As U.S. President Donald Trump vows to focus on expanding the country’s fossil fuels sector and move away from the former administration’s focus on renewable energy, this could provide Europe with an opportunity to pull ahead in the race to green.
The European Union was, for a long time, seen as a leader in the global green transition, as it invested heavily in renewables and introduced policies to shift away from fossil fuels. That all changed with the introduction of former President Biden’s Inflation Reduction Act (IRA) – the most far-reaching U.S. climate policy to date, in the summer of 2022. The U.S. began to rapidly attract high levels of private investment in green energy and clean tech, putting it ahead of its European ally in terms of investment.
An Opportunity for the EU
In January, Poland’s deputy climate minister Krzysztof Bolesta said that President Trump’s order to pause spending on U.S. climate and infrastructure laws could provide Europe with an opportunity to attract more green energy and cleantech funding.
Since Trump’s inauguration on Jan. 20, he has signed numerous executive orders calling for a pause in spending associated with the IRA and other climate policies, a freeze on both leasing federal areas for new offshore wind projects, the withdrawal of the U.S. from the Paris Climate Agreement, and favoring higher levels of oil and gas production. He has also made significant staff cuts at the Environment Protection Agency (EPA) and other government departments.
Bolesta responded to Trump’s recent moves by saying, “I think this is our moment. This is our window of opportunity, because many companies I’ve had conversations with, they were complaining about the IRA.”
The deputy climate minister said that companies had threatened to move investments to the U.S. to avoid strict EU regulations and benefit from financial incentives from the IRA. However, as the U.S. energy sector investment environment becomes more uncertain, companies may now be wary about making the move.
Bolesta explained, “Now I think the money will be harder to get in America, and we have our chance, so I just very much hope we will not blow it.”
EU Pulling Ahead
Europe is progressing well in meeting its climate goals. Renewable energy sources contributed a record 47% of Europe’s electricity in 2024, according to a January report from the London-based think tank Ember.
The publication found that solar power provided Europe with 11% of its electricity, overtaking coal for the first time. Meanwhile, solar and wind power combined provided more electricity than natural gas. This shift from fossil fuels to renewables has been made possible by the introduction of favorable energy policies from governments across the political spectrum in the region.
The increase in renewable energy capacity over the last half a decade has saved Europeans billions of dollars on fossil fuel imports, the report found. Europe continues to spend around half a trillion dollars a year importing fossil fuels each year at present.
Much in the same way as Biden introduced the IRA, the EU established the Recovery and Resilience Fund after the Covid-19 pandemic to pull Europe out of a recession. The fund has attracted $1.87 trillion in investments, a third of which have gone to green energy.
In 2022, the Russian invasion of Ukraine and subsequent sanctions on Russian energy forced Europe to diversify its oil and gas imports. This was another driver for accelerating the rollout of renewable energy projects across the region, to ensure the EU’s energy sovereignty and security.
The lead author of the Ember report, Chris Rosslowe, stated, “Fossil fuels are losing their grip on EU energy.” Rosslowe added, “At the start of the European Green Deal in 2019, few thought the EU’s energy transition could be where it is today; wind and solar are pushing coal to the margins and forcing gas into structural decline.”
Against the Clock
Despite Trump’s repeated threats to rein in climate spending, many U.S. energy leaders still believe that the green transition is unstoppable. Both Democrat and Republican states have benefitted from the growth in green investment in recent years, with several oil and gas companies even supporting the financial incentives for green spending. Therefore, Europe may only enjoy a short period of time in which it can benefit from the uncertainty of the U.S. investment environment to attract more funding to its energy market.
To benefit from the ‘window of opportunity’, Europe must make itself attractive to energy companies by enhancing access to the region’s energy sector through streamlining bureaucratic processes and providing a wide range of incentives.
In January, the European Commission launched A Competitiveness Compass for the EU, aimed at setting a “path for Europe to become the place where future technologies, services, and clean products are invented, manufactured, and put on the market while being the first continent to become climate neutral”.
The EU must follow the guidelines set out in this initiative, as well as continue to encourage member states to establish strong climate policies, to attract investment away from the U.S. and solidify the region’s position in the global green transition.
