Europe 2.5 2.6The European Union (EU) ranks second globally in energy transition investment, spending approximately $360 billion in 2023, mainly in electrified transport ($150 billion) and renewable energy ($100 billion).23 Key support mechanisms include the following: –Emissions trading system (ETS). –Government subsidies. –Feed-in tariffs and premiums. –Contracts for difference (CfD) and carbon contracts for difference (CCfD). –Sustainable bonds/debt. European countries are all aiming for net-zero carbon emissions by 2050 or earlier, with detailed plans to achieve these targets. The EU was the world’s largest issuer of sustainable bonds in the first half of 2024, reaching a total issuance of $291 billion.24 Currently, the EU spends over $10 on energy transition projects for every dollar spent on fossil fuels.25 In 2022, the cost of capital for renewables in Europe rose slightly due to supply chain and inflationary pressures, but renewable investment remains cost-competitive. To meet their 2030 climate targets, investments by EU countries in modernizing their energy systems, transport and buildings must double from the €407 billion invested in 2022 to at least €813 billion annually – 5.1% of the EU’s GDP .26 While some sectors, such as hydropower and battery storage, have exceeded their investment targets, others, such as solar and EV charging infrastructure, show minor deficits. Significant deficits remain in wind power and electricity grids, which need substantial investment to integrate new renewable capacities and support electrification. An additional €41 billion is needed annually for grid extension and maintenance. Around 40% of Europe’s distribution grids are over 40 years old and cross-border transmission capacity needs to double by 2030.27 Rystad Energy estimates an additional 18 million kilometres of grid network are needed by 2030, requiring up to $3.1 trillion in investment.28 The EU ranks second globally in energy transition investment, spending ~$360 billion in 2023 – equivalent to over $10 on clean energy projects for every dollar spent on fossil fuels. North America In 2023, the US spent over $300 billion on energy transition investment – the third highest after China and the EU, accounting for 15% of total global clean energy investment. Investments in the oil and gas sector remain significant, with $1.40 spent on energy transition for every dollar spent on fossil fuels, compared to the global average of $1.80.29 The country is the world’s second largest emitter of greenhouse gases and therefore plays a pivotal role in the global goal to reach net zero.30 The US is relying on a combination of low-cost loans and grants from the Department of Energy (DOE) and subsidies under the 2022 Inflation Reduction Act (IRA) to accelerate investment into its energy transition. The IRA provides over $370 billion For a world map denoting which countries fall within which regions, see Annex. Financing the Energy Transition: Meeting a Rapidly Evolving Electricity Demand 15

Financing the Energy Transition 2025