EU

Over a year after Russia’s illegal invasion of Ukraine and the resulting energy crisis, the EU has made significant progress in adopting policies that, if implemented effectively, would result in emissions reductions going beyond its NDC target—which means the EU should come forward with a strengthened target. However, continued investments in new fossil fuel infrastructure, especially LNG terminals and fossil gas pipelines, undermine the EU’s decarbonisation efforts. The CAT rates the EU’s overall climate action as “Insufficient”.

Combined, the adoption of most of the regulations proposed in the "Fit for 55" package and RePowerEU plan (listed below) would cut emissions by 60–61% below 1990 by 2030 (incl. LULUCF), beyond the bloc’s current ‘at least 55%’ target. The key measures include:

• Strengthening the emissions reduction targets from 43% to 63% below 2005 levels in its Emissions Trading Scheme (EU ETS), which targets emissions from electricity, industry and aviation;
• Increasing binding emissions reduction targets from 30% to 40% in the sectors covered by the Effort Sharing Regulation: buildings, transport, and agriculture;
• Expanding the scope of the EU ETS to include buildings and transport in a parallel scheme from 2027;
• Strengthening its 2030 renewable energy share target from 32% to 42.5%, with an additional tentative target to bring it up to 45%;
• Strengthening its targets for energy efficiency, including energy consumption targets which should not exceed 763 Mtoe; and
• Increasing its land use and forestry sector sink to 310 MtCO₂e.

However, contrary to the position it adopted in October 2022, ahead of COP27, the EU has still not submitted an updated NDC that would reflect its new policies.

To continue improving its climate action, the EU should:

• Stop investing in additional LNG capacity and focus its efforts on the renewable energy transition,
• Submit a further update to its NDC, increasing its domestic target to at least a 1.5°C global least cost compatible level of at least or 61% excl. LULUCF below 1990 levels by 2030,
• Substantially increase its climate finance contributions, and
• Update its strategy for reaching its net zero target.

The EU is currently preparing its 2040 target under its Climate Law, to be presented in 2024. The CAT finds that the EU should put forward a domestic emissions reduction target for 2040 of at least 80% below 1990 levels (excl. LULUCF) to meet its minimum contribution under 1.5°C global least cost pathways. However, to meet its 1.5°C fair share contribution, the EU must support significantly more emissions reductions and increase its climate finance pledge accordingly.

The expected return to coal did not materialise in the 2022/2023 winter and the bloc succeeded in cutting fossil gas consumption, exiting the winter with more stored fossil gas than in previous years. Yet it continues to pursue its LNG expansion plans, risking carbon lock-in and undermining global climate action.

The CAT rates EU’s climate targets, policies, and finance as “Insufficient”. The “Insufficient” rating indicates that the EU’s climate policies and commitments need substantial improvements to be consistent with the Paris Agreement’s 1.5°C temperature limit. The EU’s 2030 NDC target and its policies and action are consistent with 2°C of warming when compared to modelled domestic pathways. The EU is also not meeting its fair share contributions to climate action.

To improve its rating, the EU should strengthen its domestic emissions reduction target to at least 61% (excl. LULUCF) below 1990 levels, adopt policies necessary to reach this goal, and significantly increase its support for climate action in developing countries.

We rate the EU’s policies and action as “Almost sufficient”. The upper bound of our policies and action emissions projection range is based on policies reported by member states as of March 2022, which would result in an emissions reduction of around 35% (excl. LULUCF) below 1990 by 2030. The bottom end of the range is based on policies adopted at the EU level, including the stronger binding renewable energy (42.5%) and energy efficiency targets, which would result in reducing emissions by 55% (excl. LULUCF). If the enhanced LULUCF sink is taken into consideration, net emissions in the EU would decrease by 60%, taking the EU beyond its emissions reduction target of “at least 55%”. Consideration of the indicative renewable energy target (of a further 2.5%) for 2030 reduces emissions even further to 57% (excl. LULUCF) and 61% (incl. LULUCF).

In late 2022 and early 2023, the EU amended its key climate regulations, adopting stronger targets including:

• Increasing the EU Emissions Trading Scheme (EU ETS) emissions reduction target from 43% to 62% below 2005 levels by 2030.
• Increasing the emissions reduction target in the Effort Sharing Regulation from 30% to 40% below 2005 levels by 2030.
• Strengthening its renewable energy target from a 32% share [of total energy] to 42.5% by 2030, with an additional 2.5% “indicative” target.
• Cutting its final energy demand from 846 Mtoe to 763 Mtoe in 2030.
• Expanding the size of its land sector sink target from 225 MtCO₂e to 310 MtCO₂e.

