KBRA Releases European Climate Transition: Cost Burden and Risk of Slowing Progress

DUBLIN--(BUSINESS WIRE)--KBRA Europe (KBRA) releases research on Europe’s climate transition plans. The European Union (EU) has long burnished its leadership position in climate mitigation. The region pursues sustainable regulation at the EU level and works to influence other countries to commit to a low carbon transition. However, since the EU passed its sweeping sustainable policy package in 2019, the European Green Deal and global shocks including the COVID-19 pandemic in 2020, the ongoing Russia-Ukraine war, rising energy prices, the cost-of-living crisis, and the most recent Israel-Palestine conflict have often pushed climate change lower on the global policy agenda.

This KBRA report provides an overview of the EU’s climate transition plans, the cost for the region to transition including costs at the member-state level, the mounting backlash against the EU’s ambitious climate goals, and a growing need for capital markets to help fund the transition.

Key Takeaways

• The EU has historically been a leader in climate action and has been active in enacting and expanding sustainable regulation. Landmark policies include the European Green Deal and EU Emissions Trading System (EU ETS), among other initiatives.
• A large investment gap exists between what is required to meet 2030 climate targets and what is currently allocated. Although this funding could likely come from a variety of sources, many European sovereigns face significant challenges in relation to their current government financials.
• Amid high inflation and the increased cost-of-living in the EU, there is growing backlash against climate regulation given the high cost of implementation and the often burdensome regulation requirements. The results of pending 2024 EU elections may change the trajectory of climate policy in the region.
• The demand for private funding support is growing as a result of the investment gap. With a still nascent green finance market outside of green bonds there is a need for the support of capital markets to step in and help close the gap.

Click here to view the report.

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About KBRA

KBRA is a full-service credit rating agency registered in the U.S., the EU, and the UK, and is designated to provide structured finance ratings in Canada. KBRA’s ratings can be used by investors for regulatory capital purposes in multiple jurisdictions.