EU says proposal for 90% emissions cut by 2040 provides ‘investment predictability’
The European Commission has proposed reducing EU greenhouse gas emissions by 90% by 2040, but environmental campaigners are concerned about the focus on carbon capture and storage to meet the target
The European Commission has proposed a 90 per cent greenhouse gas emissions reduction by 2040 compared with 1990 levels, which would be achieved though significant amounts of carbon removals.
The plan was launched as part of the EU executive’s communication on “securing our future”, which makes clear the need to reach climate neutrality while securing jobs, industry and protecting farmers. It will be up to the next commission – to be appointed after the European elections in June – to turn the communication into a legislative proposal next year.
The commission says to get to its headline target it examined three potential 2040 targets, including reductions of up to 80 per cent, of 85–90 per cent, and of 90–95 per cent compared with 1990 levels. The European Scientific Advisory Board on Climate Change has advised a net emissions reduction of 90 to 95 per cent by 2040 is needed to reach net zero emissions by mid-century.
The chosen option “sets a clear transition path away from fossil fuels as called for by COP28, providing the greatest benefits in terms of energy independence and enhanced protection against fossil fuel price shocks”, says the EU executive.
It insists ambitious emissions reductions will not only mitigate the impacts of climate change, but also act as an industrial policy that will benefit European companies in the “global clean technology race”.
However, some environmental campaigners suggested the plan did not live up to the commitments made at COP28.
“You can set targets to cut greenhouse gases as high as you like – but without a clear plan to phase out the fossil fuels that are producing them, they simply aren’t credible,” said Dominic Eagleton, senior fossil fuels campaigner at non-governmental organisation Global Witness.
“It’s like building a bike without pedals: how are you going to power it?” he added. “The European Parliament and member states need to recognise this and push for a rapid and just transition plan for a full phase-out of fossil fuels, starting with a 2035 end date for gas.”
Influenced by last week’s protests, the importance of protecting farmers is stressed in both the communication and during the debate in parliament following the proposal’s launch by climate commissioner Woepke Hoestra. References to a 30 per cent reduction target for methane, nitrogen and other gases linked to farming by 2040 included in earlier drafts were removed from the final document.
Green MEP Bas Eickhout called on the EU “not to make the Dutch mistake of ignoring agriculture”, in reference to recent farmers’ protests in the Netherlands. “We need to talk about it; ignoring the problem won’t make it go away,” he said.
‘European approach’ to financing
According to the commission, the investment needed for 2031 to 2050 would be similar for all three options, with a 90 per cent reduction requiring higher annual investment in 2031 to 2040, but lower investment in the period 2041 to 2050.
“Defining in 2024 a climate target for 2040 will provide investment predictability” and “minimise the risks of lock-in to costly, sub-optimal paths and stranded assets”, the commission says. It adds that to reach the 90 per cent reduction targets, it will be necessary to “mobilise the right mix of private and public sector investment to make our economy both sustainable and competitive”.
Delay holds costs, says the commission: its impact assessment “estimates conservatively, without taking account of possible tipping points, that such costs could lower GDP by about 7 per cent by the end of the century”.
It calls for a “European approach on finance” to generate “economies of scale and scope, while limiting fragmentation of efforts and deepening of regional imbalances”.
The EU sustainable finance framework will continue to be “fine-tuned” in line with the needs of the energy transition, in particular to ensure those at earlier stages of the transition receive the necessary financing. “However, the transition will not be achieved through predictability and regulation alone. Europe must become more attractive for private investment.”
This means “deepening the EU capital markets union to unleash the €470bn in potential of annual private funding for companies at all stages of their development, including venture capital targeted at meeting the EU sustainability objectives and sustainable long-term investments for the climate transition”.
As well as “a reinforced, strategic capacity to identify and facilitate new investment opportunities and projects” the communication calls for the commission, EU member states and industry to work together to create a case for new business models, especially in clean tech, decarbonised energy-intensive industries and agriculture.
The commission believes a simplified regulatory environment and a strong single market can help businesses. In addition to a “more efficient and tailored use of public financial resources”, it says, market-oriented financial instruments, such as debt and equity finance can play a “pivotal role” – notably in backing “high risk, first-of-a-kind or breakthrough projects” in the form of impact finance or venture debt.
“The 2040 target should also guide the financial sector and supervisory authorities when assessing the climate transition risks of investments, leading to favourable conditions when risks are minimised and adequate risk mitigation measures when they are not,” adds the commission.
A ‘streamlined regulatory approach’
During the parliamentary debate, speakers both praised the proposals and added caveats, with French MEP Pascal Canfin highlighting that the goal would not be achieved without the necessary financing.
The managing director of industry group Solar Heat Europe, Valérie Séjourné, insisted that “political measures and financing instruments” must be “tailored to reach and serve consumers and small and medium-sized enterprises”, as well as large investments and large players.
