Hungary EU Presidency: risk of political disruption in time of new priorities for the EU

On 1 July 2024, Hungary will take over the rotating European Council Presidency amid geopolitical uncertainties ahead of the United States elections, a fluctuating political landscape within the European Union (EU), and alongside Hungarian Prime Minister Viktor Orban’s hostility towards EU institutions.

The rise of far-right parties in the most recent European Parliament elections could be reinforced by a similar shift in the upcoming French Parliamentary elections, echoing Orban’s political stances in the EU. As the European Commission defines its work priorities, the Hungarian Presidency could use its soft power to set a critical tone for the discussion.   

However, Hungary established a Ministry of EU Affairs to manage its presidency, committing to act as an “honest broker”. This stands in contrast to Hungary's intention to still use their veto power for decisions requiring unanimity, if they deem it necessary. The next six months will inevitably see European capitals devising ways to protect EU decisions from a potential growing use of the veto by Hungary.  

The Trump-inspired slogan of the Presidency Programme ‘‘making Europe great again” is indicative of the tone and stance that Hungary is prepared to use. But, independently from the posture that Orban will adopt, as no open legislative files will be discussed, the impact of the Hungarian Presidency might be limited on EU policies. 

The disruptiveness of this presidency will be assessed against its ability to impact the EU agenda and the interlinkage of several international events including the upcoming elections in the US and the stance that Hungary will adopt towards China. These will be determinant for the next six months and likely to be on full display at the 29th United Nations (UN) Climate Change Conference (COP29) in Baku, Azerbaijan, in November 2024. 

What is the Hungarian stance on COP29?

With COP29 approaching, the Hungarian Presidency will begin preparing the EU’s position with a debate at the informal Environment Council in mid-July. The mandate will be adopted unanimously in October, putting their stance as “honest broker” to its first test.

Negotiations are not an easy task in general, but even less if considered in the broader picture of actual geopolitics. The EU is under big pressure to deliver its view on the new finance goal at a time when the bloc’s budgets are tight and increasing amounts of funding is going to Ukraine. 

Donor finance pledges tie hand-in-glove to the results of the upcoming US elections, where Trump’s re-election could be a game-changer for the outcomes of COP29. In the event of a second Trump-led government, the US push for climate action would be massively revisited as of January 2025. This could create an interesting dynamic in which Orban might need to choose a side between his allegiance with Xi Jinping in China and Trump in the US, given the confrontational stance between the two leaders.

The effectiveness of the EU bloc in Baku could come into question if Orban publicly endorses a re-elected Trump. The peril of sending incoherent or negative signals to global partners looking for reassurance on climate topics could create a reputational risk. 

This reputational risk is even more pressing for the EU in view of the 2035 climate targets (Nationally Determined Contributions (NDCs)) deadline set for February 2025. Several countries are now preparing their NDCs, including China, the US, Japan and the Troika countries. Given the lack of political momentum, there is an increasing risk  for the EU to appear as a laggard. 

To overcome doubts, the 2040 target can play a significant role for the international credibility of the EU diplomacy agenda. 

Which path for the 2035 and 2040 climate targets?

Hungary conceptualised an Industrial Deal as the new EU frontier for competitiveness, recognising the opportunity for a new industrial era. This aligns with our findings that a 90% climate target in 2040, coupled with an industrial strategy, can strengthen Europe’s competitiveness, energy and economic security. The adoption of the 2040 climate target by the end of the year can become the first element of such a European Industrial Strategy, which can be designed by the European Commission.

The approaching UN deadline for countries to submit their 2035 climate targets by February 2025 requires advancements under the upcoming Presidency. This deadline can only be met if Hungary crafts a political package encompassing countries’ political concerns, policy asks and finance requirements. 

Most EU Member States have already positioned themselves around 90% climate targets for 2040, which is a good signal for a possible agreement. In this context, some Central and Eastern Europe (CEE) countries and Italy could be the most challenging to get consensus from. Linking this target with a European Industrial Strategy and an investment plan could boost governmental support with prospects for job creation and business’ competitiveness. Having them onboard could be a diplomatic success for Hungary, delivering on its commitment to act as an honest broker. 

The Hungarian energy programme: impacts on the EU energy agenda

Hungary will use its Presidency to promote its own energy model in Europe, focusing on nuclear and geothermal. It’s worth monitoring if this agenda is used as a Trojan Horse to continue undermining the European Green Deal and keep close ties with Russia. This is in contrast to the  considerable renewable energy growth being registered in the country through the tenders known as METÁR, which helped investments in solar photovoltaic (PV) mainly. Still, Hungarian potential is untapped in the domain of wind as it  targets a low-electricity mix of 90% by 2030.

Hungary’s energy policy strategy focuses on strengthening its independence and keeping prices affordable, considered a priority for the Presidency. However, both at national and EU levels this could be better achieved through a massive deployment of renewable energy and electrification, according to our analysis.

Under the premises of their Presidency, Hungarians will host more than 15 energy conferences, overall advocating for:

1. The recognition of nuclear energy as essential for achieving EU climate targets and security of supply. Nuclear can contribute to the EU electrification goals. However, given the cost and regular delays in construction and maintenance of nuclear plants, a rapid deployment of more renewable sources is the more immediate solution. It is also necessary for EU energy security and reducing dependence on gas and coal use, as our recommendations suggest.
2. A technology-neutrality approach on energy that opens the door for an increasing role of geothermal energy, CCUS and low-carbon hydrogen technologies backed by EU funding. However, our analysis limits the use of these technologies given they are not yet mature and their application is costly. CCUS should be limited to existing industrial plants and green hydrogen should be prioritised in sectors that are difficult to electrify.

Instead, Hungary could argue in favour of a zero-emission electrification framework. It has the potential to reduce electricity prices 12%, cut energy bills for households by two-thirds and strengthen energy security by saving €856 billion on fossil fuel imports between 2025 and 2040, as our report shows. 

What are the key steps ahead for the Hungarian EU Presidency?

• 8-9 July: Informal meeting of Competitiveness Ministers for internal market and industry discussions
• 10-12 July: Informal meeting of Environment Ministers, also to discuss COP29
• 15-16 July: Informal meeting of Energy Ministers
• Autumn (TBC): European Competition Day Event (Budapest)
• 14 October: Environmental Council adopts COP29 conclusions and could pursue the  2040 debate
• 15 October: TTE (Energy) Ministerial with potential conclusions on the promotion of geothermal energy
• 17-18 October: European Council (EUCO) 
• 7-8 November: Informal EUCO to assess the outcome of the US elections
• 28-29 November: COMPET (Internal market & industry) Ministerial 
• 16 December: TTE (Energy) Ministerial 
• 17 December: ENVI Ministerial 
• 19-20 December: EUCO 

Key takeaways:

• Hungary's Presidency will focus on political work and agenda-setting in the absence of open legislative files to discuss, committing to act as an “honest broker”.
• It has an opportunity to deliver on the 90% climate target in 2040 and push for an European Industrial Strategy that can foster competitiveness, reduce multiple EU dependencies and be part of the next phase of the Green Deal.
• The Presidency will represent EU leadership at COP29. In times of concerns over the future of the EU diplomatic agenda, the Hungarian Presidency could take two different paths: 

1. 1. In the event of a Trump re-election, Hungary might have little incentive to align the EU around a forceful response on climate finance and mitigation with its partners in developing countries. Other national governments should prepare for this scenario to avoid undermining the EU’s credibility at COP29.
   2. Hungary could lead the way on NDCs and the 2040 target to increase the diplomatic credibility of the EU in international fora.