Deep dives on selected index categories
Chart 5: Manufacturing category results Source: Oliver Wyman analysis
The performance of countries in this category can be clearly linked to the existing manufacturing mix, evident by the results of the correlation analysis (see Chart 6). Countries with a higher share of emissions- and energy-intensive manufacturing sectors such as coke and refined petroleum, non-metallic mineral products, basic metals, and chemicals, tend to perform worse than their counterparts.
Source: Eurostat, Oliver Wyman analysis
But there are interesting exceptions. Belgium, home to one of Europe's largest industrial ports, has the highest share of emissions- and energy-intensive manufacturing sectors across the index, yet it manages to score in the top 20 of the Manufacturing category. One of the reasons for this better-than-expected performance could be that about half of Belgium's value-added in emissions-intensive manufacturing industries is generated in the chemicals sector, which tends to be the least carbon-intensive sector of the four identified.
Chart 7: Utilities category results Source: Oliver Wyman analysis
Scandinavian, Western European and Southern European countries tend to score well, with the Netherlands, Denmark, and Norway as top performers that, interestingly, pursue quite distinct strategies.
Norway is the leader in clean energy by producing 99% of its electricity from renewable sources, mainly from hydropower (2020 figures). Norway also performs extremely well in CCS projects, ranking second after the UK; CCS has been a central part of the government's climate and energy policy since 2014. By 2024, Norway aims to develop a full-scale CCS value chain. To that end, it has launched Longship, the first cross-border, open-source CO2 transport and storage infrastructure network, which has an initial storage capacity of 1.5 million tonnes of CO2 per year. Norway will invest €1.7 billion in Longship, which will make it the largest investment in a single project in the country's history. So far, Longship has drawn interest from 60 companies across Europe, creating a potential total of 50 million tonnes of CO2 per year.[i]
Generating 82% of electricity from renewables, mainly wind (2020 figures), Denmark is also a leading force in transition technologies. In CCS, it is third in the category in the GTI ranking and fourth in hydrogen. The country recently announced that it is increasing its decarbonization target, aiming for a 70% cut in CO2 emissions by 2030 and setting a 2025 deadline for having all decisions and sector road maps in place to achieve its goal. The focus is on CCS, with the Danish government proposing to invest up to a €2.2 billion and the first projects starting in 2025.[i] In green hydrogen, the country aims for four to six gigawatts (GW) of electrolyser capacity by 2030,[i] about 10% to 15% of Europe's total target of electrolyzer capacity for that year. Additionally, two gigantic offshore wind parks with a capacity of up to 12 GW are planned, with expectations of producing enough electricity to cover the needs of five million households, the Danish Ministry of Climate, Energy and Utilities says.[i]
The Netherlands, on the other hand, produced only 27% of total electricity from renewable sources in 2020, which places the country in the bottom third of the ranking. However, it is outperforming most GTI index countries in transition technologies: In battery storage and hydrogen projects, it ranks second and third, while in CCS projects, it ranks fourth. Already Europe's second-largest producer of fossil fuel-based hydrogen and strategically located at the heart of the proposed European hydrogen infrastructure, the Netherlands has announced projects that would easily surpass the target of four GW of carbon-neutral production capacity by 2030.[i] According to the Dutch Ministry of Economic Affairs and Climate, plans call for seven to nine GW of electrolysis capacity with a startup date by 2030.[i] The country is also planning to boost its offshore wind capacity, reaching 21 GW by 2030, up from a previous target of 11 GW,[i] which will be linked to nearby electrolysis projects. As for CCS, the Netherlands is well placed to develop infrastructure. It not only has access to depleted North Sea gas fields where CO2 can be stored, but it also is home to many large carbon-intensive process industries and Europe's main seaport, which is why the country has among the highest emissions per capita across Europe. To this end, the country last year awarded €2.1 billion, close to half of its 2021 annual budget for sustainable projects, to Porthos, a project aimed at capturing and storing CO2 emissions from the port of Rotterdam.[i]
France, which ranks 12th in the Utility category, is at the lower end of performance among Western European countries. Generally lagging behind in the transition technologies assessed in the GTI, it performs particularly poor in the share of renewables in total electricity supply. France has traditionally relied heavily on nuclear energy, from which it derives about 70% of its electricity. Although some might call nuclear energy a clean electricity source because its generation is carbon-free, its extremely hazardous radioactive waste poses a substantial threat to the environment, and the problem of long-term safe storage remains largely unsolved. Having missed the EU's 2020 target for renewables in the energy mix, France recognizes it needs to accelerate its buildout of solar and wind generation capacities. By 2050, the country wants to increase solar power capacity tenfold to 100 GW and offshore wind to 40 GW in 2050. The first French wind offshore project is expected to come online in the summer of 2022, 10 years after it was initiated. At the same time, France is not expected to abandon nuclear power. Instead, it foresees a “nuclear renaissance” with 25 GW of new nuclear capacity by 2050 and a review of reactor life-span extensions.[i]
Most Eastern European countries have performed poorly because of their generally lower share of renewables in the energy mix and low engagement in transition technologies. The region's lack of progress and ambition results from its historically strong dependence on coal, particularly in Poland, where more than 80,000 jobs rely on the sector. Poland, along with Hungary and Czechia (Czech Republic), have long opposed the EU's 2050 carbon neutrality plan, and Poland ended up being the only EU-27 country that refused to commit to the 2050 target, saying it needed more time to shift to cleaner energy. However, there are some bright spots, such as the large-scale Blue Danube project, which aims to create a trans-European green hydrogen value chain, producing 80,000 tonnes of green hydrogen in Eastern Europe and subsequently transporting it to industrial customers along the Danube River.[i]
Chart 8: Buildings category results Source: Oliver Wyman analysis
Baltic countries perform particularly well in this category, occupying three of the top six spots in the ranking. Eastern European countries can be found in the top half of the ranking, while most Western European and Scandinavian countries underperform, with Norway trailing far behind.
