State commitment to local climate action: an AFD publication in collaboration with I4CE

Translating innovation into world-leading industries is critical, and FP10, the EU’s next flagship R&D funding programme after Horizon Europe concludes, offers a chance to bridge this gap. The Green Deal era saw Europe embrace ‘Cleantech 2.0’, with record investments and new projects. Yet 2024 has brought a reckoning. Slowing demand in sectors like heat pumps and electric cars, Chinese industrial overcapacity, and attractive subsidies in the US and Canada have left European cleantech struggling to compete. Closures, layoffs, and stalled projects – including the high-profile collapse of Swedish battery maker Northvolt – have shaken the sector. The EU’s Net Zero Industry Act and the upcoming Clean Industrial Deal aim to support cleantech manufacturing, but catching up isn’t enough. To lead globally, the EU must focus on the next wave, including new battery chemistries and next-gen renewables – ‘Cleantech 3.0.’

As the European economy decarbonizes, economic assets across sectors are at risk of stranding or repricing from transition pressures. Yet private financial institutions, particularly banks, often narrowly focus on fossil fuel credit losses using historical data, underestimating broader ‘whole of economy’ stranding risks. Risk mitigation in the form of prudential capital buffers and loss provisions […]

The COP29 in Baku was supposed to breathe new life into North-South climate cooperation through the negotiation of the new NCQG financing target. Instead, confrontational negotiations produced a half-hearted agreement, and the onerous task of charting a path to bridge the resource gap before the next COP.