ABSTRACT
As the EU's annual green investment gap amounts to approximately 2.3–3.2% of gross domestic product (GDP), this chapter discusses financing alternatives for the expanded EU-level industrial policies addressed in this volume. Proposed options to increase the EU budget from 2028 onwards include enhanced EU-level taxation, particularly on financial transactions, wealth, and capital gains; permanent issuance of EU bonds; the creation of a permanent EU investment fund; and the continued leveraging of development banks to scale up credit allocation and public equity funding. Many of these financing options are rather mutually supportive than exclusive on a technical level. Amid fiscal restraint (financial) derisking, intended to “escort” private finance to green but unprofitable investments, has become central to European policymakers' strategy for accelerating the green transition. However, such derisking measures have largely failed to generate the level of investment required to meet the EU's decarbonisation goals. The chapter therefore elaborates on the concept of “progressive derisking”, i.e., designing derisking mechanisms to align with progressive approaches to European industrial policy. Targeting European public goods is essential for enhancing the political feasibility of increased supranational public funding.
