COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT REPORT Part 1 Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS Securing our future Europe's 2040 climate target and path to climate neutrality by 2050 building a sustainable, just and prosperous society

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EUROPEAN
COMMISSION
Strasbourg, 6.2.2024
SWD(2024) 63 final
PART 5/5
COMMISSION STAFF WORKING DOCUMENT
IMPACT ASSESSMENT REPORT
Part 5
Accompanying the document
COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN
PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL
COMMITTEE AND THE COMMITTEE OF THE REGIONS
Securing our future
Europe's 2040 climate target and path to climate neutrality by 2050 building a
sustainable, just and prosperous society
{COM(2024) 63 final} - {SEC(2024) 64 final} - {SWD(2024) 64 final}
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KOM (2024) 0063 - SWD-dokument
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Table of contents
ANNEX 14: GHG BUDGET..................................................................................................................................1
1 EU COMMITMENT TO THE PARIS AGREEMENT........................................................................................1
2 THE GHG BUDGET IN THE EUROPEAN CLIMATE LAW...............................................................................3
3 THE REMAINING GLOBAL CARBON BUDGET............................................................................................4
4 INDICATIVE EUROPEAN UNION NET GHG BUDGET FOR THE 2030-2050 PERIOD .....................................7
4.1 GHG BUDGET ESTIMATES................................................................................................................................ 7
4.1.1 Advice by the ESABCC...................................................................................................................... 7
4.1.2 Other estimates............................................................................................................................... 8
4.2 CUMULATIVE 2030-2050 GHG EMISSIONS ASSOCIATED TO TARGET OPTIONS .......................................................... 9
4.3 CUMULATIVE 2030-2050 GHG EMISSIONS ASSOCIATED TO THE PROPOSED EU 2040 CLIMATE TARGET...................... 10
TABLE OF TABLES ........................................................................................................................................... 11
1
Annex 14: GHG budget
This Annex looks at an indicative “GHG budget” for the EU with the geographical scope of
1st
February 2021 (“EU27”). This “budget” is defined according to the emission scope of the
European Climate Law and consistently with the proposed 2040 climate target.
1 EU COMMITMENT TO THE PARIS AGREEMENT
The Paris Agreement aims at limiting “the increase in the global average temperature to well
below 2°C above pre-industrial levels” and pursue efforts “to limit the temperature increase to
1.5°C above pre-industrial levels.” In recent decisions taken in the UNFCCC, Parties have
reinforced the need to deliver emissions reductions in line with the IPCC recommendations, in
order to keep the 1.5°C within reach.
Under the Paris Agreement, Parties have agreed to prepare, communicate and maintain
successive nationally determined contributions and pursue domestic measures, with the aim of
achieving the objectives of such contributions. Article 4.3 states that each Party's successive
nationally determined contribution will represent a progression beyond the Party's then
current nationally determined contribution and reflect its highest possible ambition, reflecting
its common but differentiated responsibilities and respective capabilities, in the light of
different national circumstances. Article 4.4 of the Paris Agreement states that developed
countries should continue taking the lead by undertaking economy-wide absolute emission
reduction targets and developing countries should continue enhancing their efforts and are
encouraged to move towards economy-wide targets over time. The Paris Agreement also
requests all Parties to strive to formulate and communicate long-term low greenhouse gas
emissions development strategies. The European Union has committed to the goals of the
Paris Agreement and has been faithful to its provisions:
• In 2020, the EU committed to climate neutrality by 2050 in its long-term strategy to
the UNFCCC and submitted an ambitious Nationally Determined Contribution with a
2030 climate target of at least 55% reduction of net emissions of greenhouse gases as
compared to 1990. The 2030 and the 2050 targets are mutually supportive, are
enshrined in the EU Climate Law and are legally binding. Setting these targets, the EU
has set itself on a path of domestic GHG mitigation aiming at limiting the temperature
increase to 1.5°C above pre-industrial levels, in line with the most ambitious
interpretation of the Paris Agreement and reinforcing the EU’s commitment towards
its implementation.
• According to the Climate Law, the EU will undertake a review of its progress towards
climate neutrality target every five years, in line with the global stocktake exercise
under the Paris Agreement.
• The EU has substantially exceeded its 2020 targets, and, in 2022, the EU greenhouse
emissions reduced to 32.5% below 1990 levels, while global emissions have risen by
over 50% worldwide. During that period, the EU and its Member States’ emissions
reductions outpaced those of any other major developed or developing economy.
• Currently, the EU contributes 7% to global emissions and cannot solve the climate
crisis on its own: international cooperation remains at the heart of the EU’s
2
contribution to global climate action and the EU will continue to call on the countries
with the largest share of emissions to commit to the highest possible ambition.
Internationally, the EU has been fully engaged as a positive actor to support the mitigation of
GHG emissions globally in line with the Paris Agreement, aiming at keeping 1.5°C in reach.
On a per capita basis, EU emissions are also among the lowest of any major high-income
economy and lower than several emerging economies. The EU research and innovation and
industrial policies have for decades incentivised and supported the development of innovative,
state-of-the-art low carbon technologies and corresponding markets. For instance, between
early 2000 and 2015, the EU has consistently deployed the largest share of the solar and wind
energy capacity installed worldwide, reaching a 74% share at the beginning of the 2000s for
wind and around 2010 for solar. In this way, the EU contributed to driving global learning and
reducing costs for these two technologies that benefitted all countries: world average wind
and solar Levelised Cost of Electricity (LCOE) reduced drastically in this period by around
50% (1
) and 80% (2
) respectively. More than two decades of experience in designing, agreeing
and implementing climate and energy policies, have provided a wealth of lessons, that the EU
has been sharing for more than a decade through multilateral initiatives and bilateral policy
dialogues and projects. Thereby, it continues to contribute to the creation of global value
chains that, through technology dissemination and cost decrease, now drive the required
transformations towards zero carbon economies and societies.
The EU and its MS are collectively the largest contributor to international public climate
finance. Since the launch of the “USD 100 billion by 2020 goal” in 2009 the EU and its 27
Member States have been strongly committed to helping achieve it. In 2022, the European
Union and its 27 member states contributed EUR 28.5 billion in climate finance from public
sources and mobilised an additional amount of EUR 11.9 billion of private finance, including
more than €12 billion per year for climate adaptation or actions combining adaptation and
mitigation. Thanks to this contribution and to a significant increase in international climate
finance in 2023, OECD Secretary General stated that the 100 billion USD will likely have
been reached in 2022 based on preliminary data (3
).
The EU will continue to stand by its commitment to deliver its fair share of the USD 100
billion USD mobilisation goal and the doubling of adaptation finance by 2025, making
support for adaptation a priority of its global action. In 2024, the EU will also push for an
agreement in 2024 on the New Collective Quantified Goal for climate finance under the Paris
agreement including leveraging an increasing private sector contribution to global climate
finance and reform of Multilateral Development Banks.
(1
) Data extrapolated from Ourworldindata.org for the period 2008-2018. Original data source from IRENA
(2022), Renewable Power Generation Costs in 2021, International Renewable Energy Agency, Abu Dhabi.
(2
) European Commission, Directorate-General for Energy, Rademaekers, K., Smith, M., Gorenstein Dedecca,
J. et al., Energy costs, taxes and the impact of government interventions on investments – Final report,
summary, Publications Office, 2020, https://data.europa.eu/doi/10.2833/827631
(3
) OECD, 2023. Climate Finance Provided and Mobilised by Developed Countries in 2013-2021: Aggregate
trends and opportunities for scaling up adaptation and mobilised private finance, OECD Publishing
3
The EU aims to target and tailor support where it is needed the most, with a prime focus on
most vulnerable countries, small island developing states and fragile countries. While
developed countries shall continue to take the lead, moving the needle on climate finance
should compel the EU to reach the largest possible donor base and go beyond the
developed/developing countries split.
2 THE GHG BUDGET IN THE EUROPEAN CLIMATE LAW
Article 4(4) of the EU Climate Law mandates the Commission, when making the proposal for
the Union 2040 climate target, ‘to publish in a separate report the projected indicative Union
greenhouse gas budget for the 2030-2050 period”, taking into account the advice of the
European Scientific Advisory Board on Climate Change (ESABCC). This GHG budget
approach was an innovation for the EU introduced by the Climate Law, aiming to increase the
transparency and accountability of climate policies. It also makes it easier to compare action
at EU level with international efforts and the global emissions budget. The Climate Law also
defines the indicative Union GHG budget as “the indicative total volume of net greenhouse
gas emissions (expressed as CO2 equivalent and providing separate information on emissions
and removals) that are expected to be emitted in that period without putting at risk the
Union’s commitments under the Paris Agreement’.
The 2030-2050 GHG budget is expressed in tonnes of CO2 equivalent (tCO2-eq) and covers
all GHGs (4
) under the scope of the European Climate Law (5
) from 2030 (included) to 2050
(included). It combines a “carbon” budget (cumulative CO2 emissions) with cumulative
emissions of non-CO2 GHGs (6
) and including the contribution of carbon removals.
The notion of “emissions budget” refers to the carbon budget at global level that is defined in
the IPCC AR6 as the maximum quantity of CO2 emissions that can be released to the
atmosphere over that period while keeping global warming below a given level of
temperature. Non-CO2 GHG emissions are not typically expressed as budget.
The differentiation between the role of CO2 and non-CO2 in the definition of the budget
relates to the dominant contribution of CO2 to global surface temperature increase: most
warming to date has been caused by CO2, which has the most permanent impact on the
climate system (7
). The IPCC indicates that the maximum temperature reached is determined
with high confidence by cumulative net global anthropogenic CO2 emissions up to the time of
(4
) See part 2 of Annex V to Regulation (EU) 2018/1999
(5
) The scope is the same as the ones for the Union 2040 climate target and is defined as all Union-wide GHG
emissions regulated in Union law, which include: domestic EU emissions, international intra-EU aviation,
international intra-EU maritime, and 50% of international extra-EU maritime under the MRV.
(6
) Non-CO2 GHG emissions are converted into “CO2 equivalent” using the global warming potential for a 100-
year time horizon from the IPCC Fifth Assessment Report (“AR5”).
(7
) Jenkins, S., Cain, M., Friedlingstein, P., Gillett, N., Walsh, T., & Allen, M. R. (2021). Quantifying non-CO2
contributions to remaining carbon budgets. npj climate and atmospheric science, 4(1), 47.
4
net zero CO2 emissions and with medium confidence by the level of non-CO2 radiative
forcing in the decades prior to the time that maximum temperatures are reached (8
).
3 THE REMAINING GLOBAL CARBON BUDGET
The IPCC AR6 report reaffirms with high confidence that there is a near-linear relationship
between cumulative anthropogenic CO2 emissions and the global warming they cause,
estimating a global surface temperature increase of 0.45°C per each 1000 GtCO2 of
cumulative CO2 emissions, and highlighting that limiting global temperature increase to a
specific level, for example as defined in the Paris Agreement would imply limiting
cumulative CO2 emissions to a set carbon budget (9
).
The IPCC AR6 (10
) estimates that from the beginning of 2020, the remaining global carbon
budget is 500 GtCO2 for limiting global warming to 1.5°C with 50% likelihood, 850 GtCO2
for limiting global warming to 1.7°C with 50% likelihood, and 1150 GtCO2 for limiting
global warming to 2°C with 67% likelihood (see Table 1).
(8
) IPCC, 2018: Summary for Policymakers. In: Global Warming of 1.5°C. An IPCC Special Report on the
impacts of global warming of 1.5°C above pre-industrial levels and related global greenhouse gas emission
pathways, in the context of strengthening the global response to the threat of climate change, sustainable
development, and efforts to eradicate poverty [Masson-Delmotte, V., P. Zhai, H.-O. Pörtner, D. Roberts, J.
Skea, P.R. Shukla, A. Pirani, W. Moufouma-Okia, C. Péan, R. Pidcock, S. Connors, J.B.R. Matthews, Y.
Chen, X. Zhou, M.I. Gomis, E. Lonnoy, T. Maycock, M. Tignor, and T. Waterfield (eds.)]. Cambridge
University Press, Cambridge, UK and New York, NY, USA, pp. 3-24.
https://doi.org/10.1017/9781009157940.001.
(9
) IPCC, 2021: Summary for Policymakers. In: Climate Change 2021: The Physical Science Basis.
Contribution of Working Group I to the Sixth Assessment Report of the Intergovernmental Panel on Climate
Change [Masson-Delmotte, V., P. Zhai, A. Pirani, S.L. Connors, C. Péan, S. Berger, N. Caud, Y. Chen, L.
Goldfarb, M.I. Gomis, M. Huang, K. Leitzell, E. Lonnoy, J.B.R. Matthews, T.K. Maycock, T. Waterfield,
O. Yelekçi, R. Yu, and B. Zhou (eds.)]. Cambridge University Press, Cambridge, United Kingdom and New
York, NY, USA, pp. 3−32, doi:10.1017/9781009157896.001. Figure SPM.10
(10
) Canadell, J.G., P.M.S. Monteiro, M.H. Costa, L. Cotrim da Cunha, P.M. Cox, A.V. Eliseev, S. Henson,
M. Ishii, S. Jaccard, C. Koven, A. Lohila, P.K. Patra, S. Piao, J. Rogelj, S. Syampungani, S. Zaehle, and
K. Zickfeld, 2021: Global Carbon and other Biogeochemical Cycles and Feedbacks. In Climate Change
2021: The Physical Science Basis. Contribution of Working Group I to the Sixth Assessment Report of the
Intergovernmental Panel on Climate Change [Masson-Delmotte, V., P. Zhai, A. Pirani, S.L. Connors,
C. Péan, S. Berger, N. Caud, Y. Chen, L. Goldfarb, M.I. Gomis, M. Huang, K. Leitzell, E. Lonnoy,
J.B.R. Matthews, T.K. Maycock, T. Waterfield, O. Yelekçi, R. Yu, and B. Zhou (eds.)]. Cambridge
University Press, Cambridge, United Kingdom and New York, NY, USA, pp. 673–816,
doi:10.1017/9781009157896.007
5
Table 1: IPCC estimates of the global carbon budget.
Source: IPCC (2021). AR6. WG1, summary for policy makers, Table SPM.2
More recent estimates (11
) assess that these remaining carbon budgets have decreased, to
250 GtCO2 as of beginning of 2023 for a 1.5°C global warming threshold (with a 50%
likelihood), to 600 GtCO2 for 1.7°C and 1150 GtCO2 for 2°C (with a 50% likelihood) – see
Table 2.
(11
) Forster, P. M., Smith, C. J., Walsh, T., Lamb, W. F., Lamboll, R., Hauser, M., Ribes, A., Rosen, D., Gillett,
N., Palmer, M. D., Rogelj, J., von Schuckmann, K., Seneviratne, S. I., Trewin, B., Zhang, X., Allen, M.,
Andrew, R., Birt, A., Borger, A., Boyer, T., Broersma, J. A., Cheng, L., Dentener, F., Friedlingstein, P.,
Gutiérrez, J. M., Gütschow, J., Hall, B., Ishii, M., Jenkins, S., Lan, X., Lee, J.-Y., Morice, C., Kadow, C.,
Kennedy, J., Killick, R., Minx, J. C., Naik, V., Peters, G. P., Pirani, A., Pongratz, J., Schleussner, C.-F.,
Szopa, S., Thorne, P., Rohde, R., Rojas Corradi, M., Schumacher, D., Vose, R., Zickfeld, K., Masson-
Delmotte, V., and Zhai, P.: Indicators of Global Climate Change 2022: annual update of large-scale
indicators of the state of the climate system and human influence, Earth Syst. Sci. Data, 15, 2295–2327,
https://doi.org/10.5194/essd-15-2295-2023, 2023. Table 7.
6
Table 2: Updated estimates of the remaining carbon budget
Source: Forster et al., See also (7)
Comparing these carbon budgets with current annual global CO2 emissions shows that a
significant global reduction of CO2 emissions within this critical decade is imperative to keep
the 1.5 °C in reach. The EDGAR report 2023 (12
) estimates that the global CO2 emissions in
2022 amounted to around 38.5 GtCO2(13
), more than 15% of the remaining global CO2
budget as of 2023.
(12
) Crippa, M., Guizzardi, D., Pagani, F., Banja, M., Muntean, M., Schaaf E., Becker, W., Monforti-Ferrario, F.,
Quadrelli, R., Risquez Martin, A., Taghavi-Moharamli, P., Köykkä, J., Grassi, G., Rossi, S., Brandao De
Melo, J., Oom, D., Branco, A., San-Miguel, J., Vignati, E., GHG emissions of all world countries,
Publications Office of the European Union, Luxembourg, 2023, doi:10.2760/953322, JRC134504. The
choice of the database is motivated by the limited available data in the UNFCC Inventory, which for the
year 2021 reports only CO2 emissions (including LULUCF) from 43 countries.
(13
) representing about 71.6% of the global GHG emissions estimated at 53.8 GtCO2-eq in 2022
7
4 INDICATIVE EUROPEAN UNION NET GHG BUDGET FOR THE 2030-2050 PERIOD
4.1 GHG budget estimates
4.1.1 Advice by the ESABCC
In its advice for the determination of an EU-wide 2040 climate target and a greenhouse gas
budget for 2030–2050 (14
), the ESABCC indicates a feasible domestic EU (15
) net GHG
budget for 2030-2050 of 13-16 GtCO2-eq and recommends a range of 11-14 GtCO2eq. These
values assume a global warming limited to 1.5°C by the end of the century with no or limited
overshoot with at least 50% chance.
The range presented by the ESABCC is calculated from existing modelled scenarios that are
selected as described briefly below. The report proceeds with a multiple-step filtering process
excluding many scenarios for the EU on “high feasibility concern” grounds (related to the role
of CCUS, bioenergy, LULUCF net removals), and eventually selects seven scenarios (16
).
These seven scenarios are all compatible with the Paris Agreement, and more specifically
with the long-term temperature goal of limiting global average temperature to 1.5°C. They
serve to build the analysed range for the GHG budget within environmental risk levels (7
scenarios, 11-16 GtCO2-eq), the analysed range within environmental risk levels and the
technological deployment challenge (5 scenarios, 13-16 GtCO2-eq), and the recommended
range (6 scenarios, 11-14 GtCO2-eq). The recommended range discards the scenario showing
2040 reductions lower than 90% compared to 1990 and includes two scenarios showing very
ambitious 2040 reduction levels overcoming one or more of the technological deployment
challenges defined by the report (17
).
In terms of GHG profile, the six scenarios building the recommended range all show net
negative GHGs in 2050 (18
), implying a stronger effort than what is required under the
Climate Law, which states that the European Union shall reduce emissions to net zero by
2050 and shall aim to achieve negative emission thereafter.
(14
) European Scientific Advisory Board on Climate Change. 2023. Scientific advice for the determination of an
EU-wide 2040 climate target and a greenhouse gas budget for 2030–2050. URL: https://climate-advisory-
board.europa.eu/reports-and-publications/scientific-advice-for-the-determination-of-an-eu-wide-2040
(15
) The scope of the recommended GHG Budget by the ESABCC is “intra-EU”, i.e. domestic as per the
inventories and including intra-EU aviation and intra-EU maritime transport. It does not consider 50% of
international extra-EU maritime under the MRV, which are included in the scope of the EU Climate Law.
The difference in terms of cumulative emissions over 2030-2050 between the ESABCC “intra-EU” scope
and EU Climate Law scope is estimated at around 0.5 GtCO2-eq.
(16
) See the “European Climate Advisory Board Scenario Explorer”, for details on the different scenarios:
https://data.ece.iiasa.ac.at/eu-climate-advisory-board.
(17
) The technological deployment challenges are defined as total installed capacity in 2030 of PV (900 GW),
wind (630 GW) and hydrogen (50 GW).
(18
) The scenarios reach net GHGs in 2045 ranging from +141 MtCO2-eq to -63 MtCO2-eq, and are all net
negative in 2050 from -46 to -176 MtCO2-eq. Excluding the scenario meeting 88% in 2040 that has not
been retained by the ESABCC in its recommended ranges for a 2040 target and the GHG budget, 2045 net
emissions reach +73 to -63 MtCO2-eq in 2045 (reductions between -98% and -101% compared to 1990) and
-94 to -176 MtCO2-eq in 2050 (-102% to -104%).
8
The above discussed numbers thus represent the most ambitious approach that can be taken
by the EU.
4.1.2 Other estimates
A report by PBL (19
) provides an analysis of GHG budgets for major emitting countries to
achieve the Paris Agreement temperature goals. It looks at the global cumulative GHG
emissions over 2030-2050 (20
) of scenarios in the IPCC AR6 database for different climate
categories(21
):
- C1: limit warming to 1.5°C with no or limited overshoot and with a probability higher
than 50%,
- C1a: subcategory of C1 including only scenarios reaching global net-zero greenhouse
emissions in the second half of this century,
- C2: return warming to 1.5°C with a probability higher than 50% after a high overshoot
- C3: limit warming to 2°C with a probability higher than 67%.
The distribution of these global carbon budgets to regional carbon budgets (Table 3) focuses
on five major economies (China, India, EU, United State and Japan). The analysis gives for
the EU a 2030-2050 GHG budget of 15 GtCO2-eq (ranging 7-24) for climate category C1, 17
GtCO2-eq (12-25) for category C1a, 23 GtCO2-eq (15-36) for category C2, and 26 GtCO2-eq
(18-40) for category C3.
(19
) Hooijschuur, E, den Elzen, M.G.J., Dafnomilis, I. and van Vuuren, D.P. (2023), Analysis of cost-effective
reduction pathways for major emitting countries to achieve the Paris Agreement climate goal, The Hague:
PBL Netherlands Environmental Assessment Agency.
