Fears of EU Constraint Slowing Progress
We asked policymakers and business leaders alike what they saw as the biggest obstacles impeding their countries renewable transition and journey to net zero.
At first glance, the major obstacles for policymakers are numerous intertwining factors, all nearly equally ranked.
What are the biggest barriers to speeding up our journey to net zero, if any? Select up to three
Public and businesses do not fully appreciate the impacts of climate change will have on them
Speed at which the public and businesses can change/adapt
The technical challenge of transitioning to net zero
Policy not turned into action at regional/state level
Cost of transitioning to net zero
National policy (e.g. not ambitious enough, targets too low)
No barriers in particular
Policymakers believe public understanding and the speed at which business can adapt are key barriers (cited by 35% each), but cost and actual implementation of policy at a state and regional level are not far behind (at 33% each).
There are a few national variations from these global averages: Spanish policymakers are more likely to cite the speed at which the public and businesses can adapt as an obstacle (41%, +6% versus average), while 48% of American policymakers cited lack of public understanding of the impact of climate change (+13% versus average), and Germans are less likely to cite national policy as a roadblock (25%, -8% versus average), indicative of Germany’s ambitious national targets in this area (greenhouse gas neutral by 2045 and greenhouse negative after 2050). But the swings are not substantial, and the overall spread is just 2% for all options.
A much more distinct picture emerges from business leaders when asked the same question about their company, however:
What are the biggest barriers to your global journey to net zero, if any? Select up to three
Cost of transitioning
Not enough support from government
Lack of control over supply chain emissions
Government policy preventing progress
Not enough business resources dedicated to meeting targets
Lack of commitment from senior leadership
No clear corporate vision or target
Business leaders clearly see governmental issues as critical – lack of support from government (35%) and government policy (29%) are two related and significant factors – again, for European policymakers, echoing concern about EU constraints. But the cost of transitioning to net zero is the largest individual obstacle (cited by 42%).
In fact, Italian and US executives were the only ones to cite any other factor equal to or outweighing cost; the former ranked lack of support from the government alongside it at 45%, while the latter ranked a lack of commitment from senior leadership top at 36% (+11% versus average).
United we Stand?
Lack of support from government, or government policy actively hindering companies’ transition to net zero, emerges once more as we delve deeper into this.
We find that one recurring theme from businesses polled in both mainland Europe and the UK is that various forms of fragmentation within the EU will drag out the renewables transition in Europe.
When asked about the obstacles faced by the European renewables industry in transitioning and phasing out a reliance on Russian fossil fuels in light of the invasion of Ukraine, strains within the bloc were top of the list for businesses.
What, if any, do you think are the main challenges or barriers faced by the European renewables industry in realising and delivering the opportunity for a faster renewable transition and phase out of Russian fossil fuels created as a result of the REPowerEU plan? Select up to three
Fragmented response in policy different EU countries
Lack of agreement from EU nations on gas price cap in case of an emergency situation
Supply chain and trade policy constraints – there are not enough components to meet the current pipeline
Resource constraints at a country and local level preventing institutions from keeping up with projects' deployment needs
Workforce issues – there are not enough trained workers to meet the demand
Community acceptance challenges resulting from increased clean energy deployment
Permitting reform will not keep up with the speed of deployment needed to meet the climate challenge
Do not think there are any main challenges or barriers faced by the European renewables industry
NB: US business leaders were not asked this question
As can be seen, a “fragmented response in policy from different EU countries” (41%) and “lack of agreement from EU nations on gas price cap in case of emergency situations” (37%) are the two main challenges cited by business leaders in Europe, ahead of supply chain and resource constraints or workforce issues. The latter in particular is a clear sore point, after European energy ministers repeatedly failed to reach a compromise on the gas price cap in 2022 resulting in an emergency session being convened in December.
There are some differences of opinion between executives within the four EU countries surveyed; Germany, for instance, which was once most reliant on Russian gas, cited a lack of agreement on the price cap issue (37%) much higher than a fragmented overall response (26%), while France saw the reverse: a fragmented EU response was cited by 53% (+12% versus average).
Nonetheless, it’s these tensions in some form between the 27 member states that appear to be causing European business leaders concern.
This is crucial context in light of the EU’s REPowerEU plan, outlined in May 2022 just a few months after the invasion. This key piece of policy sets out how the bloc will move more rapidly away from Russian fossil fuels and speed up the renewable transition.
Supply chain and trade policy constraints (38%) also emerge as a barrier and likely reflect global supply chain challenges, especially with China, as well as further evidence of frustration with fragmented EU trade policy that is seen to be inhibiting progress.
Workforce issues emerge in joint fourth place (28%). A growing skills shortage is widely recognised within the renewables sector. With the amount of new deployment that is planned, and needed to achieve climate goals, this the potential to become a major constraint to the pace of the transition.
