A little over a year ago, Fire of Europe analyzed the EU 2021 Strategic Foresight Report. Back then, the European Commission expected the power of fossil fuel exporters to decrease as these fuels went down in value. It also aimed to grab a monopoly on information by ramping up control over Twitter and its competitors. Most of all, the report stated that huge loans will be necessary to finance the twin transitions (green and digital). Since then, Putin has caused panic by cutting off Europe’s gas supplies, Elon Musk has taken over Twitter and promised to get rid of censorship, and ECB interest rates have increased from -0,5% to 1,5%. The 2022 Strategic Foresight Report is published in a different world.
Given that the key assumptions of the 2021 strategy have been proven to be false it would be reasonable to expect a strategic shift; reasonable but not realistic. In fact, the European commission is doubling down on its 2021 world view. The events mentioned in the previous paragraph are either ignored or misinterpreted. Rather than adapt to realities, the commission chooses to manage perceptions.
The main part of the 2022 strategy document consists of a summary of the new technologies that are currently high in the hype cycle. Interesting to be informed of course, but one only has to look at visions of the future from 1900, 1960 or 2010 to know how hard it is to forecast technological innovation. The twentieth century’s various experiments with socialism should also inform us that choosing which technologies to develop top-down is a recipe for disaster. Only free competition in an open market can decide how to allocate investments. For well-connected entrepreneurs the European commission’s Wishlist is an invitation to make money by giving the EU administrators what they want. And like in a growing number of sectors, this incentivizes the best and brightest to forecast and, where possible, influence government policy. More and more companies live and die by political acumen rather than through a relentless drive for efficiency and customer satisfaction.
This is not to say that there is nothing of value in the report. Like in the 2021 version, the authors are aware of the enormous danger involved in the selected technologies. To achieve the twin transitions, we will need a massive supply of lithium, cobalt and other rare minerals. In lithium especially, we are highly dependent on China. In fact, this dependence is far more serious than our dependence on Russia for natural gas. The commission therefore wants to promote friendshoring and development of mining operations in the EU itself. By friendshoring the report means importing the necessary minerals from friendly states to ensure a stable supply chain. Friendship is a beautiful thing, but it is not a currency that can be exchanged for natural resources. The idea of developing mining in the EU as well is to be lauded. On the other hand, the commission expects job losses in coal mining (a commodity that has quadrupled in price since the previous report). Apparently, the commission will micromanage what minerals will be mined in the EU, and which will be imported.
The report is also well aware of the detrimental economic impact of the twin transition on citizen’s prosperity, especially where it concerns ‘people with low and medium incomes’. Many of them will not be able to adapt to the ‘new economy’ and will suffer the effects of higher food and energy prices. Moreover, many buildings will need to be retrofitted and transportation will become significantly more costly. Average Europeans face the prospect of higher costs for transportation, heating, housing and food while facing serious shocks to the labor market. A bleak prospect, especially ‘in view of the fact that those for whom the transition is most difficult to bear are those who are on the lowest end of emissions. Indeed, currently the richest 10% of Europeans emit per capita more than three times as much as the rest of Europe’s citizens.’
The average Joe and Jane are expected to suffer to solve a problem they did not cause, where the solution is uncertain and where it is unsure if it is their problem in the first place. Instead of catering to these concerns, ‘Education and training systems need to be adapted to the new socio-economic reality. This entails both learning skills to adapt to a rapidly transforming technological reality and labour market, as well as green skills and climate awareness to support value creation in the green transition and responsible citizenship.’ In other words, more marketing is needed to make the people believe this is in their best interest. Any problems are to be solved by ‘reinforcing social protection and the welfare state’. A noble goal to be sure, but hard to take seriously. The welfare state has been slowly hollowed out with all costs going up while benefits stay flat. This is unlikely to improve in the future as ‘the additional private and public investment needs for the twin transitions might amount to nearly EUR 650 billion per year up to 2030. In the current geopolitical situation, these estimates are likely to be at the lower end of the actual needs.’
The positive takeaway is that the European commission is aware of the huge risks and negative impact on public well-being of their chosen strategy. The EU is aware that by going for an electrification strategy we are making ourselves fully dependent on resources that we do not have. It is almost like a dolphin quitting a career in Olympic swimming to try and make it as a boxer. Likewise, the EU is keenly aware of the negative impact these reforms will have on the standard of living of Europeans with lower and medium incomes. It is almost absurd to believe that liberals, socialists and Christian democrats would support such an outcome, yet here we are. These problems have not yet dissuaded the European commission from pursuing their course at full speed, expecting all obstacles to be swept aside. The events of 2022 have not been a wake-up call. It begs the question: what will? For the moment, EU commission president Von der Leyen is cruising along the Autobahn at a speed of 160km. She has seen the lorry in front of her, and has pointed it out to us, her passengers. Regardless, she is not yet willing to reduce speed, much less to change lanes.