(20
) Including the year 2030, but excluding the year 2050.
(21
) Riahi, K., R. Schaeffer, J. Arango, K. Calvin, C. Guivarch, T. Hasegawa, K. Jiang, E. Kriegler, R.
Matthews, G.P. Peters, A. Rao, S. Robertson, A.M. Sebbit, J. Steinberger, M. Tavoni, D.P. van Vuuren,
2022: Mitigation pathways compatible with long-term goals. In IPCC, 2022: Climate Change 2022:
Mitigation of Climate Change. Contribution of Working Group III to the Sixth Assessment Report of the
Intergovernmental Panel on Climate Change [P.R. Shukla, J. Skea, R. Slade, A. Al Khourdajie, R. van
Diemen, D. McCollum, M. Pathak, S. Some, P. Vyas, R. Fradera, M. Belkacemi, A. Hasija, G. Lisboa, S.
Luz, J. Malley, (eds.)]. Cambridge University Press, Cambridge, UK and New York, NY, USA. doi:
10.1017/9781009157926.005. Table 3.2. Limited overshoot refers to exceeding 1.5°C global warming by up to
about 0.1°C, high overshoot by 0.1°C-0.3°C, in both cases for up to several decades.
9
Table 3: GHG budget for 2030-2050 per climate category and per country or region.
China EU-27 India Japan US World
Total
cumulative
net GHGs
2030-
2050*
C1 Median 67 15 34 5 22 308
Range 56-85 7-24 15-39 3-7 10-36 171-355
C1a Median 72 17 35 5 23 316
Range 57-84 12-25 26-40 3-7 14-38 238-363
C2 Median 98 23 39 7 41 414
Range 77-116 15-36 27-50 5-12 23-61 311-492
C3 Median 110 26 49 9 48 505
Range 90-140 18-40 32-64 6-14 31-72 398-611
Note: *Includes the year 2030 and excludes the year 2050.
Source: Hooijschuur et al. (2023).
Other recent estimates for EU CO2 and GHG budgets are reported:
- The German Advisory Council on the Environment calculates a CO2 budget for the
period 2022-2050 of 23.1 for 1.5°C with 50% probability and 39.5 GtCO2 for 1.75°C
with 67% probability (22
).
- Agora Energiewende suggests a domestic (23
) EU GHG budget of 14.3 GtCO2-eq for
the period 2030-2050 to achieve net-zero emissions by 2050 (24
).
4.2 Cumulative 2030-2050 GHG emissions associated to target options
The Impact Assessment looks at a broad range of options for the 2040 GHG emission
reduction target, ranging from below 75% up to 95% in comparison with 1990 emission
levels. The analysis focuses on three target levels:
- Option 1: a reduction of consistent with a linear trajectory between 2030 and climate
neutrality by 2050,
- Option 2: a reduction of at least 85% up to 90%,
- Option 3: a reduction of at least 90% up to 95%.
For each target option, the “GHG budget” is calculated as the cumulative net GHG emissions
of 2030-2050, assuming net GHG emissions reaching zero in 2050 and linear trajectories of
net GHGs between 2030 and 2040, and between 2040 and 2050. The EU-wide net domestic
GHG emissions cut by 2030 is estimated at 57% compared to 1990 under the Fit-for-55
legislation as adopted.
(22
) German Advisory Council on the Environment (2022). A justified ceiling to Germany’s CO₂ emissions:
Questions and answers on its CO₂ budget. German Advisory Council on the Environment. The upper limit
for CO2 for domestic budget in the period 2022-2050 is defined as of 23.1 GtCO2.
(23
) The difference in scope between the indicative budget (European Climate Law scope) and a domestic budget
(excuding emissions for international aviation and maritime transport) is quantified to around 1.2 GtCO2-eq.
(24
) Graf, A., et al. (2023). Breaking free from fossil gas. A new path to a climate-neutral Europe. Agora
Energiewende.
10
The resulting GHG budget ranges from above 23 GtCO2-eq for a 2040 reduction lower than
75%, 21 GtCO2-eq for target option 1, up to 18 GtCO2-eq for option 2 and up to
16 GtCO2-eq for option 3.
Table 4: EU GHG budget over 2030-2050 associated to each target option.
GHG reductions in
2040 compared to
1990
Below 75%
Target option 1
(linear 2040, 78%)
Target option 2
(85-90%)
Target option 3
(90-95%)
Corresponding GHG
budget over 2030-
2050 (GtCO2-eq)
More than 23 21 Up to 18 Up to 16
4.3 Cumulative 2030-2050 GHG emissions associated to the proposed EU 2040 climate
target
Consistently with the EU 2030 climate target of at least 55% reduction of net GHGs and its
associated policy framework, with climate neutrality in 2050 and with the proposed 2040
target of -90%, the resulting indicative “GHG budget” for the EU over the 2030-2050 period
is estimated at 16 GtCO2-eq.
The scope of the indicative GHG budget is consistent with the European Climate Law: it
includes domestic EU emissions, international intra-EU aviation, international intra-EU
maritime, and 50% of international extra-EU maritime under the MRV. It is calculated
considering linear reductions in the 2030-2040 decade to achieve -90% and in the 2040-2050
decade to achieve net-zero in 2050.
The indicative GHG budget consists of cumulative gross GHG emissions of around 21-24
GtCO2-eq, and of cumulative net removals of around 5-8 GtCO2-eq over the 2030-2050
period, depending on the contribution of LULUCF net removals and industrial carbon
removals. The carbon budget (including the contribution of the LULUCF net removals and of
industrial carbon removals) and the cumulative non-CO2 emissions represent each about half
of the indicative GHG budget.
It falls within the range analysed by the ESABCC from feasible scenarios compatible with a
1.5°C global warming (25
) and is in the middle of the range of AR6 scenarios analysed by
PBL between climate category C1 and C1a, both compatible with the same global warming
level.
This indicative 2030-2050 GHG budget is fully compatible with the Paris Agreement long
term temperature goals of well below 2°C and pursuing effort to limit it to 1.5°C, and thus
does not put at risk the EU’s commitment to contribute to achieving the Paris Agreement.
(25
) The difference in scope between the indicative budget (European Climate Law scope) and the ESABCC
budget (intra-EU emissions) is quantified to around 0.5 GtCO2-eq
11
TABLE OF TABLES
Table 1: IPCC estimates of the global carbon budget................................................................ 5
Table 2: Updated estimates of the remaining carbon budget..................................................... 6
Table 3: GHG budget for 2030-2050 per climate category and per country or region.............. 9
Table 4: EU GHG budget over 2030-2050 associated to each target option. .......................... 10


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EUROPEAN
COMMISSION
Strasbourg, 6.2.2024
SWD(2024) 63 final
PART 4/5
COMMISSION STAFF WORKING DOCUMENT
IMPACT ASSESSMENT REPORT
Part 4
Accompanying the document
COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN
PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL
COMMITTEE AND THE COMMITTEE OF THE REGIONS
Securing our future
Europe's 2040 climate target and path to climate neutrality by 2050 building a
sustainable, just and prosperous society
{COM(2024) 63 final} - {SEC(2024) 64 final} - {SWD(2024) 64 final}
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KOM (2024) 0063 - SWD-dokument
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1
Table of contents
ANNEX 9: ENABLING FRAMEWORK ..................................................................................................................3
1 THE INTERNATIONAL DIMENSION...........................................................................................................3
1.1 CLIMATE AND ENERGY DIPLOMACY RAISON D’ÊTRE ............................................................................................... 3
1.2 CLIMATE DIPLOMACY INSTRUMENTS .................................................................................................................. 5
1.3 ENGAGEMENT OF THE EU IN MULTILATERAL FORA................................................................................................ 5
1.4 CLIMATE CHANGE AND INTERNATIONAL SECURITY................................................................................................. 7
1.5 CLIMATE CHANGE AND TRADE........................................................................................................................... 7
1.5.1 Trade policy ..................................................................................................................................... 7
1.5.2 Emissions accounting ...................................................................................................................... 8
1.6 GLOBAL COMPETITION FOR RAW MATERIALS ..................................................................................................... 10
2 AN INDUSTRIAL STRATEGY.................................................................................................................... 13
2.1 THE GREEN DEAL INDUSTRIAL PLAN ................................................................................................................ 13
2.2 ENERGY MEASURES SUPPORTING INDUSTRY....................................................................................................... 16
2.3 CIRCULAR ECONOMY AND SUSTAINABLE PRODUCTS............................................................................................. 18
2.4 INDUSTRIAL CARBON MANAGEMENT STRATEGY .................................................................................................. 20
2.5 ALIGNING INVESTMENTS WITH CLIMATE NEUTRALITY........................................................................................... 21
2.6 RESEARCH, DEVELOPMENT, AND INNOVATION ................................................................................................... 24
2.6.1 Role of research and innovation.................................................................................................... 24
2.6.2 Research, development, and innovation for the Green Transition................................................ 25
2.6.3 Advancing the European RDI system............................................................................................. 30
2.7 SMES........................................................................................................................................................ 35
3 AN INCLUSIVE AGENDA......................................................................................................................... 36
3.1 JUST TRANSITION AND SOCIAL POLICY............................................................................................................... 36
3.1.1 How to accompany the transition? ............................................................................................... 37
3.1.2 Energy and transport poverty aspects........................................................................................... 37
3.1.3 Employment and skills related aspects.......................................................................................... 38
3.1.4 Strategic cooperation and communication................................................................................... 39
3.1.5 Examples of fair and inclusive transitions ..................................................................................... 40
3.2 REGIONAL POLICY AND LOCAL ACTION .............................................................................................................. 41
3.2.1 Available EU funding, objectives, and strategies .......................................................................... 41
3.2.2 The EU’s cohesion policy................................................................................................................ 42
3.2.3 The Recovery and Resilience Facility ............................................................................................. 46
3.2.4 Other EU initiatives........................................................................................................................ 47
3.2.5 Example of a region that has received support: the Ruhr region.................................................. 49
3.3 LIFESTYLE AND INDIVIDUAL ACTION.................................................................................................................. 50
3.3.1 Sustainable lifestyle choices .......................................................................................................... 50
3.3.2 Sustainable food consumption ...................................................................................................... 52
4 HEALTHY NATURE AND SUSTAINABLE CIRCULAR BIOECONOMY........................................................... 53
4.1 CURRENT POLICY FRAMEWORK ON CARBON REMOVALS AND AGRICULTURE GHGS .................................................... 53
4.2 REDUCING GHG EMISSIONS FROM THE LAND SECTOR ......................................................................................... 55
4.2.1 Agricultural emissions ................................................................................................................... 55
4.2.2 Halt and reverse the loss of soil carbon......................................................................................... 55
4.2.3 Increase forest carbon sinks .......................................................................................................... 56
4.3 PRESERVE AND RESTORE BIODIVERSE ECOSYSTEMS.............................................................................................. 56
4.4 INVESTMENT NEEDS FOR BIODIVERSITY AND A SUSTAINABLE AND CIRCULAR BIOECONOMY .......................................... 58
4.4.1 Towards biodiversity credits and payment for ecosystem services (PES)...................................... 58
ANNEX 10: STATE OF PLAY OF GHG EMISSIONS AND THE ENERGY SYSTEM.................................................... 61
1 TOTAL GHG EMISSIONS IN THE EU ........................................................................................................ 61
2 EMISSIONS UNDER THE EMISSION TRADING SYSTEM ........................................................................... 62
2
3 EMISSIONS UNDER THE EFFORT SHARING LEGISLATION ....................................................................... 63
4 EMISSIONS UNDER THE LULUCF REGULATION....................................................................................... 64
5 RENEWABLES DEPLOYMENT UNDER THE RENEWABLE ENERGY DIRECTIVE ........................................... 65
6 ENERGY EFFICIENCY DIRECTIVE ............................................................................................................. 66
ANNEX 11: THE CLIMATE POLICY FRAMEWORK CONSIDERED FOR THE ANALYSIS.......................................... 69
1 ENERGY EFFICIENCY POLICIES................................................................................................................ 69
2 POWER GENERATION AND ENERGY MARKETS ...................................................................................... 70
3 CLIMATE POLICIES................................................................................................................................. 71
4 TRANSPORT-RELATED POLICIES............................................................................................................. 72
5 INFRASTRUCTURE, INNOVATION AND RTD FUNDING ........................................................................... 74
6 ENVIRONMENTAL POLICIES................................................................................................................... 75
7 INTERNATIONAL POLICIES..................................................................................................................... 75
8 IMPLEMENTATION OF POLICIES TO REDUCE NON-CO2 GHG EMISSIONS............................................... 77
ANNEX 12: NON-CO2 CLIMATE IMPACTS OF THE NAVIGATION AND AVIATION SECTORS............................... 79
1 AVIATION.............................................................................................................................................. 79
1.1 SCIENTIFIC EVIDENCE .................................................................................................................................... 79
1.2 POLICY CONTEXT AT GLOBAL AND EU LEVEL....................................................................................................... 82
1.3 MITIGATION TECHNOLOGIES .......................................................................................................................... 84
1.4 NON-CO2 EFFECTS IN THE CONTEXT OF THE 2040 CLIMATE TARGET...................................................................... 84
2 NAVIGATION......................................................................................................................................... 85
2.1 SCIENTIFIC EVIDENCE .................................................................................................................................... 85
2.2 POLICY CONTEXT AT EU AND GLOBAL LEVEL....................................................................................................... 87
2.3 MITIGATION OPTIONS AND TECHNOLOGIES ....................................................................................................... 88
2.4 NON-CO2 EFFECTS IN THE CONTEXT OF THE 2040 CLIMATE TARGET...................................................................... 89
ANNEX 13: LITERATURE REVIEW OF 2040 NET GHG REDUCTIONS .................................................................. 91
TABLE OF FIGURES.......................................................................................................................................... 95
TABLE OF TABLES ........................................................................................................................................... 95
3
Annex 9: Enabling framework
1 THE INTERNATIONAL DIMENSION
The consequences of the triple planetary crisis of climate change, biodiversity loss and
pollution pose an existential threat, particularly to the most vulnerable. All regions and
citizens are directly affected by climate change, for example through job losses in climate-
affected sectors such as agriculture, fisheries, and tourism. Unequal exposure and
vulnerability to climate and environmental impacts of different regions and socio-economic
groups worsens pre-existing inequalities and vulnerabilities. Yet, the impacts of climate
change are not neutral, as for instance older people, persons with disabilities, displaced
persons, or socially marginalised have different or less adaptive capabilities. The planet is
warming at a higher speed than expected and all countries are affected by the impacts of
climate change. Russia’s war of aggression against Ukraine has caused human suffering and
massive environmental damage, increased risks to nuclear safety in Ukraine and precipitated
an energy and food crisis with global impacts.
As a consequence of the international commitments under the Paris Agreement, and to
address the above-mentioned problems, a technological revolution is taking place, with
massive investments in renewable energies in developed countries and in China, and in
decarbonisation in most of the industrialised economies. With more ambitious environmental
and climate policies in developed countries, the markets and investments are evolving, which
requires an adaptation of production processes across value chains, thereby creating new gaps
between frontrunners and the others and possible new dependencies. This is mobilising
governments in different regions of the world, looking for reference models, expertise, and
finance for developing greener production processes, diversifying their supply chains, and
maintaining their access to markets, while reducing pollution and providing better access to
energy in their territory.
At the same time, investments in fossil fuel energy continue at a high pace, and the EU
REPowerEU plan and Fit-for-55 policies aim at smoothening the transition between fossil
fuels and low-carbon energy sources, to become climate-neutral in 2050. By agreeing and
delivering on the ambitious social and economic transformation, the EU and its Member
States aim to inspire global climate action and demonstrate that moving towards climate
neutrality is not only imperative, but also feasible and desirable. Supporting this global
transformation, the EU and its Member States stand ready to engage with all Parties of the
Paris Agreement to ensure the timely delivery of robust and ambitious long-term low
greenhouse emission development strategies in line with the objectives of the Paris
Agreement.
1.1 Climate and energy diplomacy raison d’être
In this context, the climate and energy diplomacy of the EU aims inter alia at engaging with
partners worldwide to implement the Paris Agreement, to limit the global temperature
increase to 1.5°C compared to pre-industrial levels, to support the most vulnerable, such as
Least Developed Countries and Small Island Developing States in adapting to climate change
effects, and to increase international climate finance for mitigation and adaptation. EU action
also aims at supporting just transitions towards climate neutral and resilient economies and
societies, by encouraging the deployment of renewable energies and increasing energy
4
efficiency with a view to phasing out fossil fuels. EU cooperation should encourage partners
to embrace the opportunities of the green transition, including a safe and affordable access to
green energy.
Climate diplomacy is also deployed to support energy security and the green transition in the
Western Balkans and the Eastern Neighbourhood and will promote the green reconstruction
of Ukraine. It further operates both at multilateral level, in all relevant international fora such
as the UN, G20 and G7, OECD or regional organisations, and in bilateral contexts.
Bilateral climate diplomacy has been expanding in the recent years, as an external pillar of the
European Green Deal. Climate diplomacy instruments support the multilateral climate
negotiations as well as regulatory convergence by deepening mutual understanding about the
EU and other countries’ climate policies and objectives. They also allow for a strengthening
of international cooperation.
While some third countries express concerns about the impact of elements of the European
Green Deal measures, for example on their trade relations with the EU, other countries have
also showed interest in better understanding the EU climate and energy policies, and learn
from the EU’s experience in developing a well-functioning carbon market, in modelling, in
adaptation strategies, etc. Bilateral climate diplomacy thus allows to project and explain all
the policy aspects of the European Green Deal, to create opportunities for cooperation and
investments, for developing joint approaches and solutions, and for technical assistance,
amongst other types of cooperation. Climate diplomacy instruments facilitate mutual
understanding, keeping the channels open for exchanges, including of knowledge and trade.
Climate diplomacy allows to avoid creating, or to overcome, new barriers emerging from
different policy approaches.
Other international EU actions, such as on biodiversity loss, natural resource management and
circular economy, are complementary of climate diplomacy, strictly speaking, as key parts of
a holistic approach towards the achievement of the 2030 Agenda and the SDGs. The EU
diplomacy in all relevant international fora, including the G7, G20, UNEA, WTO etc,
advances an agenda in line with and in support of the implementation of the goals and targets
of the Kunming Montreal Global Biodiversity Framework to halt and reverse biodiversity
loss, and to promote the uptake of the circular economy and more in general the sustainable
use and management of natural resources. An example is the key role played by the EU in the
context of the UN Environment Assembly to achieve ambitious language on circular
economy, suistainable consumption and production, nature-based solutions, and sustainable
management of mineral resources in the Resolutions 4/1, 4/19, 5/5, 5/11 or 5/12.
Bilateral engagement between countries and regions in general will further expand with the
uptake of the green transition in more countries, as mutual understanding, learning from each
other and developing joint approaches are key for success and for leaving no-one behind.
There is also demand from stakeholders, including businesses, for clear policy orientations
and legal certainty. The EU is part of this active global diplomatic efforts (see e.g., Council
Conclusions on Climate and Energy Diplomacy of 9 March 2023) and is willing to step up its
engagement in areas such as cooperation on Emissions Trading Systems, energy transition,
modelling, and adaptation. The Commission and Member States are active in different
contexts, and ways of cooperating together to achieve common operational objectives should
be further explored.
5
1.2 Climate diplomacy instruments
The European Commission is engaging in a broad range of High-Level Dialogues on topics
related to climate and energy, amongst others, with third countries, such as Canada, Australia,
Japan, New Zealand, China, India, Indonesia, Colombia, or Mexico. This allows for
exchanging on respective climate policies and identifying areas for further cooperation. New
High Level Climate Dialogues are being launched with Chile and Brazil.
The Green Alliances with Japan and Norway, as well as the Green Partnerships with Morocco
and the Republic of Korea are recently designed instruments that allow the EU to strengthen
cooperation with like-minded countries that either committed to climate neutrality by mid-
century or are putting in place ambitious climate policies by 2030. Such alliances and
partnerships provide for a reinforced platform of policy dialogue on reforms linked to the
green transition, ad-hoc technical, financial assistance, and investments. They encompass
climate but also energy and environmental policies in a whole-of-government approach,
where all concerned ministries must participate. Green Alliances and partnerships put climate
on the political agenda of the respective countries and provide a clear direction of travel.
The G7-led Just Energy Transition Partnerships (JETPs) with South Africa, Indonesia, Viet
Nam, and Senegal are another powerful instrument to prompt sectoral reforms guided by
climate ambition. Under shared responsibility between the G7 members, JETPs provide a
platform by which partner countries can work with climate finance donor support, private
sector investors, multilateral development banks (MDBs) and relevant actors to achieve a just
energy transition. The EU Commission and EEAS are co-leading together with the UK on the
JETP with Viet Nam.
The integration of the EU climate acquis into the European Economic Area and the EU
accession negotiations are also two channels for extending the EU climate legislation to the
neighbouring partner countries, including via the Energy Community.
Plurilateral initiatives have achieved significant success in advancing with the commitments
set out under the Paris Agreement and the Convention on Biological Diversity. The EU has
worked with partner countries to put forward the Global Methane Pledge, which now has over
150 participants and a dedicated secretariat. Likewise, the EU committed to put forward a
pledge on Renewable Energy and Energy Efficiency at the upcoming COP 28 in the United
Arab Emirates.
The EU is leading the international support for climate change action and works together both
on a multilateral and bilateral level with global partners. The EU, its Member States, and its
financial institutions, collectively known as Team Europe, is the leading contributor of
development assistance and the world's biggest contributor of climate finance, with over EUR
23 billion public finance committed in 2021.
