BRIEFING

Energy transition in the EU

SUMMARY
Energy is central to the European Union's transition towards climate neutrality by 2050, in line with
the European Green Deal. As the biggest source of greenhouse gas emissions in the European Union
(EU), the energy sector is undergoing a profound transformation on the path to a net-zero economy.
The shift to a more sustainable energy system entails switching from fossil fuels to low-carbon and
renewable energy sources, improving energy efficiency in products, industry and buildings, and
creating a more sustainable energy system based on clean technologies.
The EU has developed a number of policies to support the energy transition. EU legislation sets
targets for renewables in consumption, energy efficiency and building renovations. It also fosters
sustainable transport, energy labelling of products, and clean technologies. The energy union and
climate action governance framework includes long-term national energy and climate plans
prepared by all EU countries to enhance their contribution to EU energy and climate objectives.
According to the European Commission, energy investments in the EU will have to reach
€396 billion per year from 2021 to 2030 and €520-575 billion per year in the subsequent decades
until 2050. The EU budget sets a target of 30 % climate spending, a large part of which includes
energy actions such as energy efficiency and deployment of renewables, energy infrastructure and
smart energy systems. The bulk of EU energy spending is channelled through the Recovery and
Resilience Facility, cohesion policy funds, the Modernisation Fund and several others. Specific
instruments also exist to support a socially fair transition, notably the Just Transition Fund and the
Social Climate Fund.
While the EU energy transition has advanced despite the recent energy crisis, several challenges
remain. These include technological aspects such as electrification, grid interconnections, storage
systems, further roll-out of renewables and integrating other energy sources such as hydrogen and
biomethane. However, the transformation of the EU energy system also involves taking into account
the need to ensure energy security, boost energy independence and domestic manufacturing of
clean technologies, and improve energy affordability.

IN THIS BRIEFING
 Introduction
 EU policies
 Socially just transition
 Funding
 European Parliament
 Outlook

EPRS | European Parliamentary Research Service

Author: Agnieszka Widuto
Members' Research Service
PE 754.623 – November 2023 EN
EPRS | European Parliamentary Research Service

Introduction
The energy transition is part of a broader green transition, which the EU defines as the transition of
the economy and society towards the achievement of the climate and environmental objectives, in
line with the European Green Deal. As energy accounts for 75 % of overall EU greenhouse gas (GHG)
emissions, it plays a central role in this process. Decarbonisation of the energy system requires a
structural transformation in the way energy is produced and consumed, phasing out fossil fuels and
replacing them with renewable and low-carbon energy sources. It also requires incentives for
consumers and businesses to reduce energy use, for instance by using energy-efficient appliances
and adopting cleaner manufacturing processes.
While the energy transition was already on the EU agenda (e.g. the clean energy package adopted
in 2019), the European Green Deal provided it with new impetus and became its main driver. This
was further strengthened by the REPowerEU plan of 2022, which highlighted the energy security
dimension and brought renewed focus to domestic energy production and the need to boost
renewables. A number of immediate short-term actions to address reduced energy supply and high
energy prices were complemented by initiatives to support the EU's long-term energy policies.
According to the European Commission, the energy crisis sparked by Russia's invasion of Ukraine
has paradoxically contributed to accelerating the energy transition.

EU policies
European Green Deal and 'fit for 55'
In 2019, the Commission adopted a long-term vision – the European Green Deal – with the aim of
achieving climate neutrality by 2050. The European Climate Law, passed in 2021, enshrined in EU
legislation the target of climate neutrality by 2050 (i.e. net-zero greenhouse gas emissions), along
with an intermediate target of reducing net emissions by 55 % by 2030, compared with 1990 levels.
In order to achieve this transformation, the European Green Deal entailed a set of legislative
proposals, many of which related to energy. In July and December 2021 the Commission published
the 'fit for 55' package (referring to the goal of a 55 % emissions reduction by 2030). The legislative
proposals included the revision of several energy-related pieces of legislation to align them with the
new climate targets: the Renewable Energy Directive (RED), the Energy Efficiency Directive (EED),
the Energy Performance of Buildings Directive (EPBD), the Energy Taxation Directive and the gas
and hydrogen package. New proposals included the Social Climate Fund (SCF) Regulation. Three of
these legislative acts – the RED, the EED and the SCF – were adopted in 2023; the rest are ongoing.

