Top 10 items for a pioneering 2040 communication

16. 01. 2024
AUTHOR: Linda Kalcher

On the back of the 28th United Nations (UN) Climate Change conference (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 European Union (EU) climate target for 2040 on 6 February 2024.

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 have 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, and
  • Allow China and the United States to dominate the clean technology 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 70 gigawatt (GW) added per year. CCS would be too expensive and too 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, Choices for a more strategic Europe, 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 is allocated in those regions facing 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 can be reduced through circularity (approximately 50%), direct and indirect electrification (approximately 25%) and material efficiency (approximately 20%).

Obviously, a significant amount of investments are needed to make the transition affordable for both economic actors and citizens alike. 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 to start the debate on their next Nationally Determined Contribution (NDC) for 2035, especially given the deadline for submission to the UN from November 2024 to February 2025.

Strategic Perspectives thus recommends the following 10 items be included in a pioneering 2040 communication:

Ambition

  1. At least a 90% target by 2040
  2. Highlighted economic security benefits
    • Energy security and reliable supply chains
    • Reduced imports (fossil fuels, green technology)
    • Climate-related impacts
  3. Fossil fuel end dates per fuel and sector
    • Coal phase-out by 2030
    • Zero emissions power by 2037 (gas phased-out)
    • Almost 50% of the economy electrified
  4. A 2035 target in range of 75-80% for new NDCs
  5. Separate quantified targets for removals
    • Natural sinks strengthened at approximately 400 megatons (Mt) CO2e
    • Carbon capture and storage (CCS) at approximately 60Mt CO2e

Enabling environment

  1. A new electrification framework
    • Production target for zero emissions power
    • Efficiency label
  2. An enabling framework for current industrial base
    • Circular economy
    • Direct and indirect electrification
  3. Incentives for zero-carbon technology manufacturing
    • Lead markets
    • Public procurement
  4. Ensured affordability of the transition
    • Support for low- and middle-income households
  5. A new financial architecture
    • Reformed EU budget, successor recovery
    • Improved access and aggregation of finance