Looking at the first metric, household electricity consumption per capita is particularly high in Scandinavian countries. Households in Norway consume close to five times the median of GTI index countries; in Sweden and Finland, it's close to three times the median.
One reason for the high electricity consumption in these countries is the greater reliance on electricity for residential space and water heating (see Chart 9). In Norway, electricity accounted for 69%, in Sweden for 30%, and in Finland for 24% of all energy consumed (2019 figures). This compares with a median of 8% across the index.
Another factor that comes into play here are climatic conditions. Not only do Scandinavians households rely more heavily on electricity for space heating, but there is also a much bigger need for heating overall. The number of heating degree days in Finland was 107% higher than the median across European countries, and in Sweden it was 93% (2019 figures).
Besides space and water heating, Scandinavian households depend heavily on electricity in cooking. In Norway, electricity accounts for 100% of final energy consumption in cooking, closely followed by Sweden with 99%, with Finland at 89%. Also in other household energy use, such as for lighting, appliances, cooling and other energy use, Scandinavian household consumption exceeds that of European peers. Of the 29 countries in the peer group, Sweden, Norway, and Finland are the top three in electricity consumption per capita in these demand categories.
The region's high reliance on electricity may be surprising, particularly in the case of Norway, given the country's vast resources in oil and gas. However, it does make sense for households to plug into electricity when considering the high share of relatively inexpensive hydro power in the electricity mix versus the expense of installing a nationwide gas infrastructure given the low population density.
Baltic households, on the other hand, depend far less on electricity for household energy. Instead, renewables make up a significant share of total final consumption of energy use at 32% to 43% of the total, almost exclusively primary solid biofuels, mostly wood. Looking at fuel consumption for space and water heating, the second KPI in the Buildings category, the share for primary solid biofuels reaches 40% to 48%. Thanks to the vast wooded areas in the Baltics, many households have direct access to the fuel.
Leaders in the share of renewables in space and water heating are Croatia (58%), Portugal (57%), and Slovenia (54%). While both Croatia and Slovenia almost entirely rely on primary solid biofuels, Portugal's mix is more diverse, with ambient heat pumps making up 19% of total final energy consumption for space and water heating. On the other hand, many Western countries depend heavily on fossil fuels in residential heating. In Ireland, the share of fossil fuels accounts for 90% of total residential space and water heating in 2019, followed by the UK, Luxembourg and the Netherlands (all 86%), Belgium (83%), and Germany (72%).
Source: Eurostat
Although classified as a renewable energy source, wood creates two immediate climate problems from its harvesting and burning. Not only does burning it add CO2 directly to the air while cutting down trees destroys CO2-absorbing forests that will take decades to regrow.
Meanwhile, the need for climate action is urgent. But with generous subsidies in place, the use of primary solid biomass for heat and power generation has boomed over the past decade, up 49% for heat generation and 28% for power generation. This growth is even more significant considering that overall, heat and power generation volumes saw a decline of 17% for heat generation and 7% for power generation.
Chart 10: Growth of heat and electricity production versus heat and electricity production from primary solid biomass in the EU-27 (2010-2020)
This trend has prompted the EU to reconsider its stance on biomass. In a historic vote in May 2022 the European Parliament's Committee on Environment, Public Health and Food Safety (ENVI) voted on new rules concerning the definition of primary wood-based biomass under the renewable energy directive. In principle, primary woody biomass, essentially unprocessed wood, would no longer qualify as renewable energy and would therefore no longer be eligible for incentives to promote renewables growth. The European Parliament needs to approve the proposal before it can be adopted into law.[i] In addition, the EC has announced plans to increase the blocs' carbon sink, including binding targets for countries to restore and grow forests, part of a broader plan to cut GHG emissions 55% by 2030.[i]
Finally, to also capture performance related to non-residential buildings, the index evaluates the level of activity in green buildings on a nationwide basis. With the increase of net-zero corporate commitments, the importance of green buildings is expected to rise significantly. At the same time, the interest from real estate investors should increase as well, as green buildings will command a premium in value.
We assessed country performance based on the number of certified projects using the leading standards in Europe, normalized across the peer group by GDP: (1) LEED, developed by the U.S. Green Building Council (UGBC); (2) BREEAM, created by the UK-based Building Research Establishment (BRE); (3) HQE, established by the French Centre Scientifique et Technique du Batiment (CSTB); and (4) DGNB (Deutsche Gesellschaft für Nachhaltiges Bauen). The UK comes out as the top performer in this KPI, with close to 38% of all certified projects across all standards, followed by Finland, France, and Sweden. The large number of projects in the UK is likely driven by the fact that many local planning authorities (LPA) are now asking developers to complete a BREEAM assessment as part of the planning application. LPAs are mandated by the UK government to place sustainability at the heart of their development plans, ensuring that it plays a material role in assessing applications.
