Trend watch: Public-private partnerships & climate governance in 2026 — signals, winners, and red flags

Public-private partnerships (PPPs) for climate infrastructure have mobilised €340 billion in European investment commitments since 2021, yet only 23% of announced projects have reached financial close—revealing a critical execution gap between announcement and implementation (European Court of Auditors, 2024). For procurement professionals navigating climate governance in 2026, understanding which partnership structures deliver results versus those that stall in bureaucracy has become essential as public sector climate mandates intensify and private capital seeks credible deployment channels.

Why It Matters

The scale of climate investment required exceeds public sector capacity. The European Commission estimates €1.3 trillion annually is needed to meet 2030 climate objectives—approximately triple current levels—with private capital necessarily providing 60-70% of this total. Public-private partnerships offer mechanisms to blend public de-risking with private efficiency, but poorly structured PPPs create liabilities without delivering outcomes. For procurement professionals, the stakes include both value for money and personal accountability as public audit bodies increasingly scrutinise climate partnership performance.

Extended Producer Responsibility (EPR) frameworks exemplify the governance challenge. EPR schemes across Europe now cover packaging, electronics, batteries, textiles, and vehicles—transferring end-of-life responsibility from public authorities to producers. However, scheme effectiveness varies enormously: top-performing EPR systems achieve 80%+ collection rates with full cost recovery, while poorly designed schemes recover less than 50% of costs and create perverse incentives for free-riding. The difference lies in governance design, not sector characteristics (OECD, 2024).

Industrial policy has reshaped the PPP landscape. The EU's Net Zero Industry Act, Green Deal Industrial Plan, and European Sovereignty Fund have created unprecedented public capital availability for climate investment. However, accessing these funds requires demonstrating additionality, avoiding windfall profits for private partners, and meeting increasingly stringent reporting requirements. Procurement teams must balance speed of deployment against audit risk from inadequately structured partnerships.

Standards proliferation creates both opportunity and confusion. Over 200 climate-related standards, certifications, and frameworks now compete for adoption—from ISO 14064 for greenhouse gas accounting to science-based targets, Task Force on Climate-related Financial Disclosures, and sector-specific schemes. PPPs must navigate this complexity, selecting credible frameworks while avoiding standards shopping that enables greenwashing. The EU's incoming Corporate Sustainability Due Diligence Directive will make standards selection legally consequential, not merely reputational.

Key Concepts

PPP Governance Structures for Climate

Climate PPPs typically employ three models: (1) concession arrangements where private partners design, build, finance, and operate climate infrastructure (e.g., EV charging networks) in exchange for user fees or availability payments; (2) joint ventures where public and private partners share equity, risk, and control proportionally (e.g., district heating companies); (3) performance contracts where private partners guarantee outcomes (e.g., energy savings) with payment contingent on verified results. Each model suits different risk profiles and accountability requirements.

Extended Producer Responsibility Governance

Effective EPR schemes require four governance elements: clear target-setting with enforceable obligations; independent compliance verification rather than self-reporting; modulated fees that reward design for recyclability and penalise hard-to-recycle products; and transparent fund management preventing producer contributions from subsidising general waste budgets. Producer Responsibility Organisations (PROs) managing EPR schemes must demonstrate independence from obligated producers to avoid conflicts of interest.

Traceability and Verification Standards

Climate governance increasingly demands traceability—the ability to track materials, emissions, and impacts throughout supply chains. Digital product passports, mandated for batteries from 2027 and construction products from 2028, will require granular data on carbon footprint, recycled content, and end-of-life recyclability. Blockchain-based traceability systems offer immutability but face scalability challenges; centralised databases offer efficiency but create single points of failure. Procurement specifications must address traceability requirements explicitly.

Benchmark KPIs for Climate Partnerships

Meaningful partnership evaluation requires quantified benchmarks. Key indicators include: cost per tonne of CO₂ avoided (should target <€100/t for infrastructure, <€50/t for efficiency); private leverage ratio (private capital mobilised per euro of public support—target >3:1); time from announcement to financial close (should target <18 months); and verified emissions reduction versus baseline (should target >90% of projected impact within 5 years). Partnerships lacking quantified targets with verification mechanisms should be presumed ineffective.