1.3 Engagement of the EU in multilateral fora
The European Commission and the High Representative will continue to work with Member
States to mobilise all diplomatic channels – including within the United Nations, the G7, G20,
the OECD and other international fora to achieve the ambitions set out in the Paris
Agreement. The EU has been able to act as a bridge builder between different Parties and
continues to ensure that the principles embodied in the Paris Agreement can be entrusted.
6
The United Nations Framework Convention on Climate Change (UNFCCC) process has
achieved a lot in the recent decades. The Paris Agreement and Katowice rulebook provide a
robust framework for climate action. The process is a unique framework within which we
should continue to enhance international cooperation, catalyse increased Party and non-Party
stakeholder ambition, transparency, and action, while providing a space to exchange
experiences in transitioning to low greenhouse gas emission and climate resilient economies
and societies.
The ambition cycle built upon the Global Stocktake under the Paris Agreement and the
regular submission of NDCs and adaptation communications, as well as information on
finance flows and the enhanced transparency framework will be the central feature in driving
enhanced climate action and support to achieve the long-term goals of the Paris Agreement.
The following work strands are playing a key role in engaging all Parties to the Paris
Agreement in achieving the agreed upon objectives:
On Mitigation, the European Union is strongly advocating for an ambitious Mitigation Work
Programme within the UNFCCC, focusing on delivering concrete solutions to close the
ambition and implementation gap in this critical decade towards 2030 and incentivizing high
ambitions.
On Loss and Damage at COP27 in Sharm el-Sheikh, the European Union played a leading,
constructive role by presenting a bridge-building proposal and showing openness to what
resulted in the establishment of the new funding arrangements, including a fund for assisting
developing countries that are particularly vulnerable to the adverse effects of climate change,
in responding to loss and damage. Following that decision, the European Union engages
constructively in the Transitional Committee work to deliver on all elements of its mandate in
line with our consistent commitment to scale up and strengthen support for the sources, funds,
processes, and initiatives under and outside the climate regime that are at the core of funding
arrangements for loss and damage.
On Adaptation, a steady progress has been made towards the Global Goal on Adaptation
(GGA) by implementing the two-year Work Programme launched at COP26, the global
commitment to double adaptation finance, the adoption of the 2021 EU Adaptation Strategy,
and the continued adoption and revision of EU Member States’ National Adaptation Plans and
Strategies (1
). At COP27, and in the follow up intersessional Conference 58 in Bonn, Parties
agreed on the possible structural elements of a GGA Framework for consideration and
adoption at COP28. The Global Stocktake should enable Parties to analyse past efforts to
increase resilience and implement adaptation actions while, at the same time, looking forward
with increased ambition at all stages of the adaptation policy cycle (risk assessments,
planning, monitoring and evaluation).
The FAC Council Conclusions on Climate and Energy Diplomacy approved in March 2023
were another strong political signal and set the course, together with the Environment Council
Conclusions, for the EU to support the achievement of an ambitious outcome of COP28.
(1
) See https://climate-adapt.eea.europa.eu/en/countries-regions/countries.
7
1.4 Climate change and international security
Current climate extremes, rising temperatures and sea levels, desertification, water scarcity,
threats to biodiversity, environmental pollution and contamination are threatening the health
and well-being of humanity, and can create greater displacement, migratory movements,
pandemics, social unrest, instability, and conflicts. Europe's armed forces are also confronted
with the changing and challenging operational conditions due to climate change. These new
threats have already prompted allies and partners to update their policies too.
The EU sets out four priorities on Climate Change and Security, namely strengthening
planning, decision-making and implementation; operationalising the response to climate and
security challenges; enhancing the climate adaptation and mitigation measures of Member
States' civilian and military operations and infrastructure; and reinforcing international
partnerships. This is done through around thirty actions, including: establishing a data and
analysis hub on climate and environment security within the EU Satellite Centre; deploying
environmental advisors in the EU Common Security and Defence Policy (CSDP) missions
and operations; setting up training platforms at national and EU level such as an EU Climate,
Security and Defence Training Platform; developing thorough analysis and studies of related
policies and actions, especially in vulnerable geographical areas such as the Sahel or the
Arctic.
1.5 Climate change and trade
1.5.1 Trade policy
As the world aims to achieve the goals of the Paris Agreement, trade policy has a role to play
in supporting an ecological and green transition not only within the EU but globally. This
includes, for instance, accelerating investment in clean energy or the promotion of value
chains that are circular, responsible, and sustainable. It also means creating opportunities for
sustainable products and services to be traded more extensively.
As the EU continues to be a front runner with the Green Deal and its associated policy
implementation, it places significant importance in supporting partner countries in building
the necessary mechanisms, capacity and systems via technical exchanges, financial support,
and diplomatic efforts.
Trade policy can serve as a platform to engage with trading partners on climate and
environmental action, multilaterally e.g., in the World Trade Organization or bilaterally
through our Free Trade Agreements. Commitments to sustainability have been continuously
strengthened in EU trade agreements, in particular with regard to enhancing climate action
through the recent Communication on Trade and Sustainable Development chapters in free
trade agreements (2
). The Commission has also stepped-up efforts to implement and enforce
the sustainable development commitments of EU trade agreements. On climate change more
specifically, the EU’s most recent agreements all include a binding commitment of the Parties
to ratify and effectively implement the Paris Agreement. For countries with which the EU has
or is negotiating free trade agreements, climate policy dialogues are also pursued within the
(2
) COM(2022) 409 final
8
Trade and Sustainable Development sub-committees, complemented by institutional advisory
and monitoring mechanisms. Joint Committees under the EU Strategic Partnership
Agreements also provide a forum to review the respective climate, energy, and environmental
policies. In addition to or in the absence of such existing frameworks, bilateral summits and
other official visits create opportunities to exchange on climate policy issues.
Plurilaterally as well as multilaterally, the EU is involved in the trade and climate nexus.
Within the WTO, the EU is working towards making the body a more relevant forum to tackle
climate change. In the plurilateral context in the WTO, the EU is involved in discussion on
environmental sustainability, ending plastics pollution and fossil fuel subsidy reform. Outside
the WTO, the EU together with Ecuador, Kenya and New Zealand forged the Coalition of
Trade Ministers on Climate (3
). The Coalition will provide political steer and guidance to
boost inclusive cooperation on climate, trade, and sustainable development.
In trade related discussions in other plurilateral fora, the High Representative and the
Commission have been additionally intensifying work and international outreach on ending
environmentally harmful fossil fuel subsidies along a clear timeline, with the aim of setting
milestones for their phase-out, including through the G7 and the G20, and in the context of
the fossil fuel subsidies reform dialogue in the OECD. The EU also supports the
modernisation of the OECD arrangements on officially supported export credits(4
).
Furhermore, the EU is an active participant in the OECD’s Joint Working Party on Trade and
Environment that provides analytical work on the trade and environment nexus, including
climate change.
1.5.2 Emissions accounting
Discussing the linkages between climate policy and trade also links to the differences between
and complexities of accounting for production based vs. consumption-based emissions.
Combining and comparing different types of emission accounting methods considering trade
is valuable to consider the role of exporting industries and related value chains and their
respective emissions (5
). The most common emission accounting method is production-based
accounting (PBA). PBA accounts for territorial, production-based emissions and is used for
official accounting and reporting (including the EU and international targets, e.g., under the
UNFCCC). This is mainly due to sovereignty (the emissions for which a country can be held
responsible) and measurement issues (allocating part of another country’s emissions to a third
country is technically complex).
Besides that, there are two ways of taking trade into account when estimating emission shares.
Consumption-based accounting (CBA) assigns emissions where the final product is
consumed, considering emissions along the entire value chain. It might penalise countries that
are active in reducing emissions in sectors involved in international trade. This is because a
country would see a part of its mitigation effort allocated to its export partners, while it would
(3
) See https://www.tradeministersonclimate.org/.
(4
) See the Council Decisions of July 2023 in support of modernised export credits (10117/23 and 10121/23).
(5
) See, for example, Jakob et al., 2021, Sharing responsibility for trade-related emissions based on economic
benefits, Global Environmental Change 66: 102207, https://doi.org/10.1016/j.gloenvcha.2020.102207.
9
be penalised for a lack of similar effort from its import partners. To correct for this effect,
technology adjusted consumption-based accounting (TCBA) accounts for differences in
technology of export sectors to adjust the CBA metric. Under TCBA, export-related
emissions are subtracted based on the average carbon intensity for the relevant sector on the
world market, rather than the domestic average, under the assumption that a similar good
would have been produced at the average emissions intensity on the world market for that
sector (6
). This metric thus assigns lower emissions to a country than under CBA when its
exports are cleaner than the world average, after accounting for sectoral differences in the
composition of exports. The EU has reduced both its production-based and consumption-
based emissions over the last decades (7
). Including the TCBA method shows a strong
reduction of the gap between EU GHG emissions comparing the PBA and CBA method.
Figure 1 shows the GHG emission trajectories for the EU, the US, India, and China under the
three methods for emission accounting (projections post-2020 are based on the JRC GECO
2022 1.5 scenario).
Figure 1: GHG emissions under different GHG emission accounting methods
Source: JRC-GEM-E3 model
Overall, assessing the interlinkages between climate policies and trade balances depends on
various parameter and approximations, making long term outlooks on trade balances
challenging. However, it is clear that with a transformation towards net-zero, fossil fuel-based
sectors and products will naturally see a decline in demand, whereas sectors and products
already in line with net-zero targets are expected to experience higher demand.
Lastly, EU’s net-zero technology industry can contribute to global emission reductions
outside EU when products and technologies are exported or when manufacturing in EU
(6
) Kander, A., Jiborn, M., Moran, D.D., Wiedmann T.O. (2015), National greenhouse-gas accounting for
effective climate policy on international trade. Nature Climate Change 5: 431–435.
https://doi.org/10.1038/nclimate2555.
(7
) See, for example, the estimates of CO2 emissions embodied in international trade by the OECD, see
https://www.oecd.org/sti/ind/carbondioxideemissionsembodiedininternationaltrade.htm .
10
replaces more polluting manufacturing outside EU. Such contribution to global emission
reduction would be additional to the scenarios analysed in this impact assessment and further
points at the significance of building on the capacity of the EU in raw materials and industrial
clean manufacturing.
1.6 Global competition for raw materials
Demand for non-energy raw materials, such as metals and minerals, increases rapidly with
climate ambition (8
). Unlike fossil-powered technologies, the key technologies to decarbonise
the power generation, industry, and transport sectors (namely wind, solar PV, batteries, and
hydrogen) require large quantities of metals and minerals (9
).
In view of the 2050 climate neutrality, the demand for renewable energy generation and
decarbonised transport in the EU is expected to increase, and so too the demand of raw
materials. Substituting materials and increasing material efficiency and circularity can
mitigate the projected rise in demand to a certain extent, but these steps are not expected to
reverse the trend (see Annex 6).
Markets are reacting to the current and forecasted increases in demand for critical materials,
with significant increases in supply forecast. The market size of key energy transition
minerals doubled over the past five years, reaching USD 320 billion in 2022. The IEA says
supply of minerals critical to the energy transition could move close to levels needed to
support climate pledges by 2030 after investment in critical minerals production jumped 30%
last year to $41 billion, having gained 20% in 2021. Exploration spending also rose by 20% in
2022, driven by record growth in lithium exploration. For lithium, the IEA forecasts supply by
2030 will reach 420,000 metric tons - only a touch short of demand estimated at 443,000 to
meet government pledges (10
).
As large uncertainty exists in future amounts of both the demand and supply of metals and
materials for decarbonisation, this is reflected in the uncertain outlook for prices of these
materials. Large short-term swings have been witnessed in the past due to unbalanced supply
and demand market factors, e.g., lithium prices were at record highs at the start of 2023, but
by April 2023 had approximately halved (11
). Likewise, silicon prices spiked four-fold in mid-
2021, but by mid-2022 had returned to pre-spike prices (12
).
A net-zero economy in the EU will need a secure supply chain able to meet increased product
and material demand. Certain products and intermediate material – such as cement and steel –
do not represent a supply concern since their manufacturing relies on raw materials that are
relatively abundant on earth and whose manufacturing chain is geographically spread across
world regions, including the EU. Other products and intermediate materials requiring raw
(8
) World Bank (2017). The Growing Role of Minerals and Metals for a Low Carbon Future.
(9
) JRC (2020). Critical Raw Materials for Strategic Technologies and Sectors in the EU.
(10
) IEA (2023). Critical Minerals Market Review 2023.
(11
) BNEF (2023a). Battery Metals Monthly: Lithium Price Recovery Begins.
(12
) BNEF (2023b). Transition Metals Outlook 2023.
11
materials that are not available or manufactured in the EU in large quantities (critical raw
materials or CRM) are at high supply risk. Supply risk factors can be country-level
concentration of global production of primary raw materials and sourcing to the EU,
governance of supplier countries (13
) (including environmental aspects), contribution to
recycling, substitution, EU import reliance and trade restrictions in third countries.
The EU currently relies almost exclusively on imports for many CRM. In fact, for 31 out of
82 individual materials or groups assessed, the import reliance is 100% at the extraction or
processing stage, and above 80% for another 6 materials (14
).
More importantly, within these imports, suppliers are highly concentrated (15
), and the main
suppliers are in many cases exposed to significant environmental, social and governance
risks (16
). In three cases, namely light REE, heavy REE and magnesium, the supply share of
one country, China, is above 90%. This concentration expands along the value chain, with the
processing stage being even more concentrated than the extraction stage for some materials,
such as lithium. China controls 69% of the global capacity for refined lithium, 60% for
refined cobalt, 79% for refined manganese (17
). In addition to the concentration of supply in
single countries, some actors have expanded their dominance of the global value chain by
taking control of economic activities and assets in third countries, such as China controlling
cobalt mines in Congo (18
). As witnessed during the COVID-19 crisis and the energy crisis
following Russian’s military aggression against Ukraine, the consequences of excessive
dependence on single suppliers can jeopardise the functioning on the single market and harm
the EU’s competitiveness.
(13
) Worldwide Governance Indicators (WGI): http://info.worldbank.org/governance/wgi/. Accessed on 18-04-
2023.
(14
) European Commission (2020). Study on the EU’s list of Critical Raw Materials – Final Report.
(15
) The share of the biggest supplier to the EU is 99% for the group of light rare earth elements (China), 98%
for the group of heavy rare earth elements (China), 98% for borates (Turkey), 93% for magnesium (China),
85% for niobium (Brazil), 78% for lithium (Chile) and 68% for Cobalt (DR Congo), source: Study on the
EU’s list of Critical Raw Materials (2020): Final Report, European Commission 2020.
(16
) See IEA (2021) report on Clean Energy Minerals, page 126-131.
(17
) JRC (2023). Supply chains and materials demand forecast in strategic technologies and sectors in the EU. A
foresight study.
(18
) Luc Leruth and Adnan Mazarei (2022). “Who controls the world’s minerals needed for green energy?”
https://www.piie.com/blogs/realtime-economic-issues-watch/who-controls-worlds-minerals-needed-green-
energy. Accessed on 10-10-2023.
12
Figure 2: Major countries in extraction and processing of selected minerals and fossil fuels
Notes: LNG= liquefied natural gas. The values for copper processing are for refining operations. Data from: IEA
(2020a), USGS (2021), World Bureau of Metal Statistics (2020), Adamas Intelligence (2020).
Source: Leruth and Mazarei (2022) (19
).
EU reliance on CRM imports is also due to a lack of efficient use of domestic resources, both
primary and secondary. The EU is currently a minor player in terms of extraction and
processing of primary CRMs. Despite being highly recyclable, the share of recycled CRM is
very low: this is because usually CRMs are used in low concentration as part of alloys, which
make the recovery process complex, and, until recently, their limited demand did not justify
investment in recycling infrastructure. Consequently, the share of CRM secondary production
is minimal, and significant CRM resources leave Europe in the form of wastes and scrap.
The EU strategy to overcome the challenges related to the supply of critical raw material is
described in the Critical Raw Material Act (20
), which aims to strengthen the different stages
of the European critical raw materials value chain and diversifying the EU's imports of critical
raw materials to reduce strategic dependencies by developing win-win partnerships on
sustainable raw materials value chains with resource rich countries and negotiate trade
agreements to facilitate trade and investment in CRM in third countries (21
). For more details,
see section 2.1. Circular economy measures, including product policies, can also help optmise
the supply of critical raw materials, as they can lower primary CRM consumption and
demand, and provide additional co-benefit in reducing biodiversity and pollution impacts
stemming from CRM extraction and processing.
(19
) Luc Leruth and Adnan Mazarei (2022). “Who controls the world’s minerals needed for green energy?”
https://www.piie.com/blogs/realtime-economic-issues-watch/who-controls-worlds-minerals-needed-green-
energy. Accessed on 10-10-2023.
(20
) COM(2023) 165 final
(21
) COM(2020) 474 final
13
2 AN INDUSTRIAL STRATEGY
Industry is one of the backbones of EU economy, and reducing its emissions is a key step
toward the 2050 climate neutrality.
Decarbonisation of the industry is complex. While it includes the production of some
commodities like metals and cement, the remainder of the sector’s output is extremely
heterogenous, producing very different materials and end products. It covers a highly diverse
set of input-output relationships that are highly integrated with the energy sector and the
overall economy. Decarbonising industry also enables to reduce the embodied emissions in
the products and equipment used in transport sector and the built environment. Given the
heterogeneity of the industrial sector, it stands to reason that a wide variety of decarbonisation
levers will be required, there is no silver bullet for complete industrial decarbonisation and
more ad-hoc solutions that consider the specific characteristics of the sub-sectors needs to be
implemented. An increasing number of technological solutions that result from net-zero
technology compatible investments and innovation could provide mainstream solutions in
many industrial sub-sectors by 2040, such as new manufacturing technologies, innovation in
processes, use of alternative materials or sources and cleaner supply chain.
The climate transition represents a great opportunity for creating jobs and growth. The net-
zero technology manufacturing industries, and its related ecosystem, are expected to undergo
rapid growth in the coming decades. Innovative business models, such as circular practices
and sharing economy, together with more responsible and sustainable consumer choices will
steer industry toward more resource-efficient and less climate-intensive value chains.
Today, the EU is already a global leader in certain clean sectors and is well positioned to
maintain its central role in the coming years. Embracing the industrial transition and
encouraging the development of domestic green and circular industry will provide a
competitive advantage to the EU. It will decrease resource dependency and spur innovation,
making the EU stronger at global level. However, especially the US and China are investing
heavily to compete on industrial decarbonisation solutions.
In response, between January and March 2023, the Commission tabled a number of proposals
to strengthen the growth and innovative strategy from the European Green Deal. The Green
Deal Industrial plan, adopted by the Commission on 1 February 2023 provides the
overarching principles of this reinforced industrial strategy to make Europe the home of clean
tech and industrial innovation. Additionally, provisions relevant for the EU industrial strategy
are also included in the provisional agreement on the proposal for a revision of the Renewable
Energy Directive (RED) proposed as part of the Fit-For-55 package as well as the revision
proposed as part of the REPowerEU package, and for the revision of the F-gases regulations.
2.1 The Green Deal Industrial Plan
The Green Deal Industrial plan contains four pillars. The first one is to improve the
regulatory environment to focus investment on strategic sectors and projects as well as
accelerate permitting. The second pillar aims at speeding up investment and financing for
clean tech production in Europe. To that end, the temporarily adapted state aid rules
(Temporary Crisis and Transition Framework) and in the medium term an EU Sovereignty
Fund (now announced on June 19, 2023, under the name the Strategic Technologies for
Europe Platform or STEP) allow for financing with short term flexibility. The third pillar is
skills with the establishment of Net-Zero Industry Academies to roll out re-skilling
14
programmes and facilitated access to EU labour markets for third country nationals. The
fourth pillar is trade with the aim to maximise existing trade agreements, combat unfair trade
practices and an emphasis on clean tech and net-zero industrial partnerships.
The Net Zero Industry and Critical Raw Materials Acts published together on March 16,
2023, were proposals announced under the first pillar on Regulatory Environment of the
Green Deal Industrial Plan.
The Net Zero Industry Act proposal offers a predictable legal framework for net-zero
industries in the EU. It focusses on ‘net zero technologies’ that will make significant
contribution to decarbonisation and defines a list of ‘Strategic Net Zero technologies’ (solar
photovoltaic and solar thermal; hydrogen electrolysers and fuel cells; sustainable
biogas/biomethane technologies; battery/storage technologies; heat pumps and geothermal
energy technologies; grid technologies; onshore wind and offshore renewable, CO2 capture
and storage) which can receive particular support and are subject to a target to provide at least
40% of the EU’s annual deployment needs for strategic net-zero technologies by 2030. The
Act also sets an EU objective to reach an annual 50Mt of CO2 injection capacity in strategic
storage sites in the EU by 2030, to be funded based on proportional contributions from EU oil
and gas producers.
The main pillars of the Act are the setting of enabling conditions by improving the conditions
for investment in net-zero technologies by enhancing information, reducing the administrative
burden to set up projects and simplifying permit-granting processes. In addition, the Act
proposes to give priority to Net-Zero Strategic Projects. Besides the CO2 capture target, it
also aims to diversify the supply for net-zero technologies and requires public authorities to
consider sustainability and resilience criteria for net-zero technologies in public procurement
or auctions.
