European companies need to more than double their annual investments in green technologies if the EU is to reach its net-zero emissions target by 2050 — and doing so would be “significantly” profitable for them, according to CDP.
CDP — a not-for-profit organisaion formerly known as the Carbon Disclosure Project — analysed the expenditure and carbon emissions from 882 European companies representing 76% of Europe’s market capitalisation and concluded that their annual low-carbon capital investments would need to grow from €59bn ($64.2bn) in 2019 to about €122bn a year to hit the net-zero target by mid-century.
But such a move — which would increase their capital expenditure on green investments from 12% to 25% — would add more than €40bn these companies’ bottom lines.
“The most profitable emissions reduction initiatives were investments in energy efficiency processes, yielding average profits of more than €27 per tonne [of] CO2 [emissions], but significant abatement profits were also anticipated from investments in transport electrification and low-carbon energy,” said CDP report, entitled Doubling Down: Europe’s low-carbon investment opportunity.
“Companies also identified €1.22trn of new revenue opportunities from low-carbon goods and services — more than six times the investment needed to realise them.”
The study shows that €43bn was spent on clean-transport R&D in 2019, with European utilities investing €45bn in renewables, infrastructure and “enabling technologies such as demand-side response programmes and digitalisation”.
In fact, half of all low-carbon investment last year was spent in the transport sector, with 38% in the energy industry and only 5% in what CDP refers to as the “high-emitting materials” industries, which includes cement, steel and mining.
The report adds that only 0.2% of green investment was spent on carbon capture, utilisation and storage, and 0.1% on hydrogen, raising questions about the oil & gas sector’s intentions to decarbonise.
“In the public sphere, policies must address the unfavorable economics of immature low-carbon technologies, enable companies to overcome threats to existing revenue models, and provide sufficient, long-term certainty for large transformational investments in capital-intensive breakthrough technologies,” the report says.
“Increased public financing is required to de-risk private investment and support the development of new infrastructure.
“Action on policies and regulation must be matched by action in the private sector, where the decisions to lend and invest will be taken… Among financial institutions, continued innovation in green financial products is needed, in particular to ensure the transition financing needs of ‘brown’ sectors are met.”
According to a recent report by BloombergNEF, electrification of the transport, heating and heavy-emitting industries — including switching to renewables-powered green hydrogen — could reduce greenhouse gas emissions by 60% by 2050.