16. 01. 2024
AUTHOR: Linda Kalcher
On the back of COP28 in the United Arab Emirates (UAE) and entering the final stretch of its term, the European Commission is expected to publish its proposal for a new EU climate target for 2040 on 6 February. The EU’s diplomatic successes on the mitigation text of the “UAE consensus” were significant:
- Clear emphasis on transitioning away from fossil fuels “in this critical decade”,
- Limitation of abatement technologies such as carbon capture and storage (CCS) to hard-to-abate sectors,
- And phasing out inefficient fossil fuel subsidies.
The upcoming communication provides the EU with the opportunity to become the first major economy that turns the “UAE consensus” into reality and become a pioneer on a well-managed fossil fuel phase out.
As Executive Vice-President Sefcovic and Commissioner Hoekstra personally committed to an “at least 90%” target for 2040 already, the landing point seems pretty clear and yet, there is still a lot to play for on how to achieve this target:
- Continue the high dependence on expensive fossil fuel imports and add unrealistic CCS usage or boost electrification across sectors based on domestically produced zero emissions power,
- Remain vulnerable to supply chain shocks or incentivise circularity and green products,
- Allow China and the US to dominate the clean tech sector or rapidly grow the EU’s net-zero technology manufacturing.
A pioneering 2040 communication has the potential to enhance the EU’s energy security by setting clear fossil fuel end dates for coal, oil and gas usage per sector. A zero-emissions power system by 2037 allows for electrified sectors to decarbonise swiftly. Electricity production needs to increase substantially, with 70GW addition per year. CCS would be too expensive and late to provide a contribution to power decarbonisation. Renewables provide the cheapest and most reliable energy source to be deployed at that speed. This is urgently needed, as our report shows that half of the economy will be electrified by 2040.
The 2040 climate target can become the first brick of an holistic European industrial strategy to decarbonise industry and scale up green technologies production. European industry can become more competitive if net-zero technologies are produced in the EU, addressing the international competition with the US and China head on. There is even a potential to reindustrialise regions, if the manufacturing gets allocated in those regions that face multiple transitions. The current industrial base can be supported by providing affordable energy, creating lead markets for green products and components and additional incentives for circularity. According to our report, industrial emissions get reduced through circularity (~50%), direct and indirect electrification (~25%) and material efficiency (~20%).
Obviously, a significant amount of investments are needed to make the transition affordable for economic actors and citizens alike. Especially those countries with a smaller fiscal space deserve targeted financial support to avoid a two-speed Europe. The current funding structures have become very complex to navigate, so a new financial architecture can be proposed together with the next EU budget.
The EU can also show international leadership by being among the first countries to start the debate on their next Nationally Determined Contribution (NDC) for 2035, especially as the deadline for submission to the UN is already in November 2024 – February 2025.
Strategic Perspectives thus recommends the following 10 items to be included in a pioneering 2040 communication:
