritise those sectors that are not central to the energy and food transformations. This will help streamline the narrative for implementing the Green Deal and avoid duplication or mixed messages to industry, consumers and governments.

The proposed Circular Economy Action Plan sets the right priorities covering product design, production, marketing, waste and recycling. It aims to integrate a broad range of existing policy instruments, including the Ecodesign Directive, the EU Ecolabel, and EU Green Public Procurement criteria. It also announces a legislative initiative for product policy which will provide a legal foundation for the circular economy in the EU – akin to the Climate Law for achieving net-zero greenhouse gas emissions by 2050.

The Action Plan emphasises opportunities for the circular economy to strengthen Europe’s industrial base – however this will require bold policies and targeted investments, including for research and development. For example, the System Change Compass for the Green Deal identifies 50 opportunities for “Champion industries” that can become growth engines for the EU (SYSTEMIQ and The Club of Rome, 2020). For this reason, the circular economy needs to be closely aligned with the EU’s research and innovation initiatives as well as industrial strategy.

It is less clear how the Green Deal’s “zero pollution ambition for a toxic-free environment” integrates with the Circular Economy Action Plan. The two sets of issues are of course closely aligned and should be tackled together. In particular, there may be scope to harmonize communications and raise the profile of zero-pollution by integrating it into the Circular Economy Action Plan.

The Action Plan rightly emphasises the need for international cooperation, particularly in the area of trade in waste and toxic products, where the EU still relies too much on outsourcing problems (Section 3.3). As a flagrant example, Europe cannot call for reductions in plastic waste flowing into the ocean, while at the same time continuing to export large volumes of plastic waste to countries that are known to lack adequate waste management systems. Similarly, many European countries export agricultural chemicals that are banned inside the EU.

3.1.6 Digital transformation

Build cutting edge digital infrastructure, strengthen innovation, and protect citizen’s rights to their data and European democracy.

We live in an era of unprecedented and accelerating innovation, particularly in the area of digital technologies, such as artificial intelligence, bioinformatics, big data, quantum computing, novel communication technologies, new platform business models, low-cost remote sensing. These hold the potential for combining prosperity with low environmental impacts through smart grids, car-sharing, 3D printing, blockchain, dematerialization, home office, and new circular economy models. But new technologies can also exacerbate inequalities, harm our political systems and social cohesion, and undermine governments’ abilities to mobilise tax revenues (WBGU, 2019).

Once developed, new digital technologies and innovations can be deployed at low cost in global markets. At the same time, advances in key enabling technologies require increasingly large amounts of public and private investments.

This rewards early pioneers and scale. It also shrinks the value that can be captured by followers. Currently, US and Chinese technology companies dominate many aspects of the digital transformations. European companies are mostly sub-scale and forced to follow the lead of their international competitors. If this trend is not reversed quickly, European companies and the EU as a whole risk losing long-term competitiveness and technological independence. It is for this reason that the proposed New Industrial Strategy for Europe states: “This is about Europe’s sovereignty” (Section 4.1).

Ursula von der Leyen emphasises the vital importance of the digital revolution, and the Commission has put forward initial ideas for Shaping Europe’s Digital Future. Building on Europe’s global leadership in setting rules for the digital transformation, including the General Data Protection Regulation (GDPR), the Commission has put forward clear and compelling ideas for setting better rules and fostering the Internal Market. These include proposals for a European Data Strategy, rules for the Internal Market in Digital Services, the eIDAS regulation for trusted digital identities, and a European Democracy Action Plan. Europe is well placed to continue to lead in these areas, and this leadership should support External Action and development cooperation (Section 4.4).

Commission proposals for the crucial issues of European technology innovation and digital infrastructure (including smart power grids) identify critical technologies in which Europe needs to assume a global leadership position. However, the proposals lack specificity, and in some areas fall short of the necessary vision. On digital infrastructure, the Commission notes an annual investment gap of €65 billion(European Commission, 2020k) but does not propose how this gap can be filled. This is a critical example, where the EU lacks the financial means to achieve an objective that is vital for the future prosperity, sovereignty, and cohesion of Europe (Section 4.2).

