Under the leadership of Ursula von der Leyen, the European Commission has succeeded in moving the European Union (EU) towards climate neutrality. With the European Green Pact, the EU has set itself clear and ambitious climate targets for 2030 and 2050 and has adopted a series of legislative measures to achieve them.

While the Covid-19 pandemic and Russia's invasion of Ukraine reminded us that the climate crisis is not Europe's only major challenge, the Commission has managed to stay the course. Hundreds of billions of euros of EU green funds have been made available as part of the European recovery plan.

The EU devotes around €50 billion a year to climate action. But most of this sum comes from the "Next Generation EU" post-pandemic recovery plan, which will be scaled back from 2025. As of 2027, the level of budgetary appropriations for climate action will be less than €20 billion a year.

This reduction in European funding will come at a time when member states will have to step up their efforts to position themselves on an ambitious decarbonization trajectory. They will need to set an example by implementing accelerated emissions reductions in public buildings, support household efforts and business investment. At the same time, they will have to contain their budget deficits and keep their debt under control.

This shortfall in green financing is therefore likely to represent a major obstacle to the implementation of the European Green Deal. The current annual €50 billion represents around 0.3% of the EU's gross domestic product (GDP), a bare minimum if the Union is to play a significant role in driving investment. Indeed, it should be reminded that the additional annual investment needed to meet the EU's 2030 climate target is estimated at around 2% of GDP, and that the share of public investment should be between 0.5% and 1% of GDP.

This calls for a new European investment plan worth €180 billion between 2024 and 2030. To finance this, the EU has two major options. The first is to retain a larger share of the revenues generated by the sale of emission allowances. The second is to contract new common EU loans, which would be fully justified from a legal point of view given that the green transition is an EU public good requiring a specific and temporary budgetary effort.

Of course, a loan is only conceivable on the basis of the Union's own resources. It is legitimate to stagger the timing of expenditure and income, but in the long run, these must be balanced out.

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