After 5 years of the Green Deal, where is Europe on the road to decarbonisation?

Following the European elections on June 9, the EU is adapting to a new, more conservative, political reality. Yet despite changing political tides, a new EU leadership will still need to find a credible answer to how the continent is to reach climate neutrality by 2050. To understand how to get there, we need a clear understanding of the progress already made. This is where the European Climate Neutrality Observatory (ECNO) comes in.


ECNO, led by a consortium of five European think tanks, including I4CE, tracks the EU’s progress towards decarbonisation across a range of “building blocks” – from electricity to mobility, adaptation to the just transition. In this year’s flagship report (released this week), some of the strongest progress has been seen in the domain of cleantech, as Europe races to build up its domestic manufacturing of the technologies needed to decarbonise.


Private investment in cleantech has hit record highs, while the EU’s domestic manufacturing of batteries has seen average growth of 131% annually since 2021. Meanwhile, in another area of I4CE’s expertise, aligning the financial flows with climate goals, we see a different story. With fossil fuel subsidies growing in recent years and showing no sign of being phased out, and the climate investment deficit still significant, there is still much to do to redirect financial flows to decarbonise Europe.


With fossil fuel subsidies showing no sign of being phased out, and banks failing to make clear, transparent commitments to aligning their operations with climate action, there is still much to do to get this all-important sector to pull its weight when it comes to Europe’s decarbonisation.


ECNO, and I4CE, don’t only track progress. It is critical to look ahead to areas of action for the next five years. Whether it is aligning banking transition plans with climate goals, or targeting EU funds towards the competitiveness of our green industry and protecting citizens affected by the transition, there is much to be done to help close the EU’s Climate Investment Deficit. As we enter a critical phase for climate action, where policy must now translate into results, ECNO’s annual progress tracking and full suite of recommendations makes clear where we have a good foundation to build on – and where an ambitious change of direction is sorely needed. 


Read the newsletter

To learn more
  • 06/28/2024
    From Stranded Assets to Assets-at-Risk: Reframing the narrative for European private financial institutions

    Private financial institutions must rethink their approach to managing stranded asset risks. The current narrative on quantifying fossil fuel sector exposures within a limited scope of financial portfolios (mostly loans) largely underestimates potential stranding losses. As the low-carbon transition impacts all economic sectors, private financial institutions (FIs) must consider material transition-driven stranding risks within their overall transition risk management framework using a ‘whole of economy’ lens. Traditional risk management approaches are ill-suited to the methodological and quantification challenges of transition-driven stranding risks, so a flexible, dynamic, forward-looking approach is necessary. Strong, incentivising public policy coordinated with financial regulatory and supervisory impetus is necessary to preemptively identify, monitor and manage stranding losses on ‘assets-at-risk’ (i.e., potential stranded assets). The ECB finds that 40% of the total loan portfolio of euro area banks is exposed to energy-intensive sectors*, making them vulnerable to transition risks, including stranding. It is time for an urgent reframing of the stranded asset narrative to avoid significant financial losses (endangering financial stability) and direct orderly transition finance flows to retire or transform assets-at-risk before they become fully stranded.

  • 04/11/2024
    I4CE’s recommendations to the Basel Committee on the disclosure of climate-related risks

    After a first step in 2022, the Basel Committee on Banking supervision is finally moving towards regulation for climate-related risks. Founded in 1974, this forum brings together financial supervisors of the G20 countries and establishes the common standards for financial stability. Two years ago, the Committee published a consultative document on the principles of climate […]

  • 02/16/2024 Foreword of the week
    Mobilising banks in the transition: supervisors must have better use of risk management

    The European Union is continuing its efforts to ensure that the banking system takes climate change into account. Banks will have to draw up a “transition plan”, according to the European Banking Authority’s (EBA) guidelines that are out for consultation until April.  One could hope that the banking authorities would seize this opportunity to encourage banks to better finance the transition, since their voluntary commitments are not sufficient. But the EBA does not make it a clear objective.

See all publications
Press contact Amélie FRITZ Head of Communication and press relations Email
Subscribe to our mailing list :
I register !
Subscribe to our newsletter
Once a week, receive all the information on climate economics
I register !