Financing the Energy Transition: Reforming the EU’s Diplomacy and Partnerships

The European Union (EU) is at a critical juncture to redesign its geoeconomic stance and energy cooperation model. The upcoming 29th climate summit (COP29) in Baku, Azerbaijan will be a decisive moment for the future of climate finance, and the next European Commission’s structure is in its finalisation phase. This provides an opportunity for European policymakers to reflect on how to improve their own financial tools and their effectiveness, especially when it comes to cooperating on a just energy transition. 

The EU and its Member States have been the largest contributors to climate finance among developed countries, reaching €28.5 billion in 2024. It has built the EU’s role as ‘bridge-builder’ in international climate and energy diplomacy. This translated into a significant diplomatic success at COP28 when the EU worked with partners to bring all countries to an agreement on moving away from fossil fuels, tripling renewable energy and doubling energy efficiency. 

In July 2024, European Commission President, Ursula von der Leyen, presented her Political Guidelines in which she suggested an upgrade of the Global Gateway and the creation of Clean Trade and Investment Partnerships. If coupled with enhanced diplomatic role in Baku, these reforms and new tools can lead the EU to be a leader in a fair and just decarbonisation. 

In its new report ‘‘Financing the Energy Transition: reforming the EU’s diplomacy and partnerships”’, Strategic Perspectives provides an overview of the EU’s financial tools and recommendations for improving them, as well as case studies on successful EU-financed energy projects. 

Main findings of this new analysis shows that:

• Deploying renewables is costly in third countries and access to finance remains the main challenge for energy projects. 
• EU funding structures and actors remain difficult to navigate for partner countries, especially when compared to China.
• Creating a full-fledged geoeconomic and geostrategic vision for the years ahead is necessary and can be reflected in the Clean Investment and Trade Partnerships, including its funding.
• Turning Global Gateway into a financial instrument with a clear governance structure is paramount to define how it interacts with the Clean Trade and Investment Partnerships.