This is an extract from a recent report “Implementing the EU 2040 Climate Target: Building blocks and measures” by The Ecologic Institute and Oeko-Institut.
The European Climate Law (ECL) requires the EU to adopt a climate target for 2040. The European Commission recommends an EU climate target for 2040 of 90% reduction in net GHG emissions by 2040 (compared to 1990). Achieving emission reductions on this scale is indispensable if the EU is to stay on a realistic path towards climate neutrality by 2050 and net negative emissions thereafter. To achieve emission reductions on this scale, the EU must meet its 2030 climate target and scale up its current reduction efforts significantly. With existing measures, as published by the European Environment Agency (EEA) in 2024, the EU is projected to only reduce net emissions by 54% in 2040, and 62% if additional measures are implemented. The EEA projects that the EU is currently set to miss its climate neutrality target for 2050 and its 55% reduction target for 2030. Even with additional measures, net emissions are projected to fall by only 66% in 2050, and by 49% in 2030. With existing measures, emissions are projected to decrease by 43% in 2030 and 57% in 2050.
Despite some differences, all IA’s core scenarios have one thing in common: emission reductions are primarily achieved through innovation, technology, investment, and infrastructure changes. According to the IA, industry emissions are reduced via electrification, implementation of new manufacturing technologies, innovation in processes, use of alternative materials or sources such as RFNBOs and cleaner supply chains. In the residential and service sectors, emissions decrease through widespread adoption of heat pumps and building envelope renovations. Transport emissions decline due to large-scale deployment of electric vehicles and a shift from fossil fuels to e-fuels and advanced biofuels in road, maritime, and aviation sectors. In agriculture, GHG emissions are mitigated through advancements in breeding, reduction of enteric emissions, and improved manure and fertilizer management.
As another precondition, it is equally essential that the EU achieves its energy and climate 2030 targets. According to the EEA’s 2023 Trends and Projections Report, the EU is projected to reduce its emissions by 43% by 2030 with existing measures. Even with additional measures, the EEA projects that the EU will only achieve emission cuts of 49% by 2030. To deliver on the 2030 targets, the pace of annual absolute GHG emission reductions must more than double compared to the annual progress seen since 2005. The annual reduction rate must accelerate, particularly in the sectors covered by the Effort Sharing Regulation.
For the time after 2030, the EEA projects in 2024 that existing policies and measures will deliver net emission reductions in the scope of the Climate Law of 54% in 2040 and 57% in 2050 (compared to 1990). Considering currently adopted and planned measures, Member States’ aggregated emissions are projected to fall by 62% below 1990 levels in 2040, and 66% in 2050. As a result, the EU will need to step up its efforts significantly to achieve net reductions of 90% by 2040 and climate neutrality by 2050. The current gap is very large, particularly in transport and agriculture, and must be closed as soon as possible. Very positively, however, GHG emissions in the EU fell by an unprecedented 8% in 2023. This marks the largest year-on-year emission reduction in several decades, except for the COVID-impacted year of 2020, bringing estimated 2023 emissions to 37% below 1990 levels. Reductions in 2023 were more than five times the average rate since 2005 and surpasses the annual rate required to meet the 2030 climate targets. They are a major step towards meeting the EU’s climate target for 2030. In addition, it should be noted that the IA proposes an emission budget for the EU in S 3 of 16 Gt from 2030 to 2050.
Reduced energy consumption: Reduced energy consumption is a crucial building block for achieving the required emission cuts. The IA projects that ‘continued energy efficiency improvements will reduce the need for energy’. Accordingly, gross available energy (GAE) is expected to decrease by around 30%, from 1450 Mtoe in 2021 to approximately 1020 Mtoe in 2040, with small differences across scenarios S1, S2, and S3. The LIFE variant suggests a further reduction in GAE by 24 Mtoe. The IA also projects that GAE will stabilize after 2040, as energy savings will be offset by the additional energy required for renewable hydrogen and direct air capture. Similarly, the ESABCC finds that total final energy use will decrease by 20-40% from current levels by 2040 across all pathways. The transport sector is expected to see the largest reduction in energy consumption (30-60%), followed by the industrial sector (20-45%) and the residential and tertiary sectors (15-35%). However, despite recent advancements and an overall reduction in energy consumption since 2005, progress has been too slow. If current trends persist, the EU will not meet its 2030 energy efficiency targets. To achieve these targets, the average annual reduction in primary energy consumption must more than double compared to the rate since 2005, while the reduction in final energy consumption needs to be more than three times faster. For comparison, the following graphic illustrates changes in energy consumption in Member States since 2015.
