The clean economy has decided. Can Europe’s systems keep up?

Energy transition, competitiveness and the case for completing the Energy Union

 Last week, UN climate negotiators wrapped up two weeks in Bonn in what most observers charitably called “gridlock.” At the same time, 49 French departments were on red alert for exceptional heat. London had its hottest day ever. El Niño is already turbocharging a record European heatwave — tracked in real time by ESA’s Copernicus Climate Change Service, an indispensable eye on what’s actually happening to our climate.

It’s a striking split screen. But much more interesting than the political gridlock is how much is already moving without it.

The global green economy hit a record US $10tn last year, outpacing wider markets, with capital flows in global energy investments expected to grow by about 5% and reach US $3.4tn. Last week alone: Iberdrola raised €1.7bn in green bonds to fund grid expansion and renewables. Frontier secured $915mn from Google, Anthropic and others to scale permanent carbon removal. EQT closed a $4.4bn sustainability-linked loan — Asia’s largest. Egypt and the EU backed an $800mn grid upgrade to bring 22GW of renewables online by 2030. And this enthusiasm was echoed at the London Climate Action Week, where a broad alliance of organisations and companies launched the ‘#ElectrifyNow’ campaign to accelerate the investment in supply of and demand for clean electricity.

All this is less due to concerns about the climate and more about energy security and soaring costs, which are closely entwined with fossil fuel dependency. But the important thing is that good renewable technology now exists, that it is scalable and economically viable, and that it attracts money. Private capital has made its decision. The energy transition is happening — alongside the multilateral process and, increasingly, ahead of it.

The drivers are economic as much as environmental. As electricity demand grows through electrification of industrial processes, cooling, digitalisation and emerging technologies, access to affordable and reliable clean energy is becoming a competitiveness question as much as a climate one.

And the economics keep improving. UK EV drivers are now collectively saving £3bn a year — £1,100 per driver. Thanks to strong growth in wind and solar generation, the electricity market in Spain has been influenced by high gas prices for only 9% of the hours, compared to the 52% of the previous gas crisis in 2021. Energy-efficient air conditioning could save Indian households ₹69bn annually. These outcomes have moved beyond the pilot project phase and they represent a structural shift in how energy is used and how much it costs.

This is why electrification is increasingly moving from the margins of climate policy to the centre of economic policy. Lower operating costs, greater efficiency and reduced exposure to fossil fuel volatility can strengthen both household resilience and industrial competitiveness.

What Bonn did surface — and this matters — is the one gap that markets alone won’t close: getting capital to the countries and communities that didn’t cause the problem but are first in line to suffer from it. Climate finance for adaptation in vulnerable nations remains stuck, with countries unable to agree on targets for tripling funding. That’s a real failure of political architecture. But it’s increasingly one problem to solve, not the whole picture.

There was also an uncomfortable moment in Bonn when nations had to formally mobilise to protect climate science from fossil fuel industry interference during the negotiations themselves.

Climate science integrity should not be a bargaining chip. Copernicus, the EU’s earth observation programme, is a critical piece of strategic European infrastructure and is publishing temperature records, sea level data, heatwave attribution analyses. The evidence base is stronger, more granular and more publicly accessible than ever, and it not only informs academic climate modelling but also provides critical information to public authorities, utilities and insurers.

Speaking of data, the criticism of science is also fuelled by a consistent misunderstanding of how carbon data and accounting are working and maturing. A recent study flagged discrepancies in the Climate TRACE emissions database, particularly around transportation in cities. Some see this as ‘making up the numbers’. Another perspective is that carbon accounting is doing what carbon accounting has to do. Measuring emissions at the granularity of cities and supply chains is extraordinarily complex, and baselines need constant refinement as methodologies mature. What the new picture actually tells us is that urban transport emissions are even more significant than previously measured — which means cities that crack transport decarbonisation are sitting on bigger wins than anyone projected. That’s a reason to accelerate, not a reason to doubt.

The honest read of this moment is that two parallel realities are running simultaneously. One is a multilateral system that moves slowly, haggling over financing mechanisms while populations adapt in real time. The other is a clean economy that has crossed an inflection point and isn’t going back.

Europe’s opportunity — and frankly its responsibility — is to accelerate the connection between the two: channelling the capital already moving in markets towards the places and people where it’s most needed, and using the political leverage of the Single Market and the Energy Union to set the terms of that flow.

The challenge is no longer simply mobilising investment, but ensuring that Europe can deploy it effectively. Grid bottlenecks, uneven infrastructure development and fragmented energy markets continue to slow the pace at which clean energy can be integrated and scaled. Completing the Energy Union is therefore not only a task for completing the Single Market with climate benefits, but also a competitiveness and resilience imperative.

In a world where economic and geopolitical influence increasingly depend on scale, Europe’s ability to integrate its energy system and strengthen its internal market may prove just as important as its ability to attract capital in the first place.

The heatwave making headlines across the continent this week is a stark reminder that the window for a managed transition is closing. The tools to act are there. The money is moving. The science is solid.

 We just need Europe’s energy and market systems to catch up.

The views expressed in this #CriticalThinking article reflect those of the author(s) and not of Friends of Europe.