The Greek islands have long been an iconic tourist destination and a mainstay of the country’s economy. The government has found yet another way to leverage the islands’ appeal to meet its national objectives: allowing foreign companies to sponsor the establishment of small, sustainable, circular economies supported by public sector funding.

Launched in 2020, the Gr-eco Islands initiative is a public–private partnership (PPP) programme that enlists companies to drive the green transition of the country’s 40 smallest islands. These projects can encompass anything from increased renewables and electric vehicle (EV) use to sustainable agriculture and waste management. 

“We are using the power of the islands’ brand name to attract important brand names and money, to give huge publicity to the possibility of sustainable islands,” Greece’s minister of environment and energy, Theodoros Skylakakis, tells fDi. 

The industry heavyweights participating in the first three Gr-eco Island projects suggest this strategy of attracting brand names is working. The first island, Chalki, saw a handful of French firms including Vinci, Citroën and Akuo deliver a photovoltaic (PV) plant sufficient to cover the island’s electricity needs, plus EVs and charging infrastructure. Volkswagen is sponsoring Astypalea’s shift to e-mobility. And last December, Masdar announced it will lead Poros’s transformation through a seven-megawatt (MW) PV plant, electric ferry and road transport, and a circular waste management system. 

As for the goal of attracting private investment, Mr Skylakakis says “close to €30m” has been paid or committed as of July — a considerable figure in the context of the three islands being home to fewer than 5000 people. A ministerial decision expected this summer, which will include guidelines for project selection, is expected to accelerate private sector interest in future islands. 

Volkswagen’s laboratory

The Greek government’s focus on transitioning small, isolated islands that are disconnected from the grid makes environmental sense. These communities are powered by diesel generators, struggle to transport waste and water, and find private investment is constrained by a lack of economies of scale. “We are trying to totally change this [through PPPs],” says Mr Skylakakis. “And as the islands are well-known worldwide, they can be used as an example of how to create autonomous, sustainable systems with a reasonable price tag.” 

Volkswagen is using Astypalea, and its population of 1400, to create a zero-emission mobility ecosystem to research what “will hopefully happen in Europe in the next two to three decades”, says Maik Stephan, Volkswagen’s project lead. Volkswagen’s bid to electrify the island’s vehicles is led by its provision of EVs for public transport and emergency services. Local firms have installed charging infrastructure, which is already fully powered by a 3.5MW PV plant being developed by national energy company PPC. Finally, Volkswagen has launched an app to rent its EVs — including scooters and bikes — which are provided by its Greek importer Kosmocar. 

Mr Stephan says the project is “a kind of laboratory” and has engaged Greek and Scottish universities to analyse the results over a six-year period to help Volkswagen understand what’s needed — in terms of pricing, speed, alternatives and human interaction — to electrify an entire mobility ecosystem. He says Volkswagen is investing “a single-digit, million-euro amount” on the island, but stresses it is “not doing this to make money”, but rather viewing it as a learning project.

So far, he describes the results as “totally satisfying”. The Greek government doubling the nationwide EV subsidy for Astypalea residents has helped lead to 150 of the island’s 500-odd passenger cars now being electric. Since 2020, “this is the first place on our earth where 100% of new cars registered are 100% battery EVs,” says Mr Stephan, without disclosing what percentage of new sales are Volkswagen’s. The company claims its researchers have also found that 55% of tourists want to return to Astypalea because of the project.

Green PR premium

Indeed, Astaplayea’s attraction of up to 70,000 visitors each year provides high visibility for the automaker’s sustainability efforts. It reveals one of the Gr-eco Islands’ major draw cards for corporates pushing their green credentials: the publicity of being part of eco-tourism in high-profile locations. A spokesperson from car leasing service Ayvens, which participates in the Chalki project, says it “serves as a concrete manifestation of Ayvens’ dedication to catalysing positive environmental change”.

This appeal is boosted by significant EU funding supporting the public portion of these PPPs. This includes the €1.6bn Decarbonization Fund for the Greek Islands, which the government is using to crowd some €2bn worth of private investment into Gr-eco Islands and other island-based PPPs. Supported by this strong public backing, some firms have obtained the status of Gr-eco Island partners with relatively minor contributions. Citroën’s involvement in Chalki is its provision of six EVs, two of which are two-seater quadricycles, to its public authorities. 

These contributions shouldn’t be downplayed, and part of the Gr-eco Islands’ power is its snowball effect on private investments — an example being Volkswagen’s project spurring another firm to invest in charging infrastructure. 

However the PR pull of such initiatives does bring risks. “There is a lot of greenwashing with islands” promoting themselves as eco-friendly, says Gianni Chianetta, chair of Greening the Islands Foundation. Greece is trying to mitigate this by developing a charter that requires islands bearing the Gr-eco Islands label to maintain certain standards and procedures. 

A better way?

Instead of the Gr-eco Islands’ piecemeal approach to project sponsorship, Mr Chianetta suggests a better way to channel private money into these small locations is to pool similar projects across multiple islands into a single investment proposal. “Instead of building pilot projects here and there … critical mass is more interesting to investors,” he says. 

Greater economies of scale may help mobilise more capital. But the current approach is satisfying companies and the government, while improving the islands’ environmental footprint. And while investors may use Gr-eco Islands for pilot projects, the government sees the overall initiative differently. “This isn’t an experiment,” says Mr Skylakakis. “It’s the beginning of a new reality where we can see the power of win–win solutions.”

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This article first appeared in the August/September 2024 print edition of fDi Intelligence.