REPowerEU
The REPowerEU plan of May 2022 highlighted the need to phase out fossil fuels and accelerate the
clean energy transition. Aiming to end the EU's dependence on Russian energy, the plan advocated
energy savings, diversification of energy imports and a boost for the use of renewables.
The REPowerEU included two legislative proposals. One legislative proposal amended three energy
directives (RED, EED and EPBD) in order to set higher targets for renewables in consumption and
energy efficiency, promote solar installations on buildings and accelerate permit granting for
renewable projects. The other legislative proposal amended the Recovery and Resilience Facility
(RRF) Regulation to include a REPowerEU chapter in the national recovery and resilience plans,
outlining the energy investments funded under RRF to meet the REPowerEU objectives.
REPowerEU also proposed several strategies: the solar energy strategy, the EU save energy plan, EU
external energy engagement strategy, the biomethane action plan, the hydrogen accelerator, and
an EU energy platform for voluntary common purchases of gas, liquified natural gas (LNG) and
hydrogen.

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Renewable energy
Renewable energy is a cornerstone of the EU energy transition. In 2021, the share of renewables in
EU energy consumption was 21.8 % (latest available Eurostat data, an early European Environment
Agency (EEA) estimate shows 22.5 % in 2022). This share is tracked across three sectors: electricity
(37.5 %), heating and cooling (22.9 %) and transport (9.1 %), although EU legislation sets subtargets
only for the latter two (see below). When it comes to production, the majority of renewable energy
comes from bioenergy, such as biomass (55.7 %), followed by wind (13.6 %), hydro (12.3 %), solar
(7.5 %), ambient heat i.e. heat pumps (6.2 %) and geothermal energy (2.8 %).
The Renewable Energy Directive – revised in 2023 and now referred to as RED III – set a target for
the share of renewable energy sources (RES) in EU energy consumption of 42.5 % by 2030. This goal
refers to an EU average, while Member States set their own national contributions to the target.
Some Member States have a significantly higher share than the current EU average (which is
currently around 22 %), with Sweden (62.6 %), Finland (43.1 %) and Latvia (42.1 %) at the top. The
majority of Member States are below the EU average, with Belgium, Ireland, the Netherlands, Malta
and Luxembourg recording the lowest renewables share (all under 13 %).
RED III also set additional targets for the transport, buildings, industry, and heating and cooling
sectors. On transport, Member States can choose between a committing to a 14.5 % reduction in
GHG intensity or ensuring a renewables share of at least 29 % by 2030. The annual target increase
for the share of RES in industry has been set at 1.6 %, with additional targets for renewable hydrogen
(42 % by 2030 and 60 % by 2035). For heating and cooling there is a national binding target of a
0.8 % annual RES share increase by 2026, followed by a 1.1 % annual increase until 2030. The
indicative (i.e. non-binding) target for the RES share in the buildings sector is 49 % by 2030.
Further EU targets for specific renewable sources are set in other EU initiatives. The solar energy
strategy (adopted in 2022 as part of the REPowerEU plan) establishes a target of over 320 GW of
newly installed solar photovoltaic capacity by 2025, and almost 600 GW by 2030. The strategy
proposes measures to help achieve this goal, such as a European solar rooftops initiative, an EU
large-scale skills partnership for renewable energy, the EU Solar PV Industry Alliance and legislation
on permits for solar energy projects. Furthermore, the European wind power package launched in
October 2023 seeks to address challenges in the EU wind energy sector and enable the achievement
of the previously agreed EU target of approximately 111 GW of offshore renewable generation
capacity by 2030. The package includes action on the further acceleration of permitting,
improvements to auction systems across the EU, skills, access to finance, and stable supply chains.

