France’s ecological transition put to the test of inflation

France is tackling the challenge of decarbonizing its economy against a backdrop of rising inflation, and international private investors are being called on to contribute to this colossal ecological transition.

Share:

France’s ecological transition represents a major financial challenge. This includes the need to build battery factories, finance CO2 capture networks and develop wind farms. Faced with rising inflation, the government is counting on the involvement of private international investors to finance decarbonization, a project on a scale comparable to the industrial revolution of the 19th century.

Diversification of Financing Sources

It is imperative to diversify the sources of financing for this ecological transition. With this in mind, Minister Bruno Le Maire has organized the first “Paris Decarbonation Forum,” bringing together key players, from manufacturers to investors, to discuss how the private sector can contribute.

The Financial Challenge of Decarbonization

The financial stakes involved in decarbonization are colossal. To date, investments in this field have ranged from $500 billion to $1,100 billion a year. To succeed, this amount would have to be tripled, to around $3,000 billion, according to Raj Rao, Chairman of the Global Infrastructures Partners (GIP) fund. Other experts, such as KKR’s Emmanuel Lagarrigue, even estimate that we’ll need $7,000 billion a year to achieve carbon neutrality.

France’s needs

In France, the Pisani-Ferri report estimated annual needs at between 40 and 70 billion euros. The role of the state is mainly to act as a “planner” and “risk pooler” to encourage private investors. To facilitate investment, the government will introduce a guarantee scheme for energy supply contracts.

However, inflation and rising interest rates since early 2022 have complicated the situation. Some projects, particularly in the wind power sector, are facing difficulties due to inflation and rising costs. Finding new ways to finance these infrastructure projects is crucial.

Recently announced tax credits, inspired by the US model of Ira’s major climate plan announced by Joe Biden, were well received by participants. They are proving to be an effective way of stimulating investment. However, other aspects need to be improved, such as waiting times for infrastructure permits, which are still longer in Europe than in the USA or China.

Coordination and Innovation

To meet these challenges, a more coordinated approach to the supply chain and raw materials is essential to lower costs. The obstacles are many, but the need for decarbonization is indisputable. The ecological transition is a large-scale project that cannot rely solely on public funds, and this is where international private investors come in. The future of our planet ultimately depends on their financial contribution.

The challenge of decarbonization is colossal in scale, and requires massive financial resources if it is to succeed. In the face of rising inflation, the active participation of private international investors is crucial to financing this transition. It is imperative to diversify sources of financing, improve the regulatory framework and stimulate investment. The future of our planet depends on our ability to mobilize the resources needed to achieve carbon neutrality.

US-based Chloris Geospatial has raised $8.5M from international investors to expand its satellite-based forest monitoring capabilities and strengthen its commercial position in Europe, addressing growing demand in the carbon market.
The federal government is funding three carbon capture, utilisation and storage initiatives in Alberta, strengthening national energy competitiveness and preparing infrastructure aligned with long-term emission-reduction goals.
Donald Trump approves a substantial increase in US tax credits aimed at carbon capture and utilization in oil projects, significantly reshaping economic outlooks for the energy sector and drawing attention from specialized investors.
The European Union unveils a plan aimed at protecting its exporting industries from rising carbon policy costs, using revenue generated from its border adjustment mechanism.
Colombia is experiencing a significant drop in voluntary carbon credit prices due to a major oversupply, destabilizing the financial balance of associated communities and projects.
France and Norway sign an agreement facilitating the international transport of CO₂ to offshore geological storage facilities, notably through the Northern Lights project and the CO₂ Highway Europe infrastructure.
Frontier Infrastructure Holdings has signed an offtake agreement with manager Wild Assets for up to 120 000 tonnes of BECCS credits, underscoring the voluntary market’s growing appetite for traceable, high-permanence carbon removals.
Global carbon capture and offset credit markets could exceed $1.35 trillion by 2050, driven by private investment, technological advances, and regulatory developments, according to analysis published by Wood Mackenzie.
The Australian carbon credit market is experiencing temporary price stabilization, while the emergence of new alternative financial instruments gradually attracts corporate attention, subtly altering the commercial and financial dynamics of the sector.
Norway has launched a major industrial project aimed at capturing, maritime transport, and geological storage of CO₂, mobilizing key energy players and significant public subsidies to ensure economic viability.
A €21mn European grant, managed by EIB Global, will fund Egyptian projects aimed at cutting industrial emissions and boosting recycling, while a related €135mn loan is expected to raise additional climate investments.
Stockholm Exergi begins construction of a CO₂ capture facility in Stockholm, integrated with the expansion of Northern Lights in Norway, reaching a total storage capacity of 5 million tonnes per year by 2028.
Global emissions coverage by carbon pricing systems reaches 28%, driven by expanding compliance markets, where demand nearly tripled within one year, according to a World Bank report.
Vietnam initiates a pilot carbon market targeting steel, cement, and thermal energy industries to prepare for nationwide regulation starting in 2029.
The U.S. Environmental Protection Agency (EPA) proposes granting Texas direct authority to issue carbon dioxide injection permits, potentially accelerating the commercial expansion of geological CO₂ storage projects.
Höegh Evi and Aker BP received Approval in Principle from DNV for a maritime carrier designed to transport liquefied CO₂ to offshore storage sites in Norway.
Norne and the Port of Aalborg begin construction of a 15 mn tonne per year CO2 terminal, supported by an EU grant.
The Lagos State government has launched a programme to deploy 80 million improved cookstoves, generating up to 1.2 billion tonnes of tradable carbon credits.
The US Department of Energy has cancelled 24 projects funded under the Biden administration, citing their lack of profitability and alignment with national energy priorities.
In the United States, the carbon black market faces unprecedented fluctuations in the first half of 2025, driven by declining industrial demand and persistent raw material volatility, casting doubts over the sector's future stability.