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EU warned it needs to step up investment in clean tech

A worker at the Intuis heat pump manufacturing plant in northern France. The European Climate Neutrality Observatory says more EU investment is  needed to boost the development of clean energy technologies such as heat pumps and batteries (Photo: Denis Charlet/AFP via Getty Images)
A worker at the Intuis heat pump manufacturing plant in northern France. The European Climate Neutrality Observatory says more EU investment is needed to boost the development of clean energy technologies such as heat pumps and batteries (Photo: Denis Charlet/AFP via Getty Images)

The EU must increase investment in the technologies needed for the net zero transition – or risk missing its climate targets and being left behind by other parts of the world, says the European Climate Neutrality Observatory

European public financing through the EU Innovation Fund and the European Investment Bank is vital to speed up the development of clean energy technologies such as batteries, heat pumps and low-carbon steel, says a briefing by the European Climate Neutrality Observatory, an independent initiative monitoring the EU’s progress towards climate neutrality.

The report argues that while private investment in clean tech – and particularly in more mature technologies – is at record levels in Europe, even more investment is needed to reach net zero ambitions.

Clean tech investment in the EU increased at an average of 101 per cent annually between 2017 and 2022, shows data in the report. The private sector invested €7.5bn more in the sector in 2021 compared to 2020, says ECNO, with investment reaching a total of €12.3bn, before dropping slightly to €10.6bn in 2022. Globally, the clean tech market is forecast to be worth $650bn by 2030.

Furthermore, says ECNO, the EU may boast “world-leading research infrastructure” but “more action is required to transform research into patents, and then into innovative start-ups” .

Public financing can “supercharge EU clean tech ambition” by filling funding these gaps and “derisking investments to crowd in more private capital” and get projects up and running, according to the analysis.

Risk of a two-speed Europe

Another concern is the wealth disparity between different EU countries, which ECNO suggests could create a two-speed Europe as far as the energy transition is concerned.

“Some member states are already stepping in to fill the [financing] gap. Take, for example, Germany’s climate tax credit of €7bn, or France’s announcement of a €2bn green industrial tax credit,” says the report. “However, many member states with greater fiscal constraints are not able to match this support.”

ECNO believes the EU Innovation Fund and the “EIB mechanisms such as venture debt” are well placed to offer the necessary help.

It has published the report to highlight the need for greater clean tech financing ahead of the planned vote on the EU Net-Zero Industry Act in the European parliament on November 20.

The NZIA should set ambitious targets for increasing Europe’s clean tech manufacturing capacity, but for the moment, the Strategic Technologies for Europe Platform – proposed by the European Commission to boost investments in the clean tech sector – would provide only €10bn of public funds invested across clean tech, deeptech and biotech.

By comparison, the US 2022 Inflation Reduction Act, has unlocked a potential $1.2tn in climate investments.

Lack of skilled workers

A skills gap is also threatening the net zero ambitions of both the EU and the world in general. A growing number of energy industries are citing the shortage of skilled labour as a key barrier to ramping up activity, according to an International Energy Agency survey of 160 energy firms globally, published as part of its World Energy Employment 2023 report.

The report found the number of workers pursuing degrees or certifications relevant to energy sector jobs is not keeping pace with growing demand. This is especially the case for vocational workers such as electricians specialised in energy sector work, and professionals in science, technology and engineering, says the IEA.

“Governments, industry and educational institutions need to put in place programmes to deliver the expertise needed in the energy sector to keep pace with growing demand, particularly to manufacture and build the clean energy projects necessary to meet our energy and climate goals,” IEA executive director Fatih Birol said in a statement.

In order to address the skills shortage in the EU, the European Commission this week presented a skills package, which includes an EU talent pool aimed at matching employers in the EU with jobseekers from outside the bloc.

In a statement, the commission said that without “concerted action”, the green transition could be undermined by the shortage of skilled workers across the EU.

The full European Climate Neutrality Observatory report can be read here.

The IEA World Energy Employment 2023 report can be found here.

A service from the Financial Times