If Europe wants to achieve the targeted energy autonomy and reduce its greenhouse gas emissions by 55 percent by 2030, the continent needs a competitive climatetech industry. Significant investments in the sector are essential. According to a current study by UnternehmerTUM, UVC Partners, Allianz Economic Research, and Allianz X, the current investment landscape is insufficient. Between 2021 and 2030, the EU would need to invest around €1.5 trillion annually in climatetech. Measured against the actual investments of recent years, this represents an investment gap of €700 billion per year. According to the study, €560 billion of this should come from the private sector and €140 billion from the public sector.
European climatetech plans are beginning to take shape
A closer 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 study. An additional €160 billion is also needed from the private sector. As far as public funding is concerned, in addition to the EU budget, which allocates €578 billion for the green transformation, national initiatives are also emerging. These include the German Climate and Transformation Fund worth €212 billion. France, in turn, plans an annual tax credit of €500 million to promote wind and solar energy, heat pumps, and batteries. Benelux countries and Nordic nations are also pursuing ambitious climate-related industrial policies.
However, European nations are already falling behind the USA and China. This is evident from the decision by Munich-based nuclear fusion startup Marvel Fusion to 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 form of support as the USA and China, the fusion energy industry and other sectors such as battery development and production in the EU will likely not develop well and will barely survive.”
Innovation is crucial for achieving climate goals
The study also emphasizes the important role that innovation plays in achieving climate goals. Advancing existing technologies is expected to account for only around 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 US dollars in annual investments in innovative technologies is needed between 2020 and 2040.
Venture capital (VC) and private equity (PE) support this development through their investments in climatetech and cleantech companies. And these are increasing significantly, according to the study. In 2019, global investments stood at €40.8 billion (US$43.3 billion), rising to €91.8 billion (US$97.3 billion) by 2022. European companies secured 30 percent of these funds in 2022.
However, the study notes that adjustments need to be made at the political level. Streamlined financing, the establishment of a common EU platform for access to financing, support for long-term financing through blended finance, and the awarding of public contracts for climatetech solutions should improve the situation for climatetech and cleantech companies in Europe. Arthur Singer, co-founder of Munich-based climatetech startup Stabl, 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.”
