Financing the transition to clean energy in Europe

Clean energy is energy produced and consumed generating a minimum of greenhouse gas emissions or other pollution. The level of emissions associated with energy use can meanwhile also be lowered by means of energy efficiency measures reducing demand for energy.

To meet the targets of the Paris Agreement (to keep the global temperature rise to well below 2°C above pre-industrial levels, aiming at 1.5°C), greenhouse gas emissions must be near zero in the second half of this century. For the energy sector, this means that fossil fuels must be phased out and replaced by low-carbon energy sources. This calls for an unprecedented transition in energy production and consumption, requiring trillions of euros in investment.

Financing such a large-scale transition is primarily a task for the private sector, but governments and the EU also have a critical role to play in creating a supportive policy framework. This includes markets for energy and carbon, taxation, regulation, incen¬tives, finance for key infrastructure, and innovation, coordination and information. In the framework of the energy union, the European Commission has proposed a package of legislation and policies to support the transition towards clean energy. The EU has also dedicated 20 % of its budget to climate action, including clean energy.

The European Parliament is championing an ambitious climate and energy policy; it regards the carbon and electricity markets as key drivers and favours strong targets for energy efficiency and renewable energy sources.

Author: Gregor Erbach