The heads of the European Investment Bank (EIB), the European Central Bank (ECB) and the International Energy Agency (IEA) are calling on leaders from government, finance and industry across Europe to deliver a clean energy transition which is just, swift and maintains competitiveness.
According to them, in the face of severe disruption in global energy markets, Europe must scale up funding to support an orderly transition and position itself among other industrial heavyweights in the new energy economy. In the IEA’s pathway for the global energy sector to reach net zero emissions by 2050, annual clean energy investment in the European Union needs to rise significantly by 2030.
“Europe’s quick response to the global energy crisis meant that it managed to pivot away from its main energy supplier, Russia, more smoothly than many could have imagined,” IEA Executive Director Fatih Birol said. “But now the region must learn to grow and thrive in this new reality. Last winter, I stressed that Europe needed a new industrial masterplan to keep pace with other advanced economies. Despite its large internal market, skilled workforce and world-beating research and development, we’re yet to see how Europe will put its ambitions into practice. Policymakers must take bold action, and soon, for the region to remain a global industrial power.”
“The green transition is a uniquely difficult policy challenge because the stakes of failure are so high and yet the path to success is so complex,” added European Central Bank President Christine Lagarde. “But the answer is to follow through with the transition, which means understanding the challenges it entails and ensuring the costs are shared fairly. More needs to be done to foster the market for green finance, which would reduce risk premia and help lower financing costs.”
“The energy transition is an opportunity for Europe and the world,” said European Investment Bank President Werner Hoyer. “It also brings a challenge, as our industries must be prompt and embrace change, or risk being left behind. Only massive and swift investment in net zero technologies will make sure that Europe remains an attractive place to do business, a place where innovation thrives, where new ideas flourish and wealth and jobs are created.”
The ECB’s second economy wide climate stress test finds that frontloading clean energy investment significantly reduces medium-term costs and risks for firms and households. But besides geopolitical tension and high inflation, private sector investment faces a number of market barriers including policy uncertainty and lengthy permitting procedures that delay projects, deter investors and lead to cost overruns for developers.
European industry also finds itself at a competitive disadvantage regarding the price of energy. Compared with other regions, these prices are relatively high and ambitious industrial programmes are being introduced in countries such as the United States, China, India, Japan and Korea to build up domestic supply chains, resource security and manufacturing capacity. Accelerating energy transition investment will help Europe limit dependence on major fossil-fuel producers and often volatile fuel markets.