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Increasing environment- and climate-related expenditure can help meet the objectives of the European Green Deal. Environmental protection expenditure (EPE) mainly includes expenditure related to the abatement of air, water, soil and noise pollution, the protection of biodiversity, the management of wastewater and waste, and environmental research and development. Expenditure increased between 2018 and 2023 from EUR 280 billion to EUR 357 billion in the European Union. After adjusting for inflation this represents an increase of 7%. It is very likely to increase in the coming years, as additional funds will be made available.
Figure 1. Environmental protection expenditure by institutional sector in the period 2018-2023, EU-27
Building on the European Green Deal policy objectives , the Eighth Environment Action Programme (8th EAP) aims to accelerate the green transition . Increasing environmental protection expenditure (EPE) in the Member States and green expenditure directly related to environmental protection, such as expenditure on renewables, energy and resource efficiency, and the circular economy transition can help achieve this.
EPE covers the protection of ambient air, soil and water; wastewater and waste management; noise abatement; biodiversity protection; protection against radiation; and environmental research and development (R&D). EPE only partly captures expenditure related to the climate-related expenditureand the circular economy, and includes both operating expenditure and investments.
In real terms, growing by 7% during 2018-2023 and reaching an estimated EUR 275 billion in 2010 prices (EUR 357 billion in current prices) by 2023. Most EPE is spent by corporations and increased in real terms by 12% from 2018 to 2023. Over the same period, the EPE of general governments and non-profit institutions increased by 12% but EPE by households decreased by 11%. Most EPE was spent on waste management and wastewater treatment activities in this period . Since 2018, the share of overall EPE in gross domestic product (GDP) has remained relatively stable, at around 2%, but declined from 2.2% in 2022 to 2.1% in 2023.
It is very likely that EPE will increase in the coming years, as additional resources have been made available. The EU’s 2021-2027 budget has earmarked additional funding for climate- and biodiversity-related activities . Grants and loans for climate-related activities are available through the 2021-2026 EU Recovery and Resilience Facility (RRF) . The RRF was created to mitigate the social and economic impacts of the COVID-19 pandemic and supports the EU’s aim to achieve a twin digital and green transition.
To achieve EU’s objectives on environmental protection by 2030 , the additional investment needed for the period 2021-2030 are estimated at EUR 77 billion per year. It is uncertain if investments will increase at a fast enough rate to bridge the gap between current investment and total investment needed by 2030. For instance, environmental protection investments account for only a small share of total EPE, amounting to 19% in 2023, and increased from EUR 47 billion in 2018 to EUR 51 billion (both in 2010 prices) in 2023. InvestEU and sustainable finance actions are expected to trigger additional private capital flows in Member States for sustainable investment, which would help to fill the investment gap.
Figure 2. Expenditure on environmental protection by EU Member State, 2018 and 2021, (% of GDP)
EPE increased from 2.1% to 2.2% of GDP between 2018 and 2021 at the EU level. EPE to GDP ratios varied across the Member States. In Austria, Belgium and Czechia, EPE accounted for more than 3% of GDP, while in Ireland and Luxembourg it accounted for less than 1%.
In 17 of the 27 EU Member States, this share increased during the period 2018-2021, with the biggest increases in Poland and Austria (0.5 percentage point). In contrast, the share fell in four EU Member States, with the biggest reduction in Estonia (0.4 percentage point) and remained constant in the other six EU Member States.