Iwona Chojnowska-Haponik, director of location advisory and incentives & grants, JLL looks at how green incentives can help business.
The global race towards a sustainable future represents an economic transformation of unprecedented scale. This monumental shift demands a radical redirection of capital into green technologies and sustainable infrastructure, a redirection that, left to organic market forces alone, would be slow. The International Energy Agency (IEA) starkly illustrates this, stating that global clean energy investment needs to reach $4.5 trillion annually by 2030, a significant leap from the estimated $1.8 trillion in 2023, to stay on track for net-zero goals. As we look ahead to critical discussions like COP30, it's becoming increasingly clear that economic grants and incentives are not merely helpful tools, but powerful architects poised to unlock critical green deals and significantly influence the global real estate landscape.
Indeed, while government incentives have long played a role in economic development, what we are witnessing today is a strategic deployment of "next-generation" green incentives that are profoundly impacting how value is created and unlocked for sustainable infrastructure and manufacturing. This evolution moves beyond traditional business attraction, focusing instead on transforming what were once considered high-risk, high-capital green projects into viable, attractive real estate opportunities. The International Renewable Energy Agency (IRENA) highlights this impact, noting that renewable energy projects with government backing show 40% lower financing costs and two-three year faster development timelines compared to purely private ventures.
Pioneering green projects, by their very nature, often grapple with nascent technologies, higher upfront capital expenditures, and extended payback periods – challenges that can deter even the most forward-thinking investors.
This is precisely where strategic incentives, whether in the form of tax breaks, direct grants, or preferential loans, become game-changers. They significantly de-risk these ventures by lowering the cost of capital and accelerating development timelines, thereby making commercially feasible what might otherwise remain aspirational. Multiple sources confirm that incentives are not just useful but essential to boosting clean technology investment. According to the European Investment Bank Investment Report, EU firms are 20 percentage points more likely to invest in cleantech or innovation when support specifically targets these areas. Furthermore, every dollar of public incentives can mobilise three to six times more private capital, creating a powerful leverage effect. Without such support, most firms and investors cite policy uncertainty and high upfront costs as barriers that they are unable to overcome alone.
By mitigating initial risks and enhancing viability, these incentives also play a pivotal strategic role in expanding the global map of "suitable" locations. Organisations seeking optimal sites for green developments face a complex challenge: finding locations that offer the right blend of geography, robust business environments, essential infrastructure, green power in particular, and a skilled local workforce. While incentives cannot transform an inherently unsuitable location, they act as the crucial differentiator, making previously overlooked regions attractive for significant green investment by bridging the gap between potential and profitability. The OECD FDI (Foreign Direct Investment) Database 2024 powerfully confirms this, revealing that countries offering comprehensive green incentive packages captured 65% more clean technology FDI than those relying on market conditions alone in 2023. This substantial difference demonstrates how incentives don't just attract investment, but actively shift its geographic distribution, effectively putting new regions on the map for green development by making their inherent potential economically viable and competitive.
For governments, the deployment of these incentives signifies more than just a financial transaction; it's a powerful statement of commitment. They communicate to global investors that a nation is serious about its green transition, willing to share the initial burden, and eager to partner in building a sustainable economy. This commitment fosters confidence and attracts the kind of long-term investment essential for a truly green future, demonstrating a proactive approach to shaping economic growth. Bloomberg NEF's Energy Transition Investment Trends 2024 report underscores this, stating that investment growth is fastest in jurisdictions with clear, stable, and generous incentives, with countries like the US (Inflation Reduction Act) and EU (Green Deal) seeing 30–60% year-on-year growth in announced clean energy projects.
This is evident in JLL's recent success in securing a $320 million grant from the Polish government for Ascend Elements. This landmark facility will play a crucial role in the European EV market by producing a key component for lithium-ion battery cathodes from recycled EV batteries. The strategic incentives provided by the Polish government were instrumental in positioning Poland as a leader in the green transition, drawing attention to the site and demonstrating a clear commitment to sustainable industrial development, underscoring the tangible impact of these programs.
This success signals a new era where understanding the incentive landscape is as critical as assessing traditional real estate fundamentals for major green developments. Green Incentives are not merely a financial instrument; but they can act as the powerful architects of a sustainable future, unlocking potential and transforming the global economy one green project at a time.