Similarly, proposals for developing new digital technologies in Europe lack the specificity and ambition that China has put forward in its Made in China 2025 Initiative or the US’ America AI Initiative. If the EU is to remain a leading player in new technologies, then the EU and its Member States need to decide how increased investments in technology research, development, and piloting will be financed and coordinated as part of Europe’s New Industrial Strategy.

As discussed in Section 3.1.1 above, digital skills and training form another critical leg for Europe’s long-term competitiveness and prosperity. These needs are highlighted in the Commission’s Shaping Europe’s Digital Future and the New Industrial Strategy.

3.2 External action and development cooperation for the SDGs

The 2030 Agenda and the SDGs represent a bringing together of European social market economy values and environmental sustainability. Promoting them internationally therefore can help achieving sustainable development worldwide and advances EU geopolitical interests. The SDGs have strong international legitimacy: using them as a framework for European diplomacy will further strengthen Europe’s standing. At a time when multilateralism is under unprecedented pressure, European partnership, diplomacy and soft power must play a critical role in advancing the EU’s internal and external priorities, including the SDGs.

This needs to extend to richer and poorer countries alike. The recent agreement on a Regional Comprehensive Economic Partnership (RCEP) in Asia-Pacific between countries of different levels and paths of development demonstrates the urgent need for the EU to come forward with international cooperation frameworks that integrate sustainable development and the global agenda of the “geopolitical commission”.

No country in Europe or elsewhere has achieved the SDGs. Massive problem solving and learning are needed to meet the 2030 objectives and net-zero greenhouse gas emissions by 2030. Many of these challenges are first-of-a-kind and can best be tackled through international cooperation. The Green Deal has attracted major international attention, and other countries are keen to partner with and learn from European experiences. If we needed a reminder, COVID-19 has shown that the EU can also learn a lot from other countries.

Moreover, the European Green Deal, including the Farm to Fork Strategy and the Circular Economy Action Plan, emphasises the importance of tackling negative spillovers to meet the Europe’s sustainable development objectives. Yet so far the Commission has not put forward targets for the international dimensions of the Green Deal, has done little to ensure coherences across internal and external policies, and has provided few details on policy and legislative instruments. For example, loopholes in the Renewable Energy Directive continue to permit the import of palm oil and soybean oil for biodiesel, despite attempts to restrict them (Transport & Environment, 2020).

For these reasons and as also described by the European Commission (2020c), the European Union needs to align its bilateral and multilateral diplomacy, as well as its development cooperation, with the SDGs.

3.2.1 Bilateral Green Deal/SDG Diplomacy

Even some EU leaders were surprised by the positive reaction from all corners of the world to the announcement of the Green Deal and other elements of the EU’s approach to implementing the SDGs. There were hardly any voices inside or outside the Union that dismissed the ambition of the Green Deal as unnecessary or misplaced. Indeed, most countries – including ones that have complex relationships with the EU – welcomed the Green Deal as the tangible commitment from one of the world’s largest economic blocks to pursue prosperity with social inclusion and environmental sustainability. Subsequently, other countries have announced their versions of a Green Deal. Recently, China has committed to carbon neutrality before 2060 followed by Japan and South Korea’s pledges to carbon neutrality by mid-century. The incoming Biden Administration in the US has also pledged to achieve carbon neutrality by 2050. One year after announcing the Green Deal, the EU is no longer alone on the international stage (Figure 3.1).

