Publications

How distant December 12, 2015 now seems. All delegations at COP21 had then rallied behind Laurent Fabius’s little green hammer. Ten years later, the trend is closer to backlash. Climate action is now often portrayed in the public debate as too costly, because it requires major investment. Ineffective, since our share of global emissions is small. Unfair, because it cuts into purchasing power. Too divisive, supported only by part of the electorate. Too late, since keeping the planet below +2°C of warming now seems out of reach. Arguments that are partly true—yet require substantial nuance. 

In the run up to the publication of the European Commission’s proposals for an automotive package on 10 December, car manufactures have stepped up the calls to relax the CO2 standards and the 2035 phase-out of new combustion-engine vehicles by including some flexibilities. They highlight the challenges the industry has faced in recent years, growing competitive pressure from China, and insufficient demand for electric vehicles in Europe as reasons for the sector needing more time for the transition required to meet the targets.

Recently, car manufacturers have been calling for a relaxation of CO2 emission standards for cars and vans and the 2035 phase-out target for new internal combustion engine (ICE) vehicles, by including some flexibilities. They point in particular to the crisis the industry has faced in recent years, growing competitive pressure from China, and insufficient demand for electric vehicles (EVs) in Europe, as reasons for the sector needing more time for the transition required to meet the targets. As the European Commission (EC) prepares to publish its package for the automotive industry, including a revision of CO₂ standards for cars and vans, this blogpost examines the realities behind the difficulties currently faced by car manufacturers and the consequences of relaxing and postponing the planned EU regulations for this sector. 

One year ago, Mario Draghi warned that Europe was becalmed in treacherous waters. Fading competitiveness, trade disputes to east and west, and a growing political mutiny against the green transition make the way forward hard to navigate. This year, however, the EU has begun to find its bearings – guided by the Competitiveness Compass, with decarbonisation as the north star of the Clean Industrial Deal.

This year marks an important milestone for I4CE: we are celebrating a decade of commitment to the climate economics. We would like to thank our partners who agree to say a few words at the occasion of this anniversary.  

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.

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.  

In July, Commission President von der Leyen announced a €2 trillion EU budget fit “for a new era,” set to launch for a seven-year period in 2028. As EU-watchers in Brussels and beyond scrambled to digest the reams of legislative proposals that followed this headline-grabbing announcement, much in the detail should give pause – especially from the perspective of closing the EU’s climate investment deficit.

Climate negotiations are taking place next week in Bonn, with finance once again high on the agenda. COP 29 ended last year with a New Collective Quantified Goal (NCQG) –revised climate finance target to replace the USD 100 billion goal. The NCQG decision put forward a commitment by developed countries to lead in providing USD 300 billion per year by 2035 for developing countries, as well as a proposal to work on a roadmap to scale up climate finance for developing countries to reach a level closer to the estimated needs –the ‘Baku to Belem Roadmap to 1.3T’ (USD 1.3 trillion). The latter must be delivered at the end of the year at COP 30, and strong efforts are being put in the task by the Brazilian Presidency.

In a challenging geo-political context, Europe has a window of opportunity to lead on both climate action and industrial competitiveness. As Mario Draghi highlighted in his report last year, this can only happen if decarbonisation ambitions are backed by real investment - and there is an urgent need to boost those investment. The European Commission followed suit and pledged to be an “Investment Commission,” while reaffirming its commitment to implement the 2030 emission reduction targets and to stay to course on the longer-term targets.

We are witnessing a withdrawal of commitments to climate action. In the US, President Donald Trump does not hide his hostility to what he calls the ‘climate hoax’. In Europe and in France, new narratives around competitiveness, strategic autonomy and security are gaining ground, reflecting a new political reality. If there is still a broad consensus on the long-term objective of climate neutrality, how to get there is increasingly challenged, generating uncertainty. The scarcity of fiscal resources impacts the willingness to embark on the green transition.

This week, the EU launched the policy package that will define its new mandate – the Clean Industrial Deal. Pitched as “a transformational business plan” linking Europe’s climate and competitiveness goals, the Deal is Europe’s answer to the alarm raised by the Draghi report last year.

The EU needs to secure its own green industrial base and foster new alliances. Central to success of the Clean Industrial Deal is a thriving cleantech manufacturing base, which can help Europe reduce emissions, create quality jobs, and enhance economic resilience. This analysis written in February by the European Climate Neutrality Observatory (ECNO which I4CE is a partner) reveals critical challenges for EU industry that can inform policy-making under the Clean Industrial Deal.

While several North American banks exit the voluntary NZBA (Net Zero Banking Alliance), European banks must bolster their climate risk frameworks. The European Banking Authority’s (EBA) recently published guidelines on ESG risk management offer a beacon of hope amidst the turmoil that currently surrounds the EU’s sustainable finance regulations. These guidelines are encouraging in both substance and form, reflecting prudential supervisors’ commitment to aligning the banking sector with the bloc’s climate and sustainability goals.

As Donald Trump kicks off another presidential mandate in the US, there is no turning away from the EU’s major challenges of competitiveness, energy security and decarbonising the economy. With a new European Commission in place since December 2024, the roll out of initiatives addressing those challenges can begin. Whilst a lot of focus goes […]

Translating innovation into world-leading industries is critical, and FP10, the EU’s next flagship R&D funding programme after Horizon Europe concludes, offers a chance to bridge this gap. The Green Deal era saw Europe embrace 'Cleantech 2.0', with record investments and new projects. Yet 2024 has brought a reckoning. Slowing demand in sectors like heat pumps and electric cars, Chinese industrial overcapacity, and attractive subsidies in the US and Canada have left European cleantech struggling to compete. Closures, layoffs, and stalled projects - including the high-profile collapse of Swedish battery maker Northvolt - have shaken the sector. The EU’s Net Zero Industry Act and the upcoming Clean Industrial Deal aim to support cleantech manufacturing, but catching up isn’t enough. To lead globally, the EU must focus on the next wave, including new battery chemistries and next-gen renewables - 'Cleantech 3.0.'

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.

The implementation of the new banking package (or Capital Requirements Directive package) that adopts the final parts of the international Basel 3 financial regulation is underway in the European Union. The European Banking Authority (EBA) along with the other European Supervisory Authorities (ESAs) is mandated to develop technical standards that provide the framework to help financial institutions comply with the new regulatory rules. Key among these standards is the novel guidance on ESG risks which is expected to be finalised by the EBA in the coming months. This is an opportune moment to address weaknesses in banks’ risk management practices, particularly regarding the underestimation of stranded asset risks, a missing angle in current policy debates.  

The European Commission is due to deliver a Vision for Agriculture and Food, within the first 100 days of its new mandate. Feeding into this work, the Strategic Dialogue on the Future of Agriculture (SDFA) published its report “A shared prospect for farming and food in Europe" in September. The spending under the Common Agriculture Policy (CAP) and its alignment with the climate goals agreed at the EU level will be central to the next steps.  

The Members of the European Parliament (MEPs) will audition the European Commissioner-designates in early November. The hearings are a crucial moment to seek commitment from the EU’s next executive team on the priorities for the coming five years and how they will delivered – including on the urgent issue of investment in the climate transition.