Xenia Samoultseva: In April, the EU reached an agreement on the Corporate Sustainability Due Diligence Directive (CSDDD), which will oblige businesses to conduct environmental and human rights due diligence in their value chains. How will ​this ​affect the EU’s climate diplomacy? 

Alfonso Medinilla: We have already seen a lot of opposition from third countries. ​T​his resistance is not linked solely to the directive, but more broadly to the EU’s trade​-related climate​ measures and bills. These measures are usually applied unilaterally by the EU, but they may disproportionally affect businesses in third countries. There is a sense of under-consultation​,​​​​​ with countries and businesses feeling that they are being rushed into a transition process they ​​may not be ready for.  

The big challenge for Brussels is to balance the goals of these green initiatives with effective climate diplomacy ​in order to ​get ​other ​countries on board. Ultimately, we need a collaborative approach and a significant investment in accompanying measures.  

Compared to European companies, the administrative burden of the EU’s climate measures can be much heavier on local suppliers, especially in developing countries. In light of the bloc’s growing tendency to externalise European policies and regulations, it is important to create more space for dialogue with developing countries and step up efforts to pair EU trade measures with other solutions.  

Hanne Knaepen: That’s true. There is currently a perception of regulatory imperialism, with the EU imposing ​its ​measures and regulations on other countries. 

Another thing that affects the perception of the EU among third countries is that even within the EU there has been a lot of internal disagreement among member states about climate-related measures. Initially, CSDDD extended to companies with at least 500 employees, but this faced resistance from Germany and Italy, which were worried about increased red tape for business. Now, only enterprises with a workforce of 1000 and a turnover of 450 million euros will be required to follow the law, which will take effect in 2029.  

Another landmark piece of legislation, the Nature Restoration Law, also faced fierce opposition from some member states like Hungary and the Netherlands. Germany and Belgium were blocking discussions as well because they were afraid that some businesses would have difficulty getting permits. It has been difficult for member states to reach common ground in environmental and ecological disputes, and this can affect the credibility of the whole bloc in the eyes of its partners.  

So, the EU has been imposing rules without providing enough input to third countries, listening to their needs, exploring options to help with their green transition, and making sure they can comply with the bloc’s regulations. At the same time, extensive internal discussions and disagreements have weakened the credibility and, by extension, the global leadership position of the EU. 

The rise of various international players has given developing countries a more diversified pool of partners to pick from, diminishing the EU’s influence. Additionally, the bloc’s protectionist policies such as the Carbon Border Adjustment Mechanism (​​CBAM) and its normative approach have contributed to rising tensions. How serious is this and is the EU doing anything to address it? 

Alfonso​ ​​Medinilla​: CBAM and the perception of protectionism that it conveys have become problematic for the EU’s partner countries. I think that, in a way, the bloc has been going through different phases as it learns from its past experiences.   

For instance, the story of the Global Gateway [an EU strategy to invest in infrastructure projects worldwide, with a key focus on advancing the green transition] started as a geopolitical competition narrative from the EU. Initially, Brussels expressed a sense of loss of control in the developing world and stressed the need to come up with a competing offer to the Chinese Belt and Road Initiative (BRI). However, the EU toned down its language after this bad framing, focusing more on enhancing its offering rather than emphasising competition.  

That said, given the state of play with the US I​nflation ​R​eduction ​A​ct (IRA)​, the narrative that Europe must shift its industrial policy to become more competitive is becoming increasingly prominent. This perspective is likely to define the ​EU’s ​external engagements in the next couple of years, and I think we will have to deal with this new reality regardless of how it is perceived by the bloc’s partners.  

One big flaw in this framing is that the situation is presented as an either-or, as if developing countries must choose between trade with the West or with China. This is ridiculous and unrealistic because even Europe itself has very deep trade relations with Beijing. The EU has not yet fully followed the US model of extremely high tariffs on Chinese products. Instead, it sits in the middle. And that’s exactly why we need to look more carefully at how developing countries can position themselves within big green tech value chains.  

