How do energy prices and uncertainty affect climate investment by European firms?

Fotios Kalantzis, Debora Revoltella and Matteo Gatti

No 2025/05, EIB Working Papers from European Investment Bank (EIB)

Abstract: Leveraging data from the European Investment Survey (EIBIS) spanning 2019-2022, encompassing the pandemic crisis and the 2022 energy price shocks, our study investigates how uncertainty influence firms' climate action investment decisions in Europe at a time of one of the largest energy shocks in recent history. Our results offer insights into firms' investment behaviors across various dimensions including country, sector, and firm size. We find that increasing energy prices drove European firms to invest in both energy efficiency and climate action investments to maintain competitiveness, albeit with a more pronounced effect on the former. By contrast, uncertainty deters firms from investing in climate action and reaching their potential, making them prioritize short-term challenges over long-term climate concerns. Additionally, we observe that firm characteristics, notably energy intensity, play a significant role in shaping investment decisions, with firms operating in energyintensive sectors demonstrating a greater likelihood to invest in climate action regardless of uncertainty levels. Our results reveal the challenges and trade-offs that firms face when investing in climate action under uncertainty and high energy prices and emphasize the need for consistent and supportive policies to foster a green transition.

Keywords: European Investment Bank Investment Survey; Uncertainty; Energy efficiency; Corporate investments; Energy costs; Climate Action (search for similar items in EconPapers)
JEL-codes: D22 P28 Q5 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/319634/1/192819656X.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:eibwps:319634

DOI: 10.2867/6802730

Access Statistics for this paper

More papers in EIB Working Papers from European Investment Bank (EIB) Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().