The EU goes green: who wins?

EU leaders have agreed in principle on a €750 billion recovery fund, ‘Next Generation EU,’ aimed at helping the EU economy out of the COVID-induced recession.  

The European Green Deal as the EU’s recovery strategy to include:

  • A massive renovation wave of buildings and infrastructure and a more circular economy, bringing local jobs;
  • Rolling out renewable energy projects, especially wind, solar and kick-starting a clean hydrogen economy in Europe;
  • Cleaner transport and logistics, including the installation of one million charging points for electric vehicles and a boost for rail travel and clean mobility in cities and regions;
  • Strengthening the Just Transition Fund to support re-skilling; helping businesses create new economic opportunities.

The program will be financed by issuing joint borrowing at the EU level for the first time. Newly-issued EU debt will be repaid by 2058 through the EU budget, including through new taxes introduced at the EU level. These include a tax on non-recycled plastic waste from January 2021, a carbon adjustment mechanism and a digital levy from January 2023 as well as a possible extension of the emission trading scheme to the aviation and maritime sectors.

A total of 30% of the overall spending will be earmarked for green investment and fighting climate change. As well as agreeing the recovery package, the EU has also put the framework in place for its budget up to 2027. This will be €1 trillion in spending and constitute the largest green stimulus package in history. All expenditure must be consistent with the UN’s Paris Agreement goals of cutting greenhouse gases, where possible.

In terms of the distribution of funds between countries – Italy, Spain, Poland, Greece and France will receive the lion’s share. National governments will decide how they spend their own funds with oversight from the EU to ensure it is being spent correctly.

In terms of sectors, the focus will be on companies that are able to provide for improvements in building efficiency, the circular economy, the adoption of electric vehicles, and the transition to renewable energy.

The investment in technologies key for clean energy transition, such as renewable and energy storage technologies, clean hydrogen, batteries, and sustainable energy infrastructure, will benefit European renewable manufacturers as well as utilities focused on renewable energy.

For auto companies, early investors in electric vehicles will benefit from the focus on accelerating the production and deployment of sustainable vehicles, as well as alternative fuels – likely supported by subsidies for battery electric vehicles.

Hydrogen will be key in moving away from combustion engines in long-haul vehicles where electric battery technology is likely to remain uncompetitive in the near term. Industrial gas companies have invested in the production and infrastructure needed for the move into hydrogen; such as hydrogen refuelling stations (globally) and investment into hydrogen fleet vehicle initiatives.

Building efficiency is also a key part of the recovery plan. This should be positive for manufacturers of building insulation. A renovation wave of buildings and infrastructure will likely be prioritised.

In addition, the focus on the circular economy, and the tax on non-recycled plastic waste from January 2021, should provide a boost to recycling-focused waste management companies.

Further details are still to be sketched out, but the European Commission will now put the legislation together which will then go to the EU parliament for approval and, in some cases, national parliaments will also need to approve. 

Longer term, both the recovery plan and the long-term budget will be very supportive of European companies focused on sustainability – specifically climate change – and, while European countries often lead on global efforts in sustainability, other nations tend to follow.


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