Europe is in danger of falling behind the US and China in the field of climate-related technology, a report from Allianz has warned.
According to Climate tech – the missing piece in the net-zero puzzle, public investment will not be enough to meet a growing gap, with “significant private investment” necessary alongside a common EU platform and public-private partnerships. Although the market is predicted to grow to €600bn by the end of the decade, Allianz suggested Europe was likely to lose the race against the US and China.
“The mismatch between reality and expectations is alarming,” the report’s authors wrote. “To reach its own climate targets, Europe needs to increase its annual investments in climate-tech to the tune of €140bn in the public sector and €560bn in the private sector, compared to the last decade. The current investment gap in the European energy sector alone is as high as €200bn per year, with €40bn and €160bn of missing public and private funding, respectively.”
They added: “Investments in climate-tech start-ups by venture capital and private equity have boomed in the last few years, reaching almost $100bn (€93bn) in 2022 worldwide; Europe accounts for around 30% of this. However, funding of sub-sectors is rather uneven: the sectors with the highest emissions (particularly manufacturing, the agrifood sector and the building sector) – and therefore the greatest potential to decarbonise – do not receive the most funding (which goes into the energy and transport sectors).”
The firm outlined a number of issues within the funding gap. It quoted International Energy Agency (IEA) figures that predict annual global clean energy investment should reach $4.5tn in order for the planet to reach net zero. It said the IEA estimates clean-energy investments will rise to $2.2trn in 2030 even under currently stated policies and to $3.3trn under additionally announced policies. As such, Allianz concludes that the global investment gap would be between $1.2trn and $2.3trn in 2030.
The report’s authors added: “At the European level, the situation is not much better. The European Commission estimates that between 2021 and 2030 annual investments of €1.5trn are needed to transform the EU energy system and transport sector in line with the ‘Fit-for-55’ and REPowerEU’ commitments of the EU Green Deal. This is roughly €700bn more than what was spent annually in the EU over the last decade (2011/20 period). Assuming a share of public investments of around 20%, additional public investments would amount to €140bn; the remaining €560bn would have to come from the private sector.”