European Commission Report’s Climate Tech Impact Explained

The EU Commission has published a new 400-page report — The Future of European Competitiveness — addressing European competitiveness and growth in a divided world dominated by just a handful of tech industries.

This highlights the critical juncture the EU faces in its pursuit of economic competitiveness and climate leadership. The report’s author, former European Central Bank President and former Prime Minister of Italy, Mario Draghi, emphasises the urgent need for substantial investment and policy reforms to bolster Europe’s position in the global climate tech race.

Christian Hernandez Gallardo is Co-Founder and Partner at climate tech 2150, a venture capital firm investing in technology companies that seek to sustainably reimagine and reshape cities and the industries that power them.

He said: “It’s encouraging to see the EU tackle today’s most pressing needs head on, as Europe has some unique challenges to overcome if the region wants to stay competitive in a divided world.

“This is particularly true of climate technologies. The report sees these as key to future resilience and prosperity, which is more good news, but it won’t be easy for Europe’s industries to keep up. 

“China dominates the production of core climate technologies like solar panels and electric cars and America’s climate tech space has been supercharged by public programmes like the Inflation Reduction Act. 

“Europe comparatively lacks a united vision for the industrial or financial policy we need to tackle the climate crisis”.

“Europe needs collaboration more than ever — to incentivise industrial resiliency, drive economic growth and ultimately deliver a decarbonised economy. Support for startups and their cutting edge climate solutions — particularly at the early stage — needs to be a priority to deliver these objectives.”

What does the report mean for European climate tech?

The report emphasises the importance of mobilising both private and public capital to drive climate tech innovation.

With a target of €800bn (US$888.9bn) annually for critical industries, the EU aims to bridge the investment gap in emerging technologies.

To achieve this, the EU proposes enhancing public funding for early-stage technologies, developing a basket of financing tools including contracts-for-difference and blended finance and creating a more integrated EU capital market. 

These measures, it is hoped, will channel savings into green investments and provide companies with streamlined access to funding.

The report also outlines an ambitious industrial policy to position Europe as a leader in climate technologies. Key recommendations include targeted support for strategic green industries such as batteries, hydrogen and renewable energy. 

The EU also plans to introduce minimum quotas for local production of selected clean tech products in public procurement to ensure predictable demand.

What’s needed to scale up climate tech in Europe? 

Leading consultancy Boston Consulting Group (BCG) — which also offers thought leadership on climate change and sustainability and works with clients to accelerate their climate and sustainability journeys — puts forward a number of key factors needed to scale up climate tech in Europe.

BCG’s essentials for scaling up climate tech are:

• Mobilising capital: BCG estimates that US$150tn in investment capital will be needed globally by 2050 to achieve net zero goals. For Europe, there needs to be increased mobilisation of both private and public capital to drive climate tech innovation
• Improving financing mechanisms: The EU needs to enhance public funding for early-stage technologies, develop new financing tools like contracts-for-difference and blended finance and create a more integrated EU capital market to channel savings into green investments
• Streamlining regulations: The regulatory environment needs to be streamlined, including faster permitting processes for green projects
• Industrial policy support: Targeted support is needed for strategic green industries like batteries, hydrogen and renewable energy
• Public-private partnerships: BCG emphasises the need for “much tighter partnerships between the public and private sectors” to encourage investment in emerging technologies
• Ecosystem development: Creating ecosystems and hubs where different players across the value chain can work closely together to accelerate innovation
• Talent development: Addressing talent shortages in climate tech fields
• Infrastructure and supply chain improvements: Overcoming infrastructure and supply chain constraints that are holding back scaling
• Long-term perspective: Investors need to be prepared for climate technologies to take years before they can be scaled up and reach full market potential
• International collaboration: Establishing industrial partnerships with other countries to secure supply chains and grow new markets

As Europe navigates the increasingly-complex landscape of climate tech innovation and economic competitiveness, the implementation of these recommendations will be crucial in determining its future role in the global green economy.

******

Receive the next edition of ClimateTech Magazine by signing up for its newsletter. 

As part of this portfolio, make sure you check out Sustainability Magazine and also sign up to our global conference series -  Sustainability LIVE. 

Also check out our Sister Brand, Energy Digital. 

******