Since 2019, the European Green Deal has set out ambitious climate policies and targets at EU level, backed by groundbreaking regulations. But when it comes to implementation, the green transition is surprisingly underfunded. The European Commission estimates that an additional €620 billion in investments will be needed annually for the decade 2020-2030 to meet the EU’s climate commitments.
This means that the green transition is also an investment challenge: the environmental, social and economic costs associated with climate change far exceed the costs of implementing the transition. The costs of inaction could reduce the EU’s GDP by 7% by 2100, and economic losses from coastal flooding alone could exceed €1 trillion per year, according to the European Environment Agency. This will require the dedication of significant public and private resources in the coming years.
This challenge is further complicated by the global competition for cleantech 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 decarbonize industry across Europe. However, the financial resources allocated to our industrial transformation are insufficient compared to the US Uncapped Inflation Reduction Act and the associated $1.2 trillion subsidy package that could impact the economy by 2031. After the launch of the IRA, in 2023 alone, US investments in cleantech reached $225 billion. By comparison, the recent reduction in additional funding for cleantech under the EU’s proposed STEP platform highlights the need for immediate and effective action. Otherwise, Europe will not only miss its climate goals, but also risk falling behind in the international race.
Europe is at a crossroads. 2026 marks a critical juncture for EU public spending, with the end of the Recovery and Resilience Facility leaving a significant investment gap. Given the uneven capacity of Member States to finance the transition, relying solely on the EU budget will be insufficient to meet sustainable investment needs.
Private investment will contribute greatly to the transition, but public finance is essential to steer the economy and attract private capital. A coordinated, long-term European response is essential to address these challenges and level the playing field across the EU.
A broadly supported environmental transformation can only be achieved with corresponding social changes to ensure economic and social equity across the EU. This includes boosting regional development, strengthening reskilling and upskilling efforts, and fostering a just and equitable transition towards a more sustainable future.
That is why T&E is proposing a €1 trillion climate and social investment plan to close the sustainable investment gap and propel the EU towards its green transition goals.