Figure 3.1 | Countries that have committed to net-zero emissions around the middle of the century

Figure 3.1 | Countries that have committed to net-zero emissions around the middle of the century

Source: Net Zero Tracker: Energy and Climate Intelligence Unit, 2020

The EU is therefore well placed to pursue “Green Deal Diplomacy” / “SDG Diplomacy” in bilateral relations – both terms are used interchangeably in this document. Such diplomacy should position all bi-and multilateral relationships in the broader context of the critical SDG Transformations. It leverages Europe’s assets, including soft power, regulatory and standard-setting leadership, technological capabilities, and financing to broaden and deepen relationships in the pursuit of the SDGs. Crucially, Green Deal or SDG Diplomacy is a two-way conversation, because the EU is also grappling with how to implement its own Green Deal and achieve the SDGs. The Union has a lot to learn from other countries and can promote international coordination and cooperation in the pursuit of the SDGs and the problem solving they require.

Because of the size of the internal market and its effective trade diplomacy, the EU is a leader on standards for trade, investment, and technology. Aligning trade agreements with the SDGs and the Green Deal raises complex issues, as illustrated by the ratification process of the MERCOSUR trade agreement. As more and more countries adopt their versions of a Green Deal, aligning trade flows and supply chains with respect for the SDGs and the Paris Agreement may become a global standard. The EU should also promote SDG-consistent strategies in multilateral fora, as discussed below.

However, the EU’s recent external relations strategies do not explain how the SDGs and the objectives of the Green Deal can help frame the EU’s relations with specific countries and regions. Naturally, Green Deal/SDG Diplomacy must differentiate between types of partner countries and at the same time increasingly move beyond traditional North-South paradigms acknowledging the universal character of the SDGs and the common and collective challenges of mankind.

G7 and South Korea. With the incoming Biden Administration all G7 members have now committed to carbon neutrality by 2050. The EU, including France, Germany, and Italy, can revitalise the G7 as a group of countries committed to Green Deal or SDG Diplomacy and the shared pursuit of climate neutrality, including through enhanced industrial strategies. Such enhanced coordination can help provide a counterweight to and partner for China. Though not a member of the G7, South Korea has also announced a Green Deal and full decarbonization by mid-century, and Australia’s states have made similar commitments. These and other countries outside the G7 that share the EU’s values could become important partners under Green Deal or SDG Diplomacy.

China. One of the most important bilateral relationships for the EU is with China. There are many areas of profound disagreement between the EU and China, but both powers share a commitment towards promoting sustainable development. With China hosting next year’s COP of the Convention on Biological Diversity and the EU (through Italy) co-hosting the Climate Convention COP, the EU has a huge opportunity to explore common grounds in this geostrategic relationship. China’s carbon neutrality pledge offers the chance for deeper cooperation under Green Deal Diplomacy, including on the question of border tax adjustment tariffs and other level- playing field requirements. The recently launched high-level EU-China dialogue on the environment – bringing together First Vice-President of the EU Commission, Frans Timmermans and Vice Premier of the State Council of the People’s Republic of China, Han Zheng – may become an important channel for Green Deal diplomacy and help prepare for the postponed EU-China heads of state summit.

Upper-middle-income countries. At times, bilateral relationships of countries with the EU and its Member States are dominated by important but relatively small irritants. For example, countries in South East Asia deeply resent EU policies in relation to palm oil exports. Yet they also want to advance sustainable development, which requires access to sustainable technologies, finance and markets, and learning from Green Deal pioneers. Bilateral Green Deal or SDG Diplomacy with countries or groups of countries, such as ASEAN or MERCOSUR, offers an opportunity to raise areas of disagreement in the context of a shared overall agenda. Here, European Development Cooperation may focus on technology exchange, technical cooperation, and shared problem solving on environmental and other challenges.

