The Role of Green Financial Instruments in the New European Green Deal

Green finance initiatives have been available for more than a decade now, as part of the so called Green New Deal to lead Western economies out of the international economic crisis of 2007-08. The purpose of this paper is to explore how said initiatives are being used by EU member states, and to which extent they can contribute to the wider aims of the new Commission’s European Green Deal. The paper argues that green finance is in a transition period, from an initial focus on developed countries to a shift in priorities linked to the approval of the Sustainable Development Goals and the Paris Agreement in 2015, which necessitates the inclusion of less developed countries for the achievement of sustainability goals. EU member states have been using green financial instruments unevenly, mostly to contribute to the implementation of renewable energy projects, however the actors involved in these projects are reduced to public authorities (governments), and big traditional energy companies, with limited participation of smaller players, or access to finance for citizen-led initiatives. Some argue that the use of these financial instruments should be limited to less developed countries, since developed ones already count on other support instruments that favour the implementation of renewable energy projects. This paper analyses if the proposed EGD and its accompanying initiatives really opens the door for new actors to participate in the energy transition process through green finance, which are the barriers or constraints for it to happen, and how it may affect EU commitments towards less developed countries.