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The EU has set ambitious climate targets with its Green Deal and Fit for 55 package, which will require substantial additional investments and major regulatory and tax measures. The EU’s energy policy response to Russia’s invasion of Ukraine, REPowerEU, foresees either additional or frontloaded measures to foster the green transition.

These investments will have to be funded. While most investments would be funded by the private sector, a large share of the costs will have to be funded by the public sector, either as public sector investment or by incentivising private sector investment, due to network externalities, information inefficiencies, or political economy realities.

How will EU governments meet the challenge of significantly increasing climate funding when EU fiscal rules (after their re-introduction) will require fiscal consolidation? Is there a need to alter EU fiscal rules to foster green public investment? Would a new EU climate fund be a good solution?