Sector-Specific KPI Table

KPI	Best Practice	Acceptable	Red Flag
Private Leverage Ratio	>4:1	2-4:1	<2:1
Time to Financial Close	<12 months	12-24 months	>24 months
Cost per tCO₂ Avoided	<€75	€75-150	>€150
Verified vs. Projected Impact	>90%	70-90%	<70%
EPR Collection Rate	>75%	55-75%	<55%
EPR Cost Recovery	>90%	70-90%	<70%
Traceability Coverage	>95% of materials	80-95%	<80%
Independent Verification	Third-party audit	Self-report with spot checks	Self-report only

What's Working and What Isn't

What's Working

Outcome-based contracting with performance guarantees delivers superior results. Energy performance contracts—where private partners guarantee specified energy savings with penalties for underperformance—achieve verified savings averaging 92% of projections, compared to 65% for traditional procurement without guarantees. The guarantee mechanism creates accountability that translates design-stage estimates into operational outcomes. For climate infrastructure, analogous structures guarantee emissions reductions, renewable generation, or waste diversion rates (European Energy Efficiency Platform, 2024).

Standardised project preparation facilities accelerate deployment. The European Local Energy Assistance (ELENA) facility, providing grants for project development, has supported €6 billion in climate investment from initial development costs under €100 million. Projects with ELENA support reach financial close 40% faster than self-developed equivalents. The lesson: investing in structured project preparation—rather than expecting private partners to absorb development risk—improves both speed and bankability.

Federated EPR systems with producer-funded compliance bodies outperform single-PRO monopolies. Competition between PROs, as implemented in Germany's packaging system, reduces compliance costs by 15-25% compared to monopoly arrangements. However, competition requires robust governance preventing race-to-bottom on quality—Germany's introduction of the Central Agency (Zentrale Stelle) for compliance verification addressed early quality concerns. Procurement teams should specify PRO governance standards, not just outcome targets.

Public sector demand aggregation demonstrates market credibility for emerging technologies. The Netherlands' EV charging tender, aggregating demand across 200+ municipalities, attracted bidders who wouldn't pursue individual municipal contracts. Similar aggregation for heat pump installation, building retrofit, and renewable energy procurement has reduced unit costs by 20-30% while accelerating private sector market entry. Procurement power creates markets.

What Isn't Working

PPPs structured for announcement rather than implementation consistently fail to reach financial close. Analysis of 500 announced climate PPPs found that those announced at major political events (COP, G7, European summits) were 50% less likely to reach implementation than those developed through standard procurement processes. The pressure for announcement-ready partnerships shortcuts the detailed structuring required for bankability (Institute for Government, 2024).

Technology-prescriptive specifications in rapidly evolving sectors lock partnerships into suboptimal solutions. Contracts specifying particular battery chemistries, solar panel technologies, or hydrogen production routes have required expensive renegotiation as technology advanced. Outcome-based specifications (required efficiency, emissions intensity, cost per unit) allow private partners to optimise technology selection while maintaining public sector objectives.

Inadequate risk allocation creates disputes and delays. Climate PPPs face unique risks—carbon price volatility, regulatory change, technology obsolescence—that traditional infrastructure risk matrices don't address. Contracts that allocate these risks entirely to private partners result in high pricing or failure to attract bidders; those that allocate risks entirely to public partners create contingent liabilities that audit bodies increasingly reject. Optimal allocation requires risk-by-risk analysis with allocation to the party best able to manage each specific risk.

Self-certified sustainability claims in procurement create greenwashing vectors. Suppliers claiming compliance with sustainability standards without third-party verification have been found to overstate performance by 40-60% in audit investigations. The 2024 EU Ecodesign for Sustainable Products Regulation addresses this for products, but procurement specifications must independently require verification rather than relying on evolving regulation.

Key Players

Established Leaders

European Investment Bank has deployed €40 billion annually for climate action since 2021, becoming the world's largest multilateral climate lender. Their Climate Bank Roadmap 2021-2025 sets quantified portfolio targets including 50% climate/environmental share of lending and €1 trillion mobilisation by 2030. EIB project structuring expertise and credit enhancement instruments enable bankability for projects that commercial lenders alone would reject.

Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) provides technical assistance for climate governance, having supported PPP development in over 80 countries. Their Climate Partnerships frameworks have been adopted by bilateral partnerships including Germany-India, Germany-South Africa, and Germany-Mexico, demonstrating scalable governance models.

Veolia Environment operates climate-related PPPs spanning waste management, water services, and district energy across 48 countries. Their track record of delivering contracted performance levels—with third-party verified outcomes—provides benchmarks for PPP effectiveness that procurement teams can reference.

Emerging Startups

Circularise provides digital product passport infrastructure using decentralised technology, enabling traceability requirements without centralised data custody. Their system has been adopted for battery passport pilots under EU Battery Regulation requirements.

Emitwise offers supply chain emissions measurement and management, providing the granular Scope 3 data that climate PPPs increasingly require for verification. Their integration with procurement systems enables emissions-weighted supplier selection.

ByFusion provides plastic waste transformation technology converting mixed plastics into construction materials, offering EPR schemes alternative end-markets beyond traditional recycling. Their partnership model with municipalities demonstrates viable PPP structures for circular economy infrastructure.

Key Investors & Funders

European Commission (Innovation Fund) has allocated €40 billion through 2030 for large-scale clean technology demonstration, with grants covering up to 60% of additional costs for innovative projects. The fund's competitive structure requires projects to demonstrate commercial viability beyond grant support.

Nordic Environment Finance Corporation (NEFCO) specialises in climate PPP financing for municipal and regional actors, with particular expertise in district heating, circular economy, and energy efficiency. Their technical assistance combined with financing creates integrated support not available from pure commercial lenders.

Climate Investor One (managed by FMO, Dutch development bank) provides blended finance for renewable energy projects in emerging markets, demonstrating partnership structures that combine development finance with commercial capital for climate infrastructure.

Examples

Germany's Packaging EPR Reform: Germany's packaging EPR system, operational since 1991, underwent fundamental governance reform in 2019 following quality and compliance concerns. The creation of the Central Agency (Zentrale Stelle Verpackungsregister) introduced independent compliance verification, replacing producer self-reporting. Results have been dramatic: reported recycling rates that had plateaued at 65% increased to 78% by 2024, while "free-rider" non-compliance dropped from estimated 20% to under 3%. The reform demonstrates that EPR governance structure—not just target-setting—determines scheme effectiveness. For procurement professionals, Germany's experience validates requirements for independent verification bodies in EPR scheme governance, funded by producer fees but operationally independent from obligated companies (Umweltbundesamt, 2025).
France's Rénovation Énergétique des Bâtiments (RENOV) Partnership: This public-private partnership for building energy renovation combines public loan guarantees with private financing and contractor aggregation. Homeowners access subsidised renovation loans while contractors benefit from aggregated demand reducing customer acquisition costs. The partnership achieved 800,000 renovations in 2024—exceeding the 700,000 target—with verified energy savings averaging 38% per dwelling. Critically, the partnership includes mandatory post-renovation energy audits, with contractor payment contingent on verified performance. This outcome-based structure addresses the "performance gap" that plagues renovation programmes relying on design-stage estimates. The model has been adapted by Belgium, Italy, and Portugal with similar results.
Copenhagen's HOFOR District Heating Transition: Copenhagen's municipal utility HOFOR is transitioning the world's largest district heating network from biomass to heat pumps and geothermal through a €2.5 billion PPP. Private technology partners provide heat pump installations with 25-year performance guarantees, while HOFOR retains network ownership and customer relationships. The partnership structure allocates technology risk to private specialists while preserving public control over essential infrastructure. By 2025, the programme had displaced 40% of biomass heating with heat pump alternatives, reducing both particulate emissions and biomass demand pressure on European forestry. The verified carbon savings exceed 200,000 tonnes CO₂e annually at an implicit carbon cost of €45/tonne—well below carbon market prices and demonstrating efficient public capital deployment (HOFOR, 2025).

