What could Europe’s green subsidy plan look like?
With the European Green Deal announced in 2019, Europe was the first to declare its ambition to be a climate-neutral continent. COVID-19 and the complexities of European green subsidies meant that considerable funds are still to be deployed. In the meantime, the US Inflation Reduction Act (announced in July 2022) has received significant attention owing to the simplicity of the mechanism and the potential for a more favourable policy to attract investment into the country. This policy move has prompted the European Commission to respond with the proposed Green Deal Industrial Plan (“GDIP”) to mobilise various forms of state aid for the green transition.
Amy Wong, head of European Energy, estimates around €550bn of funding could be made available. There is considerable uncertainty regarding the size and scope of the European GDIP, not only due to disagreement amongst European leaders but also because Europe has already raised multiple green transition facilities in the past. Further details are expected at the EC meeting in March and a European Sovereignty Fund proposal in Summer 2023.
The Credit Suisse EMEA Securities Research team identified nine key focuses for EU green funding based on our review of EU literature. More than 20 Credit Suisse analysts have collaborated to provide their views on how the package could impact strategy, earnings, and cash flow across sectors including Hydrogen, Transmission & Distribution, Sustainable Mobility, Renewables, and Circular Economy. The team take a first look at the sectors and companies which will see the most direct impact from state aid. Other sectors may experience a secondary effect (e.g., financial institutions and alternative investment managers could see a higher level of sustainable financing).