Energy efficiency
Using less energy is another important aspect of the energy transition. 'Energy efficiency first' is a
guiding principle in EU policy in order to ensure that only the energy that is really needed is
produced and that energy demand is managed in a sustainable way. Reduced consumption of
energy also helps to lower energy costs for households and industry.
The revised Energy Efficiency Directive was adopted in 2023. It sets a binding EU target for the
reduction of final energy consumption (total energy consumed by end users) at 11.7 % by 2030,
compared with a 2020 EU reference scenario, and the same indicative target for primary energy
consumption (which includes energy used to produce energy). EU Member States must achieve
average energy savings of 1.5 % per year by 2030 (this varies depending on the year: a 1.3 %
reduction by the end of 2025, followed by a 1.5 % reduction by the end of 2027, and a 1.9 %
reduction by the end of 2030). A higher target is set for the public sector (reduction of final energy
consumption of 1.9 % each year), along with an obligation to renovate at least 3 % of the total floor
area of buildings owned by public bodies and transform them into at least nearly zero-energy
buildings or zero-emission buildings.

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Energy performance of buildings

Buildings account for about 40 % of EU energy consumption and generate approximately 36 % of
energy-related greenhouse gas emissions. Heating and cooling, electricity and domestic hot water
account for most of the energy consumed in buildings. About 35 % of the EU's buildings are over
50 years old and almost 75 % of EU building stock is not energy-efficient.
The proposed revision of the Energy Performance of Buildings Directive (negotiations ongoing) sets
new targets for building renovations in order to decarbonise the EU's building stock. Proposed
measures include making all new buildings in the EU zero-emission by 2030 (all new public buildings
by 2027), and setting minimum energy performance standards at EU level, with timelines for
accelerating the upgrade of energy performance certificates (EPC) with the lowest (class G) to higher
energy performance classes (F or E). Moreover, EU countries must establish national building
renovation plans, aimed at decarbonising national building stocks by 2050, with indicative
milestones for 2030, 2040 and 2050.

Eco-design and energy labelling

The success of the energy transition also depends on consumer habits and incentives for producers
to manufacture energy-efficient products. The proposed eco-design regulation (negotiations
ongoing) establishes a framework for setting eco-design requirements for sustainable products. It
would replace the currently binding 2009 Eco-design Directive, which sets requirements for
energy-related products and obliges producers to reduce energy consumption throughout the
product life cycle. The new regulation will integrate sustainability considerations into the
characteristics of a product and into processes throughout its value chain, focusing on aspects such
as durability and reliability, reusability, reparability, and energy and resource efficiency. The new law
will broaden the scope of current ecodesign requirements to a wider group of products and improve
transparency about their environmental impact.
EU eco-design legislation is complemented by the 2017 EU Energy Labelling Regulation, which sets
out a framework for labelling energy-related products and an obligation to provide information
about their energy efficiency. The labelling scale is from A to G and the aim is to help consumers
make informed purchase decisions.

Governance of energy union and climate action

The 2018 Regulation on the Governance of the Energy Union and Climate Action sets common rules
for reporting and monitoring implementation of energy union and EU climate goals. The energy
union strategy was launched in 2015 and has five dimensions: i) energy security; ii) integrated
internal energy market; iii) energy efficiency; iv) decarbonisation; and v) research, innovation and
competitiveness. Progress on all these five dimensions is tracked every year and presented in a state
of the energy union report. The 2023 report states that EU GHG emissions continue to fall steadily
each year (they have fallen by 31 % compared with 1990 levels, according to EEA data), while
renewables are growing and energy efficiency is improving. The report nevertheless calls for
accelerated implementation of European Green Deal initiatives, in order to stay on track.
As part of Governance Regulation implementation, each Member State has to produce a 10-year
national energy and climate plan (NECP). The process of updating the NECPs is ongoing, as the final
updated NECPs are due by 30 June 2024. In October 2023, the Commission published an assessment
of progress towards the objectives of the energy union and climate action, based on progress
reports on NECP implementation sent by the Member States in March 2023. A revision of the
Governance Regulation is planned for early 2024, to take into account the objectives of the fit for 55
package and the REPowerEU plan.