It also enhances skills with new measures to ensure there is a skilled workforce supporting the
production of net-zero technologies in the EU, including setting up Net-Zero Industry
Academies, with the support and oversight by the Net-Zero Europe Platform. It also has
specific measures to foster innovation by making it possible for Member States to set up
regulatory sandboxes to test innovative net-zero technologies under flexible regulatory
conditions. Finally, it sets up a Net-Zero Europe Platform to assist the Commission and
Member States to coordinate action and exchange information, including around Net-Zero
Industrial Partnerships. The Net-Zero Europe Platform will support investment by identifying
financial needs, bottlenecks, and best practices for projects across the EU. It will also foster
contacts across Europe's net-zero sectors, making particular use of existing industrial
alliances.
Most of the net-zero technologies needed for the green transition use a number of critical raw
materials in their manufacturing processes that are sources outside the EU. Ensuring adequate
future supply of critical raw materials is necessary to achieve the 2050 climate neutrality
target.
15
The Commission regularly publishes the list of critical raw materials for the EU, the last one
dating from 2020 (22
), and recently forecasted future critical raw material trends (23
). These
are factual tools to define challenges and identify opportunities to support EU policy
development for critical raw materials in different domains (trade, research and innovation,
industry, and sustainability).
The Critical Raw Material Act (24
) illustrates the EU strategy to develop win-win partnerships
on sustainable raw materials value chains with resource rich countries and negotiate trade
agreements to facilitate trade and investment in CRM in third countries (25
). These
partnerships aim to contribute to the diversification of the EU’s raw materials supply chain
and enhance the sustainability of CRM production.
The Critical Raw Materials Act sets clear benchmarks for domestic capacities along the
strategic raw material supply chain and to diversify EU supply by 2030:
• At least 10% of the EU's annual consumption for extraction,
• At least 40% of the EU's annual consumption for processing,
• At least 15% of the EU's annual consumption for recycling,
• Not more than 65% of the Union's annual consumption of each strategic raw
material at any relevant stage of processing from a single third country.
In the same approach as with the Net-Zero industry act, it proposes to give priority to selected
Strategic projects with support for access to finance and shorter permitting timeframes.
Member States will also have to develop national programmes for exploring geological
resources. It also aims to ensure that the EU can mitigate supply risks with the monitoring of
critical raw materials supply chains and coordination of strategic raw materials stock among
Member States. It emphasises the need for investing in research, innovation, and skills with
the establishment of a large-scale skills partnership on critical raw materials and a Raw
Materials Academy. Finally, it also has several measures to protect the environment and
improve the circularity and sustainability of critical raw materials, in the EU and abroad.
Member States will need to adopt and implement national measures to improve the collection
of critical raw materials rich waste and ensure its recycling into secondary critical raw
materials. Special provisions on permanent magnets ensure that products that contain them
meet circularity requirements and provide information on the recyclability and recycled
content.
The Regulation was accompanied by a Communication which actions by the Commission to
improve international engagement to diversify the EU import of critical raw materials and to
further develop strategic partnerships. It also lists a number of actions by the Commission to
(22
) COM(2020) 474 final
(23
) JRC (2023). Supply chains and materials demand forecast in strategic technologies and sectors in the EU. A
foresight study.
(24
) COM(2023) 165 final
(25
) COM(2020) 474 final
16
improve the circularity of critical raw material, including a number of revisions of waste
legislations.
The Critical Raw Materials Act helps the EU to move from a linear to a circular economic
model of production and consumption. At its core, the circular economy seeks to reduce
waste to a minimum, converting into valuable resources. Instead of take-make-dispose, it
involves prolonging lifetime of products, reusing, repairing, refurbishing as well as sharing
and leasing. Ecodesing is key to exploit the benefits of the circular economy at maximum. If
this is no longer possible and a product reaches its end of life, recycling allows maintaining its
materials within the economy. The circular economy will thereby create business
opportunities and jobs while requiring fewer virgin materials and less energy. This can reduce
greenhouse gas emissions, mitigate risks associated with the supply of materials, and protect
the environment.
2.2 Energy measures supporting industry
Energy efficiency contributed significantly to decarbonisation of industry in the last years,
encouraged both by the Energy Efficiency Directive (26
) and other pieces of EU legislation
and by technological progresses in industrial processes. The remaining potential for energy
efficiency is still large (27
), and the amended Energy Efficiency Directive (28
), formally agreed
on 24 July 2023, significantly raises the EU’s ambition and places a strong emphasis on
energy efficiency: the EU countries will be required to achieve an average annual energy
savings rate of 1.49% from 2024 to 2030, up from the current requirement of 0.8%, driving
energy savings in different sectors, including industry.
In 2021, electrification only accounted for 33% of final energy use in industry, while direct
combustion of fossil fuels covers the remaining use (29
). Fossils fuels are burned to provide
industrial heat to many and varied applications ranging from low temperature heat in food
preparation to high temperature heat in blast furnaces. Electrifying low and mid-temperature
industrial heat with decarbonised electricity can lower industrial emissions today with
currently available technologies. Low temperature heat may be provided by heat pumps,
while heat for specific applications can rely on innovative, low-carbon technologies, such as
electric arc furnaces, infrared heating, and induction heating. A 3-stage analysis of the
technological potential for industry electrification in 11 industrial sectors in the EU
(accounting for 92% of Europe’s industry CO2 emissions) shows that 78% of the energy
demand is electrifiable with technologies that are already established, while 99%
electrification can be achieved with the addition of technologies currently under
development. (30
), (31
).
(26
) Directive (EU) 2023/1791
(27
) U.S. DOE Advanced Manufacturing Office. Improving steam system performance: a sourcebook for
industry, 2nd ed. Washington, D.C., 2012
(28
) COM/2022/142 final
(29
) Eurostat Energy Balances 2023
(30
) Madeddu et al. (2022). The CO2 reduction potential for the European industry via direct electrification of
heat supply (power-to-heat). Environ. Res. Lett. 15 124004. DOI 10.1088/1748-9326/abbd02
17
Fuels switching to renewable hydrogen and other decarbonised fuels (both e-fuels or biofuels)
are also an option to decarbonise industrial applications where electrification and energy
efficiency methods cannot be applied (32
). Fuel switching from fossil fuels to renewable
hydrogen or e-fuels can provide high-temperature heat with substantially lower emissions.
The actual impact on emissions should also take into account considerations external to the
industrial processes: the use of biomass should be sustainable and balanced with respect to the
carbon sink needs and biodiversity constraints; the actual carbon intensity of e-fuels depends
on the origin of the carbon (33
).
The provisional agreement on the proposal for a revision of the Renewable Energy Directive
(RED) proposed as part of the Fit-For-55 package as well as the revision proposed as part of
the REPowerEU package, reached in the seventh trilogue on March 2023, includes the
following relevant provisions supporting electrification and fuel switching in the EU industry:
• An EU indicative target of an increase of at least 1.6 percentage points in the share
of renewable sources in the amount of energy sources used for final energy and non-
energy purposes in the industry sector. as an annual average calculated for the
periods 2021 to 2025 and 2026 to 2030. (34
)
• A binding national target of at least 42% on the contribution of renewable fuels of
non-biological origin used for final energy and non-energy purposes in the hydrogen
used for final energy and non-energy purposes in industry by 2030, and of at least
60% by 2035. (35
)
• An EU regulatory framework determining when renewable fuels of non-biological
origin can count towards the abovementioned targets.
(31
) Beyond Zero Emissions (2022). Zero Carbon Industry Plan. Electrifying Industry.
(32
) BNEF (2021). Hot Spots for Renewable Heat. Decarbonizing Low- to Medium-Temperature Industrial Heat
Across the G-20.
(33
) Commission Delegated Regulation (EU) 2023/1184
(34
) Member States may count waste heat and cold towards the average annual increases referred to in the first
subparagraph, up to a limit of 0.4 percentage points, provided the waste heat and cold is supplied from
efficient district heating and cooling, excluding networks which supply heat to one building only or where
all thermal energy is solely consumed on-site and where the thermal energy is not sold. If they decide to do
so, the average annual increase shall increase by half of the waste heat and cold percentage points used.
(35
) For the calculation of that percentage, the following rules shall apply: 10794/23 LZ/st 101 ANNEX
TREE.2.B EN (a) For the calculation of the denominator, the energy content of hydrogen for final energy
and non-energy purposes shall be taken into account, excluding: (i) hydrogen used as intermediate products
for the production of conventional transport fuels and biofuels; (ii) hydrogen that is produced by
decarbonizing industrial residual gases and is used to replace the specific gases from which it is produced.
(iii) hydrogen produced as a by-product or derived from by-products in industrial installations; (b) For the
calculation of the numerator, the energy content of the renewable fuels of non-biological origin consumed in
the industry sector for final energy and non-energy purposes shall be taken into account, excluding
renewable fuels of non-biological origin used as intermediate products for the production of conventional
transport fuels and biofuels. (c) For the calculation of the numerator and the denominator, the values
regarding the energy content of fuels set out in Annex III shall be used.
18
Emissions from ozone depleting substances (ODS) result in depletion of the ozone layer and
have thus adverse impacts on our health, the biosphere, as well as having large economic
implications. These gases have internationally been regulated under the Montreal Protocol on
substances that deplete the ozone layer. This has been successful in rapidly reducing on a
global scale the production, use and associated emissions of ODS. These gases are also often
strong greenhouse gases. EU Regulation (EC) 1005/2009 (ODS Regulation) (36
) regulates the
use of ODS in the EU and has phased out production and consumption of ODS in the EU. A
recent revision of the ODS Regulation has further increased its ambition by targeting ODS
banks in the EU, by requiring ODS to be recovered from old insulation foams when buildings
are renovated or demolished. This aims to prevent the equivalent of 180 million tonnes of
CO2 or 32,000 tonnes of ozone depleting potential (ODP) emissions by 2050.
Fluorinated greenhouse gases (F-gases) typically replaced ODS when these were
prohibited. There has been globally a rapid increase of F-gas use and emissions. The F-gases
include hydrofluorocarbons (HFCs), perfluorocarbons (PFCs) and sulphur hexafluoride (SF6).
These gases, while not being ODS, are covered by the Paris Agreement because they are
highly potent greenhouse gases. They have numerous applications in everyday life, for
example in refrigeration, air conditioning, insulation, fire protection and as aerosol
propellants. At EU level, F-gases currently account for 2.5 % of total GHG emissions.
In the EU, the emissions of these gases have only started to reduce since the introduction of
the F-gas Regulation (37
). Since then, also internationally additional action was taken, with the
inclusion of notably HFCs (the largest group of F-gases) into the Montreal Protocol as a
controlled substance in 2019 with the aim of stopping global growth and achieving significant
emission reductions by 2050.
More recently the EU’s F-gas Regulation was updated and significantly strengthened in a
provisional agreement with the co-legislators (38
). It will reduce between 2015 and 2050 the
amount of HFC coming onto the EU market, expressed in CO2-eq., by 95% by 2030 and by
going to zero by 2050. This will bring an important contribution to the Fit for 55 goals and
making Europe climate neutral by 2050.
2.3 Circular economy and sustainable products
Several trends are deeply transforming industry independently of the decarbonisation process.
The fourth industrial revolution, with automation and innovative solutions like robotics and
3D printing are changing the way the end products are fabricated (39
), progressively shifting
from mass production to mass customisation (40
). Technological improvements are improving
(36
) Regulation (EC) No 1005/2009
(37
) Regulation (EU) No 517/2014
(38
) https://ec.europa.eu/commission/presscorner/detail/en/ip_23_4781
(39
) Huang RA. Multi-scale life cycle framework for the net impact assessment of additive manufacturing in the
United States. Northwestern University, 2016.
(40
) Pine, B. Joseph (1993). Mass Customization – The New Frontier in Business Competition. Harvard
Business School Press. p. 13. ISBN 978-0-87584-372-8.
19
the material and resource efficiency of certain industrial processes: minimising material scrap
at each step can reduce emissions associated with the process.
Following a circular economy approach, many industrial products can also be designed to
improve their material efficiency, and in certain cases, to employ less-carbon intensive
materials (material substitution). Currently, manufacturing and construction firms frequently
choose to use more material to save labour, reduce legal or financial risks, simplify supply
chains, or simply to conform with customary practices. This is particularly evident for cement
and steel, where concrete mass in buildings could be reduced by up to 40% by using high
strength concrete only where needed (41
) and metal in common products like cars and
structural beams, could be reduced by 30% (42
).
Certain end products in the building sector can maintain the same structural properties while
manufactured with less-carbon intensive material: concrete and steel can be substituted by
timber-based products (43
), while cement can be partially replaced by supplementary
cementitious materials up to a 40% content (44
).
Demand-side intervention, materialising through the principle of sufficiency, are also
important levers of the decarbonisation of industry (45
). Sufficiency, defined as collective and
individuals’ practices to minimise demand while delivering human wellbeing for all within
planetary boundaries (46
), (47
), (48
), influences directly on the request for end products and
influence industrial activity (49
). The economy shifts from mass production to mass
customized services and sharing practices (50
), where flexible, shared and integrate products
(41
) Fischedick M, Roy J, Abdel-Aziz A, Acquaye A, Allwood J, Ceron J-P, et al. Industry. Climate change
2014: mitigation of climate change (fifth assessment report), Cambridge, U.K.: IPCC; 2014. p. 739–810.
(42
) Allwood J.M., Cullen J.M., Sustainable materials without the hot air, Cambridge, England: UIT Cambridge
Ltd., 2015.
(43
) Heeren N., et al. ‘Environmental impact of buildings—what matters?,’ Environ. Sci. Technol., 49:9832,
2015.
(44
) Scrivener K.L., et al. Eco-efficient cements: potential economically viable solutions for a low-CO2 cement-
based materials industry. Paris, France: UN Environment Program, 2017.
(45
) IEA, Net Zero by 2050. A roadmap for the Global Energy Sector, 2023.
(46
) The concept of planetary boundaries defines a safe operating space for societies, by proposing boundaries
for anthropogenic perturbation of nine critical Earth-system processes: climate change, ocean acidification,
stratospheric ozone, global phosphorus and nitrogen cycles, atmospheric aerosol loading, freshwater use,
land use change, biodiversity loss, and chemical pollution. Crossing such boundaries can lead to catastrophic
impacts for societies.
(47
) Raworth. Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist, 2017.
(48
) Rockström J. et al., ‘Planetary boundaries: Exploring the safe operating space for humanity.’ Ecol. Soc. 14,
32, 2009.
(49
) It is assumed that the decrease in end-user demand of certain products will impact proportionally net trade,
resulting in identical changes in domestic production and industrial activity.
(50
) David, M. "Sharing: post-scarcity beyond capitalism?". Cambridge Journal of Regions, Economy, and
Society. 10 (2): 311–325, 2017. doi:10.1093/cjres/rsx003.
20
are produced locally with low unit cost and marketed as personalised custom services (51
).
Reusing, repairing, renewing, and recycling existing products extends product’s lifetime on
the market. This results in more service provided for the same energy input and avoided
emissions from product replacement, leading to lower industrial emissions and
dematerialisation of the economy. Studies shows that smart strategies and reduced material
consumption could shrink global GHG emissions by 39% and cut virgin resource use by
28%. (52
)
The Commission has highlighted the relevance of a circular economy in its Long-Term
Strategic Vision on GHG Emissions Reduction as well as in the 2030 Climate Target Plan. To
speed up the transition towards a circular economy, the Commission presented the new
Circular Economy Action Plan in March 2020. Since then, several packages of measures have
followed. The proposals target the design of products, empower consumers, encourage a
sustainable consumption, and focus on resource-intensive sectors, such as electronics and
ICT, batteries and vehicles, packaging, plastics, textiles, construction and buildings, food, and
more.
In March 2022, the Commission proposed the new Ecodesign for Sustainable Products
Regulation (ESPR) (53
), which addresses product design and sets new requirements to make
products more durable, reliable, reusable, upgradable, reparable, easier to maintain, refurbish
and recycle, and energy and resource efficient. The proposal extends the existing Ecodesign
framework (54
) and is the cornerstone of the Commission’s approach to more environmentally
sustainable and circular products.
Future policies will build on these and other measures to help the EU achieving its 2050
climate neutrality target.
2.4 Industrial carbon management strategy
Complete decarbonisation of the industrial sector will also imply reductions in both energy
and non-energy GHG emissions, where CO2, and more general, carbon is part of the material
processing or is used as feedstock for the final product. Industrial emission can be
significantly reduced by adaptations in industrial processes and material compositions.
Combining these emission reducing initiatives with circularity and carbon capture, including
Carbon Capture and Utilisation (where CO2 is used in materials), industries can mitigate most
of its emissions.
Renewable hydrogen and other decarbonised fuels will become the chemical feedstock to
replace conventional, high-emitting reactions in several industrial processes. For instance, in
the steel sector, hydrogen can directly reduce the iron that is later transformed into steel, and
large number of chemical processes can use hydrogen to substitute fossil input. In the cement
sector, CO2 is mainly released during the calcination process for clinker manufacturing for
(51
) Coletti, P., Mass Customization. An Exploration of European Characteristics, 2011.
(52
) Circle Economy, The Circularity Gap Report, 2021.
(53
) COM/2022/142 final
(54
) C/2022/2026
21
clinker manufacturing, which can be mitigated via low-carbon energy input, like hydrogen,
and material substitution in cement and further innovation in chemically binding CO2 to
materials.
Biomass may also be used many industrial processes and materials, both as source of carbon
but also of a range of other chemicals and molecules. However, limits exist on the quantity of
biomass that may be sustainably produced, given competition with food, agriculture and
biodiversity needs (55
).
CO2 coming from industrial emissions can also be captured to supply carbon atoms where
industry needs them (56
), coupling different sectors. The CO2 captured can be combined with
hydrogen to generate e-fuels but can also be stored in long-life products, such as plastics or
minerals. For instance, renewable methanol (derived from H2 and carbon neutral CO2) can
also be an excellent precursor for many end products used in the chemical sector. The annual
global demand for chemicals and derived materials is estimated to rise to 1,000 million tonnes
of carbon (Mt C) by 2050 (57
). When such products are recycled at the end of life, the same
carbon can be re-captured and re-used, leading to a more circular use of the carbon and pave
the way for negative industrial emissions.
Carbon capture technologies that can be used to produce e-fuels, or store carbon in products
and materials are at prototype or demonstration stage today. With the proposed EU objective
to reach an annual 50Mt of CO2 injection capacity in strategic storage sites by 2030 based on
funding obligations to EU oil and gas producers, the Commission has put a first step towards
a comprehensive EU strategy to create a Net-zero industrial carbon management market by
2030. This market is projected to become capable to capture, transport, store or use several
hundred million tonnes of CO2 from fossil sources that cannot be avoided, from biogenic and
from atmospheric origin by 2050 that are necessary to reach climate neutrality. The EU
growing trend is in line with global projections, with the IEA showing around 6 GtCO2 of
carbon captured worldwide in 2050 (58
).
2.5 Aligning investments with climate neutrality
The EU’s sustainable finance policies complement and enable sectoral policies outlined above
by supporting companies and the financial sector in the alignment of private investments with
the objectives of the European Green Deal. The EU has made considerable progress in
implementing its sustainable finance agenda over the last five years. Milestones include the
adoption of the Taxonomy Regulation (59
) and its various delegated acts covering six
environmental objectives, including climate change mitigation and adaptation; the Sustainable
(55
) IPCC, Special report: global warming of 1.5 °C, 2019.
(56
) IEA. “World Energy Outlook”. 2022.
(57
) Kahler et al. Turning off the Tap for Fossil Carbon: Future Prospects for a Global Chemical and Derived
Material Sector Based on Renewable Carbon, 2021.
(58
) IEA (2023), Net Zero Roadmap: A Global Pathway to Keep the 1.5 °C Goal in Reach, IEA, Paris
https://www.iea.org/reports/net-zero-roadmap-a-global-pathway-to-keep-the-15-0c-goal-in-reach, License:
CC BY 4.0
(59
) Regulation (EU) 2020/852 amending Regulation (EU) 2019/2088.
22
Finance Disclosure Regulation (SFDR) (60
); EU climate benchmarks in the Benchmark
Regulation (61
); the European Green Bond Standard (62
); and the Corporate Sustainability
Reporting Directive (CSRD) (63
). The mandatory European Sustainability Reporting
Standards (64
) under the CSRD will enable companies to communicate sustainability
information in a standardised way to a variety of lenders, investors, and other stakeholders.
This includes the disclosure of transition plans for climate change mitigation, comprising
implementing actions and related plans, to ensure that the business model and strategy are
compatible with the transition to a sustainable economy and with the limiting of global
warming to 1,5 °C in line with the Paris Agreement and the objective of achieving climate
neutrality by 2050 as established in the Climate Law (Regulation (EU) 2021/1119), and,
where relevant, the exposure of the undertaking to coal-, oil- and gas-related activities. A
2023 Commission Recommendation (65
) illustrates how the sustainable finance framework
encompasses transition finance and explains how companies, investors and financial
intermediaries can voluntarily use the current sustainable finance framework to finance their
transition to a climate neutral and sustainable economy, while enhancing their
competitiveness.
In particular, green bond markets have soared in recent years. Cumulative issuances of
bonds aligned with the International Capital Market Association’s (ICMA) Green Bond
Principles, (66
) for instance, will very likely pass the EUR 1 trillion mark in 2023 (see Figure
3).
(60
) Regulation (EU) 2019/2088
(61
) Regulation (EU) 2019/2089
(62
) COM/2021/391 final
(63
) Directive (EU) 2022/2464
(64
) C/2023/5303 final
(65
) Commission Recommendation on facilitating finance for the transition to a sustainable economy (C(2023)
3844).
(66
) See https://www.icmagroup.org/sustainable-finance/the-principles-guidelines-and-handbooks/green-bond-
principles-gbp/.
23
Figure 3: Issuance of green bonds in the EU
Note: Aligned with the ICMA’s green principles, data as of 30 June 2023.
