The European Investment Bank (EIB), supported by the European Commission, has started a €17.5 billion program for small and medium-sized enterprises (SMEs). This initiative aims to boost energy efficiency upgrades and decarbonization projects in the EU.
The program will run for three years and aims to help over 350,000 businesses. The goals are to cut costs, reduce emissions, and boost competitiveness in a changing energy market.
This financing is not only about helping SMEs modernize. It is also part of Europe’s broader plan to reach its climate goals under the European Green Deal. By supporting smaller firms, the EU hopes to ensure no business is left behind in the green transition.
The Commissioner for Energy and Housing Dan Jørgensen remarked during the announcement:
“SMEs are at the heart of Europe’s economy and way of life. But they invest in energy efficiency at only half the rate of larger companies. This EIB initiative supported by the Commission will be key to close the investment gap, simplify access to financing, and accelerate the deployment of energy efficiency solutions. With more energy-efficient SMEs, we boost our economy, we benefit our climate, and we keep a healthy heartbeat in communities across Europe.”
Why SMEs Are Central to the EU’s Climate Goals
SMEs are the backbone of Europe’s economy. They account for more than 99% of businesses and employ around 100 million people. Yet, their smaller size often makes it harder for them to invest in energy-saving measures than larger companies.
Data shows that SMEs invest at only half the rate of larger firms in energy efficiency projects. Rising energy costs have made this gap even more pressing. Old heating systems, bad insulation, or weak lighting can expose SMEs to rising energy costs.
With this major financing, the EU is helping SMEs in two ways: it lowers their costs and advances the EU’s climate goals. This approach makes sure that smaller firms join the move to a greener economy. Together, they play a big role in Europe’s energy use and emissions goals.
The European Union has reduced its greenhouse gas emissions by around 37% since 1990, as of 2024. This drop is mainly due to increased use of renewable energy and less reliance on coal.
The EU aims to cut emissions by at least 55% by 2030, using 1990 levels as a baseline. Member States may achieve reductions of about 54-49%, depending on their policies.
Looking ahead, the EU is considering even more ambitious goals: a proposed 2040 target seeks a 90% reduction in net emissions, setting the path toward becoming climate neutral or net zero by 2050.
Inside the €17.5 Billion Green Financing Plan
The EIB will provide financing in the form of loans, equity investments, and guarantees. These tools will be delivered through existing programs like InvestEU, as well as new channels designed to make access easier.
One major feature of the initiative is a “one-stop shop” model. This will allow SMEs to find support in a single place rather than navigating multiple programs. The goal is to simplify procedures, reduce paperwork, and make financing faster to access.
The projects supported will cover proven technologies that are widely available but underused by smaller firms. These include improved building insulation, energy-efficient machinery, advanced heating and cooling systems, and low-carbon lighting. Each of these upgrades can help reduce operational costs while cutting emissions.
Importantly, the financing is not limited to equipment purchases. SMEs can use funds to try new business models. One option is energy efficiency as a service. In this model, a provider installs and maintains equipment. The SME then pays only for the energy saved. This approach lowers upfront costs and makes it easier for firms with limited budgets to adopt modern technologies.
Scaling Up Impact: €65 Billion in Investments by 2027
While the program itself offers €17.5 billion, the EU expects it to mobilize at least €65 billion in total investment by 2027. This figure includes extra support from private investors, national governments, and financial institutions. They will collaborate with the EIB.
Over the 3-year period, the program could reach over 350,000 SMEs across all EU member states. The projects will help firms lower energy bills, reduce carbon footprints, and build resilience against future energy shocks.
Moreover, the impact is expected to go beyond the companies themselves. The initiative will create demand for retrofits, new heating systems, and efficiency services. This will generate thousands of jobs in construction, engineering, and clean technology. It will also support regional development, especially in areas where SMEs are a critical source of employment.
Barriers Ahead: Can All SMEs Keep Up?
Despite its promise, the initiative faces several challenges. First, many SMEs have limited time and capacity to deal with complex applications. Even with simplified procedures, awareness and outreach will be essential.
Second, energy efficiency projects often involve upfront costs that take time to recover. While financing helps, firms may still hesitate if payback periods are long.
Third, access must be balanced across all EU regions. SMEs in rural or less developed areas may need extra support to compete with firms in larger cities that already have more resources. Ensuring an equitable rollout will be key to the program’s success.
These challenges are significant, but the potential rewards are even greater. By bringing SMEs into the center of the green transition, the EU is linking small business growth with Europe’s broader decarbonization agenda.
The Policy Context: Fitting Into Europe’s Green Deal
This initiative comes at a time when the EU is under pressure to deliver on its climate commitments. Achieving these targets will require action across all sectors, including SMEs.
Global energy efficiency investment is also on the rise. According to the International Energy Agency, annual spending on energy efficiency reached $660 billion in 2024 and is expected to grow steadily.
Europe’s new program fits within this global trend by channeling resources to smaller firms that often lack access to capital. If successful, the program could deliver multiple benefits:
- Lower costs: SMEs will save money on energy, improving their competitiveness.
- Reduced emissions: Widespread adoption of efficiency upgrades can significantly cut carbon output from the SME sector.
- Job creation: New demand for retrofits, technology, and services will support employment in clean industries.
- Resilience: Companies will be better prepared to handle energy price shocks and supply disruptions.
Double Wins: Lower Costs, Lower Emissions
The EU’s €17.5 billion financing program marks a major step in supporting SMEs through the green transition. It aims to lower barriers and boost the adoption of energy efficiency and decarbonization projects in the EU by combining loans, equity, advisory services, and innovative models.
Challenges remain, like ensuring access in all areas and managing upfront costs. Still, the initiative provides a guide for governments. It shows how to support climate action and boost small businesses.
By linking competitiveness with sustainability, the EU is signaling that the path to a low-carbon future must include every level of the economy. SMEs, once seen as too small to matter in climate policy, are now positioned as key players in the EU’s decarbonization journey.