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Gas, hydrogen and electricity

Gas emits less CO2 than other fossil fuels and was for a long time considered a 'transition' fuel on the
way to climate neutrality, especially in the context of switching from coal. In recent years, the EU has
also made efforts to accelerate the shift from natural gas to renewable and low-carbon gases. The
2021 fit for 55 set of proposals included a hydrogen and decarbonised gas market package, revising
the existing gas directive and regulation. The package seeks to facilitate the integration of
renewable and low-carbon gases into the existing gas network, remove barriers to cross-border
hydrogen infrastructure and create the conditions for a more cost-effective transition. The
legislative procedure is currently ongoing.
Hydrogen is predicted to play an important role in the transition to a net-zero energy system. The
hydrogen strategy adopted in 2020 proposed strategic objectives for hydrogen production and key
actions in five areas: investment; boosting production and demand; a supportive framework
(hydrogen market and infrastructure); research; and international cooperation. As part of the
hydrogen accelerator initiative under REPowerEU, previous targets have been revised upwards to
10 million tonnes of renewable hydrogen produced and 10 million tonnes imported by 2030. The
European Hydrogen Bank established in 2023 meanwhile offers financing mechanisms to boost
both the creation of EU domestic market and international imports into the EU.
Electrification is another important part of the energy transition, especially in terms of energy use in
industrial processes, transport (electric vehicles) and buildings (heat pumps). The Commission
expects electricity demand to increase significantly, with the share of electricity in final energy
consumption growing from 23 % today to around 30 % in 2030, and towards 50 % by 2050. The
electricity market reform proposed in 2023 (procedure ongoing) aims to accelerate investment in
renewables and improve consumer access to renewable and low-carbon energy.

Industry
The energy transition is also impacting the EU's industrial sector, because of its role in reducing
emissions but also in terms of EU domestic production of clean energy technologies. The idea
behind the Green Deal industrial plan of February 2023 is to secure the EU industrial leadership in
net-zero technologies and boost a strong domestic manufacturing base, through improved access
to funding and skills. The related legislative proposals, the net-zero industry act and the critical raw
materials act (both procedures ongoing) would simplify the regulatory framework for investments,
reduce the EU's reliance on imports, and increase the circular economy approach in the supply of
strategic raw materials.
The 2023 progress report on the competitiveness of clean energy technologies analyses
opportunities and challenges in terms of EU resources, the skills base and research, with a sub-
analysis of specific strategic net-zero technologies: solar photovoltaics (PV) and thermal; onshore
and offshore wind; ocean energy; batteries; heat pumps; geothermal energy; hydrogen; biogas and
biomethane; carbon capture and storage (CCS); and grid technologies. Furthermore, the recently
proposed strategic technologies for Europe platform (STEP) includes clean technologies as one of
its three priority areas. In terms of energy, these clean technologies include: renewable energy;
electricity and heat storage; heat pumps; electricity grids; renewable fuels of non-biological origin;
sustainable alternative fuels; electrolysers and fuel cells; carbon capture, utilisation and storage;
energy efficiency; and hydrogen.

Socially just transition

Energy transition policies must also take into account socio-economic impacts. These vary
depending on the sector, region and country. However, the most common impacts relate to the
restructuring of industrial systems, job reallocations, and the expenditure associated with switching
to cleaner technologies, both in industrial processes and in daily life (such as exchanging coal or gas

