The European Union risks a significant funding gap in its efforts to meet climate goals later this decade, according to a study published by the European Central Bank (ECB) on Wednesday.
While the EU aims to achieve climate neutrality by 2050, reaching this target requires substantial investment, largely from private firms but also supported by public funding through incentives such as direct subsidies and tax breaks.
The study highlights that current green investment levels are insufficient to meet the EU’s 2030 climate targets, which could lead to higher costs and more urgent spending in the future. Although public funding for 2024 and 2025 is secured, a shortfall could emerge starting in 2027. This gap may be worsened as governments begin repaying funds borrowed through the bloc’s Next Generation EU (NGEU) post-COVID recovery package.
“To effectively achieve the green transition, Europe faces the challenge of mobilising substantial additional investments, estimated as ranging from 2.9% to 4.0% of EU GDP each year until 2030,” the study said. “A noticeable shortfall of EU public funds may materialise after the Recovery and Resilience Facility expires at the end of 2026, increasing to around €54 billion ($55.6 billion) annually by 2030.” It also noted that these findings do not necessarily reflect the ECB’s official stance.
The ECB estimates that the public sector’s share of additional climate-related investments will need to total €83 billion ($85.4 billion) annually through 2030. However, national governments may struggle to fill the gap, as they face repayments of €175 billion in NGEU funds between 2028 and 2035.
The potential funding shortfall underscores the challenge of balancing long-term climate ambitions with fiscal responsibilities, raising concerns about the EU’s ability to meet its environmental commitments.