From 2027 onwards, a parallel scheme will be established under the EU ETS to cover buildings and transport.

Member states still need to adopt policies implementing these targets. In their National Energy and Climate Plans (NECPs), they have to propose their national targets for the share of renewable energy and energy consumption that would result in at least the targets agreed in the respective directive for the EU as a whole. Drafts of these plans are to be submitted by the end of June 2023.

Along with the major policy changes, the EU has also simplified permitting procedures for investments in renewable energy, batteries, and electricity grid development. While the impact of these measures will only be visible in the coming years, already in 2022 investment in renewables increased significantly, especially for solar energy and heat pumps. However, while the installed capacity in wind energy – both offshore and onshore – has also increased, a significant drop in new investments indicates a temporary slowdown in the sector. As a result of the accelerated deployment of renewable energy and energy savings, driven to a large degree by high energy prices, the expected return to coal, especially during the winter 2022/2023, did not materialise.

In the case of the majority of low-carbon technologies, especially solar panels, wind turbines, and batteries, the EU is to a large degree dependent on imports from other countries. This has the potential to exacerbate bottlenecks if trade flows are interrupted. To mitigate this challenge, the Commission proposed the Net Zero Industry Act in March 2023, which sets the goal of covering at least 40% of selected low carbon technologies with domestic manufacturing. This is a step in the right direction as it will increase the supply of products necessary to meet EU’s emissions reduction goals and decrease their costs due to economies of scale.

NOTE: We have modified our data projections for the EU to reflect policy developments, essentially incorporating what our November 2022 update showed as planned policies, which have since been adopted. We have not updated our historical emissions to reflect the latest inventory data. We will update our projections for the EU fully later this year after the publication of the “Trends and Projections” by the European Environment Agency in Q4 of 2023.

The full policies and action analysis can be found here.

As of May 2023, the EU has failed to submit a further update to its NDC, contrary to the agreement all countries reached at COP26 in Glasgow. The EU’s current NDC target, submitted in December 2020, is to reduce emissions by at least 55% below 1990 levels by 2030 (including LULUCF). This equates to around 52-54% below 1990 levels excluding LULUCF.

The CAT rates this target as “Almost sufficient” when compared to the level of emissions reductions needed within the EU. The “Almost sufficient” rating indicates that the EU’s NDC target in 2030 is not yet consistent with limiting warming to 1.5°C but could be, with moderate improvements. If all countries were to follow the EU’s approach, warming could be held below—but not well below—2°C.

In its position for COP27 in Sharm El-Sheikh from October 2022, the EU indicated that it would update its NDC as soon as negotiations concerning the essential elements of the “Fit for 55” package are concluded (Council of the European Union, 2022g). This time has come. Our analysis indicates that the EU could increase its NDC target to net 61% to simply reflect the already adopted policies (57% excl. LULUCF).

The adoption of the binding renewable energy target of 42.5% and final energy consumption at 763 Mtoe would result in emissions reduction excluding LULUCF of 55%. The EU has also agreed on 2.5% indicative target, on top of the binding one. If the 45% renewable energy target is taken into consideration, the emissions reduction goal would increase to almost 57%. The obligation to increase the LULUCF sink to 310 MtCO₂e would result in emissions reductions of between 60% (if it includes only the binding renewable energy target) and 61% if it also includes the additional indicative renewable energy target.

When measured against a fair share emissions allocation, we rate the EU’s NDC target as “Insufficient”. The “Insufficient” rating indicates that the EU’s NDC target in 2030 needs substantial improvement to be consistent with limiting warming to 1.5°C. Some of these improvements should be made to the domestic emissions target itself (as discussed above), others could come in the form of additional support for emissions reductions achieved in developing countries. If all countries were to follow the EU’s approach, warming would reach up to 3°C.

The EU’s international public climate finance contributions are rated as “Insufficient”. The EU has committed to increase its climate finance, but contributions to date have been low compared to its fair share. To improve its rating, the EU needs to ramp up the level of its climate finance contributions in the period post-2020 and accelerate the phase-out of international fossil finance.

The EU’s climate finance is not sufficient to improve the fair share target rating, and the CAT rates the EU’s overall fair share contribution as “Insufficient”.

We evaluate the net zero target design as “Acceptable”. The EU’s climate neutrality target performs moderately in terms of its architecture, transparency, and scope, with a regular review and assessment process. According to the European Climate Law, which makes this goal binding, a provision for an intermediate 2040 target is to be set following the Paris Agreement’s Global Stocktake. At present, a clear separation of the contributions from emissions reductions versus removals is missing, although this is an element that is required of the forthcoming 2040 target.

The full net zero target analysis can be found here.