The European Union (EU) will need to increase its investment by €700 billion ($763 billion) per annum to transition to a green economy and reduce its dependence on Russian fossil fuels, according to a draft report from the European Commission. The report emphasized that the majority of the additional funds will need to come from private sources, due to the limitations of the EU’s budget. It highlights an increase in spending on clean technologies to ensure competitiveness against the US and China, and secure energy independence.
The cost of the EU’s green transition strategy, aiming for a 55% reduction in emissions this decade is rising, with the full implications of climate change and biodiversity loss yet unknown. The transition also contends with the financial impacts of the pandemic and inflation triggered by the energy crisis following Russia’s invasion of Ukraine.
Despite having already dedicated €578 billion from its multiannual budget towards climate-related actions for 2021-2027, the latest projection far exceeds the previous green transition cost estimate made by Commission President Ursula von der Leyen in 2021.
The commission’s annual Strategic Foresight Report also referenced the need for €92 billion to meet the objectives of the Net-Zero Industry Act between 2023 and 2030. This act was established to enhance Europe’s production of net-zero technology products in response to significant subsidies from the US and China, as part of a broader Green Deal Industrial Plan. It also indicated that EU venture capital investment lags behind the US, affecting the rate of innovation and capital market utilisation for the transition.