Investments in Energy Efficiency and Renewable Energy for Europe’s Energy Sovereignty and Climate Ambition

300 billion euros of investment to overcome dependence on Russian gas. Through the RePowerEU plan, unveiled on Wednesday, May 18 by the European Commission, the European Union aims to gain sovereignty by freeing itself from Russian fossil fuels and thereby increase confidence in its goal of achieving carbon neutrality by 2050. renewable energy, through energy efficiency and the taxation of carbon products… all of these are opportunities for investors. The analysis was conducted by Laurent Troules and Tristan Fava, principal investment coordinators of Dorval Asset Management, co-managers of the Dorval European Climate Initiative.

Carbon neutrality of the European Union: the same response to multiple challenges

In terms of energy and health, the European Union is beginning to recognize the need to provide itself with the means to strengthen its sovereignty. As early as 2020, the Covid-19 health crisis highlighted Europe’s dependence on its foreign suppliers (China, South Korea) for drug supplies and the need to acquire a productive tool to produce these medical resources on its own land. Last February, the Russian invasion of Ukraine highlighted another equally strategic external dependency: energy supplies. Faced with the threat of gas shortages, inflation and tensions over energy prices, European leaders could take short-term action by abandoning their goal of achieving carbon neutrality by 2050. a political and strategic choice to reaffirm Europe’s commitment to developing clean energy with the goal of being the first continent to make this important environmental transition to save the climate. This transition provides an opportunity to answer several questions: sovereignty, security, climate, trade balance, etc.

Political leaders, companies, citizens… Europe’s clean energy energy sovereignty requires collective action

Today, our economy remains highly dependent on fossil fuels (gas, oil). To change this situation, the European Commission presented its action plan “RePowerEU” (“Revival of the European Union”) on 18 May. This package of laws and recommendations, for the attention of the 27 Member States, is endowed with 300 billion euros of investment, mainly from existing funds. The goal of this European strategic plan is the complete exemption from Russian gas imports by 2030. To achieve this goal, the European Union wants to obtain 45% of its energy consumption from renewable sources (wind, solar, marine energy, biomass) by 2030. , geothermal… and hydrogen, in which Europe intends to become a world leader), while improving the energy efficiency of buildings or appliances by 13% compared to 2020. Action plans are already being implemented on this point: for example, 10 million heat pumps will be installed in Europe over the next five years.

Indeed, energy sovereignty is also based on moderate energy consumption. Although scientists and non-governmental organizations (NGOs) have been warning about this need for 30 years, this is the first time that there has been collective approval and successful support from public authorities. Remember, on April 4, 2022, when RTE called for lower energy consumption to avoid a “blackout”: the media broadcast this call, and citizens heard it. A gigantic failure could have been avoided. RTE explains in this regard that “if all the French people turn off the light bulb, this will lead to a saving in electricity consumption of 600 MW, or about the consumption of a city like Toulouse.” But above all, this unprecedented situation has shown the importance of collective action, planned and supported by the European infrastructure. France was able to import electricity from its neighbors to avoid blackouts. This change of mindset is a critical factor in achieving energy sovereignty and achieving carbon neutrality by 2030.

Produce more clean energy and share it better in Europe

To no longer depend on Russian gas or oil imports, Europe must strengthen its clean energy production capacity. In 2020, the share of renewable energy in European consumption reached 22.1% (source: Eurostat), exceeding the target of 20% in 2020 set in 2009. RePowerEU’s goal is to double this share over the next 8 years. years. This goal is ambitious but realistic: in fact, whatever renewable energy sources are considered, on average 2 years is enough to create new operating production capacity (compared to 5 years for an liquefied natural gas plant and 15 years for a nuclear power plant) . In addition, RepowerEU plans to reduce administrative delays and aims to issue permits in less than a year in “favorable” areas designated by the States. Thus, the choice of renewable energy sources is also the fastest way to acquire new energy production installations in Europe.

Apart from this issue of production volume, Europe aims to better allocate its energy resources through the development of electrical grid interconnections between the member countries of the European Union. Thus, France already has 50 interconnections with the electricity grids of its neighbors, and RTE continues to create new interconnections in order to double the capacity of cross-border electricity exchange by 2035. Strengthening these infrastructures means being able to provide electricity across Europe, which already has 400 interconnections.

Carbon taxes at European borders: A challenge to the climate and competitiveness of Made in Europe products

The choice of carbon-free energy in its territory should be an advantage in the face of many challenges that are coming in Europe. Concerned about the competitiveness of its territory, the European Union gives itself the opportunity to tax or even refuse entry into the territory of foreign products that do not meet its European environmental standards and norms. The first of these taxes will take effect between 2023 and 2026, specifically for heavy industry and steel. In fact, these measures will strengthen the competitiveness of European producers in the face of cheaper foreign competitors with lower prices from a sustainable development point of view.

More competitive European producers that contribute to achieving carbon neutrality will become more attractive by participating in the desired reindustrialization of Europe and the creation of jobs in the European territory. Foreign manufacturers who would like to continue selling on the European market will have to comply with these new standards. Thus, the climate and energy transition positive effects of this tax could extend beyond Europe.

For investors, the European Union’s energy sovereignty plan presents an opportunity: there is currently upside potential for companies that will be involved in developing these renewables, improving storage solutions and optimizing energy efficiency. Thus, in order to participate in the growth of these companies and the financing of their projects, investors have the opportunity to give meaning to their savings by investing in a climate fund, combining performance seeking and asset allocation in favor of European energy sovereignty and the environment. .

The examples provided are based on analyzes specific to Dorval AM as of 05/19/2022. They do not constitute a commitment or guarantee. The latter reserves the right to change its analyses.

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