Availability of green electricity: According to all scenarios, achieving the 2040 target depends on the availability of green electricity – in sufficient volumes and in time. The electrification of transport, buildings, and industry as well as the production of RFNBOs (Renewable Fuels of Non-Biological origin) and DACC (Direct Air Carbon Capture) require large amounts of green electricity and are essential building blocks for achieving net reductions of 90%. The IA projects that electricity demand will increase drastically in the coming decades. It assumes that electricity generation will rise from 2,905 TWh in 2021 to about 4,565 TWh in Scenario 1 (S1), 4,900 TWh in Scenario 2 (S2), and 5,210 TWh in Scenario 3 (S3) by 2040. Electricity consumption in the EU’s transport sector, for example, increases drastically, from less than 5 Mtoe in 2015 to 42-43 Mtoe in 2040 and 53-54 Mtoe in 2050 in the S1, S2 and S3 scenarios. This represents 15-16% of the EU’s total final electricity consumption across all sectors in 2040. Renewable energy is projected to supply most of the electricity in 2040.
Availability of sustainable biomass: Biomass is another essential building block for achieving net reductions of 90%. Primarily driven by increased demand for advanced liquid biofuels and biomethane, the use of biomass and waste is projected to increase by 30% in scenarios S2 and S3, representing approximately 20% of the GAE share in 2040. Overall, the IA estimates that biomass generates 9 Exajoules (EJ) of energy. The ESABCC indicates that the demand for bioenergy will increase by over 50% by 2040 in some scenarios, while other scenarios assume a more modest increase, or even no increase above today’s levels.
Availability of green hydrogen: Availability of green hydrogen is another big building block on the path towards net reductions of −90 % in 2040. The IA assumes that hydrogen consumption scales up rapidly, reaching up to 95 Mtoe in 2040 in scenario S3. Hydrogen production in the S3 scenario is projected to be over 60% higher than in S1. The production of e-fuels accounts for the “lion’s share” of total hydrogen consumption in 2040. There is only a minor need for hydrogen to stabilize the electricity production system in these scenarios. The following table provides an overview of hydrogen consumption by sector.
Green hydrogen production is still in its very early stages. According to the Clean Hydrogen Monitor 2023, hydrogen production capacity in Europe remained stable at around 11.5 Mtoe in 2022. Only a small fraction of this capacity is Power-to-hydrogen/water electrolytic capacity. In 2022, water electrolysis capacity represented just 0.3% of the total hydrogen production capacity in Europe, up from 0.1% in 2020. Conventional production methods based on fossil fuels accounted for 95.6% of the capacity and dominate the current hydrogen market. In 2023, 0.5 GW of electrolysis-based hydrogen production capacity was installed in Europe.
Availability of carbon capture and storage (CCS) and usage (CCU): Carbon capture and storage (CCS) plays important roles in IA scenarios. While annual carbon capture remains below 100 MtCO2 in Scenario 1 (S1), it increases to approximately 220 MtCO2/year in Scenario 2 (S2) and around 350 MtCO2/year in Scenario 3 (S3), where most emissions from the power sector and industrial processes are captured, and industrial carbon removal technologies are widely deployed. The captured carbon is either used to produce efuels (CCU) or stored, with storage injection rates reaching approximately 150 MtCO2/year in S2 and 240 MtCO2/year in S3 by 2040. The use of CO2 in materials is expected to expand primarily in the decade from 2041 to 2050.
Availability of carbon removals: Carbon removals are another big building block for reaching the proposed climate target of net 90%. To deliver a reduction of net GHG emissions of 90%, the IA assumes that the level of remaining EU GHG emissions in 2040 should be less than 850 MtCO2-eq and carbon removals (from the atmosphere through land-based and industrial carbon removals) should reach up to 400 MtCO2. LULUCF net removals are projected to contribute most over 2030-2050 in scenarios S2 and S3 with net removals of around 320 MtCO2-eq. The role of industrial removals remains much more limited in the short run. They become significant by 2040 to meet higher climate targets, with about 50 MtCO2 in S2 and 75 MtCO2 for S3, representing close to 25% of the total carbon capture.
Funding and investment: Funding for the required investments is an additional and indispensable building block for achieving necessary emission cuts. However, estimating the necessary funding needs is challenging and subject to significant uncertainties. Regardless of these uncertainties, trends in financing decarbonization are heading in the wrong direction. According to ECNO, the climate investment gap for the EU to achieve its 2030 climate targets was €406 billion, or half of the annual investment required to meet the targets, in 2022. Making matters considerably worse, subsidies for fossil fuel increased considerably in 2022 due to the energy crisis, reaching €190 billion.
Access the report here
