Executive summary
Fostering investment in clean energy and transport systems is essential if the European Union is to achieve the 2030 climate goal of a 55 percent emissions reduction relative to 1990. However, getting to the required levels of investment during 2025-2030 is likely to be exceptionally difficult. Clean electricity generation and electricity transmission systems need to be expanded rapidly, while industrial decarbonisation must be boosted and the green transformation of buildings and transport accelerated sharply.
But policymakers face growing constraints on the public sector’s ability to support the necessary investments. At EU level, potential obstacles include the end of the NextGenerationEU post-pandemic recovery instrument, the lack of a green carve-out in the reformed EU fiscal framework, the increasingly difficult trade-offs between decarbonisation, competitiveness and security, and the spreading false narratives on climate policy promoted by populist nationalist parties. The latter two challenges are set to be further exacerbated by the return of President Trump in the United States.
The upshot is that Europe is not on track to reach its climate targets. It is at a juncture where political resistance to decarbonisation is mounting and where budgetary means to buy off consent are becoming scarce, at both EU level (because the main source of financing is drying up) and national level (because the fiscal rules leave little room for green investment).
In this Policy Brief, we assess the investment needed to achieve the 2030 climate goal and climate neutrality by 2050, and discuss why current estimates might be either over- or underestimated. Second, we discuss the roles of the private and public sectors in making these investments happen. Third, we analyse the obstacles to reaching the desired investment levels during 2025-2030, especially for the public sector.
Finally we propose measures to overcome or circumvent these obstacles. The business strand consists of innovations destined to ensuring credibility and the full mobilisation of savings. The public strand aims to maximise the firepower of limited fiscal resources.
About the authors:
Jean Pisani-Ferry is a Senior Fellow at Bruegel, the European think tank, and a Non-Resident Senior Fellow at the Peterson Institute (Washington DC). He is also a professor of economics with Sciences Po (Paris).
Simone Tagliapietra is a Senior fellow at Bruegel. He is also a Part-time professor at the Florence School of Transnational Governance (STG) of the European University Institute and an Adjunct professor at the School of Advanced International Studies (SAIS) Europe of The Johns Hopkins University.