Low and lower-middle-income countries. They seek Europe’s partnership in their devel- opment and pursuit of the SDGs. Development cooperation continues to be critical for their social and economic development, including the recovery from COVID-19, particularly in Africa. This cooperation is sometimes misperceived as charity, but it is vital to secure European inter- ests – for example in terms of climate change, reduced migration, and the EU geostrategic role in the world. The EU needs to frame development cooperation in the broader context of Green Deal or SDG Diplomacy. Of particular importance to the EU and its members states are increased investments in human capital (education and health) and basic infrastructure in Africa and other neighbouring regions, as these are the foundation for sustainable development and long-term stability in these regions. To this end, all EU countries must meet SDG Target 17.2 to provide at least 0.7% of gross national income towards official development assistance (0.3% in new EU Member States), of which 0.2% should go to Least Developed Countries. Where possible, the EU and its Member States should favour multilateral development finance mechanisms, as discussed below.

3.2.2 Multilateral Green Deal/SDG Diplomacy

With multilateralism under threat, EU diplomacy and development cooperation must support multilateral bodies, such as the WHO, and advocate for policies and strategies that support the achievement of the SDGs and international cooperation. While support from the EU and its Member States for multilateral bodies tends to be strong, they have been moving towards greater reliance on bilateral over multilateral approaches in humanitarian assistance and development cooperation. These trends need to be resisted, as they run counter to the long-term interests of the EU and its Member States.

EU leadership in multilateral fora. Over the coming years, several opportunities exist for the EU to strengthen existing multilateral mechanisms and consider new approaches. Throughout, EU leadership on Green Deal or SDG Diplomacy will be critical for supporting the UN General Assembly, the High-Level Political Forum on the SDGs, the G7 (under UK Presidency in 2021 and German Presidency in 2022), the G20 (under Italian Presidency in 2021), and the Annual Meetings of the IMF and the World Bank.

EU leadership on biodiversity and climate. Of particular importance will be leadership from the EU – alongside China and the UK – in ensuring a successful biodiversity COP in Kunming and a climate COP in Glasgow. These two COPs make 2021 the “super year for nature and climate” and will set the foundation for long-term international cooperation on the environment. Europe’s Green Deal, China’s carbon neutrality before 2060 and bold “Ecological Conservation Redlines”, and the UK’s net zero target by 2050 align interests among the three powers, which in turn creates unprecedented opportunities for breakthrough commitments in 2021. The incoming Biden administration in the US will rejoin the Paris Agreement and further strengthen the momentum towards Green Deal Diplomacy.

Multilateral development cooperation. Development cooperation works best when it is pursued through well-designed multilateral mechanisms. European governments and the Commission should work together to ensure full funding of proven multilateral SDG financing mechanisms, including the Global Fund, Gavi, the Green Climate Fund, and others. Given the vital importance of Africa to the EU and massive shortfalls in investments in human capital on the continent, the EU should consider an EU-Africa partnership on education financing. At the country level, the EU should help and encour- age multilateral and bilateral partners to work better together to support whole-of-government SDG strategies. Integrated National Financing Frameworks (INFFs) or similar mechanisms can promote coherent strategies for financing and implementing the SDGs, including necessary policy changes, such as the phasing out of harmful subsidies.

3.3 Tackling negative SDG spillovers

The SDG Spillover Index for EU countries points to large, negative spillovers on other countries. Examples include the social costs of inhuman work conditions in some value chains, such as textiles or seafood; environmental spillovers through deforestation, greenhouse gas emissions, and other pollutants embodied in international trade or the export of waste and toxic substances; financial spillovers through unfair tax competition; or security spillovers through the export of arms to conflict zones. Such spillovers undermine other countries’ ability to achieve the SDGs and they are a stain on the EU’s legitimacy and international reputation. The EU needs to address its global responsibility and make sure that all it’s strategies, including in support of the SDGs and the European Green Deal, tackle spillovers to meet the SDGs in Europe and other countries.

Data contained in the Spillover Index suggests that the largest negative spillovers are related to trade in agricultural and forest commodities, such as meat, animal feed, eatable oils, biofuels, and timber. It is therefore fitting that the Farm to Fork strategy emphasises the need for international cooperation, including the greening of international value chains. While Europe must curb demand for non-sustainable soft commodities and help stamp out widespread illegality in many value chains, change must not happen at the cost of smallholder farmers. The EU needs to coordinate with other import markets, such as North America and China, to assist producer countries shift towards sustainable production methods, including zero-deforestation supply chains.

