Finance & Economics

Aligning climate protection, finance and economic growth to foster the transition to a modern low-carbon society

Opportunity

The transition to a low-carbon society has begun but we are not seeing change at the scale and scope that will be necessary to avoid risks from climate change to our living environments. To meet the internationally agreed target of keeping the global average temperature rise since pre-industrial times below 2°C, patterns of investment, business models and economic regimes will need to change considerably.

At the same time, the context in which the European economy needs to evolve is increasingly being shaped by global economic interdependence and technological disruptions. Global trade, international investments, integrated supply chains, a growing share of emerging markets in global production and consumption, as well as modern communication tools and digitisation influence the direction of economic development.

Challenge

These developments call for a reorientation in Europe. The goal must be to align climate protection and economic growth to foster the transition to a modern low-carbon economy and society.

  • Investments need to be carried out based on thorough climate and regulatory risk analysis. Stranded asset values are a real risk and must be addressed accordingly – by regulation and investor action to secure credible decarbonisation actions from businesses.
  • The European Union must be a forerunner market in key product areas, where ambitious standards and rules for market access create robust incentives for first-movers. Innovation has a central role to play in Europe’s competitiveness and low-carbon future.

Moving beyond sectoral divides and across national boundaries, we seek to identify synergies of goals, proceed in collaboration with diverse actors and, thus, aim to contribute to the development of more integrated perspectives.

Approach

Encouraging Investment from High- to Low-Carbon Assets. The ECF engages to ensure climate risks and opportunities are understood and acted upon. Conventional financial analysis tends to ignore or underplay the financial impact of carbon and energy regulation on portfolio returns. That is why we aim in our work to develop analysis, tools and approaches to assess companies’ ability and progress in adapting their operations, footprints and business models to a low-and-no-carbon future. In order to catalyse a substantial redirection of capital into the low carbon economy, the Finance Dialogue was launched. This multi-funder collaboration aims at enhancing coordination in climate finance philanthropy and works with investors, financial experts, NGOs and philanthropists to deliver an integrated strategy. For more information please visit www.financedialogue.org.

Aligning Economic Growth and Carbon Emission Reduction. The ECF facilitates debate to foster the development of initiatives aiming at both revitalising Europe’s economy and reducing carbon emissions. We collaborate with partners to analyse opportunities to reduce industrial emissions while strengthening Europe’s competitiveness, to assess the potential of the low-carbon transition for economic development and to evaluate the role of political direction and support. This includes work on 
a Euro Climate Deal.

Rationalising the Debate on Energy Prices. The ECF believes energy prices are critical for the design of climate policies. However, there has long been no generally accepted indicator. The ECF Energy Price Monitor (EPM) was designed to fill this gap. It describes monthly changes in consumer energy prices in Germany and Poland, and will also be launched in the United Kingdom and France. In addition, the ECF is working with leading research facilities to develop an Industry Energy Cost Indicator, which will represent energy costs of both energy-intensive and low-energy industry sectors.

For more information, please contact climate_finance@europeanclimate.org.