European leaders and industry stakeholders gathered at the International Energy Agency’s (IEA) headquarters in Paris for a high-level conference aimed at emphasizing the critical role of an expedited clean energy transition in securing Europe’s industrial competitiveness and financial stability. The heads of three influential organizations, the European Investment Bank (EIB), the European Central Bank (ECB), and the International Energy Agency (IEA), jointly called on government officials, financial institutions, stakeholders, and business leaders from across Europe to champion a clean energy transition that is not only rapid but also maintains the region’s competitive edge.
In their opening remarks at the conference, ECB President Christine Lagarde, EIB President Werner Hoyer, and IEA Executive Director Fatih Birol issued a compelling call to action, urging stakeholders to accelerate the clean energy transition.
As global energy markets face unprecedented disruptions, Europe finds itself at a pivotal moment, needing to increase investments to ensure a smooth transition and position itself among the leading players in the emerging energy economy. According to the IEA’s roadmap to achieving global net-zero emissions by 2050, annual clean energy investments in the European Union must see substantial growth by 2030.
The ECB’s recent second economy-wide climate stress test revealed that frontloading clean energy investments can significantly reduce medium-term costs and risks for both businesses and households. However, private sector investments are impeded by various market barriers, including policy uncertainties and lengthy permitting procedures that delay projects and discourage investors, leading to cost overruns.
Furthermore, European industries face a competitive disadvantage regarding energy prices compared to other regions. Countries such as the United States, China, India, Japan, and Korea are implementing ambitious industrial programs to bolster domestic supply chains, resource security, and manufacturing capacity. Accelerating investment in the energy transition will enable Europe to reduce its dependence on major fossil fuel producers and mitigate the volatility of fuel markets.
The European Union has committed to allocating at least 30% of its 2021-2027 budget to climate action, with development finance institutions like the EIB playing a crucial role in supporting clean energy projects and attracting private sector engagement. For every euro invested by the EIB in its energy operations, it draws an additional EUR 1.4 from the private sector. The EIB has recently increased its financing for clean energy projects to record levels, announcing an additional EUR 45 billion on top of its regular lending volumes to support renewables and manufacturing in strategic net-zero industries.
The conference explored policies and financial instruments that can stimulate additional investment in the clean energy transition. Given the substantial investments required, facilitating access to funding is imperative. This includes efforts to establish a green capital market union (CMU) that would facilitate the seamless flow of funds earmarked for the clean energy transition across borders. Such a union would also set robust standards for sustainable finance projects and help combat greenwashing practices. Price stability is crucial for the success of the clean energy transition, and the ECB has taken significant steps to incorporate climate change considerations into its monetary policy framework and financial stability monitoring.
IEA Executive Director Fatih Birol emphasized, “Europe’s quick response to the global energy crisis meant that it managed to pivot away from its main energy supplier, Russia, more smoothly than many could have imagined. But now the region must learn to grow and thrive in this new reality. Last winter, I stressed that Europe needed a new industrial masterplan to keep pace with other advanced economies. Despite its large internal market, skilled workforce, and world-beating research and development, we’re yet to see how Europe will put its ambitions into practice. Policymakers must take bold action, and soon, for the region to remain a global industrial power.”
European Central Bank President Christine Lagarde commented, “The green transition is a uniquely difficult policy challenge because the stakes of failure are so high, and yet the path to success is so complex. But the answer is to follow through with the transition, which means understanding the challenges it entails and ensuring the costs are shared fairly. More needs to be done to foster the market for green finance, which would reduce risk premia and help lower financing costs.”
European Investment Bank President Werner Hoyer underscored the transformative potential of the energy transition, stating, “The energy transition is an opportunity for Europe and the world. It also brings a challenge, as our industries must be prompt and embrace change, or risk being left behind. Only massive and swift investment in net zero technologies will make sure that Europe remains an attractive place to do business, a place where innovation thrives, where new ideas flourish, and wealth and jobs are created.”