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heating for heat pumps powered by electricity). High energy bills are also a problem, while
long-term solutions, such as home renovations, energy efficiency improvements and electric
vehicles, are often expensive. According to the 2022 Council recommendation on ensuring a fair
transition, public support is therefore necessary. This could include, for instance, reduced taxes and
other incentives for efficient heating systems and insulation in buildings, in a way that avoids locking
consumers into the current system based on fossil fuels. Energy poverty is another important issue
to address and particular attention must be paid to vulnerable groups such as low-income
households who spend a high share of their income on essential services such as energy, transport
and housing, as well as small and medium-sized companies. Accompanying policies to ease the
short-term costs and price pressures resulting from the internalisation of emission costs in prices or
the costs of adaptation to low-emission alternatives are needed, along with policies that ensure a
fair distribution of the benefits and costs of the transition. The lack of such measures can lead to
lower social acceptance of the transition, protests against green legislation and calls to delay the
measures owing to the high costs of decarbonisation for people and industry.

Social Climate Fund

Adopted in May 2023, the Social Climate Fund (SCF) will support the most vulnerable citizens and
businesses affected by the extension of the EU emissions trading system (ETS) to the buildings and
road transport sectors. With a budget of €65 billion (up to €86.7 billion with national contributions)
over the 2026-2032 period, it can be used for direct income support and investment in the energy
efficiency of buildings and sustainable transport. The fund will become a major EU weapon in the
fight against energy poverty.
By the end of June 2025, EU countries are required to submit their social climate plans outlining
concrete measures that help to reduce end users' reliance on fossil fuels, boost building renovations,
decarbonise heating and cooling systems, integrate renewable energy and increase the uptake of
zero- and low-emission mobility and transport. Temporary income support can be used only to
support vulnerable households and transport users.

Just Transition Fund

The Just Transition Fund (JTF), adopted in 2021, offers support for regions reliant on fossil fuels and
high-emission industries. A budget of €17.5 billion can be used for investment in areas such as clean
energy technologies, the circular economy, emissions reduction, regeneration of sites, reskilling of
workers, job creation, sustainable local transport, and the upgrading of district heating networks
powered by renewable sources.
EU Member States have prepared territorial just transition plans that identify the places supported
and outline how their investments will be spent. The territories to be funded under the JTF are those
most negatively affected by the economic and social impacts resulting from the transition, with
particular regard to the expected adaptation of workers or job losses in fossil fuel production and
the transformation needs of the production processes of industrial facilities with the highest
greenhouse gas intensity. Implementation of the Just Transition Fund is currently well under way; it
is managed as part of EU cohesion policy funds for 2021 to 2027.

Funding
Estimating the funding needed for the EU's energy transition is a complex task. The Commission's
2023 Strategic Foresight Report calculates that additional annual investment of over €620 billion is
needed to meet the European Green Deal and REPowerEU objectives. Moreover, the Commission
forecasts that the REPowerEU plan alone entails additional investment of around €300 billion
between 2022 and 2030, on top of what is needed to meet the objectives of the fit for 55 proposals.
The International Energy Agency (IEA) estimates that EU annual investment in clean energy will have
to rise to €530 billion a year by 2030 from €330 billion in 2022 in order to align with the IEA net-zero

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emissions by 2050 scenario. According to the European Commission's calculations, quoted in a 2023
European Investment Bank (EIB) report, energy investment in the EU must almost double during the
decade from 2021 to 2030, i.e. from €229 billion per year on average over the 2011-2020 period to
€396 billion per year from 2021 to 2030. In subsequent decades, this will have to increase to
€520 billion to €575 billion per year, more than 2.5 times the current level.
In terms of specific energy transition investments, the Commission estimates that in the years 2021
to 2030, the 55 % GHG emissions reduction target will require €98.5 billion in annual investments in
power plants and grids, and €180.1 billion in the residential sector, with overall energy system
investment reaching €1051.3 billion (the exact numbers depend on the scenario adopted).

