20. 10. 2025
AUTHOR: Neil Makaroff and Linda Kalcher
The 2040 climate target arrives on the menu of the European Union’s leaders at the end of the week as part of the debate on “a competitive green transition”. The European Council (EUCO)’s involvement is justified, given the scale of transformation required and the imperative to maximise the potential of this decarbonisation pathway for the EU’s industrial competitiveness, energy security, and the affordability of the transition. However, with only 21 days remaining before the opening of the next UN Climate Summit “COP30”, this debate takes place late, and agreeing on a “political package” to unlock the 2040 target won’t be a walk in the park. A solid commitment and drive by leaders will be key to gathering all the ingredients for a deal and avoiding further delays. Otherwise, the EU risks appearing dysfunctional to global partners, unreliable to investors, and passive in defending one of the few remaining functional multilateral treaties (the Paris Agreement) from the political pressure by the United States administration.
Crafting a “political package”, not a target
Unlike in 2020, when then-Chancellor Merkel was determined to agree on the target at a leaders’ level, no leader is willing to discuss the exact number or its composition this time around. Most national governments are focusing on the so-called ‘enabling conditions’ to unlock the 90%. With the European Climate Law under negotiation, they no longer need to agree on the target itself, as was the case for 2030 and 2050. The objective of the EUCO is therefore to secure the economic and social reassurances to reach a 90% target. The list of demands from Member States is well known. As an appetiser, the Commission and the Danish Presidency of the EU Council have already done major work within the Climate Law negotiations. The inclusion of high-quality international carbon credits and the mitigation of risks of a less effective carbon sink are part of it. However, some other conditions go beyond the Law and require direction from leaders.
Both Presidents von der Leyen and Costa have the important task of steering the debate and crafting a package that addresses the concerns of many without opening the Pandora’s box of issues of the few. Special responsibility lies with President Macron, Chancellor Merz, and Prime Ministers Tusk and Meloni, who requested to escalate the issue to EUCO. If an agreement is reached in EUCO, environment ministers will have a mandate and enough confidence to finalise the 2040 target as part of the European Climate Law and the Nationally Determined Contribution (NDC) on 4 November.
Stating the principles of a more competitive EU
The main dish of the EUCO will be the debate on how to link competitiveness and decarbonisation. France, followed by other EU countries, asks for legitimate guarantees that industrial policies and incentives will be implemented to ensure the 90% target leads to scaling up strategic industries and reducing import dependencies, in particular cleantech from China. Leaders can give new impetus to what the response to the Draghi report should look like, at the back of the EU-US trade deal and with the Industrial Accelerator Act coming out in December. During the recent Competitiveness Council, a number of Member States already signalled their support for lead markets, the implementation of a Made-in-Europe criteria for all relevant uses of public money, and safeguarding measures for critical industries such as steel.
Industry ministers laid the groundwork for the EUCO to give the Commission a solid direction for the long-overdue Industrial Accelerator Act. This discussion is already advanced and could find a positive outcome on 23 October, setting a new tone for a Clean Industrial Deal. A European industrial strategy that backs a 90% climate target can generate €233 billion in new industrial value-added and create more than 2 million net-zero jobs by 2040. If EU leaders confirm those key principles for the future industry package, all conditions should be in place for countries like France to endorse the 2040 target.
Striking a balance on the revision of Green Deal laws
Some countries call for an adjustment of the Green Deal laws. Here, a delicate balance is essential to be struck by Presidents Costa and von der Leyen between providing greater flexibility and preserving the EU’s decarbonisation pathway. For instance, Italy and Germany seek to continue promoting internal combustion engines. Allowing a more technological neutral approach without undermining the 2035 goal to reach zero-emission cars will be key to avoiding creating even more uncertainty for Europe’s struggling electromobility value chain. Otherwise, the result might be bitter for the EU industry.
Similarly, nineteen Member States have requested the Commission to quickly reform the Emission Trading Scheme on mobility and housing (ETS2) to better control CO2 prices and avoid high volatility in 2027. Some countries, such as Poland, also call for postponing its implementation by a few years, allowing time for the Social Climate Fund to become fully operationalised and support low- and middle-income households. With the cost of living at the top of citizens’ concerns, this is a legitimate concern that should be addressed by the Commission as a matter of priority.
By agreeing on these ‘enabling conditions,’ EU leaders have the opportunity to draw a good recipe for a political deal on 2040, while providing the Commission with a clear direction on the upcoming reforms. It is also key to restore predictability for companies and households and to stop constant attacks on EU laws that undermine investments.
Photo credit: Mette Frederiksen and Ursula von der Leyen. European Union. 2025.
