Investments to modernise energy and transport must double by the end of the decade to reach 2030 climate targets, the EU has been warned.
According to the Institute for Climate Economics (ICE), which has released the European Climate Investment Deficit report, the bloc lacks what it calls a “consistent tool” to ensure monitoring of the climate investment deficit. To meet its targets, the ICE said, the EU needs an overall average yearly investment of €813bn, or 51% of the continent’s GDP. This is double current levels.
The EU’s own declarations are to reduce emissions by at least 55% by 2030. It says that it adopted proposals by the EC in 2023 to achieve this goal. The long-term strategy, according to the EC’s own website, is to reach climate neutrality by 2050.
Now, however, the ICE authors have written: “As real-economy investments reached €407bn in 2022, this leaves a European climate investment deficit of €406bn per year, or 2.6% of GDP. By comparison, explicit and implicit fossil fuel subsidies in the EU have increased and reached €290bn in the year 2022.”
They added: “In other words, current levels of public and private investments represent already half of total investments needed to occur every year to deliver on the EU 2030 targets for the energy, buildings and transport sectors. Yet doubling those investments is essential to deliver the economic, geopolitical and climate benefits EU policymakers committed to.”
‘Climate investment deficit’
The report also found that only the hydropower and battery storage sectors saw climate investment being higher than needed. “All 20 other sectors suffer from a climate investment deficit of varying proportions,” it noted. “For instance, 2022 investments in wind power represent only 17% of total annual investment needs. Conversely investments in solar panels represent already 78% of total annual investment needs.”
The deficit of investment needed has been a common topic in these pages for some time. At the end of January, Expert Investor covered law firm Norton Rose Fulbright’s declaration that investors should benefit from the EU’s support for green subsidies.
In EU scales up green subsidies – how you can benefit from new support for clean investments – which comes on the back of the EC’s adoption of changes to its state aid framework supporting the Net Zero Plan, first adopted a year ago – the firm outlined the relevant pieces of legislation and regulations that have come into force. The EC has also pledged in recent months to held rebuild Ukraine as a green industry ‘hub’ and to help overhaul the continent’s electricity grids.
