EU member states are insufficiently engaged in the regulations and funding that will promote clean technologies necessary to deliver on its climate ambitions. Now is the time to course correct, argue Peter Sweatman and Thomas Pellerin-Carlin.
Peter Sweatman is the CEO of Climate Strategy & Partners, a leading climate consultancy based in Madrid. Thomas Pellerin-Carlin is the director of the Jacques Delors Energy Centre at the Paris-based Think Tank Jacques Delors Institute.
Economy ministers from across the European Union gather tomorrow in Luxembourg. In a context of sharply rising energy prices, they will discuss the implementation of the recovery plans each Member State recently submitted as part of NextGenerationEU, the once-in-a-lifetime €807 billion COVID-19 recovery programme.
Ministers will see if these plans are delivering a green economic recovery on the ground and if they are indeed able to advance innovation for Europe to continue to lead in the global climate and energy transition.
Unfortunately, when it comes to climate-related research and innovation funding, Europe continues to hedge its bets. Too often, too much public money ends up in the hands of entrenched business interests and in environmentally harmful investments, and not nearly enough public funds go toward climate research and innovation.
Look no further than the EU’s world-leading green taxonomy on sustainable finance – whose “do no harm” teeth should inform all public investments. The classification system for green financial products is designed to phase out investments that harm the environment, and instead scale up green investments. But fossil gas and nuclear interests are attacking the taxonomy, and loopholes would undercut the kinds of investments we need to reduce our emissions at the pace and scale needed to deliver a net-zero target by 2050.
Now’s the time to ask: Are government allocation and procurement mechanisms in the EU and throughout its Member States truly “Fit for 55”? And are they supportive of the package of legislative proposals designed to slash carbon emissions in the bloc by 55 percent below 1990 levels by 2030?
Or will business as usual reign, with recovery funds failing to reach truly bold and innovative government programmes? Leaving out the small and medium-sized enterprises whose ingenuity is so crucial to any healthy R&D ecosystem.
Extraordinarily, between 2010 and 2018 EU-27 public investment in clean energy R&D has decreased, while US clean energy investments increased by more than 25 percent, and Chinese investments almost tripled. US President Biden and Chinese President Xi clearly understand the value of public investments in cutting-edge technologies.
How many of us lived through lockdowns thanks to Chinese hardware and American software? Europe must learn its lessons from the failure of its digital strategy two decades ago, and quickly improve its climate strategy today.
Fortunately, hopeful signs are emerging. According to Cleantech for Europe, in the second quarter of this year, some of the most promising and innovative cleantech start-ups in Europe raised €5.4bn, a record.
But much more needs to be done. To address shortfalls in the EU’s current Fit-for-55 package of legislative proposals, as well as gaps in its massive recovery and investment plan, we should build on the momentum generated by start-ups, the funders of innovation and back our European cleantech industry with more public support, too.
Here’s what needs to happen:
- Follow European Council President Charles Michel’s own call for adequate financial support for research, innovation and deployment by increasing the 2022 EU annual budget for climate R&I. Right now, the Council wants to take a hatchet to the Horizon Europe budget, slashing it by more than €300 million, including a €50 million cut from the European Innovation Council which is critical to helping fledgling cleantech companies get off the ground. Working against the EU’s own stated drive to fund R&I is self-defeating.
- Review how EU Member States plan to support climate-related R&I in their green recoveries. New Jacques Delors Institute research shows how Member States provided adequate funding for hydrogen in their recovery plans but failed to do the same for other and equally important clean technologies. Beyond recovery, Member States need to adopt multi-annual investments plans for clean technology to boost the research, development, demonstration and deployment needed to achieve climate neutrality by 2050.
- Ensure the EU Innovation Fund delivers the necessary climate-relevant demonstration projects. The International Energy Agency forecasts governments must invest $90 billion by 2030 to build a global portfolio of cleantech demonstration projects. If we assume the EU’s share of this is roughly a third ($30 billion), let’s ensure that the Innovation Fund receives sufficient EU ETS allowances to properly finance the lion’s share of cleantech demonstration projects that we need.
- Ensure the EU Taxonomy can identify and boost all of the technologies which enable the EU climate transition. These should include enabling technologies hidden in software, supply chains and new materials, which are just components of the green industrial sectors that are delivering a significant contribution to climate mitigation. And should exclude those doing significant harm to environmental objectives.
- EU regulation must support the creation and deployment of clean energy innovation. This should enable Europe to become the global leader in crucial clean technologies like carbon-negative cement, solid-state lithium-ion batteries and floating offshore wind power. It does not mean tiptoeing around regulations; it means adopting highly ambitious climate regulations that boldly set a clear direction, such as 100% renewable energy-powered new boilers by 2025, 100% zero-emissions vehicles by 2035, and economy-wide climate neutrality by 2050.
With a challenge as great and as urgent as climate change, we don’t have time for second chances. This is especially true when it comes to public funding and policy support for developing and commercialising next-generation clean technologies. We must get it right now and own our own future.