EU President, Ursula von der Leyen, has pledged to stay on the course to deliver on the goals set by the European Green Deal with a focus on “implementation and investment to make it happen on the ground”.

She has announced a Clean Industrial Deal within the first 100 days of the new mandate to tackle the dual goal of boosting the EU’s competitiveness and decarbonising the industry sector.

But, as highlighted in Mario Draghi’s report on European competitiveness, the EU faces an unprecedented need to increase climate investment, both in terms of scale and speed, to meet its objectives. I4CE has estimated that €406bn of additional investment over current levels will be needed annually between 2024 and 2030 to reach EU’s 2030 climate objectives.

I4CE’s research on the current state of play of the EU’s Climate Investment Deficit tells a rather mixed picture.

The EU27 climate investments reached €407bnin 2022 (or 2.6 per cent of EU GDP), a 9 per cent growth compared to 2021, solar is going strong, wind and grids are starting to catch up, investment in wind power more than doubled in Europe in 2023 and solar power is already on track to reach its 2030 objective. Investment in power grids rose by more than 20 per cent in 2023.

After a slowdown in 2022, investment in wind power more than doubled in Europe in 2023. According to WindEurope, this resurgence in wind power investments can be attributed to the relative stabilisation of raw material costs, including steel and other commodities, after several years of inflation. In addition, the simplification of permitting conditions in the EU, and growing recognition by national governments of the necessity to index auction tariffs and prices have contributed to the restoration of investor confidence.

According to SolarPower Europe, 59GW was installed in 2023, twice as much as in 2021 to reach a total installed capacity of 263GW in 2023. Germany accounts for the lion’s share of these installations, having installed 14GW in 2023, twice as much as in 2022. The EU has the objective to reach a total solar power capacity of 592 GW in 2030, including 320 GW by 2025.

Yet this is not enough to meet the estimated €813bn needed every year between 2024 and 2030. In other words, European climate investment must double to hit 2030 EU climate target, and there is, in I4Ce’s words, a “crisis in the heat pump market”. EU investment in heat pumps has declined by 7.2 per cent in 2023 in comparison to the previous year.

According to the European Heat Pump Association (EHPA), the primary cause of this decline can be attributed to fluctuations in energy prices. Since 2023, gas prices have exhibited a downward trend after the crisis caused by the Russian invasion of Ukraine. This recent decline has resulted in a situation where they are once again below electricity prices, rendering the purchase of heat pumps a less compelling proposition for households and industries.

---