As we close the first half of 2026, Europe is reminded once again that climate, security and prosperity are inseparable. The wildfires that swept across France and Spain this summer left a deep mark on the European psyche, a visceral reminder that a warming climate is no longer a distant scenario but a lived reality on our own soil. It is why the decarbonisation agenda now has to be thought through together with adaptation, from stronger prevention policies to resilient infrastructure and communities equipped to withstand the shocks already underway. At the same time, the fragile ceasefire in the Middle East has, predictably, not held. That should force a radical realisation. Europe will not shed its exposure to global shocks until it electrifies, decisively and at scale, to cut its dependence on imported fossil fuels. Electrification, through renewables, storage, flexibility and stronger grids, is the key to breaking free, the backbone of Europe's energy security as much as its climate strategy.
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This is precisely why the 17 July package released by the European Commission matters. The ETS is not the alpha and omega of decarbonisation, but it is a reliable thermometer of the political appetite for a genuine shift and its revision, which preserves a predictable framework for the coming decade, shows that appetite is holding despite understandable pressure from a few Member States amid high energy prices. The opportunity now lies in how ETS revenues are put to work. A reformed Innovation Fund, sending a stronger and more predictable signal to project developers, could become one of Europe's most powerful investment tools.
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Its natural complement is the Electrification Action Plan, the instrument that must now turn resolve into reality. With its 46% electrification target for 2040 and the long-overdue rebalancing of gas and electricity taxation, it must drive demand for clean technologies. The case for putting it in place is already made, and delivery is key.
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Against this backdrop, it is worth placing today's investment headlines in their proper context. Deal activity has slowed and investment sits below the peaks of 2021-23, but the longer view is far more encouraging. Investment throughout the 2020s remains well above anything recorded in the second half of the 2010s, the market has expanded structurally, and Europe's cleantech ecosystem is not heading back to its pre-2020 starting point. EU venture and growth investment reached €4.9 billion in H1, 8% above the same period last year, lifted by a second quarter that nearly doubled the first. Deal volume did fall to a nine-year low of 165, as capital concentrated in fewer, larger transactions, which can be seen as a sign of a maturing market, even if it leaves earlier-stage companies facing a tougher environment.
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By sector, materials and chemicals, energy and power, and resource and environmental management together captured more than four-fifths of H1 investment, confirming a clear tilt toward industrial transformation, with activity spanning nineteen Member States.
The gap with the United States narrowed over the half, and the tools to close Europe's remaining structural weakness are now taking shape. A persistent late-stage equity gap still slows the journey from scale-up to commercial maturity and the larger debt rounds that follow, with EU cleantech debt at €3.5 billion across 23 deals. But the responses are encouraging. The EIB Group's ETCI 2.0, targeting €15 billion for around 100 growth funds, and the Scaleup Europe Fund – now in place – are exactly the right instruments, provided they are deployed at speed and matched by stronger institutional allocation to scale-up capital.
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On the demand side, the picture has matured. The Industrial Accelerator Act, once a binary fight over whether to legislate at all, has moved on. Member States now broadly accept the case for a demand signal that anchors clean manufacturing in Europe, and the debate has shifted to how wide the "Made in Europe" perimeter should be. For investors, an opt-in regime built on reciprocity sends a far stronger signal than a perimeter stretched so wide that companies can capture European support without ever building European capacity.

None of this can be approached in isolation any longer. Recent events– the fires across Europe, the Strait of Hormuz – confirm that climate, security and economic dynamism can no longer be reasoned about separately. For Europeans, the three are now bound together, and that is the lens through which this briefing should be read.