Green Deal: Three Biggest Challenges in 2022

The member states of the European Union have given the green light to the green transition of one of the largest economic centres in the world. In practice, this means achieving the European Union's carbon neutrality by the middle of this century, and reducing greenhouse gas emissions by 55 percent by 2030 compared to 1990 level.

The member states of the European Union have given the green light to the green transition of one of the largest economic centres in the world. In practice, this means achieving the European Union's carbon neutrality by the middle of this century, and reducing greenhouse gas emissions by 55 percent by 2030 compared to 1990 level.

The theme of the Green Deal and its goals seem long overdue and unquestionable. However there are risks and challenges to be overcome. Wonderinterest Trading has looked into the most imminent of them that are to be dealt with in 2022.

Prevent energy poverty

The megawatt-hour is being currently traded for almost 190 euros, which is about twice the level at the beginning of this September*. Energy suppliers are rising the prices for final consumers. Millions of people in the European Union are already facing energy poverty and millions more are at risk. EU member states are therefore looking for recipes to prevent the effects of rising energy prices on the population. Governments therefore come up with VAT remission, extraordinary social benefits or temporary remission of renewable energy charges. However, these are measures that may not have a long-term effect.

Reform the market for emission allowances

One of the reasons why energy has become so expensive in recent months is the rise in the prices of emission allowances in the European Union. Their rise in price is not a problem in itself, as they are to act as price incentives for energy and industrial companies to start replacing obsolete technologies with new, clean ones. But the allowances became an asset in which financial institutions such as Goldman Sachs, Morgan Stanley or the hedge funds Lansdowne Partners and Northlander Advisors began to invest. These institutions increase the demand for allowances, contribute to their increase in price, and thus increase the cost of energy production. The challenge for the European Union will be to find a way for financial institutions to exclude or at least reduce their purchasing opportunities from allowances trading if the EU really wants to keep the rise in emissions prices to an acceptable level. That is, so that they begin to fulfill their original function again.

Solve the issue of nuclear energy

The European Commission may include nuclear energy on the list of so-called clean sources by the end of this year. Although at first sight this may seem like a minor issue, it is a fundamental change in EU energy policy. The nuclear plants will be able to obtain public financial support as a net resource, which is crucial for countries that do not intend to or cannot easily give up. Therefore, if the European Commission really gives the nuclear energy a green light, it will have one of the key issues resolved at the beginning of 2022, which will significantly affect the achievability of the carbon neutrality target set in the Green Deal.

 

[*] Past performance is no guarantee of future results 

 

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