Are the EU’s environmental policies leading to economic stagnation?

Farmers’ protests are rapidly spreading throughout Europe and show no signs of abating. From the beginning of the year, they have been using their tractors to block access to certain roads and highways in several countries. For the first time in a decade, protesters from various countries have united against certain Brussels policies. Currently, they are rallying against the new ecological policies, known collectively as the Green Deal.

And the uprising among farmers is just the beginning of a larger issue. Data indicates that the European Union’s ecological policies have widened its economic disparity with the United States and caused setbacks in the pursuit of technological innovation.

The facts

Farmers across Europe are venting their frustrations against decisions made by the European Commission and the repercussions of Russia’s invasion of Ukraine. Reuters notes that European farmers are protesting against taxes, environmental regulations, and pricing pressures.

Particularly since the 2008-2010 financial crisis, under the influence of socialists and greens in the EU, the European Commission has sought to impose new social and environmental standards on markets that some say are proving to be unsustainable.

Farmers’ frustration stems from various factors, including inadequate incomes resulting from prices that fall below production costs, escalating administrative and environmental restrictions, and the adverse perceptions held by a segment of the population that portray the farmers as big polluters.

Over the past decade in France, 100,000 agricultural farms have vanished, representing one-fifth of the total. Although the number of farms is declining, the agricultural land area remains nearly constant. Essentially, the remaining farms are becoming larger, yet they continue to grapple with financial challenges.

The arguments

Behind the agricultural discontent, there is the European Green Deal and an ecological transition felt as unfair by farmers. These themes are exploited by the extreme right and the conservative right to promote an anti-European and anti-ecological discourse, exacerbating at the same time the division between rural and urban communities.

The GAEC 7 and GAEC 8 regulations for farmers mandate leaving a minimum of 4% of their land uncultivated and adopting an uneconomical crop rotation. These policies also contribute to a rapid increase in the cost of diesel and fertilizers, taxed heavily due to their association with polluting fossil fuels. These decisions inflict significant harm on farmers, pushing some into bankruptcy. Certain countries, like the Netherlands, have taken the ecological policies even further by attempting to limit the number of cattle farmers can raise based on pollution concerns.

In addition to these taxes and regulations, there is an unprecedented level of overregulation imposed by Brussels bureaucracy. All these regulations and guidelines also contribute to inflation, which has significantly diminished the purchasing power of Europeans in recent years and fostered the rise of extremist ideologies on both the left and the right. Consider the energy sector – reflect on how bills have escalated over the past decade. The explanation lies partially in market-related crises, such as Russia’s invasion of Ukraine, but also in the excessive taxation of fossil fuels and the subsidization of green energy. All these factors translate into costs for the end customer.

This crisis highlights the tensions between the immediate needs of farmers and the European Union’s long-term goals for ecological transition. Farmers are singling out environmental standards, crucial for combating climate change and biodiversity loss, and accusing policymakers of neglecting the economic challenges involved. Additionally, the rise in agricultural input prices, exacerbated by the general economic situation and the conflict in Ukraine, is intensifying the pressure on small and medium-sized farms. 

The current agricultural crisis is also a reflection of a larger political discontent: farmers feel neglected and misunderstood by their political representatives. This situation creates a gap, in which populists are quick to present the EU and its institutions as distant from the realities on the ground. Mobilizing this kind of rhetoric, the European far-right has already been seeking, for several months, to attack an ecological transition that it considers unfair and unnecessary, coming out in full force against the various environmental regulations provided by the Green Deal.

Europeans are confronting a new economic reality: a decline in prosperity. According to data from the International Monetary Fund cited by The Wall Street Journal, the eurozone economy has grown by approximately 6% in the last 15 years, measured in dollars, compared to 82% for the USA. This has resulted in the average EU country having a lower per capita income than every US state except Idaho and Mississippi. If the current trajectory persists, the report states that by 2035, the gap in per capita economic output between the USA and the EU will be as significant as that between Japan and Ecuador today.

Another pertinent statistic is that the European Union currently represents about 18% of global consumer spending, compared to America’s 28%. Fifteen years ago, both the EU and the USA accounted for approximately 25% of this total.

Confronted with this crisis, doubts are arising about the entire framework of the Green Deal and the EU’s ability to achieve an ecological transition. Some members of the European People’s Party are now considering a reversal of ecological reforms they once supported.