EU climate chief’s pitch: Adam Smith will save the planet

BRUSSELS — Let markets do the heavy lifting to fight climate change, Wopke Hoekstra will tell the European Parliament this week.
The former Dutch finance minister is expected to win broad approval at his confirmation hearing on Thursday, when lawmakers will decide whether to reappoint him as the European Union’s climate action commissioner, a role he took on a year ago. 
The hearing will be the easy part, though. Instead, it’s Hoekstra’s market-reliant approach to curbing global warming that faces criticism from both left and right. 
Hoekstra, who hails from the center-right European People’s Party (EPP), has promised to double down on carbon pricing, raise taxes on polluting energy sources, and scrap subsidies for oil, gas and coal. The central idea is to push consumers and companies toward greener alternatives by making climate-wrecking fossil fuels more expensive. 
“The market-based and finance-based approach is in the DNA of EU climate policy, so to speak,” said Jutta Paulus, a German Greens MEP. “Whether or not you like that, Hoekstra is the right person to implement this. He’s deeply convinced of this approach.” 
For some, the idea of relying less on visible regulation and more on the market’s invisible hand is the ideal fit for the current atmosphere in Europe, where political appetite for top-down targets to cut planet-warming pollution has waned significantly. 
Yet others are warning Hoekstra that market forces and price signals won’t reduce emissions fast enough to reach the EU’s 2050 net-zero target, can’t help with the crucial (and expensive) task of preparing for climate disasters, and may do little to reverse the degradation of nature. What’s more, it sets him apart from a broader trend toward increased industrial policy interventions. 
Lawmakers across the political spectrum also worry that raising fossil fuel prices as voters fret about soaring costs will backfire spectacularly. Already, governments are having second thoughts about plans to put a carbon price on heating and transport fuel emissions in 2027, fearing it will explode energy prices. 
The issue even divides Hoekstra’s own political family. 
Peter Liese, a German EPP lawmaker who has led the Parliament’s work on carbon pricing, defended the approach, insisting alternatives “will be more expensive and more bureaucratic.”
His colleague, Bulgarian MEP Radan Kanev (EPP), disagreed sharply, warning that jacking up carbon prices for heating and cars “is the recipe for political revolution in Europe.” 
When Hoekstra joined the European Commission last year to replace Frans Timmermans, a Dutch Socialist, left-leaning lawmakers were skeptical. 
His predecessor’s enormous green portfolio was split in two after his departure, with Green Deal oversight going to another center-left commissioner and the climate policy post going to the center-right Hoekstra, who at that point had little experience in the climate and energy fields. 
In fact, the relevant experience he had was a giant red flag to environmentally minded MEPs — he’d spent two years at fossil fuel giant Shell. After that, he spent a decade at McKinsey, a consultancy; he’s never disclosed which companies he worked with while at McKinsey, another source of irritation for MEPs. 
Over the past year, however, Hoekstra has won hearts and minds in the Parliament, to the point where even the Greens won’t entertain the idea of voting him down. 
“Hoekstra was a positive surprise for us in the last mandate, so we expect him to be at least as good and preferably even better in these hearings,” said Finnish Greens MEP Ville Niinistö. 
With the shadow of Timmermans no longer looming over Hoekstra, Niinistö now expects the commissioner to put his own “fingerprint” on the EU’s climate framework. 
That fingerprint appears to be more of an invisible hand. In his responses to the Parliament’s written questions last month, Hoekstra sketched out a vision that brings more of his finance background to the job. Commission President Ursula von der Leyen appears to back that approach, expanding Hoekstra’s portfolio this time around to include not only climate and “clean growth,” but also taxation.
While his answers touched on climate targets and industrial strategy, Hoekstra went into far more detail when describing his plans for financial instruments and taxation — from the recently agreed carbon border tax and global levies to domestic environmental taxes and the EU’s carbon market, known as the Emissions Trading System (ETS).
A member of Hoekstra’s Cabinet said that the commissioner is “impact-driven” and works with a “combination” of measures. “Our main instrument in the field of climate (the EU ETS) is indeed a market-based instrument, which works well. But our toolbox contains a mix of different instruments, including regulation and investments.” 
But even his response to questions on representing the EU at global climate talks centered on carbon markets, with Hoekstra promising to “promote carbon pricing as an essential element of a broader policy mix to achieve the goals of the Paris Agreement.” 
That’s not necessarily a surprise — Hoekstra told the Parliament last year that he was “in love” with the ETS, which currently requires power plants and industrial sites to pay a carbon price determined by market forces. With the upcoming expansion to transport and heating fuels, the ETS will regulate three-quarters of the EU’s emissions. 
He’s also long been passionate about removing fossil fuel subsidies, a potentially explosive issue as it includes state support designed to lower energy and gasoline bills. 
Yet it’s exactly those measures that will likely face fierce opposition during Hoekstra’s term. 
In 2027, the new carbon price for heating and transport takes effect just as France heads into a pivotal presidential election; Slovakia recently refused to translate the measure into national law, asking Brussels to revise the legislation instead. 
While carbon pricing, taxation and subsidy tweaks may help cut emissions, said Kanev, the Bulgarian MEP, “if you look at them from another point of view, you’ll see that every single one of them will lead to smaller or bigger increases in final consumer prices or export prices for European industrial producers.” 
The EU has passed measures to cushion the social impact of price increases — but many, including Kanev, believe those steps are far from sufficient. 
“My reading of the European elections … is that the voters in Europe are completely done with inflationary measures,” Kanev said. “The big answer the next Commission has to give is how should we go on with climate objectives, without raising prices?” 
Even carbon-market aficionados like Liese, the German MEP, caution that a softer approach may be needed, though he is concerned with the existing carbon market covering emissions-intensive sectors, known as heavy industry.
The ETS cuts emissions by requiring companies to pay for a dwindling supply of pollution certificates corresponding to their CO2 output, and Liese worries that following an ambitious reform last year, the availability of these permits is falling so fast that the mechanism could force industry to cut back production. 
Hoekstra should therefore promise to integrate negative emissions — representing CO2 taken out of the atmosphere — into the ETS, and allow companies to compensate their emissions with carbon removal certificates, Liese argued. Others warn this would undermine the emissions-cutting potential of the EU’s carbon market. 
Many green-minded MEPs, meanwhile, support a high carbon price and a phase-out of fossil fuel subsidies, but say regulations such as a ban on new cars running on fossil fuels or renewable energy targets are needed, too. 
Pascal Canfin, the environmental coordinator of the Parliament’s centrist Renew Europe group, advocates expanding the ETS even further to include agriculture, for example. “It’s always good to put a price on carbon,” he said. “But it’s usually not enough.” 
Meanwhile, some aspects of dealing with climate change can’t be steered via markets — particularly when it comes to making the EU more resilient against fires, floods and droughts. While more expensive fossil fuels can put consumers off a new gas boiler, price signals can’t direct them to the safest place in the event of a climate disaster. 
Any plan to prepare the EU for the impacts of climate change must involve binding regulation and funding, said Spanish Socialist MEP Jávi López. “The EU has to do something more than guidelines and recommendations.”
Restoring or protecting natural areas, a key pillar of any climate strategy, also doesn’t lend itself as easily to financial mechanisms. 
Nevertheless, von der Leyen has plans to create “a market for restoring our planet” — and Hoekstra, in his written responses, has promised “a more decisive push for market-based measures in tackling environmental issues.”