Proposal for EU 2040 climate targets is the first step towards EU emissions trading rules for a net-zero future, says IETA
Brussels, 6 February 2024 – The European Commission has today published a Communication on the EU’s 2040 Climate Target and path towards climate neutrality by 2050, recommending an EU-wide target of 90% net emission reductions by 2040. This target will set the bloc well on the path to achieving the goal of reaching net zero by the middle of the century.
“The Commission’s proposal for almost full decarbonisation of the EU economy in less than 20 years is revolutionary and reinforces the EU position as a global leader on climate change. It is also the first step towards the revision of the EU emissions trading rules for a net-zero future”, says Julia Michalak, EU Policy Director, IETA.
Today’s communication highlights the vital role of carbon pricing, CCS and carbon removals in achieving the 90% target. According to the Communication, achieving the target depends on the existence of “a fully developed carbon management industry by 2040, with carbon capture covering all industrial process emissions and delivering sizable carbon removals, as well as high production and consumption of e-fuels”.
Europe is already setting a benchmark in its use of market-based mechanisms to achieve climate goals. The region’s emissions trading system (EU ETS) currently covers the power sector, manufacturing industry, maritime and aviation, and the EU is preparing to introduce emissions trading in the transportation and building sectors (ETS 2).
It is likely that both caps for EU ETS and ETS 2 will be further reviewed to deliver a greater share of emissions under the new 2040 target. Where the cap for EU ETS is currently expected to reach zero around 2040, the cap for ETS 2 is set to reach 0 in 2044.
“We welcome the acknowledgement of carbon trading as a major instrument to deliver net-zero cost-efficiently. However, carbon markets must change to deliver net-zero as the mechanism as we know it will not take us there. It is crucial that the right policy incentives are introduced with greater urgency for removals technologies to develop at scale. This includes the recognition of industrial carbon removals that can be measured with a high level of accuracy under the EU ETS”, comments Michalak.
The Commission analysis does not provide an exact number of removals that will contribute to a 90% target. The Impact Assessment examined three mitigation scenarios, including one for “at least at least 90% and up to 95%” that provide specific numbers for a 92% net target. Under this scenario, gross GHG emissions are projected to be reduced by circa 84%, and removals would deliver around 8%. Nature-based removals would deliver four times more carbon storage than industrial removals.
The publication of the Communication is an opening move towards the revision of the European Climate Law, that legislates the EU’s net zero climate objective by 2050.