EU budget and Next Generation EU

The green transition is supported by the EU budget's 30 % spending target for climate action. This
target refers jointly to the 2021-2027 multiannual financial framework (MFF) and the Next
Generation EU (NGEU) instrument that covers the years 2021 to 2026. This translates to around
€600 billion (if the loan component of the RRF is used in full). Energy is an important part of this
spending. Specific energy-related actions that contribute to this goal are linked mainly to renewable
energy and energy efficiency, as specified in the energy cluster of the climate-tracking
methodology. They can also include green energy infrastructure, electricity transmission,
distribution and storage, CO2 transport and storage, renewable and low-carbon gases, including
hydrogen, high efficiency co-generation, district heating and cooling, and smart energy systems
(such as smart grids and information and communications technology systems).
The main component of the NGEU programme is the Recovery and Resilience Facility (RRF),
implemented through national recovery and resilience plans (NRRPs). The RRF also has a climate
spending target, which amounts to 37 % of each recovery and resilience plan's total allocation. This
share is calculated on the basis of a separate methodology for climate tracking set out in Annex VI
to the RRF Regulation. The bulk of energy-related investment focuses on energy efficiency,
renewable energy and networks. The resources dedicated to the energy dimension vary across
Member States, though almost all countries are financing measures in the two main categories of
energy efficiency (€54.85 billion, i.e. 62 % of the total) and clean energy, including investment in
renewable energy sources and energy infrastructure and networks (€33.64 billion, i.e. 38 % of the
total). According to the RRF Regulation, the NRRPs must also specify how the measures will
contribute to the green transition. The national plans must ensure complementarity between
measures funded under the RRF and actions supported via other EU funds (see overview below).
Following the REPowerEU programme, the national plans were updated to include a REPowerEU
chapter, which outlines reform and investment contributing to at least some of the following
objectives: improving energy infrastructure to meet security of supply needs; boosting energy
efficiency in buildings and critical energy infrastructure; decarbonising industry; accelerating the
deployment of renewable energy; addressing energy poverty; incentivising reduced energy
demand; addressing internal and cross-border energy transmission and distribution bottlenecks;
supporting electricity storage; reskilling the workforce towards green skills; and supporting value
chains in critical raw materials and technologies linked to the green transition.

Specific funds
The EU provides energy transition funding through a variety of instruments.
The InvestEU Fund (endowed with an EU budget guarantee of €26.2 billion) finances 'sustainable
infrastructure' as one of its policy windows. This includes renewable energy, energy efficiency and
building renovation. The Commission proposal for a strategic technologies for Europe
platform (STEP) establishes an additional EU guarantee of €7.5 billion. The energy-related 'clean
technologies' under the STEP proposal include: renewable energy; electricity and heat storage; heat
pumps; electricity grid; renewable fuels of non-biological origin; sustainable alternative fuels;

