EU fuelling economic ‘doom loop’ by weakening climate rules during record heatwave, Dutch bank says

A Dutch bank has warned that Europe risks falling into a “doom loop” in which climate damage slows economic growth, prompting governments to weaken climate policy, and so leaving the continent even more exposed to future heatwaves.

Triodos Bank puts the price of this summer’s record temperatures at €180bn in a recent analysis, wiping out all forecasted growth this year.

And the bank’s economists said that Brussels was“making the problem worse” by weakening the EU’s carbon pricing system for industry and energy companies. Operational since 2005, the EU’s Emission Trading System (ETS) puts a price on industrial pollution by making companies pay for permits covering every tonne of CO2 they emit.

By the commission’s own estimates, emissions from the more than 10,000 installations covered by the system have fallen by 50 percent since its launch, including a 24-percent drop in 2023 and a further 11 percent in 2024.

But national governments and a powerful business lobby pushed the commission on 17 July to water down the rules in the name of protecting the bloc’s competitiveness.