On the eve of the European elections, the period is taking stock of the Green Deal (Cf. the Zenon event on 26 April) .In this context, two French think tanks, I4CE and the Rousseau Institute, recently published analyses on European climate funding.They provide welcome insights as quantifying climate investments is a political compass that was not sufficiently available. In its January 2024 report, Towards European Climate Neutrality: Progress, Political Gaps and Opportunities, the European Scientific Council on Climate Change deplored the lack of available information on the investments required to finance the transition.
During the presentation of the European Climate Investment Gap report, Jean Pisani-Ferry, President of I4CE, highlighted an investment trajectory for the future of Europe, the European economic context that is substantially more tense than at the launch of the Green Deal, and the current trend of fiscal tightening, and the current trend of fiscal tightening, which make it all the more necessary to have objective methods to compare investment actions with decarbonization objectives.
Already, in May 2023, the Pisani-Ferry Mahfouz report on The economic impacts of climate action signalled the urgency of a major economic mobilization, with a “brutal” acceleration, similar to an industrial revolution but “faster”, and additional annual investment needs for France estimated at €34 billion, or 2% of GDP in 2030.
The I4CE study estimates the investments required based on the EU's goals for 2030, in terms of technology volumes (installed GW, etc.), and cost assumptions drawn from specialist literature. In 2022, public and private investments observed in the 22 technology sectors considered (renewable energies, networks, transport, buildings) reached 407 billion euros, or 9% more than in 2021. However, the study estimates that it would take 813 billion dollars, or double, each year to reach the 2030 goals. The investment gap is therefore estimated at 406 billion billion/year, with the sectors with the biggest deficits currently being wind power, electrical networks, thermal renovation of buildings, heat pumps, heat pumps, trains and private cars. The report concludes with the need to draw up a European green investment plan in the short term.
In January 2024, the Rousseau Institute published its Road to Net Zero report (180 pages against 40 for the I4CE report), which proposes a more detailed approach, the result of work involving 150 researchers from around ten partner European institutions. The study analyzes in detail 7 countries (France, Germany, Italy, Italy, Spain, France, Italy, Spain, Spain, Spain, Netherlands, Italy, Italy, Spain, Spain, Spain, Netherlands, Poland, Sweden) representing 77% of the GDP of the EU-27 GDP and 73% of domestic emissions, and extrapolates the estimates to the whole EU. For each of the 37 sectoral levers studied, the report constructs a scenario of transition to carbon neutrality in 2050 (inspired by others but original), assesses the investments required, and compares it to a Business as Usual (bAU), scenario of non-transition. The final estimate figures the total investment required at 1520 MDs/year by 2050, including 360 MDs/year of over-investment required compared to the BaU scenario, i.e. 2.3% of GDP, a figure similar to the estimate by I4CE or the Pisani-Ferry Mahfouz report for France.
For Guillaume Kerlero de Rosbo, coordinator of the report, their estimate of the total investment required is also very close to the figure of 1,500 MDs/year given by the European Commission (in its impact study of the objective of reducing emissions by 90% in 2040), however the methods differ significantly. The scope analyzed by the Commission is narrower, but the measures cost more. The main difference is due to the much stronger sobriety measures scripted by the Rousseau Institute. Thus, for transport, the Rousseau Institute is fully modeling the role of modal shift, with increased space taken up by train and bicycle. The Rousseau Institute report is also more comprehensive in that the I4CE study does not include industry, and that of the Commission does but does not include hydrogen and power to gas. In general, Guillaume points out, more sobriety in technological choices makes it easier to finance the transition.
The Rousseau Institute also quantifies the respective shares of 30% of public and 70% private investment, which indicates that a political strategy aims in particular to guide private investments through planning, incentives and regulations.
A common remark in all reports is that the costing concerns only CAPEX and not OPEX. However, as Guillaume Kerlero indicates, some people's OPEX are often the CAPEX of others. The main message common to all reports remains that transition is not only an absolute necessity but also a source of important benefits in terms of resilience and economic sovereignty; in particular, leaving fossil fuels would allow Europe to save 650 billion euros per year in imports, which are current costs, and not investments.
Image Credit: greenpeace.org