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electrolysers and fuel cells; carbon capture, utilisation and storage (CCUS); energy efficiency;
hydrogen and its related infrastructure; and smart energy solutions.
The Modernisation Fund is funded from EU ETS allowances, which makes its budget hard to predict,
but the European Commission estimates that it could reach over €48 billion in the years 2021 to
2030. The fund can be used for investment in renewable energy, energy efficiency, energy storage,
modernisation of energy networks (including district heating, pipelines and grids) and just transition
in carbon-dependent regions (e.g. redeployment, re-skilling and upskilling of workers, education,
job-seeking initiatives and start-ups). It is available to 10 lower-income countries: Bulgaria, Czechia,
Estonia, Croatia, Hungary, Latvia, Lithuania, Poland, Romania and Slovakia. From 2024, three more
countries will be supported: Greece, Portugal and Slovenia.
The Innovation Fund, with a projected budget of €40 billion, obtained from ETS allowances (over
the 2020 to 2030 period), finances projects based on highly innovative technologies. The eligible
sectors are energy-intensive industries, renewable energy, energy storage, and CCUS. The fund also
supports cross-cutting projects for innovative low-carbon solutions that lead to emissions
reductions in multiple sectors.
Cohesion policy, with a budget for 2021 to 2027 totalling €392 billion, covers several funds that can
support the energy transition. The principle of 'thematic concentration' requires that a proportion
of funds must be dedicated to one of the policy's objectives on a greener, low-carbon Europe
transitioning towards a net-zero economy. The European Regional Development Fund (ERDF) can
be used for actions such as energy efficiency, reducing GHG emissions, renewable energy,
developing smart energy systems, grids and storage outside the trans-European energy network
(TEN-E), as well as promoting sustainable transport. The Cohesion Fund is available only to
15 Member States. It supports investment in environment and transport, including in particular
renewable energy. European Social Fund Plus (ESF+) focuses mainly on employment, social
inclusion and skills. In the context of energy transition, it can be used for the adaptation of workers
to change, reskilling, education and training, job creation in the energy sector, and the social
integration of people at risk of poverty or social exclusion.
The Just Transition Fund (JTF) – formally a cohesion policy fund – supports those regions worst
affected by the transition towards climate neutrality. These are mainly carbon-intensive regions, for
instance relying on fossil fuels and high-emission industries. The fund supports investments in clean
energy technologies, emissions reduction, regeneration of sites, reskilling of workers, job creation,
reducing energy poverty etc. Member States prepare just transition plans that explain how support
will be used to achieve the transition. The JTF is part of the broader Just Transition Mechanism,
which also includes a scheme under InvestEU and a public sector loan facility implemented together
with the European Investment Bank.
The Social Climate Fund with a budget of up to €86.7 billion provides support for vulnerable groups
and companies affected by the green transition. It can be used to finance building renovations,
sustainable mobility and income support (see above).
The Connecting Europe Facility has a special component for energy. With a budget of €5.84 billion
in the 2021-2027 period it can fund projects identified under the TEN-E Regulation (projects of
common interest – PCIs) designed to improve the EU's cross-border energy infrastructure.
With a budget of approximately €1 billion for the 2021-2027 period, the LIFE Clean Energy Transition
sub-programme, targets market barriers that hamper the socio-economic transition to sustainable
energy. It focuses on five areas of intervention: building a policy framework in support of clean
energy transition; accelerating technology, skills and the roll-out of new business models; attracting
private finance for sustainable energy; supporting the development of local and regional
investment projects; and involving and empowering citizens in the clean energy transition.

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The EU renewable energy financing mechanism provides grants that cover either the installation of
a renewable energy production facility or the actual production of renewable energy in sectors such
as electricity, heating and cooling, and transport. The call for projects is published once a year.
Horizon Europe, the EU's research and innovation funding programme, has a budget of €95.5 billion
for the 2021-2027 period. Research projects focusing on energy are funded mainly from the Climate,
energy and mobility cluster, which includes areas of intervention such as energy supply, energy
systems, energy storage, clean transport and buildings, and industrial facilities in energy transition.
Calling itself 'Europe's climate bank', the EIB adopted its energy lending policy back in 2019. Its focus
is on transforming the energy sector through energy efficiency, low-carbon supply, innovation and
enabling infrastructure. EIB does not support traditional fossil fuel projects, including natural gas,
and was the first international finance institution to end financing for fossil fuel projects. According
to EIB estimates, the bank has been supporting the EU's energy transition with €10-12 billion per
year in recent years.
The European Globalisation Adjustment Fund for Displaced Workers (EGF) is a special instrument
that offers support to workers who lose their jobs due to the transition to a low-carbon economy,
among other things. It does not co-finance social protection measures such as pensions or
unemployment benefits, but can be used for instance for career advice, education and training,
entrepreneurship and business creation. It has an annual budget of €210 million for 2021 to 2027.
The Technical Support Instrument, part of EU structural reform support, provides tailor-made
technical expertise to design and implement reforms, including those relating to energy transition.
It has a budget of €864 million for the 2021-2027period.

