Europe needs to redirect €39 billion ($43 billion) in public funds annually from fossil fuel subsidies and traditional infrastructure projects to green transport technologies to remain competitive, according to a new report by Transport & Environment (T&E). The report emphasises that shifting public spending from roads and airports to green infrastructure, such as EV charging and energy grids, is critical to decarbonising Europe’s transport sector and bolstering green technology manufacturing within the continent.
The report indicates that with public funding directed toward green initiatives like EV social leasing, green fuels, and battery manufacturing, Europe could unlock seven times that amount, €271 billion ($295 billion) annually, in private investments by 2030. The combined public and private spending on green transport could total €507 billion ($552 billion) annually by 2040. While 87% of these funds are expected to come from private investors, T&E emphasises the importance of public financing to support capital-intensive sectors, including grid expansion and clean fuel production.
T&E specifically advocates for the creation of a €25 billion ($27 billion) EU battery fund to support battery manufacturing in Europe, which is under competitive pressure from China. This fund would assist in scaling local production, sourcing key materials, and reducing investment risks in essential battery components.
Additionally, the report highlights the need for €86 billion ($93 billion) by 2030 to develop e-fuels for aviation and shipping. To attract private investment in this emerging sector, T&E suggests that governments cover a third of the required funding through guarantees and loans.
A significant portion of public funds is also necessary to modernise energy grids. T&E calls for doubling the EU’s grid investment to €67 billion ($73 billion) annually through 2050, a cost that could be covered by reallocating half of the €61 billion ($66 billion) currently spent on road construction.
Xavier Sol, sustainable finance director at T&E said, “Greening Europe’s most polluting sector will need significant investment. Failing to do so will not only cost Europe its net zero goal, but also the competitiveness of its leading industries like carmaking, battery production, ship and plane building. Public funds are needed to kickstart nascent industries and bring the continent’s grid and charging infrastructure up-to-speed. Luckily, fresh taxpayer money isn’t always necessary. Governments can free up funds by re-prioritising support towards clean technologies and ending support for costly road expansion.”
As the EU Transport Commissioner hearings commence today, T&E stresses the importance of a comprehensive Sustainable Transport Investment Plan to prioritise green transport funding and phase out road expansion and fossil fuel subsidies.