Clearly, EU action on spillovers must be symmetric and guard EU producers against unfair international competition based, for example, on the absence of appropriate carbon pricing mechanisms or “social dumping” through lower social and labour standards. The EU has effective tools at its disposal – particularly under its bilateral trade agreements – to identify and tackle such unfair competition. As the Green Deal changes incentives for producers inside the EU, for example by raising the implicit carbon price, new tools might be needed to ensure a level playing field with international competitors, such as border tax adjustment tariff. Such new tools are blunt and invasive, so they should be used carefully, and the EU must avoid unwarranted pressure from domestic industries to shield them from international competition. Hopefully, China’s recent commitment to carbon neutrality before 2060 will allow the EU and China to strike an agreement that removes the need for border tax adjustment tariffs on greenhouse gas emissions.

As part of its SDG strategy, the EU should monitor international spillovers (Section 3.3) and undertake three broad sets of actions to curb negative spillovers:

1. Coherent trade and external policies through “Green Deal diplomacy”. As discussed above (Section 3.2.1), European Green Deal Diplomacy should promote policy coherence across trade, investment, development cooperation, and industry regulation to promote sustainable supply chains and lesson negative spillovers (Section 3.3). It is right, for example, for European countries to ask how the MERCOSUR trade agreement will support the objectives of the Paris Agreement, and for the Commission to include binding commitments to implement the Paris Agreement in each trade agreement.

Europe must, however, not become “protectionist” and deny poorer countries their right to development. So technical and where necessary financial support will be needed to support countries in protecting critical ecosystems, such as the Amazon or Congo Basin rainforests. While development cooperation can be an important enabler, the EU needs to support dedicated, predictable funding mechanisms for protecting tropical forests, marine ecosystems and other “Global Commons”, which might require $50 billion annually (FOLU, 2019).

Farm to Fork, the Circular Economy Action Plan, and other components of the European Green Deal all emphasise the need for sustainable supply chains and policy coherence. The EU also promotes greater transparency and traceability for global value chains, including zero tolerance for illegal timber developed economies, but unless the Green Deal also proposes ways to help close the gap in predictable funding for environmentally and socially sustainable trade practices in producer countries, the EU risks being branded “protectionist” or of “colonial mindset”.

2. Strengthened tax cooperation and transparency. One of the most pervasive negative SDG spillovers is the loss of public tax revenues in developed and developing countries due to unfair tax competition, profit shifting, tax secrecy and the abetting of money laundering. These resources are then no longer available to governments wishing to invest in the SDGs in their own countries. The new EU Commission has started to address the issues of unfair tax competition among Member States with renewed vigor, and European countries are the forefront of efforts under the OECD to address the tax challenges arising from the digitization of economies, tax transparency, and information exchange for tax purposes. This is long overdue because in recent years EU Member States have facilitated extremely low corporate tax rates with detrimental impacts on follow EU countries and developing countries in particular (Tørsløv et al., 2018). Tackling tax base- erosion and profit shifting is very much a priority for the Green Deal or else European and other nations will not be able to finance needed investments in clean energy, mobility, agriculture, and so forth.

3. Lead by example by applying EU standards to exports and curbing trade in waste. Data in this report shows, for example, that companies in many EU countries export toxic agrochemicals that are banned inside the EU. The same applies to the export of waste. While such exports may be perfectly legal, they are illegitimate and inconsistent with a commitment to achieve the SDGs in every country. The Green Deal, its subsidiary policy instruments, and future trade agreements should be clarified to ban such exports. Efforts under the Circular Economy Action Plan to make manufacturers responsible for the safe disposal and recycling of their products must extend to wastes that would otherwise be shipped beyond Europe’s borders.