Macroeconomic Opportunities and Funding Priorities for the Next European Commission’s Climate Strategy

  • Project Duration: 01/2023 - 12/2023

The implementation of the EU Green Deal and the further policies needed to reach climate neutrality by 2050 will have major economic, social, and fiscal effects in Europe. The first part of this project aims to assess these effects through 2050, exploring our scenario of accelerated gas phase-out compatible with the EU 2050 climate neutrality objective. A quantitative analysis in collaboration with Oxford Economics will shed light on how the development of climate-related regulation and increasing clean tech investment are going to shape the European economy. It will provide insights into the effects of economic convergence of poorer Member States, industry dynamics, and even within-country inequalities. This study compares how different fiscal policy approaches perform during the transition to climate neutrality, concerning their impact on economic growth and debt sustainability.

The second part of the project deals with the shortcomings in the existing EU climate funding framework and proposes reforms that ensure every Member State will be able to deliver on the necessary climate investments through the next decade and beyond. The EU-level funding needs cannot be properly assessed without a clear view of the micro-level public funding requirements across sectors and countries, but also on the broader economic policy framework including the EU economic governance and even monetary policy. Therefore, this study provides further analyses of the public spending needs for supporting climate investment and an assessment of alternative financing sources for expanding the EU investment in climate action, including the redirection of EU funding currently used for fossil fuel infrastructures. These analyses will back our recommendations for the reform of the EU Multiannual Financial Framework in the context of the mid-term review and upcoming negotiations for the next EU budget.

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