Publications Europe

EU election time: climate policy and finance challenges under scrutiny

This weekend, citizens across the EU head to the polls. Many expect a swing to the right, in stark contrast to the “green wave” of 2019. In Brussels, leaders are looking ahead to a five-year mandate dominated by questions of security and competitiveness.  In these turbulent times, what is the future of Europe’s flagship climate package, the Green Deal? The Green Deal and the Fit for 55 package gave us the regulatory framework – but implementation requires investment. I4CE‘s flagship EU Climate Investment Deficit report shows that climate spending must double to make the 2030 target achievable.

 

However, investing in Europe’s decarbonisation should be seen as a cornerstone to achieving competitiveness and security. The EU’s competitiveness in part depends on developing a robust cleantech manufacturing base, and better use should be made of the tools the EU already has, as we explore in this report on the Innovation Fund. Furthermore, Europe’s long-term security demands a defence against military threats, but also the impacts of climate change. I4CE’s work on how best to finance adaptation, as well as on how to better integrate prudential transition plans into financial regulation to ensure the financing of an orderly transition at EU level sets the tone for policymakers in this next mandate.

 

Finally, to ensure an equitable transition, Member States will need to support the poorest as they retrofit housing and transition away from combustion engines. I4CE‘s research in the French context demonstrates the scale of the challenge, which will only be greater in countries facing higher rates of energy poverty. We are about to embark on a new five-year mandate – and one where the European Union stands at a critical juncture. Ensuring European security, competitiveness and decarbonisation requires public action, at the EU-level and by Member States. I4CE, through its analysis across sectors and geographies, is ready to support policymakers in facing these challenges, and regaining the trust of voters who are increasingly disillusioned. To do so however, requires a Europe that is willing to act – a Europe that invests.   

 

#MeetTheTeam

A Europe that acts and invests – what does it take ? See our latest reports on the EU policy agenda for financing a just climate transition, with assessments of the state of play across the main policy areas and recommendations for the EU next mandate.   

 

Europe’s 406Bn euros climate investments deficit

I4CE‘s first European Climate Investment Deficit report analyses investments in 22 sectors of the EU27 economy that are critical for the EU to deliver its 2030 climate and energy security objectives. Climate investments in the EU grew by 9% in 2022, reaching €407Bn in those 22 sectors, contributing to reducing GHG emissions in the years to come. Still, investments must double for the EU to hit its 2030 climate targets. This report provides granular and transparent evidence to support informed decisions by EU citizens and policymakers, before and after the 9 June 2024 EU elections. 

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From denial to acceptance: Europe next step in the cleantech race

The EU Innovation Fund is Europe’s largest fund for climate innovation. It has a key role to play in European climate action, energy security, technological leadership and competitiveness. To unleash the full potential of European cleantech, greater public support is needed to help more companies and projects cross the so-called “valleys of death” that are inherent to cleantech innovation and scale-up. I4CE‘s paper «The sharpest tool in the box» proposes five ways in which the Fund’s impact can be improved to meet European cleantech ambitions.

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Failing to plan is planning to fail: Prudential transition plans and European Banking Authority consultation

The recent adoption of the Capital Requirements Directive saw climate change included and a requirement for banks to draw up prudential transition plans under the supervision of European Central Bank. It represents a major opportunity but a lot will depend on the implementation. The European Banking Authority (EBA) is clarifying how the banks should frame these prudential transition plans. In its response to the public consultation, I4CE recommends that the EBA should strengthen the guidelines prudential transition plan.

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EU certification framework: the devil is in the details

Following the adoption of the EU’s Carbon Removals Certification Framework (CRCF), there are high hopes for improving and harmonizing carbon measurement to certify projects in a sector where there is a great deal of uncertainty. I4CE works with its European partners in several EU funded projects (INFORMA, CREDIBLE, CLIMATE FARM DEMO) to improve forestry and agriculture monitoring and scale-up funding for climate-positive projects. 

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Putting social equity at the heart of the transition

Unprecedented inflation rates and a cost-of-living crisis across Europe have challenged climate action in several aspects. Reduced purchasing power, combined with higher costs -particularly for home energy retrofits- and increased financing costs, undermine the ability of households to undertake the investments required for the transition. In this context, to what extent are low carbon solutions accessible to households? Read I4CE’s report on the situation in France, which highlights that all economic players must have the means to take part in the transition.

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Adaptation: credible pathways is the next essential step

As the European Union gradually steps up its action in favor of adaptation, I4CE‘s study has provided initial estimates of the costs of adaptation for some of the main economic sectors in France: building, land transport infrastructure and agricultural crop production. Over and above the need for immediate action that we had quantified in 2022, these results open the debate on the major choices of adaptation that still need to be made. Determining the costs of adaptation means first asking: what level of service do we want to maintain at all costs? What are we prepared to transform? What are we prepared to give up?

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I4CE Contacts
Ciarán HUMPHREYS
Ciarán HUMPHREYS
Research Fellow – Cleantech, Financial instruments for climate innovation Email
Clara CALIPEL
Clara CALIPEL
Research Fellow – EU Climate Investments  Email
Natasha CHAUDHARY
Natasha CHAUDHARY
Research Fellow – Prudential transition plans, Climate risks Email
Romain HUBERT
Romain HUBERT
Research Fellow – Climate risks, Adaptation and financial institutions Email
Julie EVAIN
Julie EVAIN
Research Fellow – Financial regulation, Prudential transition plans Email
Clothilde TRONQUET
Clothilde TRONQUET
Research Fellow – Carbon Farming, Carbon markets, Agriculture and Forest Climate Clubs Email
Simon MARTEL
Simon MARTEL
Research Fellow – Carbon certification, forest, and carbon farming Email
Julia GRIMAULT
Julia GRIMAULT
Team Lead – Forest-based sector, Carbon certification Email
To learn more
  • 07/05/2024 Foreword of the week
    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.

  • 07/02/2024
    State of EU progress to climate neutrality

    Assessing the state of progress to inform next steps in policy-making. The European Union (EU) is on its journey to become climate neutral by 2050. This multigenerational project holds many societal, economic, and environmental opportunities. At the same time, it is of unprecedented scale and implies considerable changes to the current systems, which need to be anticipated and addressed for the transition to be fair and acceptable to all. Regular progress checking is the key to understanding where the EU stands on the journey. It allows to identify challenges and opportunities and take targeted policy action guiding investment, supply, consumption, and societal development. There is still no official, comprehensive, and regular EU-wide progress monitoring to achieve this. This second ECNO progress check aims to close the current information gap. It provides a comprehensive view on the state of EU progress towards climate neutrality and identifies key areas of action for the next policy cycle.

  • 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.

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Press contact Amélie FRITZ Head of Communication and press relations Email
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