Source: Dealogic DCM and JRC calculations.
This increase in absolute green bond issuances is reflected in green bonds’ share of the
corresponding bond market. For EU and non-EU issuers, the share in the EU27 remained
lower than 1% until 2013, but has significantly increased since then, and even more markedly
from 2016, on the back of strong growth of the green segment. In 2022, green bonds
accounted for 16% of newly issued bonds in the EU27, and only 2% of overall issuance in
non-EU markets, confirming Europe’s leading role in the sustainable debt capital market (see
Figure 4).
24
Figure 4: Green bond share in total new issuance for EU and non-EU
Note: Data as of 30 June 2023.
Source: Dealogic DCM and JRC calculations.
Sustainability-linked bonds emerged in 2019 as a new financial instrument, complementing
green bonds in green debt markets. These instruments have garnered a lot of interest from
both issuers and investors given the ease of setting them up and their ability to incentivise the
transition with contractual sustainability targets, which differentiates them from green bonds.
However, their uptake is still limited compared to green bonds, having peaked in 2021 at EUR
51.8 billion, given the more recent development of this new type of assets.
It should be noted however that the “green-ness” of green bonds and sustainability-linked
bonds remains cause for concern due to the risk of greenwashing in spite of the emergence of
standards and principles that require third-party certification and adequate reporting. Political
agreement was reached in early 2023 on the voluntary EU Green Bond Standard, which will
rely on the EU Taxonomy and independent reviewers to provide guarantees with a high
degree of confidence that financing raised compliant with this standard is genuinely ‘green’
(67
).
2.6 Research, development, and innovation
2.6.1 Role of research and innovation
Science is at the core of EU policymaking. Policies developed with an insufficient scientific
basis are less likely to solve the underlying issue and more likely to give rise to unintended
consequences. Research and innovation (R&I) is a key engine through which to foster
Europe’s sustainable productivity growth, competitiveness, inclusiveness and fairness – it is a
key enabler of the green transition.
(67
) See https://finance.ec.europa.eu/sustainable-finance/tools-and-standards/european-green-bond-standard_en.
25
The urgency of the climate crisis requires an unprecedented mobilisation of R&I across all
sectors to achieve transformative change in our society and economy. R&I is fundamental in
many domains, notably in net-zero technologies, circular economy and sustainable
bioeconomy including sustainable agriculture land-use and forestry, zero-emissions mobility,
building techniques, and the adaptation to climate change to improve our preparedness for and
response to climate-related extreme events.
The strategic orientations for the EU climate research and innovation investments are outlined
in the Horizon Europe Strategic Plan 2025-2027 Analysis (68
), as well as the climate R&I
priorities crystalised from the process of developing the Horizon Europe Strategic Plan 2025-
2027.
2.6.2 Research, development, and innovation for the Green Transition
R&I is critical to achieving the clean energy transition and meeting the objective of climate
neutrality by 2050. This section first reviews the identified needs in terms of R&I to achieve
the green transition of Europe.
The European Commission regularly collects and assesses evidence on the development and
uptake of low-carbon industrial technologies. This includes industry’s focus on R&D
investment, Member States’ engagement in relevant R&I, and local action to support
industrial transformation (69
).
2.6.2.1 Climate science
Advancements in climate science whilst creating a solid knowledge base remain essential to
catalyse the transition towards a climate-neutral and climate-resilient society. The challenges
outlined in the 6th
Assessment Report of the Intergovernmental Panel on Climate Change
(IPCC) will need to be addressed with research that furthers our understanding of the
changing climate and its implications. This will contribute to closing knowledge gaps,
developing crucial tools to support decisionmakers in the design and implementation of
effective mitigation and adaptation solutions at various time and spatial scales, whilst taking
into account complementarities and trade-offs with other policy objectives.
2.6.2.2 Space data
Space data and services play a crucial role in enabling the achievement of climate neutrality
targets. Integration of space technology with climate change mitigation efforts is
indispensable for reducing greenhouse gas emissions and combating climate change. EU
(68
) See https://research-and-innovation.ec.europa.eu/news/all-research-and-innovation-news/horizon-europe-
strategic-plan-2025-2027-analysis-now-public-2023-05-25_en.
(69
) Relevant monitoring tools include the EU Industrial R&D Investment Scoreboard, the Strategic Energy
Technology Information System (SETIS), the Science, research and innovation performance of the EU
(SRIP) reports, the Horizon Europe Results Platform, the Innovation Radar, the Global Industrial Research
& Innovation Analyses (GLORIA) project, etc. They continuously improve their monitoring and assessment
work including on breakthrough industrial technologies and innovation ecosystems, in collaboration with the
European Innovation Council (EIC).
26
Space data and services are essential assets to supporting the implementation of the Green
Deal.
Copernicus (Earth observation), Galileo and European Geostationary Navigation Overlay
Service (EGNOS) (satellite navigation) supply the information companies need to monitor
environmental indicators, to reduce their environmental impact, to become more sustainable
and to drive their green transformation.
EU space data and services can contribute to the achievement of climate target and can be
used for: Monitoring and Measurement of various parameters, including greenhouse gas
concentrations, land use change, deforestation and ocean temperatures; Understanding
Climate Patterns including analysing atmospheric circulation, ocean currents, and weather
systems; Early Warning Systems for extreme weather events and natural disasters related to
climate change, such as hurricanes, droughts, floods, landslides, wildfires, or storm surges;
Carbon Accounting and Reporting by measuring and quantifying emissions from different
sources, including deforestation, industrial activities, and transportation; Climate Modelling;
International Cooperation; Climate Education and Awareness; Monitoring Deforestation and
Land Use Change to enable targeted action to protect forests; Agriculture and Livestock
Management to improve agricultural practices and livestock management, leading to reduced
emissions from these sectors, Supporting Renewable Energy by helping identify suitable
locations for renewable energy projects; Improving Transportation Efficiency by aiding the
monitoring and optimizing transportation routes; Methane Detection; Forest Fire Detection
and Management; and Environmental Policy and Decision-Making by providing valuable
information to develop and implement effective environmental policies.
2.6.2.3 Technological approaches
The green transition relies on a range of innovations and technological solutions that together
drive the path towards climate neutrality in a complementary manner. This section does not
outline an exhaustive list of technologies that will enable the green transition. Rather it
provides a selection of key technological solutions that are often at different stages of
maturity and technological readiness level and that can decarbonise different sectors and parts
of the economy.
Clean energy generation
Research and innovation will be crucial to support the transition of the energy system with the
aim to reduce the overall energy demand, whilst ensuring that the supply of energy is
independent, diversified, climate-neutral, and resilient to the impacts of climate change.
The reinforcement of the competitiveness of the European value chain relies on the
development of clean, sustainable, and “circular by design” energy technologies. Diverse R&I
activities on key clean energy technologies such as solar energy, wind energy, sustainable
biomethane and advanced biofuels, hydropower, geothermal energy, heat pumps, ocean
energy and synthetic renewable fuels are needed to achieve and eventually maintain the
autonomy and competitiveness of the EU energy supply. At the same time, it needs to be
ensured that ecosystems are not harmed in the process, and that the zero-pollution ambition of
the European Green Deal is supported, whilst bringing social benefits for all.
Further, research and innovation activities are needed to advance the modernisation of the
energy networks, grids, markets, and services, as well as to support energy system integration
27
and to accelerate electrification. Integrating demand response, lowering the cost of energy
storage solutions at various timescales, while minimising the use of critical raw materials and
ensuring their reuse and recycling, are key elements of the energy system.
Moreover, the output from research and innovation can accelerate the deployment of Carbon
Capture, Utilisation and Storage (CCUS) in electricity generation, industry applications, and
negative emissions technologies.
Electrification
Reducing emissions from industrial sectors will require coordinated action throughout value
chains to boost and accelerate innovation and deployment of all mitigation options, including
integration of renewable electricity. R & I still remains crucial for even ‘mature’ low-
emission energy technologies such as heat pumps, as well as new technologies to electrify
high temperature processes.
Buildings are responsible for around 40% of EU energy demand and are pivotal to the success
of the energy transition and achievement of a climate neutral economy. Research and
innovation is needed to achieve the full electrification of building systems with the integration
of grid-compatible and flexible solutions that involve demand side management, energy
storage, and electric vehicle charging.
Energy storage
R&I activities will allow for the development of lower cost and more sustainably produced
battery technologies and other long-term storage technologies, not only in transport
applications (road, maritime and aviation), but also in stationary storage applications, where
new solutions, such as flow batteries, can play a key role in the development of resilient
energy grids. Supporting local sustainable battery production capacity (including equipment
and skills development) will be an important driver, but R&I will also need to focus on the
replacement, reuse, recycling and end-of-life management of batteries and raw materials
recovery.
Renewable hydrogen
Decarbonising the production of hydrogen used as an industrial feedstock, and for new uses as
an energy carrier requires R&I for the scaling up of hydrogen production and the production
of synfuels, and to develop large-scale hydrogen storage systems.
Whilst the technologies used to integrate green hydrogen into a carbon-free energy system are
already available, innovation is needed for the scale-up, demonstration, and deployment of
hydrogen-based systems in order to take advantage of European technological leadership.
Biotechnology and biomanufacturing
The advances in life sciences and information technology are leading to deeper understanding
of functioning of living organisms and providing tools to influence biological processes.
Increasingly biotechnology and biomanufacturing are becoming important EU assets to
advance strategic autonomy and competitiveness and to enable timely solutions to urgent
crises, including climate change or pandemics. However, despite the first-class research in
biotechnology, the EU could enhance the efforts for deployment and commercialisation of
28
biotechnology solutions. An initiative is being prepared on EU Biotechnology and
Biomanufacturing.
2.6.2.4 Sustainable transportation
Transport is the only sector where greenhouse gas emissions are still above their 1990 levels
(18% higher in 2021 relative to 1990). The transport sector (including international aviation
and maritime) is responsible for 27% of GHG emissions in the EU (of which over 76.2%
came from road transportation in 2021). Energy use of oil and petroleum products accounted
for 90.7% of the final energy consumption (70
) in transport. Intensified R&I activities are
needed, across all transport modes and in line with societal needs and preferences, for the EU
to reach its policy goals towards net-zero greenhouse gas emissions by 2050, and to
significantly reduce air pollutants towards the zero-pollution ambition.
As regards road transport, research and innovation actions must focus on contributing to the
shift to zero-emission mobility by targeting cost- and energy-efficient zero-tailpipe-emission
vehicles and their integration of these vehicles in the mobility system.
Road transport has the potential to be largely electrified as it provides high potential for
absorbing renewable electricity at times when it is abundant and feed it back into a grid when
there is scarcity. With the projected increase of electric vehicles already by 2030 it is
necessary to ensure that they can contribute to optimising electricity grid in a cost-effective
way by offering flexibility services such as energy storage capacity and demand response
thanks to smart charging and bidirectional charging which are expected to become
mainstream in the coming years. Moreover, private recharging infrastructure in buildings or
depots for specific purpose vehicle fleets where electric vehicles typically park for extended
periods of time are highly relevant to energy system integration and could contribute the most
to optimising the electricity grid through the flexibility services thus reducing the need for
additional investments to expand the grid due to increased electrification. In the rail sector,
regenerative braking and energy buffers offer a large untapped potential for enhanced energy
efficiency.
The European aviation sector aims to reach climate neutrality by 2050. This objective relies
on the development of sustainable aviation fuels, and hydrogen-powered zero-emission
aircraft and infrastructure. R&I actions on aviation need to develop integrated aircraft
technologies for deep decarbonisation transformation and to reduce all negative non-CO2
impacts and emissions. Likewise, research and innovation is required to further advance net
zero-emission solutions on new fuels, engines and ship designs in the shipping sector.
2.6.2.5 Circular industry
A functioning circular economy is one of the key objectives of the European Green Deal.
Research and innovation is critical to achieving a circular economy by fostering new safe
(70
) Final energy consumption excludes international aviation and maritime. The energy consumption in air
transport and maritime are dominated by oil products.
29
ways of designing, producing, repurposing, reusing, repairing, and recycling. R & I is needed
to reinforce our resilience and strategic dependency by decoupling economic growth from
resource use.
There is much scope for improvement for design of circularity in terms of circularity
technologies applicable to different value chains with special attention to disassembly,
remanufacturing/upgrading, recycling, and ‘Zero-X’ – zero defects, zero breakdowns, zero
waste.
It will be important to develop and test different circularity technologies in the context of the
entire value chain and life cycle, with a view to facilitating deployment, further developing
value chains for circularity.
Research will be needed to enable energy-intensive industries to embrace the circular
economy as a key pillar in the design of their value chains. This will be fundamental to
ensuring the efficient use of resources (material, energy, and water) by these resource-
intensive industries. Particularly important in this context is the development of innovative
upcycling of secondary raw material and of resource-efficient industrial processes.
Achieving circularity of both raw materials and advanced materials is a key challenge for the
future. The establishment of new materials flows, as well as the advancement of the recovery,
re- and up-cycling of materials from waste relies on R&I.
2.6.2.6 Sustainable circular bioeconomy
In “A Clean Planet for All: Long-term Strategy, 2018” Bioeconomy is one of the seven
strategic building blocks towards a net zero GHG economy. Bioeconomy sectors mentioned
in this IA (i.a. food and non-food bio-based value chains from agriculture, LULUCF,
bioenergy) were included under Reaping the full benefits of Bioeconomy and creating
essential carbon sinks for: sequester and store C in agricultural land, forestry and wetlands;
substitute C-intensive materials; create new business opportunities; developing climate-
friendly farming and forestry systems; unlocking the potential of aquatic resources; and
substitute fossil fuels in power generation.
Innovation in the sustainable bioeconomy lays the foundations for the transition away from a
fossil-based economy. Sustainable bio-based innovation is an important segment of the
overall bioeconomy and takes into account sustainability in all its dimensions. Research and
innovation need to contribute to scaling up the potential of bioeconomy to substitute GHG
intensive products and materials, as well as to improving the circularity aspects of bio-based
systems, with a particular focus on biowaste, waste management and valorisation, considering
the whole life cycle of bio-based products and technologies. Moreover, the cross-cutting
aspect of zero pollution in the sector has to be further implemented.
The EU agriculture sector is the only major agriculture system in the world that has reduced
its GHG emissions (by 20 % since 1994). The development of sustainable agriculture and
food systems is one of the main priority areas of action for the EU. Key research areas for
agriculture include mitigation and adaption to climate change, enabling more sustainable
farming practices, and fostering sustainable livestock systems.
Further R & I is needed in the forestry sectors in order to meet the expectations of the
European Green Deal. Specifically, there is a need to foster multifunctional forests for future
30
generations through sustainable management approaches, technologies, innovative wood and
non-wood products, prevention and management of forest disturbances, urban forestry,
management of genetic resources, deployment of inclusive and fair value chains, and
improved governance. Overall, a better understanding of consumption of these resources is
needed to help shifting to more sustainable consumption patterns (71
).
2.6.2.7 Socio-economic & behavioural R&I
Research and innovation must go hand in hand with social innovation, inclusiveness, and
promotion of solutions that allow the integration of aspects going beyond functionality, whilst
achieving efficiency, sufficiency, and sustainability. The important role of social sciences and
humanities must be realised to advance behavioural change and social acceptance, trust, and
uptake of solutions.
The necessary innovations to address key societal challenges, notably climate change, call for
interdisciplinary approaches to research and innovation that combine knowledge from the
social sciences and the humanities, including the arts and science, technology, engineering,
and mathematics, while at the same time maintaining the human-centric focus.
Research is needed to evaluate the societal impact of climate change and the measures
required to achieve climate neutrality and to prepare for adverse impacts and risks linked to
climate change.
2.6.3 Advancing the European RDI system
2.6.3.1 Role of RDI
In 2019, the European Green Deal Communication emphasised the key enabling role of R&I
in steering the EU towards climate neutrality by 2050 and pointed out the need for the R & I
agenda to take a systemic approach to achieving the ambitious targets. Innovation is needed to
develop and adopt cutting-edge clean technologies, transformative climate policies and novel
practices tailored for a climate-neutral society. Achieving the goals of the Paris Agreement
requires rapid and profound changes across all countries, sectors, and aspects of how the
society operates and calls for mobilising R&I at the scale and speed that are commensure with
this challenge. Innovative net-zero solutions must not only be developed and deployed faster,
but also have to be climate-proof. The problems at stake today are complex and
interconnected, thus requiring solutions from multiple perspectives, disciplines, and sectors,
maximising the co-benefits, and attenuating the trade-offs. Beyond delivering technological
innovation, R & I policies are increasingly expected to provide novel instruments and to act as
a lever for catalysing transformational change towards sustainable development, empowering
individuals, and communities to meet societal needs and build sustainable, inclusive and
resilient societies. All this will require sustained and more effective investments in research
(71
) European Commission, Directorate-General for Research and Innovation, European bioeconomy policy –
Stocktaking and future developments – Report from the Commission to the European Parliament, the
Council, the European Economic and Social Committee and the Committee of the Regions, Publications
Office of the European Union, 2022, https://data.europa.eu/doi/10.2777/997651.
31
and innovation, from public and private sources alike, if the EU is to succeed in decarbonising
at sufficient speed to fall in line with what the science says is necessary.
2.6.3.2 Where the EU is today
The EU has remained stable over time in terms of number of patent applications filed related
to the societal grand challenge (SGC) “Climate and Environment” (Figure 5). The EU is still
the top worldwide patent applicant in the field of “Climate and Environment” (23 %), but its
share has declined (see Figure 6), underscoring the importance of stepping up the investments
to secure Europe’s leadership in technologies needed for the transition.
Figure 5: Number of patent applications filed under the PCT in the EU by SGC
Note: Covers PCT patents at the international phase designating the European Patent Office. Fractional counting
method used; inventor’s country of residence and priority date used.
Source: Own analysis based on Science-Metrix using the European Patent Office’s patent statistics database (72
).
European countries (73
) are also among the leaders of the green transition. From 2016 to 2021,
Europe produced 30 % of all green inventions worldwide. Japan was second, with 21 %,
followed by the United States (19 %) and China (13 %). The European lead is especially
strong for domains such as green transport (41 %), biofuels (37 %) and wind energy (58 %).
The production of solar energy technology or batteries is more evenly distributed among the
largest and most innovative countries (74
).
Europe has maintained a stable position in the green transition since 2004. In addition,
although a slowdown can be observed during the 2007–2008 financial crisis, the rate of output
of innovation has been relatively stable since 2014.
(72
) European Commission, Directorate-General for Research and Innovation (2022). Science, research and
innovation performance of the EU 2022 – Building a sustainable future in uncertain times, Publications
Office of the European Union, Luxembourg, https://data.europa.eu/doi/10.2777/78826.
(73
) Understood as the group comprising the EU-27, the United Kingdom, and the European Free Trade
Association countries.
(74
) See https://www.paballand.com/asg/esir/fow/green-transition.html.
32
Figure 6: Global patent applications for SGC “Climate and Environment”
Note: Filed under the PCT. 2008 (interior ring) and 2018 (exterior ring).
Source: Own analysis based on Science-Metrix using the European Patent Office’s patent statistics database (75
).
The EU has put in place a number of instruments and funding programmes that aim to deliver
research and innovation results, with a particular focus on the green transition:
• The EU Framework Programmes for R&I Horizon 2020 (2014-2020) and
Horizon Europe (2021-2027) (76
), with the latter having a budget of EUR 95.5
billion, of which 35% are allocated to tackling climate change. Horizon Europe
plays an important role in mobilising research and innovation in the most strategic
areas for transitioning to climate neutrality and resilience, notably through its
comprehensive portfolio of EU partnerships (77
) and missions (78
).
(75
) European Commission, Directorate-General for Research and Innovation (2022). Science, research and
innovation performance of the EU 2022 – Building a sustainable future in uncertain times, Publications
Office of the European Union, Luxembourg, https://data.europa.eu/doi/10.2777/78826.
(76
) See https://research-and-innovation.ec.europa.eu/funding/funding-opportunities/funding-programmes-and-
open-calls/horizon-europe_en.
(77
) See https://research-and-innovation.ec.europa.eu/funding/funding-opportunities/funding-programmes-and-
open-calls/horizon-europe/european-partnerships-horizon-europe_en
(78
) See https://research-and-innovation.ec.europa.eu/funding/funding-opportunities/funding-programmes-and-
open-calls/horizon-europe/eu-missions-horizon-europe_en
33
• The European Institute of Innovation and Technology’s (EIT) Knowledge and
Innovation Communities (KICs), that comprises public-private partnerships on
different societal challenges, including on climate (79
) and energy (80
).
• The Innovation Fund (81) under the Emissions Trading System (ETS), which is
the EU fund for climate policy, and aims to bring to the market solutions to
decarbonise European industry and support its transition to climate neutrality.
• The European Regional Development Fund (82) (ERDF) and Cohesion
Fund (83) (CF) support Member States in advancing the transition to climate
neutrality and other EU priorities. The funds will deliver at least EUR 78 billion in
investment in climate action in 2021-2027 (30% of the total ERDF and 37% of the
total Cohesion Fund budget allocation).
• The LIFE Programme (84) is the EU’s funding instrument for the environment
and climate action.
• R&I is a key dimension of the National Energy and Climate Plans (85) (NECPs).
The inclusion of specific and measurable R&I objectives in the NECPs will help
integrating national strategies and priorities at EU level in a 2030-2050
perspective.
• The EU is participating in international fora on innovation related to
decarbonisation, in particular as a member of the Clean Energy Ministerial (86)
and of the Mission Innovation (87).
