Fit for 55? Contrasting green infrastructure investment needs in Europe with the EU’s sustainable finance strategy

The paper “Fit for 55? Contrasting green infrastructure investment needs in Europe with the EU’s sustainable finance strategy” will be presented at the FSR Sustainability Conference on “Greening Infrastructures” (22 June 2022).


Europe intends to become the first continent to reach net zero in 2050. To this end, the European Commission presented its “Fit for 55” legislative package, which aims for a reduction of 55% of GHG emissions by 2030 compared to 1990. This requires massive investments in infrastructure, especially in energy, transport, and urban infrastructure. In this context, “making financial flows consistent with climate goals“, as emphasized under the Paris Agreement, marks an important prerequisite for the success of this new package. While redirection of capital flows is also a key point of the EU Action Plan on Sustainable Finance, it remains however unclear how the plan actually addresses the financing needs of green infrastructure. This is particularly relevant as different infrastructure technologies need different kinds of finance, and delayed investments in infrastructure can lead to significant carbon lock-ins and stranded assets. To address this gap, the aim of this paper is twofold: First, we explore what specific shifts in infrastructure investment are required in Europe (EU27+ UK, Norway, and Switzerland) in the near term to get on a pathway towards net zero by 2050. Second, we analyze how present EU policies on sustainable finance address the needs of the low-carbon infrastructure required to meet the Fit for 55 targets.

Research design

This paper is the first meta-analysis of infrastructure investment shifts across the energy, transport, and urban sector. In a systematic literature search process, we identify 50 relevant studies with a European scope published after the Paris Agreement. We combine top-down results from optimization modeling, which are typically holistic but rather generic w.r.t. technologies, with bottom-up results from technology-specific analyses, which provide higher granularity but lack completeness. On this basis, we collect 300 data points spread over 40 subsectors. We cluster the estimates in three different decarbonization pathways: (1) 1.5-degree ambition, (2) 2-degree ambition (closest to Fit for 55), and (3) moderate decarbonization, which represents a collection category for all less stringent pathways.

Preliminary results

We find an overall uptake in infrastructure investment needs compared to historic levels from ~EUR 300 to 400 bn/yr. The largest investments are required for renewable power plants (~EUR 70bn/yr) and electricity grids – especially on the distribution level – (~EUR 65bn/yr), which both almost double compared to historic levels. At the same time, investments in fossil fuel plants would need to shrink by more than half, and investments in oil and gas transport by more than two-thirds. In the transport sector, road infrastructure remains the largest investment area (~EUR 100bn/yr), followed by rail (~EUR 80bn/yr). Still, low-carbon transport modes, such as rail and inland waterways show a stronger relative growth by 50% and 300%.

Comparing the identified investment areas to priorities in the EU Sustainable Finance strategy (e.g. its green taxonomy), we find good alignment w.r.t power generation. Still, our results show that, beyond renewable energy, massive infrastructure investments for decarbonization are required for natural monopolies (transport and electricity networks). In this context, more efforts from policy makers will be needed to effectively foster long-term sustainable investments from the private sector and close investment gaps.

More on Energy & Climate

The unrivaled guide to electricity markets
The unrivaled guide to electricity markets

After 30 years of open electricity markets, an assessment of their achievements and current challenges is due, particularly given the…

A first look at the EU Hydrogen and Decarbonised Gas Markets Package
A first look at the EU Hydrogen and Decarbonised Gas Markets Package

Yesterday, 15 December 2021, the European Commission released its ‘Hydrogen and Gas Market Decarbonisation package’ (“gas package”), along with legislation…

Join our community

To meet, discuss and learn in the channel that suits you best.