Europe’s cleantech toolbox is taking shape
With a crowded 2027 election calendar in France, Italy and Poland ahead, Brussels is racing to close its biggest files. Talks on the 2028-2034 EU budget, including a dedicated clean transition window in the proposed Competitiveness Fund, are reaching the political level, with a deal sought by the end of the year. And the Commission’s July proposal to revise the EU Emissions Trading System, which sets the course to 2040, has gone into high gear within weeks.
Together, these two processes shape much of the funding toolbox available for industrial decarbonisation. Where past efforts have been disjointed, there is now the chance to design a suite of tools that build a more coherent landscape of support for projects from innovation to scale-up. Still, as negotiations intensifiy, trades offs become inevitable. Bad choices made under pressure could also leave gaps or lock in an ineffective architecture for years to come.
The carbon market is more than a price signal: since 2013, it has generated more than €270 billion in auction revenues. The European Commission now wants to use these revenues more strategically. A new Industrial Decarbonisation Bank and an ‘Investment Booster’ could support technologies nearing commercial deployment, while the Innovation Fund would focus on breakthrough, first-of-a-kind projects.
The Innovation Fund shows why getting this division of labour right matters. It is coming under scrutiny, with 40% of funded projects reporting delays and a growing number stuck before financial close. In a new analysis, Ciarán Humphreys examines why, and argues that the ETS review offers an opportunity to redesign the Fund around the risks it is best placed to address. More broadly, today’s fragmented landscape of EU instruments must become a continuum, where each tool tackles the risks it handles best, allowing projects to move from one phase to the next.
The Commission has drawn the blueprint and will design the tools. But how well stocked the toolbox is, and how firm the carbon-price signal underpinning it, will be settled with Member States and the European Parliament. Benoît Leguet, Managing Director at I4CE argues in his latest op-ed, any sign of hesitation will be read as encouragement by companies that have yet to engage in decarbonisation.
Rarely does Europe get the chance to take a step back and reimagine its cleantech financing toolbox. A coherent design process could leave the bloc with a suite of tools best suited to every task – but with political pressure and looming elections, the risk is that a rushed job leaves the toolbox in the same jumble as before. The stakes go beyond the climate: for a continent poor in resources, a strong clean industrial base is Europe’s best bet for staying competitive.
