Europe must beware an investment gap in moving to a climate-neutral economy, the European Climate Neutrality Observatory (ECNO) has warned.
The ECNO said its assessment for this year showed 75 indicators indicate progress, while three have slowed. Part of this is due to a significant investment gap.
“The transition to a climate-neutral and resilient Europe requires substantial investment in climate – both mitigation and adaptation – to contain the long-term costs of climate impacts, which are already escalating.” It noted. “Despite a moderate rise in investments for climate change mitigation for the energy, buildings and transport sectors, with increases of 15% in 2021 and 9% in 2022, the EU is still facing a significant investment gap of €406bn to meet its 2030 climate objective as of 2022.”
As a result, the ECNO has set out 10 recommendations it believes the EU should take over the next five years:
1. Advance effective implementation of the existing policies. According to the ECNO, those policies adopted over the last four years now require national implementation so the EU should provide support to member states, along with “further specification” of the legal requirements allied with stricter follow-up to ensure adherence.
2. A strong policy push to redirect financial flows towards transition financing. This will include, said the ECNO, progressively phasing out fossil-fuel subsidies and closing the investment gap.
3. Ensuring a socially just and people-centred transition.
4. Accelerating the industrial transition by providing EU-level funding and leveraging existing spending. In addition, wrote the ECNO, national energy and climate plans should consider the three enablers of circularity, energy efficiency, and zero carbon energy carriers.
5. ECNOuraging efficiency, modal shift and electrification in buildings and mobility.
6. Ensuring a predictable and just transition in agriculture. Part of this would involve ECNOuraging plant-based diets, said the ECNO.
7. Investing in natural CO2 removals “as a matter of urgency”.
8. Enhancing global climate action through climate finance and diplomacy. The ECNO said international climate finance should correspond to the fair share and alignment of all public funds with the goals of the Paris Agreement.
9. Improving data for “smarter” policymaking.
10. Establishing an official EU-wide transition monitoring system. This, said ECNO, would reduce the overall effort and administrative burden for member states and EU institutions alike.
“The EU has kept up its progress towards climate neutrality in many building blocks for a climate neutral society,” the ECNO concluded. “Even though all 13 building blocks remain in the same progress classification as in the 2023 assessment, still requiring the transition to pick up pace, a closer look reveals important and promising progress in individual indicators and in new and revised policies.”
