Open Letter: It's time for a real EU Cleantech Investment Plan

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Brussels, 25 October 2023

Dear Madam President of the European Commission,
Dear Executive Vice-President Dombrovskis,
Dear Executive Vice-President Šefčovič,
Dear Vice-President Jourová,
Dear Vice-President and Minister for Economy and Digitalisation Calviño,
Dear Ambassador Permanent Representative Alonso:

Yesterday, the European Commission released its first ever report on investment in clean technologies1, taking stock of the EU’s competitiveness in the global cleantech race. While this report shows cleantech is now a major priority for the European Union (EU), its findings are overly optimistic. The EU has been an early-mover in the green transition, and the Green Deal paves the way for the wide deployment of clean energy. But when it comes to investments in cleantech manufacturing, the EU is lagging its peers and suffers from a significant investment gap.2 The report also downplays the impact of the Inflation Reduction Act (IRA), pointing to a lack of data on its impact. In fact, recent research by Rhodium Group shows that since the IRA was passed, the US received $213 billion in new clean investment across the economy—a 37% increase from the previous year and a 165% increase from five years ago.3 The American Clean Power Association also notes that over $270 billion in investment has been announced for utility-scale clean energy projects and manufacturing facilities since the passage of the IRA.4 Acknowledging this boom is the first step toward creating our own conditions for success in the global cleantech race.

Over the last decade, the EU has become a cleantech innovation powerhouse, investing billions of euros and developing most of the technologies we need to decarbonise, become energy resilient and build industrial leadership. EU-based cleantech companies are ready to scale-up their manufacturing of world-leading batteries, electrolysers, heat pumps, electric trucks and near-zero carbon steel and cement. A generation of industrial leaders can underpin Europe’s global competitiveness for decades to come at a time when peers in America and Asia are also investing significantly to take the lead in these new industries.5

At this critical “scale-up” stage, European cleantech companies need to shift from raising tens of millions of euros in venture capital to validate their technologies, to billions of euros in mainly debt instruments to build large-scale plants. And while most of the investment will need to come from industry and capital markets, the public sector has a key role to play in de-risking the initial steps of the deployment of technologies. Today, traditional financing options do not adequately address the unique challenges associated with financing hardware-intensive projects, which is why Europe is suffering from a major cleantech investment gap.

The European Commission estimates that the EU will need at least €92 billion investments over the period of 2023-20306 to scale just six clean technologies. From this €92 billion, the Commission estimates that €16-18 billion should come from public investments.7 Even if those €16-18 billion were to be met, at the current rate of private investments in these technologies8, this leaves a €50 billion gap, which could easily double once all the Net Zero Industry Act strategic technologies are included.

Source: European Commission9, Cleantech Group10, Cleantech for Europe analysis

To close this investment gap and become the climate and industrial leader of the next decades, the EU needs an ambitious Cleantech Investment Plan, which as the Commission states in its report many global peers (US, China, Canada and Japan) already have in place.11 An EU Cleantech Investment Plan should rest on four pillars:

  1. Mobilising public guarantees to catalyse private investment;
  2. Unleashing institutional capital to create a step-change in EU cleantech investment;
  3. Targeting ETS funding to unlock investments in manufacturing of EU cleantech solutions;
  4. Establishing a European Sovereignty Fund that invests in European cleantech companies and projects that are critical to the EU’s strategic autonomy.

In the following annex, we outline priority actions for these four pillars. The time for action is now, and we cannot afford to let financial barriers hinder the progress of cleantech solutions. It is our collective responsibility to support the accelerated growth of start-ups and scale-ups in this sector, as they hold the key to a more sustainable future and to European global leadership.


Ann Mettler, Vice President, Europe, Breakthrough Energy
Jules Besnainou, Executive Director, Cleantech for Europe
Peter Sweatman, CEO, Climate Strategy & Partners
Pia Dorfinger and Tobias Lechtenfeld, Executive Directors, Tech for Net Zero

Annex – Priority Actions to close Europe’s cleantech investment gap

Action 1 (short-term): Mobilising public guarantees to catalyse private investments

Many cleantech companies face difficulties getting project loans from financial institutions. Limited collateral and the lack of an established credit history are major hurdles. When selling innovative equipment, cleantech manufacturers are also asked for a series of bank guarantees, to mitigate the buyer’s risks in purchasing this equipment. European institutions, such as the European Investment Bank (EIB), can establish mechanisms that provide loan and manufacturing guarantees to financial institutions to treat these problems. By reducing the risk for lenders, we can empower cleantech companies to secure the necessary financing to fund their operations and scale their businesses. The recent announcement that the EIB will deploy a manufacturing guarantee mechanism for the wind industry is a great first step in this journey and should be expanded to other cleantech industries. InvestEU, a €26bn budget guarantee extended to implementing partners, is heavily oversubscribed. It needs a significant budget boost and a stronger focus on scaling cleantech manufacturing together with commercial banks.

