Financing the European Green Deal

28/07/20

Green Deal Monitor

With the Green Deal, the European Commission unfolds a roadmap towards a circular economy without any harmful emissions by 2050. This aim requires huge investments in the coming years. The budget is partly financed by the European budget, but the Commission also heavily relies on private investments. How do we get these private investments off the ground and what are the factors to take into account? The new edition of PwC’s Green Deal Monitor focuses on financing the Green Deal and provides insights, data and inspiring practical examples.

Where does the money for the green transition come from?

In order to realise the ambitions of the Green Deal, the European Commission has made plans to mobilise at least a trillion euros for sustainable investments over the next ten years. This amount will be mobilised by "greening" the EU budget and through public-private partnerships. An amount of about 500 billion euros comes from the EU budget, while Member States contribute 114 billion euros to co-finance European projects. Co-financing means project expenditure that is not covered by the EU budget but is guaranteed by private or public sources from the national Member States. The rest of the funding should come from private investments, part of which are backed by guarantees from the European Investment Bank (EIB).

A trillion euros is not enough: More private investments are crucial

Yet, a trillion euros will not be able to cover the costs of the green transition. The European Commission estimates that 260 billion euros a year are needed for additional investments to achieve the climate targets set for 2030. This means that an additional 2.6 trillion euros are needed in the next ten years. This makes it clear that the private sector will play a major role here and that it will have to provide a large proportion of the necessary investments for the green transition. The big question is how we get those green investments off the ground. Is there a business case for private parties to invest in projects that support the Green Deal? What drives these investments? What are the hurdles? And what about the profitability of green investments?