The government has to grapple with the rising cost of trying to mitigate climate change and conforming with European environmental norms.
The European Commission’s bold proposals under the “Fit for 55” label include reducing greenhouse emissions to a level 55% lower than in 1990 by 2030 and banning the sale of all emissions-producing cars from 2035.
Gasoline in Greece is expensive because it is heavily taxed; the tax on unleaded gas stood at 64% in 2019, and Greece was the third most expensive country in the EU. Taxes mean revenue for the government. And at present it rakes in €6 billion annually, a revenue stream that will diminish soon.
If one adds this to the cost of subsidizing the transition to renewable energy, Finance Ministry officials say that the demands of Fit for 55, combined with spending on ever-increasing climate-driven emergencies, such as fires and floods, have an enormous fiscal cost. “The cost of transitioning into the new policy will be much higher” than the expected EU support through its two funds tackling the climate emergency, the Social Fund and the Modernization Fund.
Greece expects to get €5.5 billion from the two funds in the 2025-32 period, to help support the most vulnerable population segments (€4 billion) and modernize its energy sector (€1.5 billion). The “Fit for 55” plan’s call to extend emissions trading to transport and buildings will directly affect consumers.
In addition to cutting emissions by revamping the energy sector and other actions, Greece, like other countries, has to deal with managing the effects of disasters very likely brought about by the warming climate. Finance Ministry officials point out there were four major such events in the past year; floods, wildfires, a heatwave and a frost. This is a sign, they worry, that climate change is happening faster than forecast and, therefore, planning is necessary to adapt to this new fact.
One way is to revise the plans to be funded by the EU’s Recovery and Resiliency Fund, with grants and loans adding up to €30.5 billion. Many of these programs are already geared toward green goals, but maybe more changes are needed in view of the latest developments.