Investments in the sustainability transition: leveraging green industrial policy against emerging constraints

The implementation of the European Green Deal (EGD) demands a huge amount of investments, around EUR 520bn (billion) per year from 2021-2030. Additional investments to boost the EU’s capacity to manufacture net-zero technologies amount to around EUR 92bn from 2023 until 2030. Fiscal sustainability is emerging as a limitation on all public policies. European governments are facing competition in allocating scarce public budgets between the digital transition, military expenditures and investment in social infrastructure. They must also balance high inflation and interest rates with higher costs in public debt management, and the cost of an ageing population. The political will to invest in the green transition may fall short in light of these competing factors. A new green industrial policy can help to avoid possible standstills in green public investments and pave the way to the private sector’s deeper commitment to the sustainability transition. Private finance will be imperative to the transition’s success.