Drought, greenwashing and the economy: What’s the solution?

In April this year, the Copernicus Climate Change Service released its annual European State of the Climate (ESOTC) report detailing the significant climate events of 2022 in Europe and across the globe.  

The data from Copernicus, which is coordinated and managed by the European Commission, revealed that Europe saw its hottest summer on record: temperatures across the continent rose at twice the global average rate. Combined with fewer snowy days and below-average rainfall, the result is widespread drought. 

“Droughts hamper nature's ability to deliver a wide range of environmental, social, climate change adaptation and mitigation, and biodiversity benefits,” says the European Environment Agency.  

Long-term objectives of the EU common agriculture policy are affected by drought

“Viable food production, sustainable management of natural resources, climate action and balanced territorial development, long-term objectives of the EU common agriculture policy, are also affected by drought. It is therefore important that the EU takes action to decrease impact severity.” 

Gas and nuclear, green energies? 

Despite the pledge to sustainably manage natural resources and mitigate the effects of climate change, in July 2022 the European Parliament approved an EU proposal to label gas and nuclear power as climate-friendly. The Complementary Delegated Act adds ‘some’ nuclear and gas activities to those already covered by the first Delegated Act on climate mitigation and adaptation, and “under strict conditions”. 

The move was met with controversy: the Commission is facing legal challenges from Greenpeace and a coalition formed of ClientEarth, the WWF European Policy Office, Transport & Environment and BUND (Friends of the Earth Germany). 

But according to Robert Tornabell, emeritus professor at the Department of Economics, Finance and Accounting at Esade, the energy system needs these traditional sources to make up for deficits in renewable energy.  

“In Spain, wind energy is a main source of generation, but when there are no continuous gusts we need alternative sources,” he says. “We still have hydraulic energy in parts of the country, but we face drought in many areas. 

“Gas being classed as green energy—even if it has become exorbitantly expensive—allows it to ensure the balance of the renewable system.”  

But, he stresses, natural gas is a small part of a wider solution. “It can be used alongside hydraulic and nuclear energy, in addition to combined cycle plants—although they emit C02,” he says.  

A direct hit on the economy 

However limited its use may be, the inflated energy costs of natural gas combined with the increasingly severe impact of drought create an elevated risk to the economy, says Manuel Hidalgo. The senior researcher at the Center for Economic Policies at Esade explains: “Drought has an impact on food production, which has a significant weight of activity in GDP and exports.”  

The topic was the focus of discussion at EsadeEcPol’s Taxation Forum: Environmental Taxation in Spain, in April.  

Speaking on a panel of tax experts, Xavier Labandeira, director of Economics for Energy and member of the Committee of Experts of the White Paper on Tax Reform, said: “We have very serious challenges: high temperatures, fires, drought, high energy dependence... that generate revenue needs, and we are going to need many resources, partly public, for all this change.”  

Alain Cuenca, director of the Institute for Fiscal Studies, also suggested that taxation is one answer to the social and economic problems caused by climate change and increasing levels of drought. 

“Taxing behaviors that are harmful to the environment has redistributive benefits for society, since we all benefit from a cleaner atmosphere,” he said at the taxation forum. 

Taxing behaviors that are harmful to the environment has redistributive benefits for society

Francisco de la Torre, director of the forum, agrees. “Taxation will make sense if the environment is changing, which is what we have to ask ourselves,” he said at the event. “We cannot alter the atmosphere and think that nothing is going to happen to us.” 

But environmental groups say financial resources are being channeled in the wrong direction.  

Greenpeace argues that what it calls the Commission’s “greenwashing act” allows fossil gas and nuclear power plants to receive money that otherwise would have gone to drought-tackling renewables.  

“We’re in a race against climate and ecological breakdown,” says the organization’s sustainable finance campaigner Ariadna Rodrigo. “In the meantime, polluters are already using this fake label to siphon green finance away from where it’s needed.” 

And for the affected communities, government-backed projects and funds are making slow progress. In 2022, droughts affecting the Po River in Italy, one of the most important agricultural zones in Europe, caused €6 billion worth of damage to agricultural produce. The picture for 2023 is looking similarly bleak, and despite €36.5 million being distributed to help areas directly affected by the drought, community members remain angry. 

“The EU has its priorities completely wrong,” says Po Delta resident and activist Vanni Destro. “They spend their time finding ways to make polluters rich and they don’t care about the damage to communities like mine.” 

Is hydrogen a solution? 

Is there a compromise? Esade’s Robert Tornabell thinks so, and it lies in hydrogen. Hydrogen can be produced from a variety of resources including natural gas and nuclear power, but also renewables including solar and wind. 

“In the Basque Country and in Catalonia there are already supplies of green hydrogen that can replace natural gas,” he says. “The Basque Country has facilities that do not emit CO2, and CAF freight trains have locomotives that run on green hydrogen.” 

The European Commission has approved up to €5.2 billion in public funding for hydrogen projects, but they won’t have any impact on communities or economies in drought-hit areas like the Po River this year. 

But, as Robert Tornabell says, “In the face of drought, we require new energy solutions. Green hydrogen is one which does not pollute.”