European Parliament
The European Parliament supports an ambitious climate and energy policy. Its 2019 resolution on
the climate and environment emergency called for far-reaching reform of EU energy and
infrastructure investment policies, ensuring a fair and equitable transition that supports job
creation, and recognised its own institutional responsibility to reduce its carbon footprint.
In its 2020 resolution on the European Green Deal, Parliament highlighted the central role of energy
in the transition to a net-zero economy and called for the revision of several EU energy directives
(the RED, the EED, the EPBD and the Energy Taxation Directive) to align them with the new
decarbonisation goals, while paying special attention to vulnerable citizens and economic
predictability for the sectors concerned.
In its two resolutions adopted in the aftermath of Russia's invasion of Ukraine (resolution of
March 2022 on Russia's aggression against Ukraine and resolution of May 2022 on the social and
economic consequences for the EU of the Russian war in Ukraine), Parliament highlighted the need
to speed up the clean energy transition as one way to contain the energy crisis.
In its resolution on the UN COP28 conference, adopted in November 2023, Parliament highlighted
the way in which Russia's invasion of Ukraine had added urgency to the need to transform the global
energy system. Parliament supported a global target for tripling renewable energy and doubling
energy efficiency by 2030, to be adopted at COP28, together with the phasing-out of fossil fuels. It
also welcomed EU energy policy initiatives leading to reducing the EU's dependence on fossil fuels.
Parliament highlighted the need to accelerate electrification, build a renewables-based energy
system, tackle energy poverty and ensure a just energy transition.

Outlook
The coming years will bring multiple challenges for the EU, as it tries to balance implementation of
its green transition agenda with energy supply issues linked to geopolitical tensions, energy
affordability issues, and structural shifts in the economy and energy use. An increasingly important

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issue is also that of preserving EU competitiveness and boosting domestic industry to ensure stable
energy supply chains and boost the independence of the energy system, while avoiding
over-reliance on third countries.
According to a 2023 Jacques Delors Institute report, solving the 'energy trilemma' (i.e. achieving
climate neutrality while guaranteeing security of supply and reasonable prices) must be based on
three key elements: enhanced energy and climate governance, an increased EU budget for energy,
and improved involvement of citizens in decision-making. In terms of funding, the International
Energy Agency estimates that spending for solar PV, battery storage and energy efficiency is close
to being sufficient to meet the EU's 2030 investment needs, but annual investment in the clean
electrification of industry, buildings and transport, grids (a key enabler for the clean energy
transition), and low-emission fuels must be increased.
The EU's negotiating position for the 28th UN Climate Change Conference (COP28), taking place in
Dubai between 30 November and 12 December 2023, reiterates the EU's commitment to the green
transition. It highlights the need for an energy sector predominantly free of fossil fuels, striving for
a decarbonised global electricity system, tripling installed global renewable energy capacity and
doubling the rate of energy efficiency improvements. It also calls for the phasing-out of fossil fuel
subsidies that do not address energy poverty or the just transition. The EU Energy Days at COP28,
on 4 and 5 December 2023, offer an opportunity to explore the EU's approach to energy transition.

MAIN REFERENCES
D'Alfonso A., Energy policy in the national recovery and resilience plans, EPRS, European Parliament,
2022.
Erbach G., Financing the transition to clean energy in Europe, EPRS, European Parliament, 2017.
Erbach G. and Höflmayr M., Economic impacts of the green transition, EPRS, European Parliament, 2022.
European Commission, Towards Green Transition in EU regions, Joint Research Centre, 2022.
Heflich A. and Saulnier J., Towards carbon neutrality through ambitious transformation of the EU energy
system, EPRS, European Parliament, 2022.
Zachmann G. et al., Decarbonisation of Energy: Determining a robust mix of energy carriers for a carbon-
neutral EU, Policy Department for Economic, Scientific and Quality of Life Policies, European Parliament,
2021.

DISCLAIMER AND COPYRIGHT

This document is prepared for, and addressed to, the Members and staff of the European Parliament as
background material to assist them in their parliamentary work. The content of the document is the sole
responsibility of its author(s) and any opinions expressed herein should not be taken to represent an official
position of the Parliament.
Reproduction and translation for non-commercial purposes are authorised, provided the source is
acknowledged and the European Parliament is given prior notice and sent a copy.
© European Union, 2023.
Photo credits: © kilimanjaro / Adobe Stock.
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