Publications

Assessing the state of progress to inform next steps in policy-making. The European Union (EU) is on its journey to become climate neutral by 2050. This multigenerational project holds many societal, economic, and environmental opportunities. At the same time, it is of unprecedented scale and implies considerable changes to the current systems, which need to be anticipated and addressed for the transition to be fair and acceptable to all. Regular progress checking is the key to understanding where the EU stands on the journey. It allows to identify challenges and opportunities and take targeted policy action guiding investment, supply, consumption, and societal development. There is still no official, comprehensive, and regular EU-wide progress monitoring to achieve this. This second ECNO progress check aims to close the current information gap. It provides a comprehensive view on the state of EU progress towards climate neutrality and identifies key areas of action for the next policy cycle.

Private financial institutions must rethink their approach to managing stranded asset risks. The current narrative on quantifying fossil fuel sector exposures within a limited scope of financial portfolios (mostly loans) largely underestimates potential stranding losses. As the low-carbon transition impacts all economic sectors, private financial institutions (FIs) must consider material transition-driven stranding risks within their overall transition risk management framework using a ‘whole of economy’ lens. Traditional risk management approaches are ill-suited to the methodological and quantification challenges of transition-driven stranding risks, so a flexible, dynamic, forward-looking approach is necessary. Strong, incentivising public policy coordinated with financial regulatory and supervisory impetus is necessary to preemptively identify, monitor and manage stranding losses on ‘assets-at-risk’ (i.e., potential stranded assets). The ECB finds that 40% of the total loan portfolio of euro area banks is exposed to energy-intensive sectors*, making them vulnerable to transition risks, including stranding. It is time for an urgent reframing of the stranded asset narrative to avoid significant financial losses (endangering financial stability) and direct orderly transition finance flows to retire or transform assets-at-risk before they become fully stranded.

This weekend, citizens across the EU head to the polls. Many expect a swing to the right, in stark contrast to the “green wave” of 2019. In Brussels, leaders are looking ahead to a five-year mandate dominated by questions of security and competitiveness.  In these turbulent times, what is the future of Europe’s flagship climate package, the Green Deal? The Green Deal and the Fit for 55 package gave us the regulatory framework – but implementation requires investment. I4CE's flagship EU Climate Investment Deficit report shows that climate spending must double to make the 2030 target achievable.

The European Banking Authority (EBA) is clarifying how the banks should frame their “transition plan” as required by the EU prudential regulation. The transition plan is the bank’s strategic roadmap to prepare for the transition to a sustainable economy as framed by the jurisdictions they operate in, including an EU climate-neutral economy. It has been introduced in several EU regulatory frameworks, including as a disclosure requirement arising from the CSRD. The prudential framework and the EBA are focusing on a specific angle: how the banks plan to manage their financial risks related to the transition. EBA’s framing of these plans will be key to determine whether the banks will manage their financial risks consistently with the broader need of financing the transition to a low-carbon economy. 

After a first step in 2022, the Basel Committee on Banking supervision is finally moving towards regulation for climate-related risks. Founded in 1974, this forum brings together financial supervisors of the G20 countries and establishes the common standards for financial stability. Two years ago, the Committee published a consultative document on the principles of climate […]

A few days after the conclusion of negotiations on the European Union's carbon removals certification Framework (CRCF), I4CE helped organise the European Carbon Farming Summit in Valencia, as part of the CREDIBLE project. The high level of stakeholder participation at the summit testifies to the expectations that this new tool will contribute to a better economic valuation of carbon farming practices. The summit raised high hopes for improving and harmonising carbon measurement to certify projects, in particular through remote sensing, in a sector where there is a great deal of uncertainty. While it is vital to improve measurement and monitoring, uncertainty must not be allowed to justify inaction, and the key is to find the right balance between cost and accuracy.

The European co-legislators have just reached an agreement on the content of the future European Carbon Removal Certification Framework (CRCF). Negotiations were swift and fruitful, against a backdrop of a general step back in the adoption of the various Green Deal texts. While today sees environmental issues played off against farmer's livelihoods, this draft regulation brings these two elements together to create the conditions for investment in the transition of agriculture and forestry sectors. However, several details still need to be clarified to ensure that this framework actually enables effective and ambitious climate financing.

This week, I4CE launches the first European Climate Investment Deficit report. During a year’s research, we analysed investments in 22 sectors of the EU27 economy that are critical for the EU to deliver its 2030 climate and energy security objectives. The European Green Deal is gaining economic momentum, as climate investments in the EU grew 9% in 2022, reaching […]

Climate investments in the EU economy grew by 9% in 2022. This report finds that the European Green Deal is gaining economic momentum but investments in modernising energy, transport, and buildings must still double for the EU to hit 2030 climate targets.

