Implementing the European Green Deal has become the smartest economic and security choice. However, the current framework until 2030 doesn’t adequately address the magnitude of interconnected challenges the EU is facing: volatility of energy prices, industrial competition from the US and China as well as high import dependence on few fossil fuel exporters and China for key technologies.

Our new report ‘Choices for a more Strategic Europe’ sets out sectoral transition pathways, related greenhouse gas emission reductions and policy recommendations that can inform EU policy making in the following years based on a ‘Visionary Scenario’ with a 90% net emissions reduction by 2040.

ACCESS TO THE REPORT

What are the strategic choices leaders need to discuss?

The transition to climate neutrality by 2050 at the latest constitutes an opportunity for the EU to strengthen its energy security, industrial competitiveness and resilience of supply chains while creating future-proof jobs.

Three key choices provide the solutions to the multiple challenges the EU faces and require planning beyond 2030:

1. Continue the high dependence on fossil fuel imports or boost electrification across sectors based on renewables,
2. Remain vulnerable to supply chain shocks or incentivise circularity and green products,
3. Allow China and the US to dominate the clean tech sector or rapidly grow Europe’s net-zero technology manufacturing.

The timely publication of the EU 2040 climate pathway by the European Commission will be essential for guiding those choices. 

What are the key milestones of achieving a 90% net emissions reduction by 2040?

• A zero-emissions power sector by 2037 is feasible based on a solid deployment of renewable energies. 80% of the electricity mix would come from renewables by 2040, strengthening the EU’s energy security. Countries like Spain or Germany want to reach this already in 2030 as it is key to decarbonise electrified sectors.
• Electrification plays a key role across sectors: Over half of heating and industrial energy demand as well as over 85% of the car fleet could be electrified by 2040. Electricity demand would rise to approximately 4,019 Terawatt hours (TWh) by 2040, compared to 2,780 TWh in 2019.
• Modernisation of industry requires strong electrification and circularity: Industrial competitiveness could be strengthened through a significant gas phase-down by 2040 and higher use of recycled materials (over 60% for steel, glass, and paper). Companies benefit by being less dependent on importing primary materials. In total, 50% of industrial emissions can be cut due to circularity.
• Manufacturing of strategic net-zero technologies will be crucial to support their deployment rate at the pace needed for the net-zero transition. Lowering the dependence on China could strengthen the EU’s resilience against supply shocks. Companies can strengthen their market leadership in wind, heat pump and li-ion battery production as well as development on electrolysers.

Why should the debate start now and how does it link to the 2040 climate target?

Industry and investors plan for 10-15 years ahead, they need predictability and a clear sense of direction beyond 2030. Systemic transformations and innovation take time to scale up. Our findings show that advancing the power decarbonisation and industrial transformation (circularity, net-zero technology manufacturing and electrification) have the biggest emissions reduction potential until 2035. A just transition, smart allocation of factories and upskilling of workforce are key components for success. 

Defining a 2040 pathway allows the EU to plan these structural changes in advance, determining the right level of investment and the policy framework that will support these trends. 

How does it interact with the international level?

COP28 and the Global Stocktake coming up this year start the international “ambition cycle”. Countries are invited to pledge new 2035 targets in the first quarter of 2025 as well as an update of their 2030 targets with a view on the window to keep the 1.5C within reach closing rapidly.

With international conversations focusing on “fossil fuel phase out”, the 2035 and 2040 horizons provide an excellent context to discuss what it means for the EU. Setting out its own fossil fuel phase out trajectories enhances the EU’s credibility at the international level.

On the basis of which data did you reach these conclusions?

On the basis of the full analysis, we developed our report with trajectories and policy recommendations for the energy and industry sector.
The modelling happened in partnership with CLIMACT and using their Pathways Explorer. The Pathways explorer shows the evolution of societal and technology choices, manually optimising multiple dimensions along the context evolution. Investments needs and job creation have not been assessed in this work but could be in future publications. In terms of results and data, the current exercise models the EU27 region as a whole. The online tool has a yearly granularity.