• Furthermore, the EU supports the work of the IPCC (88) which makes a major
contribution to the advancement of climate science, which underpins evidence-
based climate policies and global climate diplomacy. The support is channelled,
inter alia, through the EU Framework Programmes for R&I (89
).
(79
) See Climate-KIC | The EU’s main climate innovation initiative, https://www.climate-kic.org/.
(80
) See KIC InnoEnergy: a new approach to education, https://eit.europa.eu/news-events/news/kic-innoenergy-
new-approach-education.
(81
) See ‘What is the Innovation Fund?’, https://climate.ec.europa.eu/eu-action/eu-funding-climate-
action/innovation-fund/what-innovation-fund_en.
(82
) See https://commission.europa.eu/funding-tenders/find-funding/eu-funding-programmes/european-regional-
development-fund-erdf_en.
(83
) See https://commission.europa.eu/funding-tenders/find-funding/eu-funding-programmes/cohesion-fund-
cf_en.
(84
) See https://cinea.ec.europa.eu/programmes/life_en.
(85
) See https://energy.ec.europa.eu/topics/energy-strategy/national-energy-and-climate-plans_en.
(86
) See https://www.cleanenergyministerial.org/.
(87
) See Mission Innovation – Catalysing Clean Energy Solutions for All (mission-innovation.net).
(88
) IPCC — Intergovernmental Panel on Climate Change, https://www.ipcc.ch/.
(89
) Factsheet EU research & innovation – Top funder of leading climate science,
https://op.europa.eu/en/web/eu-law-and-publications/publication-detail/-/publication/5417b4fd-c9fa-11ed-
a05c-01aa75ed71a1.
34
Figure 7: Available public funding by stage of the RD & D process
Note: Annualised estimates for the period 2021 – 2027, except from the Innovation fund which is annualized for the
period 2020-2030 and the Breakthrough Energy Europe which spans over the 2018-2023 period, in 2022 EUR
values.
Source: European Scientific Advisory Board on Climate Change (2024) (90
)
2.6.3.3 Future R&I for EU decarbonisation & industrial growth
Even if the EU is positioned as a leader in terms of the green transition, continued investment
into R & I progress and uptake are still critical for implementing the European Green
Deal (91
), and translating the leadership into environmental, economic, and social benefits.
To deliver on the green and digital transitions, systemic change should be fostered across our
entire economy and all sectors, covering both production and consumption side, and with a
focus on energy (as key enabler for electrification and decarbonisation of other sectors),
energy-intensive industry, (large-scale) infrastructure, transport, food, agriculture and land-
use, construction and buildings. Some innovations are market-ready, such as solar power, but
many need to be improved and scaled up, while others still need to be invented to reach
climate neutrality. In order to enable such systemic changes, unprecedented mobilisation of
R&I is needed, with technological innovation complemented by social, governance and
economic innovation, as well as behavioural research on accelerating the transition towards
climate neutrality. Given the potential of demand-side mitigation (92
), research is needed to
(90
) European Scientific Advisory Board on Climate Change (2024): Towards EU climate neutrality: progress,
policy gaps and opportunities
(91
) European Commission, Directorate-General for Research and Innovation (2022), Science, research and
innovation performance of the EU 2022 (SRIP), Publications Office of the European Union,
Luxembourg, https://data.europa.eu/doi/10.2777/38888.
(92
) IPCC AR6 estimates that demand side mitigation could deliver 40–70% of emissions reductions by 2050.
35
better understand how lifestyle choices can contribute to climate objectives. Finally, in the
context of this impact assessment, a defining element of the scenarios proposed is the ability
to deploy novel technologies with important implications for choices on how to accelerate and
scale up R&I to support the more ambitious options.
According to the Analysis for the Horizon Europe Strategic Plan 2025-2027 (93
), the
following priorities for EU R&I were identified for delivering on the European Green Deal,
many of relevance for addressing the climate change challenge:
• protect and restore natural capital;
• decarbonise the economy;
• accelerate the transition to chemicals and materials that are safe and
sustainable (94
);
• achieve a circular economy and the zero pollution ambition;
• modernise our infrastructures, buildings, and transport, and make them more
resilient;
• protect the health and well-being of citizens and communities (including rural
ones);
• design sustainable and resilient agriculture, forestry, fisheries and aquaculture, and
food and water systems; and transform our ways of producing and consuming (95
).
In the context of the transition to climate neutrality, it is also important for Europe to pursue
reciprocal openness and a level playing field through strategic international R & I cooperation
with like-minded partners.
2.7 SMEs
The transition implies challenges and opportunities for SMEs. At the stakeholder event
organised by the Directorate General on Climate Action on June 9th
, one SME mentioned that
the reduction of activity in some sectors (for example in the supply chain for fossil fuel
engines in the automobile sector (96
)) will be compensated by new opportunities (in growing
activities (for example, demand for heat pumps in the residential sector).
(93
) See https://research-and-innovation.ec.europa.eu/news/all-research-and-innovation-news/horizon-europe-
strategic-plan-2025-2027-analysis-now-public-2023-05-25_en.
(94
) European Commission, Directorate-General for Research and Innovation (2022), Strategic research and
innovation plan for safe and sustainable chemicals and materials, Publications Office of the European
Union, Luxembourg, DOI: 10.2777/876851.
(95
) European Commission (2019), The European Green Deal, COM(2019) 640 final, https://eur-
lex.europa.eu/legal-content/EN/TXT/?uri=COM%3A2019%3A640%3AFIN.
(96
) Less than 0.07% of SMEs in the EU are in the manufacturing of motor vehicles, trailers and semi-trailers;
less than 0.06% are in the manufacturing of other transport equipment (Eurostat Structural Business
Statistics). Around 3.4% are in the wholesale and retail trade and repair of motor vehicles and motorcycles.
Other sectors involved in the supply chain of the automobile sector may be not impacted by the transition
(e.g., textile manufacturing), negatively impacted (e.g., the manufacturing of compounds used in fossil fuel
engines) or positively impacted (e.g., the manufacturing of batteries).
36
Specific measures and programmes exist to support SMEs in the transition (see SME test in
Annex 4). In 2014-2020, the European programme for small and medium-sized enterprises
(COSME) contributed to the climate mainstreaming objectives. The detail of measures and
initiatives conducted under the programme are presented in the COSME 2020 Monitoring
Report (97
). To give a few examples, the Equity Facility for Growth (EFG) and the Enterprise
Europe Network (EEN) paid attention to the challenges implied by the decarbonisation. The
EEN helped SMEs to improve their energy and resource efficiency and reduce their
emissions. The COSME Equity Facility for Growth (EFG) invested EUR 6.7 million in a
Venture Capital (VC) fund dedicated to clean technologies. In the time period 2014-2020, the
EFG facilitated more than EUR 62 million of investments in SMEs in the ‘Energy and
Environment’ sector. The COSME programme is an experience to learn from for developing
other comparable programmes in the next decades.
Aware of the impact that climate change may be for SMEs, the European Investment Bank
(EIB) Group also pays attention to develop financing tools that are particularly adequate (98
).
It works with financial intermediaries that offer products targeting small and medium firms
and micro-enterprises. Some of the instruments offered by the EIB Group typically helps
more established small businesses while others focus on enterprises in earlier stages of
growth.
The recent SME Relief Package (99
) is expected to support SMEs in the transition to a low-
carbon economy. Rules to ensure small businesses are paid in due time help them invest and
innovate in sustainability and hire more employees (100
).
In addition, depending on the regions and the sector in which SMEs operate, they may benefit
from measures and programmes aimed at supporting specific regions and sectors throughout
the transition (see Annex 9).
3 AN INCLUSIVE AGENDA
3.1 Just transition and social policy
The European Green Deal sets out the strategy for the Union to become the first climate-
neutral continent and to transform the Union into a sustainable, fairer, and more prosperous
society. It stresses that no person and no place should be left behind. Addressing from the
outset the socio-economic impacts of the energy and climate transition and protecting
households, exposed industries and workers throughout the process is a prerequisite for a fair
and inclusive transition. It is clear by now that the impacts of the green transition on
(97
) Report from the Commission to the European Parliament and the council. COSME 2014-2020. Programme
for the Competitiveness of Enterprises and SMEs. 2020 Monitoring Report.
(98
) Small and medium enterprises. Overview 2022. European Investment Bank Group.
(99
) COM(2023) 535 final
(100
)Di Bella, L., Katsinis, A., Lagüera-González, J., Odenthal, L., Hell, M., Lozar, B. Annual Report on
European SMEs 2022/2023, Publications Office of the European Union, Luxemburg, 2023,
doi:10.2760/028705, JRC134336.
37
businesses and employment will vary by sector, occupation, region, and country (101
).
Restructuring and adjustment in the companies, sectors, and industrial ecosystems most
affected by the transition will require the development of new business models while
upskilling, reskilling or labour reallocations both across sectors and regions will be needed.
The transition will bring numerous benefits (job creation, healthier environment, cheaper and
cleaner energy, better living comfort). Yet, ensuring a fair and inclusive transition will require
to pay due attention to transforming sectors (automotive, agriculture, forestry, waste), the
quality of jobs being created, the impact on various skills segments and the gender gap.
Increased climate ambitions combined with important labour shortages, calls for timely
investments in education and (re)skilling. Additional and targeted measures to address the
distributional impacts of the transition, including social challenges such as energy and
transport poverty aspects, are also required. Wide stakeholder involvement based on close
cooperation with social partners and civil society is essential for ensuring a just and inclusive
transition towards a climate neutral economy, especially in regions and sectors most affected.
3.1.1 How to accompany the transition?
To accompany the transition to a climate neutral economy, the EU has put in place a
comprehensive enabling framework. Council Recommendation 2022/C243/04 adopted in
2022 provides Member States with comprehensive guidance on measures to address the
employment and social aspects of climate policies. The objective of these measures should be
to provide active support to quality employment, ensure access to quality education, training,
and life-long learning, provide fair tax benefit systems and social protection, and ensure
access to essential services. In 2023 and 2024, Member States are required to update their
2030 national energy climate plans (NECPs,) which are the central strategic planning tool
under the Governance Regulation. In the Commission Notice 2022/C495/02, the Commission
stressed the importance of considering fair transition aspects when designing policies and
measures to advance towards climate neutrality.
3.1.2 Energy and transport poverty aspects
Energy poverty is exacerbated by the fact that the EU’s population is projected to continue
ageing and shrinking in the coming decades. This demographic change can have a significant
impact on energy poverty as older people are particularly affected by it (lower incomes, live
in poorly insulated homes and are more susceptible to health problems associated with cold
homes). Climate change affects the poor at a disproportionately higher rate as they frequently
suffer from poor health conditions and work outside more often (102
).
In 2021, the European Commission launched the Energy Poverty Advisory Hub (EPAH), the
leading EU initiative aiming to eradicate energy poverty and accelerate the just energy
transition of European local governments. In April 2022, the Commission Energy Poverty and
Vulnerable Consumers Coordination Group was established. It provides EU countries with a
(101
)SWD(2020) 176 final
(102
)Meyer-Ohlendorf, Nils; Spasova, Deyana; Graichen, Jakob; Gores, Sabine (2023): Designing the EU 2040
climate target. Ecologic Institute, Berlin.
38
space to exchange best practices and increase coordination of policy measures to support
vulnerable and energy-poor households. A new Social Climate Fund (SCF) (103
)will support
vulnerable households, transport users and micro-enterprises affected by the introduction of
emissions trading for fuels used in road transport and buildings. The aim is to help these
groups reduce their reliance on costly fossil fuels by making buildings more efficient,
decarbonising heating and cooling of buildings (including integrating energy from renewable
sources) and increasing access to sustainable transport. In addition, the SCF can also support
vulnerable groups through national measures via targeted and temporary direct income
support.
3.1.3 Employment and skills related aspects
3.1.3.1 Better understanding of jobs and skills required
As the transition will have substantial effects on labour demand and skills in some specific
regions, sectors, and occupations, it is essential to better understand and monitor where
shortages are expected and who will be adversely affected. To better anticipate these changes,
there is a need to develop up-to-date labour market and skills intelligence and foresight. More
granular data (e.g., at regional, occupational, and gender levels), more precise definitions of
green jobs and skills, as well indicators are required. Cooperation between public authorities
at all levels and with social partners, civil society organizations, educational organisations and
enterprises is important for improving the evidence base for a fair and inclusive transition.
Several Commission initiatives have been laying the ground for further work in this area such
as the recent GreenComp reference framework for sustainability competences (104
), the
European Skills, Competences, and Occupations (ESCO) taxonomy on skills for the green
transition (105
) and the CEDEFOP Green Observatory which tries to map skills needed in the
EU job market.
3.1.3.2 Targeted upskilling and reskilling
To mitigate unemployment in declining sectors and address increasing labour shortages in key
sectors for the green transition, it is essential to re- and upskill the workforce in impacted
sectors and to ensure that educational programmes are labour market relevant. Today, 70-80%
of people see the green transition as an opportunity but around 50% of people are not sure
whether they have the rights skills (106
). Several EU Level initiatives seek to address the
growing demand for “green” skills. The European Skills Agenda is the current five-year plan
to help individuals and businesses develop more and better skills and thereby spur the green
and digital transition. Actions within the EU Skills Agenda, such as the Pact for Skills,
demonstrate the facilitating role that the EU can play in connecting Member States, education
and training providers, industry, and social partners to effectively identify skills and learning
(103
)Regulation (EU) 2023/955 of the European Parliament and of the Council of 10 May 2023 establishing a
Social Climate Fund and amending Regulation (EU) 2021/1060.
(104
)See https://joint-research-centre.ec.europa.eu/greencomp-european-sustainability-competence-
framework_en.
(105
)See https://ec.europa.eu/newsroom/empl/items/741088/en.
(106
)Eurobarometer on fairness, inequality and intergenerational mobility.
39
pathways. The recent EU’s Skill Partnership for the automotive ecosystem is a good example
of a tailored approach to bridge the gaps and facilitate road transport electrification (107
).
Skills are also at the centre of the Green Deal Industrial Plan with initiatives such as the skill
academies for clean technology sectors, initiatives aimed at ensuring there is a skilled
workforce supporting the production of net-zero technologies in the EU.
But equipping the workforce with the right set of skills is just one side of the coin. It needs to
be complemented with measures supporting access to quality employment, in particular
through public employment services, tailored job search assistance and other active labour
market policy measures. The European Social Fund Plus, the EU’s main instrument for
investing in people, is becoming an increasingly more important tool in the current context.
Within this framework, Member States have programmed around 6 billion € for the period
2021-2027 including in the area of skills development, green entrepreneurship, job search
assistance, active labour market policies and social inclusion of people impacted by the
transition. In addition, other funds such as the Recovery and Resilience Facility, Invest EU
and the Just Transition Fund can support up- and reskilling. (108
)
Finally, as the climate and energy transition affects women differently than men (109
), specific
attention can be paid to the gender aspects in programmes and plans designed to facilitate and
support the transition, for example in the NECPs (110
).
3.1.4 Strategic cooperation and communication
Effective multilevel governance at the EU, national and regional levels is key for the kind of
long-term systemic change that is needed to reconfigure production and consumption systems
in impacted sectors (111
). From the outset, fair and inclusive transition objectives should be
integrated into policymaking at all levels through an effective whole-of-society approach.
Regional and local authorities need to play an active role in the development, implementation
and monitoring of fair transition policies. Indeed, local authorities are the closest to citizens
and implement 70% of all EU legislation, 90% of climate adaptation policies, and 65% of the
Sustainable Development Goals (112
). Active involvement of social partners, civil society,
educational and training institutions, and those affected at different stages is essential for
raising awareness and providing reliable information to the public, facilitating learning and
(107
)Tamba, M., Krause, J., Weitzel, M., Ioan, R., Duboz, L., Grosso, M., Vandyck, T. Economy-wide impacts
of road transport electrification in the EU, Technological Forecasting & Social Change, 182 (2022) 121803.
(108
)An overview of all funds which can contribute to upskilling and reskilling is available on the following
webpage: https://ec.europa.eu/social/main.jsp?catId=1530&langId=en.
(109
)See EIGE (2023). Gender Equality Index 2023. Towards a green transition in transport and energy,
Publications Office of the European Union
(110
)COM(2023) 796 final
(111
)Eurofound and EEA (2023), The transition to a climate-neutral economy: Exploring the socioeconomic
impacts, Publications Office of the European Union, Luxembourg.
(112
)Resolution of the European Committee of the Regions - The Green Deal in partnership with local and
regional authorities (2020/C 79/01).
40
ensuring support across regions and economic sectors for the systemic changes to come. This
requires investments in capacity development. To give an example of relevant initiative, the
European works councils (EWCs) is a European representation of employees (over 17
million) at company level. They facilitate the information, consultation, and participation of
employees with a focus on transnational issues. At the EU level, several tools exist. For
example, the Council recommendation on social dialogue can help ensure that the new jobs
for the green transition are quality jobs with good working conditions. It can support
(re)skilling, job transitions and EU competitiveness. In the Communication on Enhancing the
European Administrative Space (ComPAct) (113
), the Commission sets out actions to reinforce
the capacity of public administrations across Member States to manage the green transition,
by up- and reskilling civil servants, mainstreaming the green transition into the policymaking
cycle, and greening their own organisation and operations.”
3.1.5 Examples of fair and inclusive transitions
Promoting the exchanges of best practices while considering country specificities can help
ensure successful transition across countries and regions.
Financial incentives for home renovation play a key role to support energy-poor and
vulnerable households to achieve energy savings.
Germany’s transition away from coal for electricity generation entails significant structural
change and economic and social challenges, with over 19,650 direct and 35,734 indirect jobs
impacted in coal mining (114
). In particular, the transition to clean energy is affecting three
coal mining areas: the Lausitzer Revier, the Rheinische Revier, and the Mitteldeutsche Revier.
Measures to address this challenge were designed. For example, the “adjustment allowance”
(“Anpassungsgeld”) provides financial support to workers facing job losses. Under this
scheme, former mining workers above the age of 50 and meeting certain conditions can
receive a bridge aid for a maximum of five years until entitlement to benefits from the miners’
pension insurance. Furthermore, the federal government has pledged to support the affected
states (“Länder”) with up to EUR 14 billion in financial transfers for regional investments
until 2038 at the latest. The federal government will fund additional measures with up to EUR
26 billion, such as rail and road infrastructure, research institutions (115
). The Just Transition
Fund was also utilized to help the most affected regions.
One example of a successful transition in the energy sector is the offshore wind evolution of
the city of Esbjerg in Denmark. Esbjerg underwent a fundamental transformation from
servicing the oil and gas sectors over the past three decades to becoming one of Europe’s
leading hubs for offshore wind. Reskilling and upskilling pathways were designed to absorb
(113
)COM(2023) 667 final
(114
)SWD(2020)504 final
(115
)SWD(2020)504 final
41
workers from the oil and gas industry to the offshore wind sector, which helped avoid high
unemployment and economic stagnation of the region (116
).
Poland is developing 120 Sectoral Skills Centres (SSCs) which will cover industries related to
the green transition, i.e., in areas of renewable energy, environmental protection,
environmental engineering and waste management. Practical trainings will target young
people and people with disabilities, adults and teachers for vocational education and
training (117
).
Another successful example is the “Contrat de Transition Écologique” (CTE) initiated in
France as a partnership programme between the State and local communities to help develop
local projects that diversify the local economy, for sustainability and environmentally
responsible development. Each contract lasts three to four years. The process started in 2018,
experimenting with 18 territories and later expanding to 107 territories. This initiative shows
how cooperation between the State, local authorities and local socioeconomic actors can
support ecological action undertaken at national level and transpose it to the local level (118
).
3.2 Regional policy and local action
Regional authorities play a crucial role in the climate transition because they are at the
forefront of implementing climate change mitigation and adaptation measures. Each of them
faces unique opportunities and challenges as they decarbonise their economies (see Annex 8)
by 2040. To support regions with the implementation of locally tailored ambitious climate
policies and measures, the EU has put in place a comprehensive and flexible enabling
framework. This framework is supplemented by the initiatives and strategies developed by
national and regional authorities. However, neither regional, nor national or EU authorities
can act alone. It is vital that different levels of government coordinate their climate efforts,
both within and across borders.
3.2.1 Available EU funding, objectives, and strategies
A significant share of the EU’s multiannual financial framework (MFF) for 2021-2027 and
NextGenerationEU (€2.018 trillion in current prices) will directly support climate action in
less developed regions. At least 30% of these two sources combined will be spent on fighting
climate change (119
). A significant share of these amounts should be spent by the end of 2029.
The next, post-2027, long-term budget of the EU will be adopted under the next Commission
mandate.
(116
)Implementation of just transition and economic diversification strategies. A compilation of best practices
from different countries. United Nations Climate Change. Katowice Committee on Impacts. 2023.
(117
)Vocational education and training and the green transition - Publications Office of the EU (europa.eu). DOI:
10.2767/183713
(118
)Just transition interventions: report by the Katowice Committee of Impacts (created in 2018 in the
framework of the UNFCCC with a mandate for monitoring response measures).
(119
)EU budget today. Midterm review of the MFF 2021-2027. https://commission.europa.eu/strategy-and-
policy/eu-budget/motion/today_en.
42
Several spending programmes under the EU’s 2021-2027 budget have climate spending
targets of at least 30%. These include the European Regional Development Fund (ERDF)
(30%), Horizon Europe (35%), the Cohesion Fund (37%), the Connecting Europe Facility
(60%), and LIFE (61%). 100 % of the resources of the Just Transition Fund (JTF) contribute
to climate objectives. The resources from the JTF’s own envelope are additional to the
investments needed to achieve the EU’s overall 30% climate expenditure target (120
). Several
of these funds strongly support less developed regions or, in the case of the JTF, target the
regions most affected by the climate transition.