Rather than determining whether developing countries should pick China or the West, perhaps we should ask: how can developing countries attract meaningful investments in domestic industries through their diverse partnerships? And how can they work with different partners to reach those goals? Instead of simply looking at the security of European supply and value chains, we must focus on fostering processing and manufacturing capacities within developing countries and building stronger trade relations with them. 

In other words, to benefit both sides, we must explore ways to form a collaboration that is not purely extractive but works for the EU’s partners and aligns with their industrialisation objectives.  

Can Global Gateway compete with China’s Belt and Road Initiative (BRI)? 

Alfonso Medinilla: We’re comparing apples and oranges when we’re talking about the BRI versus Global Gateway. The two projects have a very different model of mobilising finance.  

BRI, especially in the heyday of Chinese infrastructure finance, was closely linked to public funding but also with Chinese engineering, procurement and construction companies. Developing countries generally perceive that Chinese initiatives move much faster than those offered by Western counterparts. 

Another point to keep in mind about BRI’s financing, specifically concerning energy, is that the project previously focused on fossil fuels, low-income enterprises, and large-scale projects. There is now a shift towards renewables, which was already a focus of European energy finance. Now, the question for the Global Gateway is how the EU can adapt its offers rather than emulate what the Chinese are doing, so it can better secure its interests and meet the demands of those third countries. 

At the moment, there is a massive shortage of investment in some of our partners’ energy infrastructure, with many of them having outdated energy systems. In this context, the EU’s piecemeal approach is not going to cut it. Developing countries are looking for large-scale investments that can take them to the next stage. They require speed and scale, both of which Western finance has struggled to deliver in the past.  

Besides the Global Gateway, what initiatives has the EU undertaken to assist developing countries’ green transition and specifically adaptation efforts and how successful have they been? 

Hanne Knaepen: A lot of the EU’s finance goes to climate-related objectives. Under the current Multiannual Financial Framework for the period 2021-2027, there is a 30 per cent climate spending target. In 2022, the EU and the member states together mobilised 28.5 billion euros in public funding for developing countries. Over 54 per cent of that amount went to adaptation and cross-cutting, including climate change mitigation and adaptation initiatives.  

There exist success stories of European adaptation finance. The EU supports many adaptation projects in, for example, African agriculture, but they are quite scattered.   

Generally, climate finance is an area where the EU has met criticism from African partners about a lack of transparency. If Brussels says 54 per cent of climate spending goes to adaptation and cross-cutting, it’s very difficult to understand how much exactly went to adaptation. Ideally, it should be 50-50. 

In addition, there are concerns about the quality of finance as well. One criticism here is that the EU packages funding already allocated or in the pipeline as if it’s new funding under a big flagship initiative. This is the case with projects like the Team Europe on Adaptation (amounting to one billion euros) or initiatives announced under the Global Gateway. 

African partners are tired of not having clarity and transparency about where the EU’s money flows from or how much of the committed funding will actually be disbursed. The EU has regularly talked about pooling efforts under Team Europe headings. But how beneficial will this be?  

To benefit both sides, we must form a collaboration that is not purely extractive but works for the EU’s partners and aligns with their industrialisation objectives.

To carry out adaptation successfully, it is required to have access to concessional adaptation finance. At the same time, there are a lot of discussions on involving the private sector in adaptation, for instance through blending mechanisms or the EU providing various types of guaranteed windows for the private sector to (co-)invest in climate-sensitive sectors such as water or agriculture in Global South countries.  

However, there are few good examples of how the EU, as a public sector, has involved the private sector in adaptation. Let’s not forget that the private sector aims to generate profit, so more effort is needed to prove that investing in adaptation can be bankable in the longer term, for instance through weather-based insurance mechanisms.  

Moving forward, it is essential for the EU to couple extraction with regeneration. For example, Europe needs to work on water diplomacy efforts, such as investing in large-scale water retention and landscape restoration projects. This will enable industrial expansion in water-stressed areas and, at the same time, will create the environment needed to work on adaptation. Currently, there remains a gap between these different areas of work. 

Do you think finance should be the central pillar of the EU’s climate diplomacy? 

