Progress on finance was heading in the wrong direction
The EU global financial flows are not on track to limit global warming to 2°C or less. The EU therefore fails to contribute to Article 2.1.c of the Paris Climate Agreement. The climate investment gap that needs to be filled to enable the EU to reach its climate objective by 2030 is still significant. Due to the lack of an annual climate investment gap assessment, it is not possible to ascertain the required increase in annual public and private investments in the EU. The closest estimate is that public and private climate investments in the Union should be 50% higher than they are now, to bridge the average annual gap of EUR 360 billion assessed by the European Investment Bank. Public intervention is essential to enable the redirection of private financial flows, but the EU and its Member States do not seem to be headed in the right direction in this regard. Fossil-fuel subsidies granted by EU Member States skyrocketed in 2021 and 2022, and no path of phase-out has been adopted yet. Environmental taxation is still well below what is targeted by the EU. Finally, it is difficult to assess the progress of the private financial system towards climate neutrality financing as no relevant indicators are currently available. This lack of traceable data may lead to an implementation gap in the EU's sustainable finance aspirations.