Overcoming the green investment gap will require a comprehensive approach
Although European green investments have gained momentum in recent years, an additional €406 billion is needed annually to meet the EU's climate objectives by 2030. This is stated in a study carried out by the Institute for Climate Economics (I4CE), an independent institute . tank, Euractiv reports .
The report is the first of its kind to comprehensively track public and private investment in economic sectors considered key to achieving the EU's decarbonisation objectives, including energy and construction.
According to the study, at least 813 billion euros are needed annually across 22 sectors of the economy to achieve the decarbonization bloc's objective of reducing greenhouse gas emissions by 55% by 2030, compared to levels 1990.
“As investments in the real economy reached 407 billion euros in 2022, this means that the European climate investment deficit is 406 billion euros per year, or 2.6% of GDP,” states the study.
According to I4CE analysts, overcoming the green investment gap will require a comprehensive approach that includes regulation, carbon pricing policies and some additional public funding from the EU. But this will require addressing political issues such as the restrictions imposed by the bloc's fiscal rules on national spending, the role of EU funds in supporting green policies and the debate over potential new sources of EU funding.
At the beginning of February this year, the bloc's countries agreed to reform their spending rules. However, they have provided only limited additional space for green investment under pressure from frugal countries like Germany that want to reinstate strict rules that were suspended during the COVID-19 pandemic and energy crisis.
“The European Commission needs to better assess and address the climate investment gap in the EU, otherwise there is a risk that the Green Deal will not be able to deliver on its economic, social and environmental promises,” warns I4CE.
As the GMK Center previously reported, the European Commission has recommended that the EU reduces net greenhouse gas emissions by 90% by 2040 (compared to 1990 levels). The EC has also outlined the measures necessary to achieve this objective. In particular, it refers to the need to fully implement the bloc's agreed framework to reduce emissions by at least 55% by 2030 and decarbonize industry building on existing advantages (wind power, hydropower and electrolysers).
