What’s happening? Upcoming European Parliament elections pose a threat to ambitious EU climate change policies, with recent polls indicating a potential “sharp right turn” in the EU’s political constitution, according to a study commissioned by the European Council on Foreign Relations. Researchers warn that the shift towards populist, right-wing parties could result in an “anti-climate policy action” coalition in the European Parliament, undermining the EU’s Green Deal framework. The study suggests that the election may hamper the legislative progression of environmental measures, hindering efforts to meet the EU’s net-zero targets. (Reuters)

Why does this matter? Results from June’s European Parliament elections will significantly impact the EU’s ambitious climate policy and cast significant uncertainty over the bloc’s investment landscape. The report applies a statistical model to recent electoral opinion polls from each EU member state and projects the number of seats each national party will potentially receive in the upcoming elections. The projections suggest that the biggest winners will be “radical right Identity and Democracy” parties, which will gain 40 seats, a 69% increase from 2019.  

Shifting support – Conversely, the projections predict that Green parties will lose 14% of their seats, while traditional mainstream and centre-left parties will continue to shed seats. As the EU potentially shifts politically, the report warns that the new political makeup is “likely to seriously limit the EU’s actions to tackle the climate crisis.” For instance, under its existing climate plans, fossil fuel use could drop 80% compared to 1990 levels by 2040, underscoring the ambitious policy commitments the EU is currently pursuing.

Legislative challenges – To illustrate the practical impact of the electoral shift, the researchers compared how the tightly contested vote on the EU Nature Restoration Law would play out after the election. The law passed in July by just 12 votes, but following the study’s projections, the law would be rejected by a sizeable 72 votes. Other examples of disunity among European lawmakers, governments, and industry leaders that could easily see diverging outcomes post-election, include the Euro 7 regulation which will tighten vehicle emission limits from 2025, pledging methane emission reduction in the oil and gas industries, and plans to cut livestock pollution from commercial farms. As the “’anti-climate policy action coalition’ is likely to dominate,” according to the study, it is highly likely these contentious environmental policies would repeatedly be rejected by the European Parliament, which would “significantly undermine the EU’s Green Deal framework and the adoption and enforcement of common policies to meet the EU’s net-zero targets.”

Industry impact – Given the EU’s current climate policies are so comprehensive and impact so many industries, a potential swing in the European Parliament towards climate scepticism will likely pose a significant risk to many sectors. For example, if automakers begin investing in lower emissions exhausts to stay in line with the Euro 7 regulation, but then the regulations are drastically weakened or thrown out altogether, significant investment in improving automotive emissions reduction technology would have been wasted.  

UK EV market – A similar situation occurred in the UK when Prime Minister Rishi Sunak watered down a raft of net-zero pledges, including pushing back the banning of internal combustion engine vehicles to 2035 – a five-year delay. Soon after the announcement, Ford’s UK chair Lisa Brankin argued the relaxation would disrupt company strategy and “undermine” the values businesses require from the government to operate successfully, while analysts fear the delay could damage investor confidence in the UK electric vehicle (EV) sector. Indeed, EV market share stalled for the first time last year in the UK. European markets could be subject to similar shifts and row-backs on environmental policies and pledges if the European Council on Foreign Relations’ projections are accurate, producing similar investor and corporate uncertainty as the UK EV market exhibited in 2023.