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Climate investments in Europe must double, and the clock is ticking

27 November 2024 - Blog post - By : Dorthe NIELSEN / Benoît LEGUET

To tackle the challenges of competitiveness and well-being of future generations, Europe needs to accelerate the climate transition. This will require sizable investment, both public and private. National governments must thus embrace and the EU must facilitate investments in climate transition. 

 

As the next European Commission prepares to take office, the challenges facing the College are stark. The recent report by Mario Draghi makes clear that there is an urgent need to invest in European competitiveness and innovation, while accelerating the decarbonization of the continent’s economy, to avoid a “slow agony of decline” for the block.

 

European Commission President Ursula von der Leyen has pledged to lead an “investment Commission” and to ensure the European Green Deal stays on track. The new five-year mandate will bring the EU right up to the 2030 milestone for delivering on its emission reductions goals, whilst the race for global competitiveness intensifies. Unlocking private and public investment will be critical to both accelerating Europe’s decarbonization and reinforcing its competitiveness.

 

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Closing Europe’s Investment Deficit

Climate investments in Europe grew by 9% (to €407bn) in 2022, according to research by the Institute for Climate Economics – I4CE. Meanwhile, investment in European wind power more than doubled in 2023, and solar power investment is currently on track to meet its 2030 targets.

 

Still, not all sectors are seeing such growth: the heat pump market, vital to decarbonizing buildings but facing a slowdown in demand, saw a 7.2% decline in 2023. There is a significant gap left to bridge – overall, reaching the EU’s 2030 targets will require an additional investment of €400 billion per year. In a nutshell, climate investments need to double.

 

Every year that this investment deficit persists, it increases the financial and environmental cost in the years to come. Von der Leyen’s Investment Commission must as a consequence hit the ground running to address the investment gap and deliver on its climate goals.

 

An Investment Commission with a Plan for Europe

The EU’s new flagship initiative, the Clean Industrial Deal, inspires some optimism for Europe’s decarbonization goal. Europe can build a competitive edge in the net-zero industrial race. But accelerating investment in cleantech across the continent is critical if Europe is to secure its long-term competitiveness. For the Clean Industrial Deal to succeed, it must not only put climate action at its core but also give Member States the flexibility on public spending needed to boost climate investment.

 

With the European Commission’s current emphasis on the need for fiscal discipline, many Member States are grappling with how to balance the need for climate investment with fiscal constraints. If the EU is serious about achieving its climate goals, it must loosen the grip on public budgets to enable strategic, long-term investments.

 

A Cleantech Investment Plan, led by the European Investment Bank and the EU Innovation Fund, would be a good start, as it would provide the necessary support for cleantech manufacturing, ensuring Europe remains at the forefront of the global transition to a net-zero economy.

 

In addition, Europe needs a broader policy and investment mix, including a longer-term climate investment plan, based on a regular and detailed assessment of the investments carried out and further investment needs across sectors and Member States. Turning the national climate and energy plans into genuine transition investment plans would be a step in the right direction, helping to attract investment at all levels. By ensuring a stable and supportive investment environment, Europe can create the conditions for sustainable growth while tackling the need to both adapt to and mitigate further climate change.

 

Investing in Jobs, Prosperity, and Our Future

Investing in the climate transition is about securing Europe’s future prosperity. When Europe invests in net-zero technologies like electric vehicles, renewable energies, and modern power grids, it also invests in high-quality jobs, energy security and sustainable growth. Public debt used to finance these investments should be viewed as “good debt” – an investment in a transformative transition that will benefit future generations. The high stakes attached to the climate transition and the costs of inaction justify public financing efforts, even in times of intense pressure on public budgets.

 

If the transition to climate neutrality by 2050 remains Europe’s North Star, and while there are high expectations for the new European executive, the responsibility for driving this transition forward lies not only with Brussels. Member States must also step up, ensuring investment at the national and sub-national levels align with the climate transition.

 

Our leap into the future begins now, whether in Berlin, Madrid, Paris, Rome or Warsaw. If Europe fails to invest in the climate transition, it risks falling behind in a rapidly changing world. But with the right investment strategy, Europe can secure its place as a leader in clean technologies, creating jobs, fostering prosperity, and ensuring a sustainable future for generations to come.

To learn more
  • 09/26/2025 Foreword of the week
    A decade of commitment to advancing economic policies for the climate

    This year marks an important milestone for I4CE: we are celebrating our 10-year anniversary. Setting sails the year the Paris Agreement was adopted, our mission was clear from the outset: to promote effective, efficient and fair policies for the climate transition.  Since then, we have focused our economic analysis on public policies with an emphasis on assessing the investment needs and policy options for the transition. Our ambition has been to advance the public debate on climate with facts and figures, promoting long-term investment plans as an essential tool to turn political ambitions into reality. Over the years, we have applied this approach to a growing number of policy areas and expanded our geographical scope from France to Europe and internationally.

  • 09/05/2025 Foreword of the week
    2030 and Beyond: Budgeting Europe’s Climate Transition

    The next long term EU budget will take us through the 2030 goal posts, by when GHG emissions should be down by 55%. It will also lay the groundwork for investing in a climate-neutral future for the continent towards the yet-to-be agreed objectives for 2040. So, when the European Commission presented its proposal for a €2 trillion multiannual financial framework (MFF) just before the summer break, there was good reason to carefully study the details from the perspective of closing the EU’s climate investment deficit.  

  • 09/03/2025
    State of EU progress to climate neutrality – ECNO 2025 Flagship report

    Europe is making progress on the clean transition, but the pace is too slow across several parametres. ECNO’s analysis is structured around 13 building blocks of the transition, tracking changes in the six-year trend for nearly 150 indicators and also the expected impact of policies – a new addition to this year’s report. In the 2025 edition, we also analysed the changes through the lens of broader EU objectives, namely competitiveness, resilience, and citizens’ well-being. 

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