The last hours of COP27 were perhaps the busiest. The final text included language to embrace “low-emission energy”, which left a bitter taste in countries that backed India’s proposal to phase out all fossil fuels.

However, in the last few days there has been an important change that has brought a positive development to the conference: loss fund. As COP27 threatened to deadlock over the contentious issue of a compensation fund for the southern states hardest hit by climate change, an idea was brought to the table. The EU has proposed that if a global commitment to peak emissions is made by 2025, it will support a new global fund to finance responses to climate disasters in the world’s most vulnerable countries. Up to this point, the EU has joined the US in blocking ideas from less developed countries. But at the last minute, the EU left the US isolated in opposition.

Since the US joined the Paris Climate Agreement, the EU and the US have had different leadership styles. The US approach, typified by the Inflation Reduction Act that went into effect in August 2022, aims to achieve the US contribution to meeting the Paris targets through government subsidies to businesses willing to invest in clean energy to maintain their competitiveness. On the other hand, the EU seeks to lead by example through the European Green Deal, the first attempt by any world power to transform its economy through decarbonization, ahead of all other participants. Key aspects of the Green Deal such as carbon limit adjustment mechanism, they will make it harder for businesses in neighboring countries to compete with European companies unless they also decarbonise. But the philosophy of the European Green Deal has been to make the hard choice first, using regulation in a way that will push businesses to change, thereby showing the most reluctant countries that the path to zero emissions is possible.

The EU’s climate vision is facing credibility issues in 2022 due to Russia’s aggressive war in Ukraine. In the ensuing energy crisis, EU member states quickly sought to replace fossil fuel supplies from Russia with equivalent ones. In doing so, they undermined supplies to other countries and raised gas prices around the world. When, in the run-up to COP27, EU leaders insisted that other countries fulfill and deepen their goals under the Paris Agreement while they themselves backed down, they were accused of hypocrisy: They ignored their decarbonisation promises when their energy security was in jeopardy.

As shown by the new energy agreement monitoring tool which launched ECFR this month, there is some truth to this accusation. Of the new EU energy agreements signed in 2022, only half contain clean energy elements. However, the aforementioned ones vary in depth, from the commitment to explore renewable energy sources with non-EU countries, to the development of appropriate infrastructure and direct imports of clean energy.

Sharm El Sheikh has shown how fragile the global climate cooperation consensus is, given the huge gaps in confidence in climate finance, debt finance and vaccine nationalism. And – given the lack of progress on phasing out fossil fuels at the COP this year – a permanent European commitment to combating climate change is needed more than ever. It is not a fact that the President of the United States will be like this after the 2024 elections favorable place on the climate agenda as much as Biden. If Europe abandons the leadership role it has played in recent years, the difficult path to global decarbonization will become impassable.

In this context, the belated transition of the EU in case of increased climate finance to the most vulnerable countries is welcome, but not enough to continue to be a climate leader in the coming months and years. The EU must also strengthen its leadership by example, demonstrating that climate action is compatible with and indeed a key part of sustainable energy security for Europe and the rest of the world.

The EU needs a plan to quickly invest and scale up clean energy that proves that climate-smart investment options will pay off. Investing in a strong and sustainable industrial transformation in the EU will enable it to better compete with the US as the Deflation Act begins to show results. Following the example of the US, the EU can use its own climate power to be competitive by maintaining healthy competition with US businesses and supporting the most vulnerable economies.

A successful European combination of investment and regulation may even persuade the US to do more through legislation. Two global regions using similar approaches to decarbonization are stronger than one when it comes to competing with China’s coal-fired model. But European leaders must act now, implement clean energy investments and incentives at scale, shape the post-COP27 landscape and push others to get involved. In Sharm el Sheikh, the Europeans said “we can do it”, so now the EU must demonstrate that it can do it at home.

Susie Dennison she is the director of the European Strength program. European Council on Foreign Relations (EKFR).