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European low carbon investment only half of what's needed, as UK falls behind

Image: Getty.

Image: Getty.

Company spending on low carbon investment in Europe hit €124 billion in 2019, but the UK is faltering with just 3% of that investment.

This puts the nation in sixth position, with just €4 billion of low carbon investment despite 194 companies reporting investment according to Doubling Down: Europe’s Low Carbon Investment Opportunity, a new report produced by the CDP.

Germany topped the chart with €44.4 billion from 69 companies, followed by Spain with €37.9 billion from 48 companies.

The UK was likely lower in the charts despite the large number of companies because it outsources much of its investment in green infrastructure, such as energy, transport and materials to international companies such as the Spanish energy giant Iberdrola, which owns UK Big Six supplier ScottishPower.

Throughout Europe, investment in R&D for electric vehicles (EVs) grew more than any of the other sectors the report looked at, with €43 billion pumped into the sector.

This was followed by €16 billion of capital investments in renewable energy, €15 billion in energy grid infrastructure, as well as €8 billion worth of investment in demand-side response programmes for intelligent energy use.

Overall, capital investments to deploy large scale energy projects amounted to €45 billion in 2019, with new spending on renewables, grid infrastructure, demand-side response and digitalisation technologies.

Overall in the energy sector, there was a decline of 12% in investment, in a like-for-like comparison with 2018. In particular, investment in renewables by electric utilities fell €27 billion, or 65%. However, the report notes that this is partially due to EDF’s €25 billion solar investment plan in 2018.

While the overall €124 billion spent by the 882 European companies covered by the report was only a small decline from 2018, the CDP warns that this is only half the investment needed to reach net zero targets.

The low carbon share of capital expenditure (CAPEX) needs to rise from 12% of countries' annual spend to 25% per year if it is to be consistent with a net-zero emissions pathway by 2050.

The report highlights the benefits of such an increased investment, with €1.22 trillion in new low carbon business opportunities available, in particular driven by higher demand for EVs and green infrastructure. This is more than six times the investment cost of €192 billion needed.

Currently European companies are expected to avoid 2.4 gigatons of emissions thanks to low carbon investments. This is more than the emissions of the UK, Germany, France, Italy and Poland combined, and has contributed over €40 billion to the companies’ bottom line.

Steven Tebbe, managing director of CDP Europe, said that companies are making “significant investments” in low carbon technologies, aiding the journey to net zero.

“Across many types of investment, the business case for transitioning businesses onto a low carbon pathway is clear, and the opportunities vast.

“But overall current investment levels are still short of putting European firms on track for net zero emissions. For industries where decarbonisation is more challenging, there is a serious need for financial markets and policymakers to create better conditions for low carbon investment and deliver stronger incentives to drive investment into breakthrough technologies, where capital expenditure is often high and returns long-term.”

The CDP, formerly known as the Carbon Disclosure Project, releases an annual report mapping corporate action on climate change.

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