Action 2 (next mandate): Unleashing institutional capital to create a step-change in EU cleantech investment

Institutional investors, including pension funds, sovereign wealth funds, insurance funds, impact investors, and family offices, have a growing interest in the cleantech sector. Yet, while US insurers and pension funds are prolific investors in venture and growth capital, this is not the case for their European counterparts. EU pension funds in 2021 invested less than 0.018% of their total assets in venture funds12, a 100x difference vs. the US. This gap has massive implications for the EU cleantech ability to scale the innovations developed in Europe. For Europe to become the home of clean technologies manufacturing and green jobs, we need to incentivize institutional investors to invest more in venture and growth cleantech funds. We must also engage and mobilise these investors by raising awareness about the potential of cleantech growth funds and companies, facilitating connections between funds and institutional investors, and developing new fund-of fund and risk-pooling instruments. The successful example of the Tibi initiative13 in France shows that institutional investors are ready to invest in the next generation of technologies, when brought to the table. The cleantech companies and investors represented by the signatories of this letter stand ready to engage in such a discussion.

Action 3 (next mandate): Targeting EU Emissions Trading System (EU ETS) funding to unlock investments in cleantech manufacturing

Cleantech companies struggle to access financing options that align with their unique needs. These innovative, asset-heavy ventures require financial instruments that accommodate their business models and growth trajectories. While the proposed Strategic Technologies for Europe Platform (STEP) allocates €10 bn to funding instruments to support cleantech, deeptech and biotech, it will not be enough to level the playing field between EU cleantech, and its American and Asian competitors.14 Current funding instruments such as the Innovation Fund are good and yet under-resourced, both in terms of funding and staff,15 to meet the needs of a rising industry. The pioneering work of the US Department of Energy’s (DoE) Loan Programs office should be taken as an example. Over the years, the DoE has built a team of hundreds of cleantech experts who actively scout for and support eligible projects and companies.

We must make targeted use of revenues from the auctioning of allowances of the EU ETS to supplement the size of the Innovation Fund. This could be done through an injection of Member State national revenues into the Fund, or through the allocation of a portion of national ETS allowances into the Fund. At 2021 levels, a 10% contribution would amount to an extra €2.5bn per year for the Innovation Fund, with that amount trending upwards.16 These revenues are significant enough to allow for a mixed use of grants, loans, guarantees, procurement, and project finance for scaling up clean technologies.

The ETS revenues and allowances can also play a critical role in unlocking investments and driving demand for emerging climate solutions that today still come at a premium. It is a promising start that regulators set up new instruments using ETS revenues such as the European Hydrogen Bank and a Sustainable Aviation Fuel (SAF) incentive scheme using ETS allowances for airlines procuring SAF, covering price differences and therefore helping to bring down the green premium. It is crucial to expand these models and increase their funding, and to explore ways to create similar instruments for other technologies such as shipping fuels, storage technologies or carbon management technologies.

Action 4 (next mandate): Establishing a European Sovereignty Fund that invests in European cleantech companies and projects that are critical to EU’s strategic autonomy

Closing the EU’s cleantech capital gap requires a rethinking of the EU’s funding architecture of cleantech industrialisation. In the wake of the IRA and the changes to State aid rules, some Member States are forging ahead and providing large subsidies to cleantech manufacturing projects. While positive, this risks fragmenting the EU’s cleantech scale-up and leaving behind large swathes of the EU.

The EU should explore the development of a European Sovereignty Fund that would support the growth and industrialization of EU cleantech companies. The Fund should have the flexibility to provide grants, loans, guarantees, procurement and project finance for strategic clean technologies over a 10-year timeframe. The current STEP program can only be thought of as an initial steppingstone to something much more ambitious and expansive, and more in line with sovereign funds of other global clean technology leaders. We won’t be able to play in the global big league with what is currently on the table.

10 Venturecapital, debt and project finance invested into EU developers of Solar PV,wind, batteries, heat pumps, electrolysers and CCS (€3.2 billion in 2022,multiplied by 8 to cover the 2023-30 period), Cleantech Group.
11 p.8
16 EuropeanEnvironment Agency, Use of auctioning revenues generated under the EU EmissionsTrading System, 2023

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