How is the EU financing the transition to climate neutrality?
EU countries have committed to achieving climate neutrality by 2050. Making the green transition happen will require enormous investment.
The EU and its member states have secured almost €660 billion for this purpose in the current multiannual budget. On top of that, part of the revenue derived from auctioning ETS allowances is also being spent on climate action. The money will be distributed through a number of funds dedicated to different aspects of green transition. Moreover, the EU is incentivising private investment in technologies that help to green the European economy.
How is the EU financing the transition to climate neutrality?
The EU and its member states are mainstreaming climate action in their spending. This infographic introduces the EU funds and tools that are used to distribute a significant proportion of the EU budget, together with part of the revenue from auctioning ETS allowances.
34% - that is almost €658 billion - from the EU’s budget for 2021-2027 and the recovery instrument Next Generation EU has been or will be spent on climate action (including €275.7 billion from the Recovery and Resilience Facility and €93.5 billion from the Cohesion Fund and the Regional Development Fund). Part of the revenues from the EU ETS allowances will also be spent on climate action.
Leaving no-one behind
Social Climate Fund
At least €86.7 billion for 2026-2032 to support people and businesses most impacted by the introduction of the new emissions trading system for buildings, road transport and fuels for additional sectors.
The fund will be financed through the revenues from the sale of the allowances under both the existing and new emissions trading system.
Just Transition Mechanism
Around €55 billion to address the social and economic effects of the green transition, focusing on the most challenged regions, industries and workers.
Three pillars:
1. Just Transition Fund
€19.7 billion expected to mobilise over €27 billion in investments for:
- productive investment in SMEs and creation of new firms
- R&D, digital innovation and connectivity
- clean and renewable energy
- enhancement of circular economy and land restoration
- retraining of workers and job seekers
- activities in the areas of education and social inclusion
2. Just Transition Scheme within InvestEU
Dedicated InvestEU budget guarantee scheme to mobilise up to €15 billion of investment in the most affected regions.
3. Public sector loan facility
- €1.3 billion in grants from the EU budget
- €6-8 billion in loans from the European Investment Bank (EIB)
Goal: to increase public sector investments for regional development needs to up to €15.3 billion.
Modernisation Fund
Between 2021 and 2030, around €57 billion is allocated to 10 lower-income member states to be spent on:
- renewable energy
- energy efficiency
- energy storage
- energy networks
- just transition in carbon-dependent regions
(The exact figure depends on carbon price. Calculation made for €75/tCO2)
The Modernisation Fund is financed through the auctioning of allowances under the EU emissions trading system (EU ETS), initially 2% of the total allowances for the 2021-2030 period.
Since January 2021, €12.65 billion have been disbursed to support over 170 projects in ten countries.
Boosting innovation and R&D
Horizon Europe
€93.5 billion through the EU’s key funding programme for research and innovation. 35% of the funds to be spent on climate-related projects:
- tackling climate change
- achieving the UN’s sustainable development goals
- boosting the EU’s competitiveness and growth
Innovation Fund
Between 2020 and 2030, around €40 billion to develop innovative low-carbon technologies, including:
- technologies and processes in energy-intensive industries
- carbon capture, use and storage
- renewables
- energy storage
The Innovation Fund is financed through the auctioning of around 530 million allowances under the EU ETS. The exact figure depends on carbon price. Calculation made for €75/tCO2.
Protecting the environment
LIFE programme for the environment and climate action
€5.4 billion between 2021 and 2027 to support projects and actions covering:
- nature and biodiversity
- circular economy and quality of life
- climate change mitigation and adaptation
- clean energy transition
Beyond the EU
The EU and its member states are the largest providers of public climate finance in the world. Amost €36 billion in 2023 (28.6 billion from public sources and 7.2 billion of private finance). This is to help developing countries:
- reduce emissions
- build resilience against the effects of climate change
Last review: 31 January 2025