commerzreal-institutionals-keyvisual-onshore-woman

Institutionals Quo Vadis: The transition to the EU's Net Zero Target

20.02.2024 • 7 Reading Time

What is meant by "Net Zero 2050"?

The European Union has set itself the goal of achieving a climate-neutral economy with net-zero greenhouse gas emissions by 2050. This target is part of the European Green Deal and is made legally binding by the European Climate Law1 . EU Member States have developed national long-term strategies to meet their commitments under the Paris Agreement and the EU's climate neutrality goal. The strategies should be consistent with the Member States' integrated national energy and climate plans for the period 2021-30.

Climate neutrality refers to the state in which only as many greenhouse gases are released into the atmosphere as can be absorbed by nature, including uptake by forests, oceans and soils. To achieve the goal of reducing net emissions to zero, EU member states must drastically reduce their greenhouse gas emissions by 2050 while finding ways to offset the remaining unavoidable emissions.

In its conclusions, the European Council underlined the significant opportunities arising from the transition to climate neutrality, including:²

economic growth
Developing new markets and creating jobs
Promotion of technological developments.

The Climate Change Act includes measures to monitor progress and adapt our actions accordingly, based on existing systems such as the governance process for Member States' national energy and climate plans, regular reports from the European Environment Agency and the latest scientific evidence on climate change and its impacts. Progress will be reviewed every five years, in line with the global stocktake under the Paris Agreement.

What are the necessary steps set out in the Climate Protection Act to achieve the net zero target for 2050?

Based on a comprehensive impact analysis, the EU has set an interim target for 2030: a reduction in net greenhouse gas emissions of at least 55 per cent compared to 1990 levels, clearly defining the contribution of emission reductions and removals. The "Fit for 55" package is an essential part of the EU's efforts to achieve climate neutrality. It contains a large number of proposals for revising existing legislation and introducing new initiatives and is therefore regarded as the EU's key plan for implementing its climate targets through EU legislation.³

The package deals with regulations in the following areas:

Energy
transport
Emissions trading and mitigation
Land use and forestry

Another component of the law is a process for setting a climate target for 2040 that takes into account an indicative greenhouse gas budget for the period from 2030 to 2050, which will be published by the Commission. In addition, the law reaffirms the commitment to negate emissions after 2050 and the establishment of a European Scientific Advisory Board on Climate Change, which will provide independent scientific advice.

Furthermore, stricter provisions on adaptation to climate change will be introduced and a strong coherence in all policy areas of the Union with the goal of climate neutrality will be sought. Finally, the EU is committed to working with different sectors of the economy to develop sector-specific roadmaps that show the way to climate neutrality.

The EU has committed to spending at least 20 per cent of its EU budget for the period from 2014 to 2020 on climate action. For the EU budget from 2021 to 2027, this share has been increased to 30 per cent, which corresponds to around 87 billion euros per year. This sum represents less than 10 per cent of the total investment needed to achieve the 2030 targets, which are estimated at around €1 trillion per year. The rest of the investment is expected to come from national and private funds.⁴

Status quo and next steps

The EU Climate Law instructs the Commission to propose an EU climate target for 2040 no later than six months after the first global stocktake under the Paris Agreement, which took place at COP28 in December 2023.

On 6 February 2024, the European Commission presented its assessment for a 2040 climate target for the EU. The Commission recommended reducing the EU's net greenhouse gas emissions by 90 % by 2040 compared to 1990 levels.⁵

The next Commission, which will be determined by the 2024 European elections, will present the legislative proposal to incorporate the 2040 target into European climate law and ensure that the appropriate policy framework will be in place after 2030 to achieve the target in a fair and cost-effective manner.⁶

One lever: climate technologies

A recent analysis by McKinsey & Co7 shows the scaling gap in the area of climate protection. Over 4,000 companies have already committed to reducing emissions and more than 70 countries have set net zero targets. But how fast would key technologies need to grow to meet these targets?

Looking at the current growth trajectory of climate technologies in relation to existing net zero commitments, it is clear that even established technologies such as wind and solar energy would have to grow six to fourteen times faster to achieve the 1.5 degree pathway by 2030 (see figure).