Determined players are winning one victory after another in the climate war. The decisive factor is not the size of a country, but whether it has its own industrial policy or not.
It is entirely welcome that, more than a year after the European Green Deal was approved in government, a debate is finally beginning to emerge in Estonia. For now, still at the level of general opinion — but I believe that Green Deal-related topics will soon become more analytical, find their way into party programmes, and from there, perhaps, even into the Riigikogu.
Conducting public debate on the Green Deal and climate neutrality is considerably difficult, as these are highly technical domains. Just as with the state budget, however, the investment decisions required for the green transition should not be left to civil servants to define. First, this lacks transparency, and second, it creates an excellent opportunity for parties to talk entirely past one another — both inadvertently and deliberately. Take the electricity price debate that flared up in August: on one side, the discussion concerns the energy balance; on the other, the impossibility of quickly resolving problems with technologies that are still in development (Tõnis Mölder’s response to Martin Helme, Eesti Päevaleht, 9 September 2021). Dancing around each other like this, the parties will never meet in the middle.
One solution would certainly be to establish a Climate Act expressing a societal consensus (Ahti Asmann, ERR, 9 September 2021). This would, however, require very swift action — immediately. Is our legislative process ready for that? One would have to start from scratch — from drafting a legislative intent and coordinating it with ministries and interest groups. In broad public terms, this appears to be a highly complex and time-consuming mission. But certainly not an impossible one, given genuine political will.
Estonia’s peculiarity is that the public climate debate takes place between energy specialists and environmentalists, while the main actors are kept off the stage. In fact, industry is the central protagonist of climate policy — globally and within the European Union. We cannot afford to ignore this fact. Estonia’s own industry is not the central protagonist of our climate policy, and we cannot afford to ignore that fact either.
Look for industry! EU climate policy is a ruthless contest between various large industrial sectors. Estonia entered this contest at the back of the queue from the very beginning. And for good measure, eyes closed — as if no one would notice. This is not an appropriate position for a small open economy dependent on exports.
Determined players, meanwhile, are winning one victory after another in the climate war. The decisive factor is not the size of the country, but whether it has its own industrial policy. Countries with an industrial policy have managed to embed messages and actions aligned with the competitiveness of their own firms into EU-level agreements. Sweden, for example, has for years sought to bring other member states to sign up to a full fossil-fuel phase-out message across all pivotal climate and economic issues. Given Sweden’s energy balance, the transition to renewable energy is cheaper there than in any other member state, which in turn gives the Swedish economy a competitive advantage. During the Austrian presidency, the steelmaker Voestalpine was visibly present, despite the convention that commercial considerations should be kept separate from the presidency. The benefit of that transgression was, however, considerably greater: a clean steel package became one of the components of the EU’s updated industrial strategy.
Or consider the development of hydrogen technologies: behind the appealing messaging lies a ruthless battle over the continued use of gas. Common sense says gas is a fossil fuel. Yet on the table of EU industrial policy-makers there is currently a proposal that, for as long as sufficient renewable energy for green hydrogen production is not available, blue hydrogen — hydrogen produced from fossil natural gas — should be permitted during the transition period. Unsurprisingly, this idea enjoys strong lobbying support from the gas industry.
The climate war is an economic war. We are participants, but we lack a strategy. What is more, we are also fighting among ourselves. It is hard to say who could forge a saving strategy. A societal consensus formalised as a Climate Act would certainly help. But we could also draw lessons from the countries that have so far succeeded and from the strategies that have given them a head start. Above all, it is worth noting that the industrial policies of countries staking out positions in the climate war are no longer “Made in my country” policies — no analogue of Made in China, Made in USA, or Made in UK. Achieving the global and all-encompassing objective of climate neutrality requires massive investment in breakthrough technologies, and no country can make those investments alone. This is why the countries with strong positions are not the large ones — Germany or Poland — but those that have managed to develop a domestic industrial policy that is simultaneously aligned with internal market trends: Finland and Sweden, for instance.
In Estonia too, a domestic industrial development strategy could be the first step on which to base our positioning in the climate war. It would also allow us to abandon an outdated business policy and transition to a modern one — linked to the climate neutrality objective and supportive of the green transition.
It is understandable in one respect: if our own industry does not wish to align with internal market trends, then the state should not be compelled to do so either. If our electronics industry sees no need to participate in microchip development projects, then Estonia’s industrial development strategy can remain a bystander in that area. Or if the technology sector and machinery manufacturing do not see a role for themselves in the EU’s common industrial data space, then Estonia can remain a bystander there too. One cannot engage with everything and everywhere. All the more reason that, in those areas where our industry wishes and indeed needs to move forward, strategic positions must be formed. Made in Estonia is not a climate-war strategy. A climate policy that recognises the existence, needs, and involvement of domestic industry is.
This article was published in Eesti Päevaleht on 26 July 2021.
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