Action Checklist

Establish mandatory outcome-based performance specifications for climate PPPs, with payment contingent on verified emissions reduction, renewable generation, or circularity achievement—not merely activity completion
Require independent third-party verification for all supplier sustainability claims, specifying accredited verifiers and verification frequency in procurement documentation
Implement standardised risk allocation frameworks for climate PPPs, allocating regulatory risk to public partners (who can influence policy), technology risk to private partners (who select and operate), and market risk proportionally to commercial exposure
Develop project preparation pipelines with adequate public funding for feasibility, structuring, and procurement—accepting that €1 spent on preparation typically mobilises €50+ in implementation investment
Specify traceability requirements in all materials procurement, requiring digital chain of custody for carbon-intensive materials and EPR-covered products with explicit data quality standards

FAQ

Q: How should procurement teams evaluate the credibility of private partner sustainability claims? A: Evaluate claims across four dimensions: verification (third-party audit versus self-certification); specificity (quantified metrics versus qualitative statements); boundary (complete scope versus cherry-picked elements); and track record (demonstrated delivery versus prospective promises). Require that sustainability claims be backed by verified data from accredited bodies—ISO 14001 certification, Science Based Targets verification, or equivalent. For complex claims, request supporting documentation including calculation methodologies, data sources, and verification reports. Compare claimed performance against sector benchmarks from independent sources (CDP, Climate Action 100+, MSCI). Consider requiring performance bonds linked to sustainability claims, with partial payment contingent on post-implementation verification. The EU Green Claims Directive, effective 2026, will create legal framework for advertising claims that procurement specifications should anticipate.

Q: What governance structures prevent climate PPPs from stalling between announcement and implementation? A: Successful governance requires: (1) dedicated project teams with authority to resolve issues without escalation; (2) realistic timelines with contractual milestones and consequences for delay; (3) pre-agreed change mechanisms for inevitable scope adjustments; (4) senior sponsor accountability at both public and private partner organisations; (5) independent monitoring reporting to governing bodies rather than project teams. Structurally, design partnerships to reach financial close within 18 months of procurement initiation—projects taking longer rarely recover momentum. Avoid announcement-driven timelines that force premature public commitments before structuring is complete. Build in decision gates with explicit go/no-go criteria that create pressure for resolution rather than indefinite negotiation.

Q: How should EPR scheme governance be structured to avoid conflicts of interest? A: EPR governance should separate three functions: (1) target-setting and policy by public authorities with no producer influence; (2) compliance verification by independent bodies funded through scheme levies but operationally independent from both producers and PROs; (3) operational delivery by PROs that may be producer-controlled but operate under regulated conditions preventing self-certification and free-riding. The German Central Agency model—funded by producer registration fees but governed independently—provides a template. Procurement specifications for PRO contracts should require: transparent fee calculations; modulated fees rewarding design for recyclability; arms-length governance from major obligated producers; annual independent audits; and public reporting of collection, recycling, and cost recovery rates.

Q: What are realistic expectations for private capital leverage ratios in climate PPPs? A: Leverage expectations should vary by project risk and sector maturity. For proven technologies (solar, onshore wind) in strong regulatory environments, expect 5-7:1 leverage—€1 of public support mobilising €5-7 of private investment. For emerging technologies (hydrogen, CCUS) or challenging markets, 2-3:1 represents realistic expectations. Leverage below 2:1 suggests either excessive public subsidy or project unbankability requiring different intervention. Critically, measure leverage based on financial close, not announcement—announced leverage ratios often include uncommitted capital that fails to materialise. Track portfolio leverage across multiple projects rather than optimising individual transactions, accepting that demonstration projects with lower leverage enable subsequent projects with higher leverage by proving technology and market viability.

Sources

European Court of Auditors. (2024). EU Climate and Energy Policy: Have Investments Met Targets? Luxembourg: Publications Office of the European Union.
OECD. (2024). Extended Producer Responsibility: Updated Guidance for Efficient Waste Management. Paris: OECD Publishing.
European Energy Efficiency Platform. (2024). Energy Performance Contracting: Market Report 2024. Brussels: EU3P.
Institute for Government. (2024). Public-Private Partnerships for Climate: What Works? London: Institute for Government.
Umweltbundesamt. (2025). Packaging Waste in Germany: Annual Report 2024. Dessau-Roßlau: German Environment Agency.
HOFOR. (2025). District Heating Transition: Progress Report 2024. Copenhagen: HOFOR.