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.

Thomas

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 <a href="https://institutdelors.eu/en/publications/an-ambitious-recovery-budget-tough-negotiations-ahead-2/">once-in-a-lifetime €807 billion COVID-19 recovery programme</a>.
Ministers will see if these plans are delivering a <a href="https://institutdelors.eu/publications/greener-after/">green economic recovery</a> 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, <a href="https://institutdelors.eu/wp-content/uploads/2021/02/PB_210223_CleanEnergyInnovation_Pellerin-Carlin_EN.pdf">when it comes to climate-related research and innovation funding, Europe continues to hedge its bets</a>. 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 <a href="https://www.climatestrategy.com/en/informe_15.php">the EU’s world-leading green taxonomy on sustainable finance</a> – 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 <a href="https://twitter.com/AlexisDutertre/status/1439970993334784003">fossil gas and nuclear interests are attacking the taxonomy</a>, 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&amp;D ecosystem.
Extraordinarily, <a href="https://institutdelors.eu/wp-content/uploads/2021/02/PB_210223_CleanEnergyInnovation_Pellerin-Carlin_EN.pdf">between 2010 and 2018</a> EU-27 public investment in clean energy R&amp;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 <a href="https://www.cleantechforeurope.com/quarterly">Cleantech for Europe, in the second quarter of this year, some of the most promising and innovative cleantech start-ups in Europe raised</a> €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:
<ul><li>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&amp;I. Right now, <a href="https://sciencebusiness.net/news/waltz-goes-meps-limber-fight-over-2022-horizon-europe-spending">the Council wants to take a hatchet to the Horizon Europe budget, slashing it by more than €300 million</a>, 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&amp;I is self-defeating.</li></ul>
<ul><li>Review how EU Member States plan to support climate-related R&amp;I in their green recoveries. <a href="https://institutdelors.eu/wp-content/uploads/2021/07/Analytical_Note_Green_Innovation_in_National_RRPs.pdf">New Jacques Delors Institute research shows</a> 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.</li></ul>
<ul><li>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.</li></ul>
<ul><li>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.</li></ul>
<ul><li><a href="https://institutdelors.eu/en/publications/make-regulation-fit-for-innovation/">EU regulation must support the creation and deployment of clean energy innovation</a>. 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.</li></ul>
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.
This article was co-authored by Peter Sweatman, CEO of <a href="https://www.climatestrategy.com/en/">Climate Strategy &amp; Partners</a>, and Thomas Pellerin-Carlin, director of the <a href="https://institutdelors.eu/en/tag/jdec-en/">Jacques Delors Energy Centre</a>.
This article also appeared on <a href="https://www.euractiv.com/section/energy-environment/opinion/europe-must-seize-its-chance-to-lead-the-world-in-cleantech/">Euractiv</a>. Energy Voices is a democratic space presenting the thoughts and opinions of leading Energy &amp; Sustainability writers, their opinions do not necessarily represent those of illuminem.

Europe must seize its chance to lead the world in cleantech

When a company like Royal Dutch Shell loses a landmark legal case ordering it to reduce emissions in line with the Paris Agreement, and when climate campaigners are elected onto Exxon’s board – both of which happened last week – there is a sense that with fossil fuels, the tide is turning.

