In December 2019, the European Union (EU) signed the European Green Deal, a policy roadmap for the EU’s climate agenda that focuses on creating a comprehensive pathway for the continent to reduce its carbon emissions. The deal envisions the achievement of zero-net emissions of greenhouse gases (GHG) by 2050 along with decoupling economic growth from resource consumption. It will guide policies, reforms, regulations, and actions across all sectors, including transport and mobility, to achieve the ambitious targets of emission reduction while ensuring economic growth in the region.

The European Green Deal is committed to increasing the EU’s climate goals for 2030 and 2050. The current EU policy will result in achieving only 60 per cent reduction in GHG emission by 2050 as compared to 1990. The European Green Deal seeks a 55 per cent reduction by 2030 and a 90 per cent reduction by 2050. To further strengthen the efforts aimed at achieving this long-term strategy, the European Commission proposed the European Climate Law in March 2020 that will enshrine the EU’s carbon-neutrality objective in legislation.

In addition to the primary focus on emission reduction, the European Green Deal also includesthe following elements: increasing the supply of clean, affordable, and secure energy; mobilising a circular economy;adopting energy-efficient construction methods;implementing financial reforms to support the transition; accelerating the shift to sustainable and smart mobility;adopting a sustainable food supply system (from farm to fork); restoring biodiversity; and ensuring zero pollution development.

Targets for and impact on transport

Transport accounts for 25 per cent of GHG emissions in Europe. Figure 1 outlines the share of GHG emissions by different modes of transport.

Figure 1: Mode-wise share of GHG emissions
Source: Statistical Pocketbook, 2019

The share of GHG emissions highlights the importance and urgency of reforms required in the transport sector. The European Green Deal outlines key guidelines to tackle all emission sources. The European Commission is developing a Sustainable and Smart Mobility Strategy as part of the European Green Deal and in line with these guidelines; itis scheduled for release before the end of 2020.

Meet need for multimodal transport:To increase the efficiency of the transport system, 75 per cent of inland transport by road must be shifted to railway and inland waterways. This would mean significantly increasing the capacity of railway and inland waterways to cater to the anticipated surge in demand.

Shift to automated and connected mobility:Advancement in automated and connected technology must focus on reducing congestion and pollution levels, especially in urban areas. The European Commission will boost investment in smart systems for traffic management and will encourage the adoption of Mobility-as-a-Service (MaaS)solutions to optimise passenger transportation.

Adopt effective pricing based on environmental impacts: The price of transport will be based on a consideration of the environmental impact of the different modes of transport. The European Commission will withdraw subsidies for fossil-based fuelsand will reassess the current tax exemptions on aviation and maritime transport fuel.

Increase production and deployment of alternative fuels:Nearly 13 million zero- and low-emission vehicles are expected to be deployed in Europe by 2025. The transition will require one million public recharging and refuelling stations, a significant increase from the existing 0.14 million charging stations. The European Commission will accelerate the deployment of charging stationsthrough support funding andlegislative options to boost the production and deployment of charging facilities.

Reduce pollution by transport sector: To reduce pollution and to combat road congestion in urban areas, the European Commission will propose stricter air pollutant standards for combustion engine vehicles. It will also revise legislation on the CO2 emission performance of vehicles. It will also takesteps to reduce pollution from maritime and aviation transport.

In addition to these specific strategies, actions and reforms undertaken in other sectors will also impact the transport sector indirectly. These steps includethe mobilisation of the circular economy, adoption of carbon-based pricing throughout the region, adoption of carbon border-alignment mechanisms to reduce the risk of carbon leakage,implementation of an industrial strategy, anda boost for renewable energy.

Key actions undertaken in transport sector

European Climate Law

The European Climate Law aims to write into law the goal set out in the European Green Deal. The law will include a long-term commitment that legally binds the member states to achieve the 2050 targets, to create a system for monitoring the progressmade in this regard, to provide predictability to investors, and to ensure that the transition to climate neutrality is irreversible. The legislative proposal was submitted to the European Parliament, the European Council, the EuropeanEconomic and Social Committee,and the Committee of the Regions for further consideration.

2021: The European Year of Rail

In line with the goalof shiftingcommuters from road to rail and inland waterways, the strategy will focus on increasing the share of rail transport for passenger and freight and on making rail travel more attractive by increasing customer satisfaction and improving the travel experience. Passenger share in rail increased by only 0.6 per cent in the period from 2011 to 2016. 2021: The European Year of Rail policy will promote rail as an attractive and sustainable way of moving across Europe for citizens, businesses, and authorities through projects, debates, events, exhibitions, and initiatives across the continent. Additionally, under this policy, theEuropean Commission will implement rules agreed upon under theFourth Railway Package, which isdesigned to complete the single market for rail services (Single European Railway Area) and to revitalise the rail sector by making it more efficient and therefore more competitive vis-à-vis other modes of transport.This will primarily include the opening upof the market for domestic passenger services and cutting costs and reducing the administrative burden faced by railway undertakings operating across the EU.

Financial impact

The European Commission has estimated that an additional annual investment of EUR 260 billion is required to achieve the current 2030 climate target. To ensure the required investment, the Commission will present a Sustainable Europe Investment Plan. The Commissionhas also proposed the reallocation of 25 per cent offunds towards climate mitigation projects across all EU programmes. Additionally,30 per cent of the InvestEUFund will be allocated to projects addressing challenges posed by climate change. TheEuropean Investment Bank plans to become Europe’s climate bank by doubling the fund allocation to climate-resilient programmes from 25 per cent to 50 per cent by 2050. Lastly, the Commission has also proposed a Just Transition Mechanism,including a Just Transition Fund,to support the regions and sectors that are most affected by the transition.


The implementation of the proposed strategies of the European Green Deal is likely to facechallenges on account of legal and economic hurdles. First, the European Climate Law is essential for ensuring the commitment of member states. However, it has yet to be approved by the European Parliament andby the member states. Second, the revised ambitious targets of emission reduction are likely to face opposition, particularlygiven the economic slowdown due to the COVID-19 pandemic. Third, the European Green Deal plans a financial allocation of EUR1 trillion. However, there is as yet no clarity on how the funds will be utilised and if the assigned amount would be sufficient to achieve the targets. Fourth, international cooperation is essential in ensuring emission reduction. The strategy to implement a carbon tax on nations bordering the EU regionmay hinder exports and may cause an increase in tariffs.

Secondly, the strategiesoutlined in the European Green Dealpertaining tothe transport sector will now also need to consider changes in commuters’ travel behaviour in the post-COVID-19 pandemic period. Commutersat present prefer to use private modes of transport wherever possible as a safety precaution. Unlike the pre-COVID pandemic period, peak traffic is distributed over a longer span of time and across new modes of commuting such as e-bikes and cycle-sharing systems which are gaining popularity.

Lastly, the focus of the European Green Deal, especially in the transport sector,is based ona supply-driven approach. The strategies and innovationsare designedto offer alternatives to modes of transport that increase carbon emissions. However, there is little emphasis on curbing the actual demand for transport.Pricing mechanisms based on the environmental cost of transport are likely to affect different sectors of the economyin different ways. The proposed guidelines do not focus sufficiently on efforts to encouragecommuters to use public transport. Instead, the strategy envisions a tremendous increase in low-emission vehicles and adopts a proactive approach towardsthe deployment of charging stations. However, without an effective strategy to cap or reduce vehicular growth, cities will have to invest in constantly upgrading their road infrastructure to meet ever growing demand. The overall strategy focuses on decarbonising energy for consumption and places little emphasis on creating innovative solutions to reduce energy consumption while ensuring economic growth.