The Governance of the Energy Union and Climate Action Regulation (121
) facilitates the
involvement of all governance levels including regional actors in addressing energy and
climate policies by creating a permanent Multilevel Climate and Energy Dialogue in Member
States. Such a permanent and regular dialogue on climate and energy among all levels of
governance and relevant stakeholders has delivered various benefits: continuous political
support, ownership, feedback loops, shared responsibility as well as a better implementation
of the necessary actions.
The EU has developed strategies and measures to tackle climate change in regional clusters.
For instance, the macro-regional strategies (MRS) address common challenges such as
climate change in defined geographical areas, allowing the impacted regions to benefit from
strengthened cooperation (122
). The MRS involve 19 EU and 10 non-EU countries. They will
contribute to increasing economic, social, and territorial cohesion. The MRS are:
• the EU strategy for the Baltic Sea Region (EUSBSR, 2009);
• the EU strategy for the Danube Region (EUSDR, 2011);
• the EU strategy for the Adriatic and Ionian Region (EUSAIR, 2014); and
• the EU strategy for the Alpine Region (EUSALP, 2016).
3.2.2 The EU’s cohesion policy
The EU’s cohesion policy aims to promote and support the overall harmonious development
of all EU Member States and regions, making it a vital element of the enabling framework.
The policy is implemented by Member States’ national and regional bodies in partnership
with the European Commission. It contributes to the goals of the Commission priorities,
including the European Green Deal (EGD) and more specifically the transition to climate
neutrality. Cohesion policy has been allocated a major share of the EU budget – currently
€378 billion for 2021–27 (123
). Figure 8 indicates that most of the cohesion funds are targeted
at less developed regions, which are regions with a GDP per capita under 75% of the EU
average.
The cohesion policy is delivered through specific funds:
(120
)Official Journal of the European Union. L231/1. 30.6.2021.
(121
)See Governance of the Energy Union and Climate Action (europa.eu).
(122
)Inforegio - Macro-Regional Strategies. https://ec.europa.eu/regional_policy/policy/cooperation/macro-
regional-strategies_en
(123
)Inforegio – EU cohesion Policy: 2021-2027 programmes expected to create 1.3 million jobs in the EU.
43
• The European Regional Development Fund (ERDF), which invests in the social and
economic development of all EU regions and cities;
• The Cohesion Fund (CF), which invests in environment and transport in EU countries
with gross national income (GNI) per capita below 90% of the EU-27 average;
• The European Social Fund Plus (ESF+), which supports jobs and, more generally, a
fair and socially inclusive society in EU countries (see the section “Just transition &
social policy” in Annex 9 of this impact assessment);
• The Just Transition Fund (JTF), which supports regions most affected by the transition
towards climate neutrality. It is one of the three pillars of the Just Transition
Mechanism (see below);
• Interreg funds, which support territorial cooperation across EU borders as well as with
certain neighbouring third countries.
Figure 8: Investment by fund and category of regions
Note: billion EUR. ERDF: European Regional and Development Fund; ESF+: European Social Fund Plus; CF: Cohesion
Fund; JTF: Just Transition Fund.
Source: European Commission.
With over EUR 118 billion in EU funded climate investments in the 2021-2027 programming
period, cohesion policy is providing a significant contribution to the European Green Deal
(EGD). The adopted 2021-2027 ERDF and CF programmes allocate respectively 33% and
56% of their funds to climate action, which exceeds the minimum regulatory commitments of
30% for ERDF and 37% for the Cohesion Fund. The major areas to receive support are
energy efficiency; sustainable urban mobility; renewable energy and networks; and climate
change adaptation (see Figure 9). In addition, 100% of the JTF’s funds benefit climate action.
ESF+ will contribute to the creation of green jobs. Combined, these climate relevant
investments will enable regions to significantly boost the implementation of the EU’s climate
and environmental policies that aim to improve the life and prospects of people throughout
the EU.
44
Figure 9: ERDF/CF climate expenditure by climate-relevant policy area
Source: European Commission.
The cohesion policy’s enforcement mechanisms help to ensure climate action stays on track.
For example, cohesion policy has introduced a climate adjustment mechanism that can
introduce remediation measures when there’s insufficient progress. Further, during the 2025
midterm review, the adopted programmes will be reviewed. This review will provide an
opportunity to take account of the country-specific recommendations (CSRs), including those
concerning climate policy, and of the progress made by Member States in implementing
National Energy and Climate Plans (NECPs).
3.2.2.1 Just Transition Mechanism
In addition, the newly created Just Transition Mechanism (JTM) (124
) provides targeted
support to the regions most affected by the climate transition, for example those that must
cease fossil-fuel related activities, transform and restructure carbon-intensive industries and/or
diversify their economy, maintain social cohesion, invest in future-proof job opportunities,
retrain the affected workers and youth to prepare them for future jobs.
The JTM consists of three pillars:
• JTF (125
), which contributes to alleviating the socio-economic impacts of the transition
to a climate-neutral economy and to support the economic diversification and
reconversion of the territories concerned. The actions supported by the JTF should
directly contribute to alleviating the impact of the transition by financing the
diversification and modernisation of the local economy and by mitigating the negative
repercussions on employment.
• A dedicated InvestEU ‘Just Transition’ scheme to support economically viable
investments by private and public sector entities in a wider range of projects. The
(124
)See https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/european-green-deal/finance-
and-green-deal/just-transition-mechanism_en
(125
)Just Transition Fund: https://commission.europa.eu/funding-tenders/find-funding/eu-funding-
programmes/just-transition-fund_en
45
investments should foster economic growth and ultimately economic attractiveness of
the Just Transition territories.
• The Public Sector Loan Facility for additional investments to be leveraged by the
European Investment Bank (EIB). This helps public sector entities in the most affected
regions to meet their development needs in the transition towards a climate-neutral
economy.
3.2.2.2 Territorial Just Transition Plans (TJTPs)
The territorial just transition plans provide a novel model for the territorialisation of the
climate action, by defining the territories which might receive financing from the JTM. These
plans set out the challenges in each territory, as well as the development needs and objectives
to be met by 2030. The territories eligible for support by the JTF are published on the Just
Transition Platform website with the links to the plans (126
).
Figure 10: Overview of territories in approved territorial just transition plans (Sept. 2023)
Source: European Commission.
Box: An example of support by the JTF: the decarbonisation of the Swedish industry
The JTF is helping the Swedish industry transition to climate neutrality (127
), while
maintaining competitiveness and sustaining economic and employment levels in the
(126
)Inforegio - Just Transition Fund. https://ec.europa.eu/regional_policy/funding/just-transition-fund/just-
transition-platform_en
(127
)EU Cohesion policy: €155.7 million climate transition Sweden.
https://ec.europa.eu/commission/presscorner/detail/en/ip_22_5316
46
Norrbotten, Västerbotten and Gotland regions. As industrial emissions account for 32% of
Sweden’s total greenhouse gas emissions, the transformation of the steel, mineral and metals
industry is expected to have important socio-economic impacts. The JTF will help alleviate
these impacts by investing EUR 155.7 million in research and innovation and in the retraining
and reskilling of workers.
3.2.3 The Recovery and Resilience Facility
The Recovery and Resilience Facility (RRF) will help achieve the EU’s targets to reduce net
greenhouse gas emissions by at least 55% by 2030 and to reach climate neutrality by 2050.
The RRF Regulation provides that the reforms and investments included in each of the
recovery and resilience plans must reach targets for climate and digital expenditure. The
measures supported by the RRF are contributing to meet the EU’s climate ambition by
promoting sustainable mobility, increasing energy efficiency, and promoting a higher
deployment of renewable energy sources (Figure 11). They will also ensure progress towards
climate adaption and other environmental objectives such as reducing air pollution, promoting
the circular economy, or restoring and protecting biodiversity.
Figure 11: Breakdown of expenditure supporting the green transition, by policy area
Note: This chart shows a breakdown of the estimated contribution to the policy pillar according to a list of policy
areas established by the European Commission. The percentage relates to the overall share of the plan tagged under
this policy pillar.
Source: Recovery and Resilience Scoreboard.
The reforms and investments that support climate objectives in Member States’ RRPs have
exceeded the target of 37% of total allocation set in the RRF Regulation. Total estimated
climate expenditure in the adopted plans amounts to EUR 204 billion, which represents about
47
40% of the total plans’ allocation as calculated according to the climate tracking
methodology (128
).
3.2.4 Other EU initiatives
There are several other EU funds, policies, and initiatives that support Member States and
their regions with implementing climate policies (see below a non-exhaustive list of such
initiatives). Not all these initiatives directly or exclusively target specific EU regions.
However, they will all have an impact on climate action in specific regions.
3.2.4.1 Funding
The Modernisation Fund (129
) is a programme from the European Union to support 10
Member States to meet the 2030 energy targets by helping to modernise energy systems and
improve energy efficiency.
The Innovation Fund (130
) is one of the world’s largest funding programmes for the
demonstration of innovative low-carbon technologies. The Innovation Fund’s total funding
depends on the carbon price, and it may amount to about €40 billion for 2020-2030 (assuming
a carbon price of €75/tCO2). In practice, the Innovation Fund allowances from the EU ETS
are being auctioned based on the agreed schedule and the revenues perceived are used to
provide support to innovative projects afterwards.
Connecting Europe Facility (CEF) is a key EU funding instrument to deliver the European
Green Deal and an important enabler towards the Union’s decarbonisation objectives for 2030
and 2050 (131
). It supports the development of high performing, sustainable and efficiently
interconnected trans-European networks in the fields of transport, energy, and digital services.
The InvestEU Programme (132
) supports sustainable investment, innovation, and job creation
in Europe. With the EU budget guarantee provided to International and National promotional
banks, the InvestEU programme aims to trigger more than €372 billion in private investments
to high EU policy priority areas. Its Advisory Hub will provide advisory support services to
regional authorities.
(128
)The RRPs had to specify and justify to what extent each measure contributes fully (100%), partly (40%) or
has no impact (0%) to climate objectives, using Annex VI to the RRF Regulation. Combining the
coefficients with the cost estimates of each measure allows calculating to what degree the plans contribute to
the climate target. Please note that the contribution to the green transition pillar is higher than the
contribution to climate objectives as defined in Annex VI of the RRF Regulation, since methodologies
differ. The differences arise mainly because all covered measures are considered to contribute with 100% of
their estimated cost to the pillar, while some contribute only with 40% of their estimated cost to the climate
objectives as defined in Annex VI of the Regulation. In addition, the green transition pillar also includes
coefficients for environmental objectives that are wider than climate objectives as per Annex VI of the RRF
Regulation.
(129
)See https://modernisationfund.eu/.
(130
)See https://cinea.ec.europa.eu/programmes/innovation-fund_en.
(131
)See https://cinea.ec.europa.eu/programmes/connecting-europe-facility_en.
(132
)See https://investeu.europa.eu/investeu-programme_en.
48
The EIB (133
) offers targeted support for projects in less-developed regions, including for
green transition projects.
3.2.4.2 Fostering collaboration between regional authorities
Horizon Europe Mission on Cities (134
) involves local authorities, citizens, businesses,
investors as well as regional and national authorities to deliver 100 climate-neutral and smart
cities by 2030 and to ensure that these cities act as experimentation and innovation hubs to
enable all European cities to follow suit by 2050.
The EU Covenant of Mayors for Climate & Energy (135
) is an initiative supported by the
European Commission that brings together thousands of local governments that want to
secure a better future for their citizens. Local governments voluntarily commit to
implementing EU climate and energy objectives and the European Green Deal on the ground.
The initiative is a first-of-its-kind bottom-up approach to energy and climate action. There are
almost 11.000 cities committed to become climate neutral by 2050.
Regions4Climate (136
) is developing innovative tools and collaborative practices to support
European regions and communities in developing and implementing their own resilience
plans that not only explicitly address social, environmental, and economic innovations but
also inherently consider social equity and social justice concerns associated with resilience
building.
The European Climate Pact (137
) is a movement of people united around a common cause,
each taking steps in their own worlds to build a more sustainable Europe. Launched by the
European Commission, the Pact is part of the European Green Deal and is helping the EU to
meet its goal to become climate-neutral by 2050.
3.2.4.3 Regional State Aid
The European Commission’s regional state-aid (138
) policy supports economic development
and employment. The regional aid guidelines set out the rules under which Member States can
grant state aid to companies to support investments in new production facilities in the less
advantaged regions of Europe or to extend or modernise existing facilities.
3.2.4.4 Technical assistance
The Commission offers technical assistance to Member States and their regions, including
through the following measures.
(133
)See https://www.eib.org/en/projects/regions/index.htm.
(134
)See Climate-neutral and smart cities, https://research-and-innovation.ec.europa.eu/funding/funding-
opportunities/funding-programmes-and-open-calls/horizon-europe/eu-missions-horizon-europe/climate-
neutral-and-smart-cities_en.
(135
)See https://eu-mayors.ec.europa.eu/en/home.
(136
)See Regions4Climate - Building resilient communities, https://regions4climate.eu/.
(137
)See https://climate-pact.europa.eu/index_en.
(138
)See Regional Aid, https://competition-policy.ec.europa.eu/state-aid/legislation/modernisation/regional-
aid_en.
49
The C4T Community of Practice (139
) is a community-based platform that aims to support EU
Member States and regions to make a better use of EU funds for sustainability transitions.
C4T engages national, regional, and local cohesion and sustainability transitions practitioners
in sharing experience and good practices, creating partnerships and jointly identifying
solutions. C4T also provides technical assistance to facilitate the development and/or
implementation of sustainability transitions. C4T brings together beneficiaries involved in the
implementation of transition measures with support from cohesion policy under Policy
Objective 2 ‘A greener, low-carbon transition towards a net zero carbon economy and
resilient Europe’.
EU Technical Support Instrument (140
) is the EU programme that provides tailor-made
technical expertise to EU Member States to design and implement reforms. The support is
demand driven and does not require co-financing from Member States.
The policy support facility (141
) gives Member States and countries associated to Horizon
Europe practical support to design, implement and evaluate reforms that enhance the quality
of their research and innovation investments, policies, and systems.
The Climate Adaptation Platform for the Alps (CAPA) (142
) supports decision-makers in
Alpine countries, regions, and municipalities in adapting to climate change by giving them
access to knowledge resources and information that have been selected by experts based on
relevance and usefulness criteria. It offers knowledge products for a broad spectrum of
administrative and socio-economic sectors (agriculture, energy, health, water management,
spatial planning, etc.). It puts strong emphasis on cross-sectorial aspects of adaptation.
3.2.5 Example of a region that has received support: the Ruhr region
The Ruhr region in North Rhine-Westphalia has traditionally been one of Europe’s industrial
powerhouses, based on the extraction of coal (143
). Spanning roughly 2,700 km2
the Ruhr
Valley lies in the state of North-Rhine Westphalia, made up of 53 cities that came to depend
on coal mining when it reached an industrial scale in the 1800s. At their height in the 1950s,
the mines employed about 600,000 workers, entwining the region’s identity with coal.
According to Reitzenstein et al. (2021), Galgoczi (2014), Sheldon et al. (2018), in the Ruhr
region in 1957, 70% of the population was employed in coal, iron and steel industries (half in
coal mining).
(139
)See Inforegio - Cohesion for Transitions (C4T), https://ec.europa.eu/regional_policy/policy/communities-
and-networks/cohesion-4-transition_en.
(140
)See https://commission.europa.eu/funding-tenders/find-funding/eu-funding-programmes/technical-support-
instrument/technical-support-instrument-tsi_en.
(141
)See https://ec.europa.eu/research-and-innovation/en/statistics/policy-support-facility.
(142
)See https://climate-adapt.eea.europa.eu/en/metadata/portals/climate-adaptation-platform-for-the-alps-
capa#:~:text=The%20platform%20provides%20resources%20about,analytical%20studies%20and%20polic
y%20reviews).
(143
)See https://economy-finance.ec.europa.eu/system/files/2022-
12/dp176_en_green%20transition%20labour.pdf.
50
Cohesion policy supported many projects in the framework of a long-term strategy aimed at
transforming the region, including the restoration of the river system, the construction of a
bicycle network, the creation of landscape parks, and the conversion of former steel sites and
railroads into lakes and green neighbourhoods. This is embedded in nearly three decades of
EU funding to support the structural change of this old industrial region into a modern, green
metropolis. This involved structural policies to support the specialization of the region, the
development of new universities, infrastructures, in particular in renewable energy, and
cultural activities. Several policies contributed to the successful transition in the Ruhr region.
These include a consistent engagement of different levels of governments; a strong
participation of social partners; targeted public sector investments; institutional cooperation;
and effective labour market policies.
Coal mining has now completely disappeared but despite the loss in coal jobs, the overall
number of jobs stayed constant. The support provided to the Ruhr region turned it into an
exemplary territory for green infrastructures and an attractive area for companies.
In the 2021-2027 period, the Ruhr region is also one of the German territories benefitting
from the JTF. The fund will help the region with investments in skills, green innovation, and
environmental restoration. This contributes to cushioning the socio-economic impacts of
Germany’s coal phase-out.
3.3 Lifestyle and individual action
3.3.1 Sustainable lifestyle choices
Individual action is one of the key factors to efficiently mitigate climate change and protect
the environment. Household consumption has been associated with up to 72% of global
greenhouse gas emissions (144
), thus changes in individual and household lifestyles have an
enormous potential to reduce GHG emissions.
Making more climate-friendly choices on an individual level requires a willingness to adopt
new behaviours, but policy makers need to facilitate more climate-friendly lifestyle choices
by removing barriers and creating incentives to set up proper framework conditions for new
lifestyles (145
). Examples for an improvement of proper framework conditions for new
lifestyles are increasing their availability (e.g., through improved access to public transport),
incentivizing their use (e.g. reducing taxes on repair work to increase the longevity of
products) or informing individuals about the environmental impact of their choices (e.g.,
reliable and trustworthy eco-friendly or energy efficiency labels, protection against false
green claims, and reliable data on door-to-door transport emissions (146
)).
Some examples for individual action in a non-exhaustive list are:
(144
)Hertwich, E.G., Peters, G.P., 2009. Carbon footprint of nations: A global, trade-linked analysis. Environ.
Sci. Technol. 43 (16), 6414–6420.
(145
)Frederiks, E. R., Stenner, K., Hobman, E. V. ‘Household energy use: Applying behavioural economics to
understand consumer decision-making and behaviour’, Renewable and Sustainable Energy Reviews, 41,
1385-1394, 2015.
(146
)COM(2023) 441
51
- Sustainable lifestyle choices: individuals can make choices in their daily lives to
reduce their carbon footprint such as reducing waste, consuming more sustainable and
sufficient. This includes buying locally and environmentally friendly products and
opting for long-lasting products, reducing single-use products, and opting for the reuse
of products. Furthermore, citizens can choose a more sufficient lifestyle by buying less
and repairing more as part of advanced circular economy practices.
- Sustainable transportation: walking, cycling, or using public transport instead of using
a car can significantly reduce carbon emissions. Citizens can also advocate for
‘mobility as a service’ such as car- and bike-sharing options that aim to share transport
modes between individuals and aim for a higher use intensity. An increasing concern
on climate change and a shift in the social norm among citizens may incentivize
citizens to use less flights in favour of more sustainable transport alternatives, like rail.
- Energy and housing transition: individuals may participate in the transition to
renewable energy sources at the individual level through supporting community-based
renewable energy projects, the installation of solar panels on their homes, or adopting
energy efficiency measures in homes and businesses. This may also include a shift
towards reduced floor area and a preference for renovation over new construction.
Results from the public consultation show that large parts of EU citizens are in general willing
to adopt new lifestyles and to adopt a variety of individual actions to reduce their own carbon
footprint (82%). The highest support was expressed for individual action towards a more
circular economy such as repairing or reusing goods (88%) (147
) and reducing wasteful
consumption through the use of long-lasting appliances, clothing and other products (89%).
High support was also expressed for a dietary change towards more climate-friendly diets
(85%) and for the use of climate-friendly labels (82%) and the acceptance of renewable
energy infrastructure in one’s municipality (80%).
However, it appears these changes in lifestyles and consumption patterns need support from
policy makers (148
), for example through a change in the choice architecture, incentives,
available mobility alternatives, or urban planning (149
). EU citizens indicated in the public
consultation that number of policies would help them adopting a more climate-friendly
lifestyle (150
). Citizens indicated as most helpful, if prices of goods and services would reflect
their climate impact to a better degree (Avg. = 4.43), the facilitation of personal investments
in climate friendly solutions (Avg. = 4.27) and ensuring that the most vulnerable in society
have access to climate-friendly products and services (Avg. = 4.19). On general, all types of
(147
)Participants in the Public Consultation questionnaire were asked which of the listed personal actions they
would be willing to take to fight climate change. Percentages indicate EU citizens willingness to take these
actions.
(148
)Scientific Advice Mechanism (SAM), ‘Towards Sustainable Food Consumption’, Group of Chief Scientific
Advisors Scientific Opinion, No.14, 2023.
(149
)IPCC AR6 WG III, Summary for Policy Makers.
(150
)EU citizens indicated on a scale from 1 (not helpful) to 5 (very helpful) how much the following proposals
would help them to reduce their personal climate footprint. Numbers in brackets show the mean value. The
closer a mean value to 5 the more helpful it is assessed on average.
52
support to increase information, raising awareness and facilitating the access to climate-
friendly solutions was rated positively (Avg. = 3.77 to 4.04).