Hanne Knaepen: Although the EU member states are the biggest climate finance providers, their contributions are insufficient in the face of the challenge of climate change. Just consider the scale of the needs and the support that is required for resilience, adaptation, and the energy transition. It’s impossible to expect the EU to close the gap in finance that African countries have. Still, the EU should make its climate target more ambitious, work on mobilising the private sector to scale up finance, etc. 

Climate action should be part of the entire socio-economic transition of countries. It must go beyond individual projects and instead become part of a completely integrated approach whereby climate, resilience, and energy efficiency become a central pillar of all the activities that countries undertake.  

I think that Europe and Africa are not there yet, but some Asian countries are more advanced in this regard. For instance, in Bangladesh, six to seven per cent of all government spending must be on climate mitigation and adaptation efforts. Climate awareness exists on the highest political level because they feel the effects of climate change on a daily basis. You can consider this a success story.  

Vietnam is another good example as climate considerations are at the centre of all the country’s activities and line ministries. For the EU, it is instructive to study and understand what has triggered this attitude and how we can work towards similar models and mechanisms in African societies. 

Alfonso Medinilla: This reminds me of the overall tension that we are seeing in the EU’s approach to climate action and climate financing, between narrative and practice. The narrative has evolved to emphasise the need to plan strategy-driven finance that can transform economies in a way that links them to the European market, ultimately creating opportunities for industrialisation and economic development on both sides.  

The main intention here is to closely integrate European private-sector finance into climate-related projects through various means, but we are only at the start of this transition. In practice, institutions still view things through the lens of a portfolio of projects that are supposed to come together in a coherent strategic framework.  

Hanne Knaepen: Of course, we are criticising the EU from our own perspective, but African countries also need to have a clear picture of their partnership with Brussels. They must be able to clearly communicate their needs and their potential to address them, as well as their expectations from the EU. There should be a two-way dynamic in all climate-related projects, and in climate diplomacy more broadly.  

Could the rise of conservative factions after the European elections significantly alter the bloc’s climate diplomacy? 

Alfonso Medinilla: Conservatives can be a significant blocking factor in Europe against climate measures. We have seen this already with the role of, for instance, Hungary and Poland on key green issues in the past. 

I think European progressives have been trying to appeal to certain concerns around the European Green Deal by emphasising its affordances for fostering industrialisation and economic competitiveness. They have also sought to assuage fears that the landmark deal will increase net costs for societies, a concern raised often by European right-wing parties. However, I am not sure if these attempts are sufficient to bring back alienated voters.  

Killing the Green Deal would render Europe globally less competitive.

European progressives are generally preparing for the worst in the climate movement.  There has been a number of very important pieces of legislation, which will be difficult to dismantle. But the Right can create extended delays, and that has increasingly damaged the EU’s international credibility. It is especially bad when the EU enters global climate negotiations divided because this division will exacerbate some of the existing accusations and tensions.  

What’s more, I think a lot of internal European issues linked to the energy transition, nature restoration, and agriculture will increasingly dominate the political agenda. This may further dilute external international efforts, making them harder to sustain and manage. 

Hanne Knaepen: Europe already has some challenging political priorities, such as the various ongoing international conflicts and the need for the EU to build a stronger defence strategy as member states are wary of the risk of Russia’s war on Ukraine spilling out. These concerns have put a strain on the EU’s budget, and climate development assistance is likely to continue to fall victim to shifting priorities. 

This reality is apparent in the EU’s strategic agenda for 2024-2029, where there is little talk about climate change, ecological transition, or biodiversity. Instead, the agenda’s focus is mostly on defence and illegal migration.  

Still, now that the EU elections have wrapped up and Ursula von der Leyen seems likely to keep her job as Commission President, we can expect that the European Green Deal will stay on its course. Rolling back the measures laid out in the deal would be a major setback for European industries that have already started to invest in green and climate-proofed products. Killing the Green Deal would also render Europe globally less competitive vis-à-vis “green” frontrunners such as the US and China. 

Hopefully, this economic narrative can help convince the most stubborn among us in Europe.