Despite these extraordinary times, there are some positive news. China, US, Europe, Japan, Korea, India and many others are making record-breaking investments in renewable energy and other sustainable solutions.

In the current energy crisis and growing geopolitical uncertainty, countries want to increase their energy independence. Local renewable energy is the fastest way to build energy security. Clean technologies and other sustainable solutions in industry, buildings and transport save energy and materials. Circular solutions enable energy and material reuse.

Domestic clean technologies and diversified supply chains are clearly becoming strategic industry policies.

The Race for Clean Energy Investment: China, EU, and US Strategies

Last year, China invested EUR 360 billion in clean energy technologies. The country is leading in solar panels, wind turbines, batteries, electric vehicles, hydrogen and many critical raw materials needed for many clean technologies.

The EU invested EUR 245 billion, and the US EUR 200 billion. (IEA 2022) The US Inflation Reduction Act will channel EUR 360 billion more, mobilising thousands of billions to decarbonise the world’s biggest economy.

The package includes many subsidies and tax incentives for US based companies for the next ten years. This brings a risk that European companies will relocate to US to benefit from the support measures.

International Energy Agency (IEA) estimates that the global market for key mass clean energy tech is worth around EUR 600 billion by 2030.

This is why the European Commission proposed its Green Deal Industrial Plan just couple of weeks ago.

The EU wants to scale up the EU’s manufacturing capacity for the net zero technologies. Those include wind and solar power, electrolysers (needed to produce renewable hydrogen), heat pumps, energy storage, electric vehicles as well as critical raw materials extraction, processing and recycling.

The main pillars of the plan is to speed up permits (one stop shop), secure funding and relax state aid rules (until 2025), ensure needed skills, and build open trade for supply chains.

International Energy Agency (IEA) estimates that the global market for key mass clean energy tech is worth around EUR 600 billion by 2030.

The key areas to develop

Net zero technologies are needed as the world is heading towards net zero emissions, a balance between emission and removals (also known as climate neutrality).

To reach net zero we need to reduce emissions as much as possible and balance the residual emissions by carbon sinks (forests, oceans and vegetation) and use technologies that capture and store carbon from the atmosphere at scale. Technologically captured carbon can be stored or used to make synthetic fuels or plastics to replace fossil raw materials.

The key areas to develop are: the generation and storage of clean electricity, the development of green hydrogen production and market, the decarbonisation of industries, transport and buildings with energy efficiency, electrification, alternative fuels (hydrogen, sustainable biofuels, e-fuels) and carbon capture and storage in industrial processes.

Net zero technologies are needed as the world is heading towards net zero emissions.

The green transition requires substantial investments. It is estimated that in the EU EUR 5 trillion is needed between now and 2030 and EUR 12 trillion (excluding transport) between 2030 and 2050. Globally up to 2050 EUR 100 trillion is needed.

The EU has used nearly EUR 100 billion per year to import Russian fossil energy. Rolling out renewables and other net zero technologies will cut dependency on imported energy, save money and reduce emissions and improve air quality

The green transition

IEA recently reported that renewable power will pass coal as the dominant energy source by 2025 and the world will add twice as much renewable capacity in the next five years as in the previous five years. In Europe, renewable power has already passed fossil energy and the share is expected to be 70% by the end of the decade.

In all energy consumption, the EU aims to increase the share of renewables to 45%. The current share is 22%. More solar power, wind power and biomethane is needed. There is also a need to ramp up green hydrogen and energy storage and improve energy efficiency.

We need to accelerate climate action.

According to IEA, the new investments accelerate the green transition and help keep the 1.5 degree alive. Climate science says we must hold the global temperature rise to 1.5 degree C from the pre-industrial times to avoid the most dangerous effects of climate change.

Governments around the world have committed to implement policies to achieve net zero emissions in average by the mid-century. If all these pledges are fully implemented, the warming can be limited to 1.8 degree (The Carbon Tracker). This is close to 1.5, but not enough. We need to accelerate climate action.

The European Green Deal

The EU continues to push for stronger climate and environment policies with its flagship climate and environmental agenda, the European Green Deal. It is a combination of revised and new legislation, policy initiatives, financial instruments and strategies to zero out European greenhouse gas emissions by mid-century.

The European Climate Law in force since July 2021, writes into law the EU’s targets to become climate neutral by 2050 and to reduce emissions by at least 55% by 2030 compared to 1990, the commitment the EU and its Member States made under the Paris Agreement.

More money than ever is being pumped into climate projects. In the outset of the Covid-19 pandemic, it was decided that the Green Deal should guide the recovery efforts, and money to stimulate European economies should support the Green Deal.

More money than ever is being pumped into climate projects.

Through the EU’s economic stimulus package the Next Generation EU around EUR 750 billion is going to Member States. 40% of this funding has been allocated to roll out renewables and other green technologies in industries, transport, buildings and agriculture, in other words providing an enormous new resource helping Member States to reach their climate targets.

REPowerEU Plan, which the Commission proposed in response to the energy market disruption caused by Russia’s invasion of Ukraine will bring EUR 210 billions of additional investments in energy efficiency, energy infrastructure and renewable energy. At least 30% of the EU budget for 2021-2027 and of Next Generation EU is allocated to climate action (up from 20% in 2014-2020).

In 2021, the Commission proposed a package of climate and energy legislation to ensure that the EU policy framework is fit to achieve the EU’s new climate target for 2030 and keep the union on path towards climate neutrality by mid-century. The proposals are being negotiated by the European Parliament and the Council. In my next article, I will describe this package in more detail.

Author

Susanna Perko is an experienced policy officer, sustainability business consultant and analyst with a firm understanding of European climate and environmental policies and measures, net zero pathways and decarbonisation technologies. Currently she works as Policy Officer in DG Climate Action (CLIMA) European Commission on several key European climate and energy files.

She is a published author in the field of sustainability. She recently wrote a book Ilmastouudistajat. Kohti puhtaampaa maailmaa ja parempaa bisnestä (Climate reformers. Towards A Cleaner World and Better Business), together with Aija Bärlund (Alma Talent 2022).

The article is based on Susanna Perko’s material presented at the Boardman Morning Studio 9.2.2023. “Boardman Morning Studio” is a concept implemented by ”Responsibility on the Agenda of the Board and Management” -development group. It organises webinars which discuss how responsibility can be made as a differentiating factor and competitive advantage for companies and public entities. All events are free, but registration is required.