“Let’s focus also on the small and the micro scale, and those that most need the support and instruments to operate change, and allow to keep them manufacturing in Europe and meet this growing demand,” she said.
“This communication matters – it is a report card for the Green Deal to date, but it also sets a framework enabling future investment. The member states will want ambition but, in the current economic and geopolitical conditions, realism too. This is the test the commission must meet – the art of the possible in the face of the climate imperative,” said Katrina Williams, former UK deputy permanent representative to the EU.
“The European Commission must seize the momentum to define the ecological transition’s pillars and ensure socio-ecological resilience. As we approach the 2040 climate strategy, clarity and a streamlined regulatory approach are imperative to navigate complex challenges and ensure a just transition towards deep emissions reductions, sustainable production and consumption practices,” said Catherine Banet, research fellow at the Centre on Regulation in Europe and professor of law at the University of Oslo.
Others stressed that ambition must be matched by decisive action.
“The commission has come out with an ambitious target, underlining once again the EU’s resolve to be a global leader in climate action,” said Marc Vanheukelen, former EU climate envoy and former EU ambassador to the World Trade Organization. “It is now up to council and parliament to make up their mind and decide. For Europe’s future competitiveness, it will be key to persuade other major economies in the run-up to COP30 in 2025 to show similar ambition.”
“Clean, secure and inexpensive energy is at the heart of European competitiveness and social wellbeing and so EU 2040 goals must further progress made in advancing the rollout of renewable energy, increasing energy efficiency, building new and better infrastructure, using digital solutions to help with grid integration and management and encouraging innovative new technologies to exploit nuclear and geothermal energy,” said Megan Richards, former director of the commission’s energy unit.
This was echoed by Stientje van Veldhoven, vice president and regional director for Europe at the non-profit World Resources Institute, who said: “The EU’s new climate target sets a strong north star for where the region should be by 2040 to reach net zero by 2050 and maintain a liveable future. The sooner we decarbonise the better, and so the EU should double down on climate and cut emissions faster, getting to 90 per cent even before the 2040 deadline.”
CCS controversy
In addition to the main communication, the commission has published a proposal on industrial carbon management that sets out a roadmap on the deployment of carbon capture and storage and carbon capture and utilisation technologies for “hard-to-abate” sectors. The proposal also underlines the need for a regulatory framework in areas such as the injection and transport of carbon dioxide as a precondition to creating a single market for CO2.
The EU executive has likewise launched an “industrial alliance”, which includes plans to accelerate the deployment of small modular reactors by early 2030.
The carbon capture figures in the communication are impressive (and, many believe, unachievable). The commission estimates around 280mn tonnes would have to be captured by 2040 and around 450mn tonnes by 2050. Storing 50mn tonnes in 2030 is equivalent to Sweden’s 2022 CO2 emissions, it notes, insisting that “industry stakeholders expressed that, by 2030, they could capture up to 80mn tonnes of CO2 per year in Europe if the necessary investment conditions are in place”.
Peter Vis, former head of cabinet in the commission’s climate action unit, said: “After having changed to ‘net’ climate targets five years ago, the EU needs to do much more to encourage removals of CO2 from the atmosphere, beyond increasing the carbon stored in its forests. EU policies are urgently needed to give credit to removals where achieved, both nature-based and technology-based, if the EU is to balance its unavoidable legacy emissions by 2050.”
“We are thrilled to see the first-of-a-kind CCUS strategy at the European level,” said Allyson Anderson Book, chief sustainability officer at US energy company Baker Hughes. “CCUS will have to play a role in achieving the EU’s climate objectives. CCUS contributes to decarbonisation of the industrial plants and can realise emission abatement in power generation as well.”
However, this excitement was not shared by Green MEPs and environmental groups. Eickhout suggested the commission was trying to “CCS [its] way” out of the climate crisis, while Arjun Flora, director at the Institute for Energy Economics and Financial Analysis Europe think tank, also expressed scepticism.
“Public funding and regulatory support for an industrial carbon management economy has been proposed as a necessary intervention to meet climate targets. However, its key assumptions are not being sufficiently challenged, nor is there any consideration of how the strategy could pivot if technological progress does not proceed as promised, or alternative pathways appear. Instead, all long-term liabilities are expected to pass to taxpayers,” said Flora.
He compared this approach to “exaggerated claims around the need for hydrogen and liquefied natural gas infrastructure” in recent years.
“An industry push for business case development means maximising the potential size of the market to drive investment and profits, rather than allowing a more holistic, systems-level approach to planning for the energy transition, which might leave a smaller role for certain industries and technologies. Such an industry-led approach can drive vast sums of public and private resources into inefficient projects, wasting time and budgets and creating stranded assets,” said Flora.
“Rather than making long-term bets on unproven technologies and debatable carbon accounting, it would be prudent to limit support to specific key projects – to first demonstrate real-world performance by 2030 or 2035 – before committing to any further targets and public funds in this direction,” he concluded.