The European Union is continuing its efforts to ensure that the banking system takes climate change into account. Banks will have to draw up a "transition plan", according to the European Banking Authority’s (EBA) guidelines that are out for consultation until April.  One could hope that the banking authorities would seize this opportunity to encourage banks to better finance the transition, since their voluntary commitments are not sufficient. But the EBA does not make it a clear objective.

A report to clarify linkages between these two approaches to climate action for the financial sector. The mobilization of the sector is necessary to help to finance the low-carbon transition. Some stakeholders thus advocate the explicit mobilization of the sector in favor of financing the transition. This rationale for action is known as the “transition finance approach”. The sector is also exposed to the financial risks arising from climate change and the necessary transition. This observation motivates a rationale for action known as te “risk approach”, aimed at managing the exposure of financial institutions to such risks.

After nearly 4 years of negotiations, the European Union has just reached an agreement to reform the Capital Requirements Directive (CRD) for banks. The inclusion of climate change is a major step forward: banks will have to draw up prudential transition plans, supervised by the European Central Bank. These plans will complement the European regulatory architecture that is being put in place for large companies, with the Sustainability Reporting Directive (CSRD) and the Due Diligences Directive (CSDD). Are these banking transition plans a sufficient breakthrough to finally commit banks to climate neutrality? The answer to this question will depend on the implementation of EU legislation.

The European Union has just adopted the Capital Requirements Directive (CRD) and introduced a new feature: transition plans will now integrate prudential regulations. This paper looks at the major opportunity represented by prudential transition plans and the decisive role that the European Banking Authority will play. It explains why the Authority should adopt a comprehensive definition of banking transition plans and how these plans should be consistent with the European directives on Corporate Sustainability Reporting (CSRD) and on Due Diligences (CSDDD).

The Global Stocktake at COP28 in Dubai marked the start of a cycle for reviewing governments’ decarbonization trajectories. The cycle will end at COP30 in Brazil at the end of 2025, and 2024 will hopefully show progress in the ambition of these trajectories. We equally hope that this renewed ambition will be accompanied by a reflection on the financing plans for national low-carbon trajectories, covering the amounts and evolution over time of domestic and international resources, and the respective roles of the private and public sectors. Because simply put, a low-carbon transition with no associated financing plan is not a transition, it is mere wishful thinking.

The net-zero transition, i.e. the transformation towards a carbon-neutral and resilient economy, is a major and urgent challenge for reducing the effects of climate change. This transformation requires the transition and adaptation of all activities and all economic agents. It is first and foremost a matter for the real economy and must be based on an operational roadmap of actions to be taken. This must be defined by an ambitious economic policy (budgetary, fiscal, monetary, regulation of products and sectors, etc.).

After several years of strong growth, the revenue generated by carbon pricing mechanisms (carbon taxes or markets) worldwide, as reported in our 2023 edition of the Global Carbon Accounts, stabilized at nearly USD 100 billion. This stabilization could not be more deceptive.  The future has rarely been so uncertain for carbon prices, caught between very strong opposing trends, and the next two years could mark a major turning point, for good or bad, for the use of these climate policy instruments worldwide. 

What are the carbon taxes and markets around the world, the range of carbon prices, the revenues generated, the emissions covered by these mechanisms? Find the answers to these questions, and many more, in the new edition of the Global Carbon Accounts from I4CE.

Investment in the development of the cleantech sector in Europe is too slow and unevenly spread across EU member states and despite its best intentions, it is not clear that the EU’s Net-Zero Industry Act (NZIA) will rectify this. Unveiling the Net-Zero Industry Act (NZIA) earlier this year, Ursula Von Der Leyen declared it would “create the best conditions for those sectors that are crucial for us to reach net-zero by 2050: technologies like wind turbines, heat pumps, solar panels, renewable hydrogen as well as CO2 storage.”

Year after year, France becomes aware of the drastic deterioration in the carbon sink of its forests. Tree mortality increases sharply with droughts and health crises. Yet France needs this carbon sink to achieve its climate objectives and needs to preserve it by improving the resilience of its forests, but also - and this is less obvious - by making the best possible use of the harvested wood from the forests. France's climate strategy is counting heavily on maximising the carbon sink in wood products, i.e. making greater use of the wood harvested to manufacture long-lasting products, particularly in the construction industry. Some products store carbon over the long term, and are not only those that we imagine at first glance, as we showed in a previous study. 

Achieving carbon neutrality will require the redirection of harvested wood towards long-life uses. To achieve carbon neutrality, France is relying on its carbon sink to balance residual emissions in 2050. A smaller carbon sink would require even greater emissions reductions from other sectors (transport, agriculture, industry, etc.), sectors in which France is already calling for drastic sixfold cuts between 1990 and 2050. In a context where the carbon sink in ecosystems is already falling sharply due to an increase in tree mortality, preserving this sink and developing carbon storage in wood products must be a major concern of the national climate policy.