If Europe wants to achieve its desired energy autonomy and the goal of reducing its greenhouse gas emissions by 55 percent by 2030, the continent needs a competitive climatetech industry. Significant investments in the sector are essential. A recent study from UnternehmerTUM, UVC PartnersHowever, according to Allianz Economic Research and Allianz X, the current investment landscape is inadequate. The EU needs to invest around €1.5 trillion annually in climate technology between 2021 and 2030. Based on actual investments in recent years, this represents an investment gap of €700 billion per year. According to the study, €560 billion of this would need to come from the private sector and €140 billion from the public sector.
European plans for climate tech are just taking shape
A look at the energy sector illustrates the situation. Annual investments in clean energy in the EU currently amount to around €400 billion, leaving a public investment gap of around €40 billion per year, according to the studyA further €160 billion will also be needed from the private sector. In terms of public funding, in addition to the EU budget, which provides over €578 billion for the green transformation, national initiatives are also emerging. These include Germany's €212 billion Climate and Transformation Fund. France, for its part, is planning an annual €500 million tax credit to promote wind and solar energy, heat pumps, and batteries. The Benelux and Nordic countries are also implementing ambitious climate-related industrial policies.
However, European countries are already falling behind the US and China. This is demonstrated not least by the decision of the Munich-based nuclear fusion startup Marvel Fusionto build its laser fusion factory in the USA. Lucio Milanese, co-founder of Proxima Fusion, another Munich-based nuclear fusion startup, explains in the study:
“If the EU does not offer the same level of support as the US and China, the fusion energy industry and other sectors such as battery development and production in the EU are unlikely to develop well and are unlikely to survive.”
Innovation is crucial for climate goals
The study also emphasizes the important role that innovation plays in achieving climate goals. Further development of existing technologies is expected to achieve only about 25 percent of the required CO2 emission reductions. The remaining approximately 75 percent of emission reductions must come from new technologies. To achieve this, an average of $3.3 trillion in annual investments in innovative technologies will be needed between 2020 and 2040.
Venture capital (VC) and private equity (PE) are supporting this development with their investments in climatetech and cleantech companies. And these investments are increasing significantly, according to the study. While they stood at €40.8 billion ($43.3 billion) globally in 2019, they rose to €91.8 billion ($97.3 billion) by 2022. European companies secured 30 percent of these funds in 2022.
However, the study warns that adjustments must be made at the political level. Streamlined financing, the establishment of a common EU platform for access to finance, support for long-term financing through blended financing, and the awarding of public procurement contracts for climatetech solutions are intended to improve the situation for climatetech and cleantech companies in Europe. Arthur Singer, co-founder of the Munich-based climate tech startup Stable, which is presented as a case study in the report, says:
"If companies want to go public, they will. Unfavorable market conditions in Europe will lead to IPOs abroad."