When a company like <a href="https://www.ft.com/content/1ef8739c-585b-4b25-8177-fe821c8b7375">Royal Dutch Shell loses a landmark legal case</a> ordering it to reduce emissions in line with the Paris Agreement, and when climate campaigners are <a href="https://www.theguardian.com/business/nils-pratley-on-finance/2021/may/27/how-did-a-green-newbie-hedge-fund-out-play-exxon-so-comprehensively">elected onto Exxon’s board</a> – both of which happened last week – there is a sense that with fossil fuels, the tide is turning.
While ordering fossil fuel companies to clean up their act is necessary to address climate change, that on its own is insufficient to accelerate clean alternatives like solar, wind, renewable hydrogen and building energy efficiency.
Silence is also a poor option. This was illustrated by <a href="https://www.consilium.europa.eu/media/49791/2425-05-21-euco-conclusions-en.pdf">the conclusions of the European Council on climate change</a>, which with their absence of substance rang hollow and were another missed opportunity. With the usually conservative International Energy Agency (IEA) publishing a new <a href="https://iea.blob.core.windows.net/assets/ad0d4830-bd7e-47b6-838c-40d115733c13/NetZeroby2050-ARoadmapfortheGlobalEnergySector.pdf">Net Zero by 2050 Roadmap</a> that explicitly calls on Governments to accelerate clean energy innovation, this gap is all the more evident.
The IEA said governments must invest $90 billion to build a global portfolio of clean tech demonstration projects. Today, the IEA can only identify $25 billion budgeted. Without such innovation investments the 9 million clean energy jobs IEA sees post-2020 could be short-lived.
With so much at stake in such a compressed time frame, 14 organisations recently wrote an urgent <a href="https://www.climatestrategy.es/press/Fit4ClimateInnovation.pdf">letter</a> to the European Commission Executive Vice-Presidents presenting 30 policy actions to help sharpen the focus on climate-related innovation in the European Union’s Fit for 55 legislative proposals, which are due in July.
The policy actions spelled out in the letter can help compress to the innovation cycle for technologies and industries including carbon capture from cement production, electrolytic hydrogen-based ammonia, low‐emissions ammonia‐fuelled ships, hydrogen‐based steel production, direct air capture of CO2, plant-based proteins, solid state batteries and refrigerant‐free cooling. The goal is to have the innovation cycle for these technologies churn 20-40% faster than what occurred with solar panels.
One recurring theme among these proposals is the <a href="https://institutdelors.eu/en/publications/make-regulation-fit-for-innovation/">vital role of EU regulation to support the creation and deployment of clean energy innovation</a>. In areas like buildings where clean energy solutions can already be deployed at scale, the Fit for 55 regulations should provide scale through measures like minimum energy performance requirements. In other areas, EU regulations should create adopt stringent regulation that provides time, flexibility and regulatory sandboxes that allow clean economy innovators to test in this decade the solutions that we need to deploy at scale in the next decade.
Fossil fuel subsidies also need to be phased out. These include several subsidies in the Common Agricultural Policy, which do not consider the latest science on net greenhouse gas sinks, and <a href="https://www.e3g.org/publications/the-eu-ets-from-cornerstone-to-catalyst/">free emissions allowances that disincentivise clean energy innovation</a>. Such phase-outs should be combined with investments by channelling the any revenue generated or money saved into the Innovation Fund and to fund EU-level Carbon Contracts for Difference. These will support the first generation of commercial climate-neutral industrial production and demonstration sites, as called for by the IEA.
The market potential for the leaders in clean technology-led, net-zero goods and services is expected to be at least €800 billion annually from 2030-50, <a href="https://www.capgemini.com/resources/investments-in-next-generation-clean-technologies/">according to CapGemini Invent</a>.
European firms like the automaker Scania know this. That’s why they are already leading the way. Alongside venture capital firms, Scania has invested in <a href="https://renewableh2.eu/stories/solving-the-green-steel-puzzle/">H2 Green Steel</a>, which plans to build the world’s largest green steel plant near a major Swedish port with abundant, local renewable energy supplies. This $2.5 billion project will be powered by a hydrogen electrolyser 40-50 times bigger than any other on the market, and by 2030 the plant expects to produce 5 million tons of green steel annually.
Despite such projects, just 7% of global cleantech growth equity funding goes to EU companies today. There is a clear role for green recovery funds and the European Investment Bank to stimulate and support the creation of more cleantech growth equity funds. In addition, a legal framework for investors to create cross-border venture capital funds and increasing alternative asset class limits for EU pension funds would help address this gap and support promising companies scale-up in multiple EU locations.
Being fit for 1.5 degrees means more than just a 55% emissions reduction for Europe by 2030. In all cases, it requires an “all of the above” approach to innovation as well. Technology, product, business model and societal innovation are all required to deliver the EU Green Deal. That’s why this July, the European Commission’s must ensure that its Fit for 55 package is as strong and ambitious as we need it to be to avoid a climate disaster. This article first appeared on EURACTIV, co-authored with Peter Sweatman, Chief Executive at Climate Strategy &amp; Partners. Energy Voices is a democratic space presenting the thoughts and opinions of leading Energy &amp; Sustainability writers, their opinions do not necessarily represent those of illuminem.​

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Thomas Pellerin-Carlin

Thomas Pellerin-Carlin

Europe must seize its chance to lead the world in cleantech

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