Towards a €1 trillion package for Europe

April 23, 2024

€620 bn The additional investment needed each year to fulfil the EU’s climate commitments

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Since 2019, the European Green Deal has set ambitious climate policies and targets at EU level, backed by ground-breaking regulations. But when it comes to implementation, financing for the green transition is alarmingly scarce. The European Commission estimates that an additional investment of €620 billion is needed for each year throughout the 2020-2030 decade to fulfil the EU’s climate commitments.

This means that the green transition is also an investment challenge. The environmental, social and economic costs linked to climate change will largely outweigh the cost of implementing the transition. The cost of inaction risks knocking 7% off the EU GDP by 2100, and economic losses from coastal floods alone could exceed €1 trillion per year according to the European Environmental Agency. Therefore, significant public and private resources will need to be deployed in the coming years.

This challenge is further compounded by the global competition for clean technologies’ supply chains and manufacturing. The EU Green Deal Industrial Plan announced in early 2023 emerged as a promising initiative to accelerate the energy transition and decarbonise the industry across Europe. However, the financial resources allocated to our industrial transformation fall short in comparison to the USA’s uncapped Inflation Reduction Act and its associated $1.2 trillion subsidy package which could reach the economy by 2031. In 2023 alone, following the IRA’s launch, investments in cleantech in the US reached $225 billion. In comparison, recent cuts to extra funding for cleantech under the EU’s proposed STEP platform highlight the need for immediate and impactful action. If not, Europe risks lagging behind international competition, on top of failing to deliver on its climate targets.

Europe stands at a crossroads. 2026 marks a crucial juncture in EU public spending, with the end of the Recovery and Resilience Facility leading to a substantial gap in investments. Relying solely on the EU budget will be insufficient to meet our sustainable investment needs, especially considering the uneven capacities of member states to fund their transition.

While private investments will contribute significantly to the transition, public funding is crucial to steer the economy and crowd in these private funds. To address these challenges and create a level playing field across the Union, a coordinated, long-term, European response is imperative.

A widely endorsed ecological transformation will only be achieved with a corresponding social shift, guaranteeing economic and social fairness throughout the Union. This involves fostering regional development, strengthening reskilling and upskilling initiatives and nurturing a fair and just transition toward a more sustainable future.

Therefore, T&E puts forward a €1 trillion Climate and Social Investment Plan to bridge the sustainable investment gap and propel the EU towards its green transition goals.

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