Monthly online mentions of "REPowerEU"
Policymakers Overlook Tensions
Interestingly, it is not clear however that European policymakers are cognisant of the same issues and frustrations relating to policy that business leaders have. Indeed, when asked the same question, they were more likely to cite other factors:
What, if any, do you think are the main challenges or barriers faced by the European renewables industry in realising and delivering the opportunity for a faster renewable transition created as a result of the REPowerEU Plan? Select up to three
Supply chain and trade policy constraints – there are not enough components to meet the current pipeline
Community acceptance challenges resulting from increased clean energy deployment
Resource constraints at a country and local level preventing institutions from keeping up with projects' deployment needs
Fragmented response in policy from different EU countries
NB: US business leaders were not asked this question
Workforce issues – there are not enough trained workers to meet the demand
Permitting reform will not keep up with the speed of deployment needed to meet the climate challenge
Lack of agreement from EU nations on gas price cap in case of an emergency situation
Do not think there are any main challenges or barriers faced by the European renewables industry
Though the spread is again small, supply chain issues are top, cited by almost a third of those polled (32%). Community acceptance challenges from increased clean energy development is next (31%) and reflects the risk of growing tensions between developers and local communities as more and more greenfield renewable development takes place.
A fragmented response in policy is ranked only equally fourth at 28%, and lack of agreement on the gas price cap bottom at 27%.
That number drops for some EU member states further: French policymakers are less likely to cite a fragmented EU response (26%, -2% versus average), and Germans even lower at 25% (-3% versus average).
Clearly, geographic and economic diversity across the bloc is causing strain, especially when reacting to events such as the Russian gas crisis that do not impact every member state evenly; the lack of awareness by European policymakers that political gridlock has become a sustainability concern for businesses may also explain the discrepancy we saw earlier between businesses and policymakers on transition target dates.
Brexit Independence Driving UK Transition Optimism?
Interestingly, this is in contrast to the UK, where it seems Brexit-born agility, or at least the perception of this, may now actually be fuelling optimism for net zero goals.
As we saw earlier, UK policymakers (62%) are among the most confident in believing net zero can be achieved before 2040, second only to the US (75%) and much higher than all European countries surveyed.
But they are also less likely to cite national policy as an obstacle in achieving that goal (28%, -5% versus average).
What are the biggest barriers to speeding up our journey to net zero, if any? Select up to three
How, if at all, will the war in Ukraine affect the world's path to net zero?
British policymakers are also more likely to say the Ukraine invasion will not affect the world’s path to net zero (54%, +16% versus average), and only delay the country’s net zero goals by a year than those in any other country (34%, +8% versus average).
While struggling with a sluggish economy in part brought on by Brexit, the UK appears to have perceived the events of the past few years as an opportunity to drive forward on sustainability goals.
The downside for UK businesses is that workforce issues are now a huge challenge, and cited at a far higher rate than average (38%, +10% versus average) as an obstacle in speeding up the transition to renewables.
UK
Europe (excl. UK)
Percentage of business leaders who cite workforce issues as a barrier faced by the European renewables industry in realising a renewable transition and phasing out Russian fossil fuels
US Leaders United by Supply Chain Struggle – and Timeline Scepticism
While European policymakers and business leaders feel under strain and at odds in response to the Russian invasion of Ukraine and its potential long-term environmental impact, we see more consensus between both sides in the US.
American business leaders and policymakers alike see supply chain and trade policy issues (35% and 42% of those polled respectively) as the key obstacle hindering the clean energy sector in making a faster renewables transition.
This general agreement on where the pain points are likely stems from common ground achieved by Congress in passing the Inflation Reduction Act of 2022 last summer; given how political gridlock affects US law-making, any bill that successfully passes into law requires notable bi-partisan agreement – something it can be argued is reflected in the responses we see here.
What, if any, do you think are the main challenges or barriers faced by the U.S. renewables industry in realising and delivering the opportunity for a faster renewables industry in realising and delivering the opportunity for a faster renewable transition created as a result of the Inflation Reduction Act? Select up to three
American business leaders and policymakers also agree on what events of the past few years may have done to set back the transition to global net zero and a renewable economy.
In fact, few US policymakers said the war in Ukraine won’t affect the world’s path to net zero (21%) – compared to 41% of European policymakers, and 54% of UK policymakers. Only Spanish policymakers were more sceptical (15%).
How, if at all, will the war in Ukraine affect the world's path to net zero?
The perception that some delay is inevitable is also felt by by US business leaders. Though the US has largely been shielded from the European energy crisis triggered by the invasion of Ukraine, US business leaders are the most likely of those in any country to say that it has set back global net zero goals by four years or more (29%), higher even than Germany (28%). Given the US's position as a world leader, and a leading source of carbon emissions, this perception of delay is of notable significance.
By how much time, on average, do you estimate that energy disruption caused by the war in Ukraine will delay your business' net zero targets?