3.3.2 Sustainable food consumption
A particularly relevant field for changing lifestyles is food consumption. With regard to
demand-sided mitigation potentials associated with individual choices, behaviour and lifestyle
changes, the IPCC has identified nutrition as the area with the biggest potential to reduce
emissions (151
). Also, throughout the EU, food has both emerged as the consumption area of
individuals with the highest environmental and climate impact (152
), as well as a field that
shows a notably high agreement for willingness to change throughout EU citizens. As an
example, a high share of EU citizens indicated their inclination in the public consultation to
eat food with a lower climate impact, such as plant-based, local, or sustainably produced food
(85%). When looking more closely on food consumption habits of EU citizens, animal-based
products (i.e., meat, dairy products, and eggs) stick out since they make up only about one
quarter of the total amount of food consumed while contributing to more than 60% of the
climate change impacts from food (153
). This is due to the lower efficiency from an
input/output perspective of animal-based products compared to other food products (154
).
A voluntary change in food diets in societies is not uncommon. Food diets can change in a
comparably short time and recent history underlines the potential for widespread changes,
including on more diverse and healthier diets (155
). Moreover low-meat diets increase in EU
countries as some recent examples show. The number of products being labelled as
vegetarian, or vegan has increased significantly (156
) and with-it meat-alternatives in
supermarkets. Meat consumption per capita in Germany declined in 5 years until 2022 by
13% for beef and cattle and by 20% for pork and is now at the lowest total consumption level
since 1989. (157
) One of the main reasons is that meat alternatives become increasingly
available and plant-based diets increasingly popular among the population. On EU level, a
(151
)IPCC AR6 WG III, Summary for Policy Makers Figure SPM.6
(152
)Five areas of consumption have been assessed: food, mobility, housing, household goods and appliances.
Food makes up 48% of the consumption footprint on environmental impacts and 38% of the consumption
footprint on climate change for an average EU citizen in 2021. See Sanyé Mengual E, Sala S, ‘Consumption
Footprint and Domestic Footprint: Assessing the environmental impacts of EU consumption and production.
Life cycle assessment to support the European Green Deal’, Publications Office of the European Union,
2023.
(153
)European Commission, Joint Research Centre, Sanyé Mengual, E., Sala, S., Consumption footprint and
domestic footprint – Assessing the environmental impacts of EU consumption and production – Life cycle
assessment to support the European Green Deal, Publications Office of the European Union, 2023,
https://data.europa.eu/doi/10.2760/218540
(154
)Capone, R., et al., ‘Food System Sustainability and Food Security: Connecting the Dots.’, Journal of Food
Security, 2, 1, 13-22, 2014.
(155
)Vermeulen, S.J., et al., ‘Changing diets and the transformation of the global food system’, Ann. N.Y. Acad.
Sci., 1478, 3-17, 2020.
(156
)FReSH insights report, ‘Consumption behavior and trends: understanding the shift required towards healthy,
sustainable, and enjoyable diets’, Geneva: World Business Council for Sustainable Development, 2018.
(157
)BLE (2023), Press Release: Fleischverzehr 2022 auf Tiefstand.
53
slight general trend of dietary change is also visible. In the last five years before 2023, per
capita consumption of meat declined by nearly 2% and consumption of fresh dairy products
by 6%, a trend that is generally expected to continue in the future. This is in line with results
from the public consultation.
Furthermore, the European Commission projects a shift from red meat to white meat (158
),
which is associated with lower GHG emissions. The current changes in dietary preferences
result from health considerations and consumer concerns about climate, animal welfare and
environment. The increasing availability of protein alternatives also play a role in dietary
changes. Importantly these meat alternatives can be vegetables, fish as well as artificial meat.
However, to obtain a sustainable and healthy diet simply replacing meat with fish comes with
its own concerns. Overexploitation is already impacting fish stocks, and more importantly
Europeans consumption of fish should with regard to healthy diets not drastically
increase. (159
)
4 HEALTHY NATURE AND SUSTAINABLE CIRCULAR BIOECONOMY
Managing the land more sustainably is not only important for the achievement of climate
targets but is also essential to ensure that the land sector can continue to provide food,
biomass, freshwater and ecosystem services for generations to come, in the context of
increasing global warming.
4.1 Current policy framework on carbon removals and agriculture GHGs
Management of land and biological resources within ecologic boundaries is one of the
dimensions of bioeconomy policies. There are challenges to be addressed, such as the
increased pressure on land for climate mitigation and adaptation and nature protection while
supplying an increasing demand of biomass for food, materials (e.g., bioplastics, long-lasting
wood products) and bioenergy. To ensure environmental integrity, there is a need to
understand the status and resilience of terrestrial and marine ecosystems, including their
services and related socio-economic costs and benefits.
The current policy framework addresses the climate change mitigation potential of sustainable
land management practices through national targets. These targets are characterised by a
separation between the agriculture sector and the Land Use, Land Use Change and Forestry
(LULUCF) sector. The agriculture sector, which corresponds to non-CO2 emissions mainly
related to the raising of livestock, the use of fertilisers and the management of manure, is not
governed by a specific sectoral target; its emissions are instead included in the national
emission targets under the Effort Sharing Regulation together with other sectors. Recently,
with the Fit-for-55 revision, Effort Sharing targets underwent a significant increase in
ambition: emissions in these sectors will have to be cut by 40% (up from -29%) by 2030 as
(158
)European Commission, DG Agriculture and Rural Development, ‘EU agricultural outlook for markets,
income and environment, 2022-2032’, Brussels, 2022.
(159
)Willet et al., ‘Food in the Anthropocene: the EAT–Lancet Commission on healthy diets from sustainable
food systems’, Lancet, 2019.
54
compared to 2005 emission levels. The LULUCF sector mainly corresponds to CO2 fluxes
(i.e., emissions and removals) between soils, biomass and the atmosphere; with the LULUCF
Regulation, the EU has recently agreed on a new target to achieve 310 MtCO2 of net
removals in 2030, and this target is distributed across Member States through binding national
targets.
National targets can trickle down to the individual land managers through public-based or
market-based incentives to take climate action. The Common Agricultural Policy (2023-2027
period), which includes several climate-related obligations and incentives, represents an
important budget envelope that Member States can use to support farmers in adopting more
sustainable land management practices and to help to achieve those national climate targets.
Every EU Member State describes in a national CAP Strategic Plan how it intends to design
CAP requirements and interventions to contribute (among others) to the objective of climate
mitigation and adaptation. Under the enhanced conditionality, by 2025, land management
practices minimising or avoiding carbon release will be applied on agricultural wetlands and
peatlands in all EU countries. Member States are planning to support carbon removals and
protection, and reduced methane and nitrous oxide from better use, management, and
application of fertilisers on 35% of the EU’s utilized agricultural area with practices beyond
conditionality. Eco-schemes, agro-environment climate commitments and investments are
broadly used to support practices such as agroforestry, afforestation, soil cover and reduced
tillage, grassland protection, and management of peatland. Investments in improved manure
storage and management, low emission slurry spreading, and anaerobic digesters have been
planned to address livestock-related emissions, with some Member States planning other
practices such as outdoor grazing, improvement of feeding plans and feed additives. Over
600 000 ha are planned to be supported for afforestation, agroforestry, restoration, and
creation of landscape features. A specific article in the CAP Strategic Plan Regulation
requires Member States to assess whether their CAP Strategic Plan should be amended
according to recent agreements on more ambitious EU climate targets for the LULUCF and
the Effort Sharing sectors.
The upcoming proposal for a legislative framework for sustainable food systems (FSFS) is
one of the flagship initiatives of the Farm to Fork Strategy (160
). It aims to accelerate and
make the transition to sustainable food systems easier while mainstreaming sustainability in
all food-related policies and strengthening the resilience of food systems. As a result of a
more sustainable food system emissions in the agriculture sector as well as in food processing
industry should decline. One important input to the proposal is the independent expert report
(161
), which highlights the need to decrease the environmental impacts from food production,
reduce food waste and loss, and stimulate dietary changes towards healthier and less resource-
intensive diets through a combination of various policy measures.
(160
)COM(2020) 381 final
(161
)European Commission, Directorate-General for Research and Innovation, Group of Chief Scientific
Advisors, Towards a sustainable food system – Moving from food as a commodity to food as more of a
common good – Independent expert report, Publications Office, 2020,
https://data.europa.eu/doi/10.2777/282386.
55
Carbon farming is a business model whereby land managers are rewarded for providing
carbon sequestration. To enable this approach, the Commission has proposed an EU-wide
voluntary framework for the certification of carbon removals, as a tool to reliably monitor,
report, and verify (MRV) high-quality carbon removals that deliver unambiguous climate
benefits and have the potential to also deliver on biodiversity and restoration of ecosystem
services. The proposed framework can create innovative business opportunities for land
managers, but only if the resulting carbon removals are credible and trustworthy, so that they
can attract private and public financial support. Carbon farming will provide farmers,
foresters, and other land managers with an additional source of income in exchange for
storing carbon in the soil, trees, shrubs, wetlands, and peatlands. The proposal requires that
carbon farming does not harm other environmental objectives and encourages the delivery of
environmental co-benefits, such as on biodiversity and the provision of ecosystem services.
Once the Regulation enters into force, the EU-level quality criteria and verification rules will
be further operationalised through technical certification methodologies adopted by the
Commission, in the forms of Delegated Acts, tailored to the different types of carbon removal
activities. To this end, the Commission has established an Expert Group on Carbon
Removals, which will assist the Commission to map out best practices on certification
methodologies for carbon removals, ensuring full and close involvement of civil society.
4.2 Reducing GHG emissions from the land sector
4.2.1 Agricultural emissions
GHGs emitted from agricultural activities include non-CO2 emissions such as methane (CH4)
and nitrous oxide (N2O). Most of these non-CO2 emissions come from the livestock digestion
process, the management of manure, and the use of fertilisers. Over the last decade, the
agricultural sector has not reduced its absolute GHG emissions, although increasing
production efficiencies have led to reduced GHG emissions per unit produced. Practices to
reduce methane emissions from enteric fermentation should focus on breeding to reduce
methane intensity and improve animal health and fertility, optimising feed management and
use of pastures/grazing, and using appropriate feed additives. The best way to reduce fertiliser
emissions is to optimise the fertilisation process, mainly through a precise selection of the
fertiliser dose in space and time (precision agriculture); other options include management
practices beneficial for the nutrient cycle and soil, such as using legume crops or pastures in
rotation instead of nitrogen fertiliser, catch and cover crops or practicing minimum tillage for
cropping. Techniques to decrease manure-related emissions are cooling slurry, slurry
acidification, covering manure and slurry stores, anaerobic digestion with biogas recovery for
renewable energy, improvements in the housing of livestock.
4.2.2 Halt and reverse the loss of soil carbon
Besides creating non-CO2 emissions, agricultural activities may cause a loss of carbon from
soils due to the use of land as cropland and grassland. Overall, EU soils are losing carbon. In
2019, Member States reported net emissions of 108 MtCO2 from organic soil and net
removals of 44 MtCO2 from mineral soil. The IPCC (162
) cites afforestation, enhanced
(162
)IPCC AR6 WG III Full Report, 2022, Mitigation of Climate Change
56
sequestration in cropland and grasslands, use of biochar, peatland and costal wetland
restoration and agroforestry as mitigation options with a positive impact on soil carbon
storage. These nature-based removals can provide important co-benefits such as better
resilience to climate change (in particular, droughts and floods) improved soil quality,
increased crop yields, improved biodiversity and reduced N2O and CH4 emissions, when
implemented properly (163
). However, the solutions can also lead to increased competition for
land and negative impacts on food production (with consequent risks for food security) and on
biodiversity, as well as increase N2O and CH4 emissions and the risk of subsequent loss of
sequestered carbon due to climate change and future disturbances (164
).
4.2.3 Increase forest carbon sinks
The capacity of EU forests to sequester carbon has been rapidly declining: EU forests only
absorbed 256 MtCO2 in 2020, down from 320 MtCO2 in 2016 and 357 MtCO2 in 2013. The
decline in the forest sink can be attributed to an increase in wood demand, an increasing share
of forests reaching harvest maturity, and an increase in natural disturbances (165
). To reverse
this trend, it is important to consider mitigation options in the LULUCF sector such as
improved forest management, afforestation, rewetting, and emission reduction on agricultural
land, while ensuring that any new forest is composed of mixes of species that can be resilient
in the face of climate change.
4.3 Preserve and restore biodiverse ecosystems
Climate change and biodiversity loss are two of the most pressing issues of the Anthropocene.
The rapid decline of biodiversity and changes in climate are interdependent: they share
underlying direct and indirect drivers, they interact and are mutually reinforcing. Furthermore,
both can have cascading and complex effects that impact people’s quality of life and
compromise societal goals.
Climate change is one of the five main drivers of global biodiversity loss, with change of land
and sea use, direct exploitation, pollution, and invasive alien species (166
). At the same time,
biodiversity is an essential ally to fight climate change. Healthy ecosystems deliver services
that are key for climate mitigation and adaptation (protection against floods, droughts, urban
heat and desertification, water retention, air, and water purification). However, it should be
noted that climate change is not the only factor threatening ecosystems. For instance, certain
forestry practices may be beneficial to store carbon but can exacerbate the risks of extreme
weather events, such as forest fires or plagues (167
). More biodiverse forests are more resilient,
(163
)European Environment Agency, Briefing no. 14/2022, Soil carbon, 2022. doi: 10.2800/822511
(164
)IPCC, 2022, IPCC 6 Assessment Report, WG3, Chapter 12
(165
)SWD(2021) 609 final
(166
)IPBES (2019). Global assessment report on biodiversity and ecosystem services of the Intergovernmental
Science-Policy Platform on Biodiversity and Ecosystem Services (Version 1). Zenodo.
https://doi.org/10.5281/zenodo.6417333
(167
)Robbie S.H. Johnson, Younes Alila (2023). Nonstationary stochastic paired watershed approach:
Investigating forest harvesting effects on floods in two large, nested, and snow-dominated watersheds in
British Columbia, Canada, Journal of Hydrology, Volume 625, Part A, 129970, ISSN 0022-1694,
https://doi.org/10.1016/j.jhydrol.2023.129970.
57
multifunctional, productive, deliver more ecosystem services and even capture more
carbon (168
) (169
).
Nature-based solutions are actions to protect, conserve, restore, sustainably use, and manage
natural or modified terrestrial, freshwater, coastal and marine ecosystems which address
social, economic, and environmental challenges effectively and adaptively, while
simultaneously providing human well-being, ecosystem services, resilience, and biodiversity
benefits (170
). In that sense, nature-based solutions not only help to mitigate climate change
but also can directly provide additional benefits to biodiversity and people (171
). Examples of
concrete nature-based solutions are conserving forests and ecosystems, and ecosystem
restoration, reforestation, and afforestation. The IPCC highlights that nature-based solutions
have greater likelihood of being successful than other mitigation measures on agriculture,
forestry and land-use, whose rapid deployment is essential to reach the 1.5°C
target (172
).Biodiversity-friendly climate strategies, far from leading to additional costs, are
often a more economical approach than mitigation that does not take environmental protection
into account (173
), thanks to the synergies generated and the socio-economic costs avoided
from degraded ecosystems (174
).
The EU has launched several initiatives to preserve and restore biodiverse ecosystems. The
EU Biodiversity Strategy for 2030 (175
) is a part of the European Green Deal and focuses on
halting biodiversity loss, protect areas at land and at sea, restoring degraded ecosystems, and
introduce measures to enable the necessary transformative changes as well as to tackle the
global biodiversity challenge. The EU Forest Strategy for 2030 (176
) builds on the EU
biodiversity strategy for 2030 and sets a vision and concrete actions to improve the quantity
and quality of EU forests and strengthen their protection, restoration, and resilience. It aims to
restore and enlarge the EU’s forests to combat climate change but also to reverse biodiversity
loss and ensure resilient and multifunctional forest ecosystems. The strategy is designed to
(168
)Lewis, S.L., Wheeler, Ch.E.; Mitchard, E.T.A. and Kock, A. (2019). “Restoring natural forests is the best
way to remove atmospheric carbon, in Nature, 68, 25-28, https://doi.org/10.1038/d41586-019-01026-8.
(169
)Pukkala, T. (2016). Which type of forest management provides most ecosystem services? Forest Ecosystems
3, 1-16.
(170
)UNEA (2022). Nature-based solutions for supporting sustainable development. UNEP/EA.5/Res.5.
Available at: https://wedocs.unep.org/20.500.11822/39864.
(171
)Seddon, N. et al. (2020). ‘Global recognition of the importance of nature-based solutions to the impacts of
climate change’, Global Sustainability, 3, p. e15. Available at: https://doi.org/10.1017/sus.2020.8.
(172
)IPCC (2022). Climate Change 2022: Mitigation of Climate Change. Contribution of Working Group III to
the Sixth Assessment Report of the Intergovernmental Panel on Climate Change. Available at:
https://www.ipcc.ch/report/ar6/wg3/.
(173
)Strassburg, B.B.N. et al. (2018). ‘Strategic approaches to restoring ecosystems can triple conservation gains
and halve costs’, Nature Ecology & Evolution, 3(1), pp. 62–70. Available at:
https://doi.org/10.1038/s41559-018-0743-8.
(174
)Pörtner, H.-O. et al. (2023) ‘Overcoming the coupled climate and biodiversity crises and their societal
impacts’, Science, 380(6642), p. eabl4881. Available at: https://doi.org/10.1126/science.abl4881
(175
)COM(2020) 380 final
(176
)COM(2021) 572 final
58
address various challenges and opportunities related to forests, including environmental,
economic, and social aspects. Part of the strategy therefore is to promote the sustainable forest
bioeconomy for long-lived wood products, ensure the sustainable use of wood-based
resources for bioenergy and the re- and afforestation of biodiverse forests.
The proposal for a Directive on Soil Monitoring and Resilience (177
) is also part of the EU
Biodiversity Strategy for 2030 and was proposed to ensure a level playing field and a high
level of environmental and health protection. More specifically, the proposed Soil Monitoring
Law aims to address key soil threats in the EU, such as erosion, floods and landslides, loss of
soil organic matter, salinisation, contamination, compaction, sealing, as well as loss of soil
biodiversity.
4.4 Investment needs for biodiversity and a sustainable and circular bioeconomy
The Bioeconomyy Strategy Progress Report 2022 (178
) which was delivered in response to the
updated EU bioeconomy strategy (179
) emphasizes that EUR 2.7 billion of private investment
has been unlocked to bio-based industries, which helped to develop new technologies for
sustainable and circular bio-based value chains. However, pressure on ecosystems is
increasing and more action is needed. Most importantly, future bioeconomy needs to develop
solutions on how to better manage land and biomass demands (180
) and make consumption
patterns more sustainable.
Annual financing need for biodiversity protection and restoration reaches up to EUR 48
billion per year to 2030, with a foreseen gap of around EUR 19 billion, with implications
beyond 2030. As part of this, nature restoration investments of EUR 8-15 billion per year,
need to be maintained up to 2050 (181
). These investments are also necessary to increase the
carbon removal capacity and the resilience of ecosystems.
4.4.1 Towards biodiversity credits and payment for ecosystem services (PES)
The Kunming-Montreal Global Biodiversity Framework (GBF) commits parties to increase
financial resources for biodiversity (182
) for example through stimulating innovative schemes
(177
)COM(2023) 416 final
(178
)European Commission, Directorate-General for Research and Innovation, European bioeconomy policy –
Stocktaking and future developments – Report from the Commission to the European Parliament, the
Council, the European Economic and Social Committee and the Committee of the Regions, Publications
Office of the European Union, 2022, https://data.europa.eu/doi/10.2777/997651.
(179
)COM/2018/673 final
(180
)See for instance JRC, ‘Biomass production, supply, uses and flows in the European Union’, JRC Science for
policy report, 2023.
(181
)European Commission, Directorate-General for Environment, Nesbit, M., Whiteoak, K., Underwood, E. et
al., Biodiversity financing and tracking – Final report, Publications Office of the European Union, 2022,
https://data.europa.eu/doi/10.2779/950856.
(182
)GBF Target 19 ‘Financial resources increased to $ 200 billion per year, including $ 30 billion through
international finance’; https://www.cbd.int/gbf/targets/19/.
59
such as payment for ecosystem services (PES), green bonds, biodiversity offsets and credits,
and benefit-sharing mechanisms, with environmental and social safeguards.
Payment for ecosystem services (PES) (183
) represent a policy instrument and describe
incentives provided to landowners, farmers, or communities in exchange for managing their
land or natural resources in ways that benefit the natural ecosystems and its respective
services. Ecosystem services are the various benefits that humans receive from natural
ecosystems, including clean water, air purification, soil fertility, pollination, and climate
regulation. PES has received wide attention among scientists, governments, and institutions,
and have been implemented at local, national, and international levels (184
). PES programmes
around the globe have already generated annual payments over US$36 billion by 2018 (185
)
financing services such as providing water quality and quantity, biodiversity and habitat
conversation, pollination services, but as well climate change mitigation through forests and
other ecosystems. In a PES scheme dedicated to climate mitigation, owners of land that hosts
ecosystems such forests, grasslands, and wetlands but also agroecosystems would receive a
premium for carbon sequestration and long-term carbon storage. The payments are either
user-financed (direct beneficiaries of ecosystem services), government-financed, or
compliance-based (parties facing regulatory obligations paying to satisfy their mitigation
requirements such as the EU ETS).
Biodiversity credits is a more specific policy instrument designed specifically for biodiversity.
The credits are tradeable units of biodiversity, which can be bought by companies to measure
milestones towards becoming nature positive. They can be self-standing or complement
voluntary carbon credits. Biodiversity credits represent improvements in biodiversity, while
biodiversity offsets are measurable conservation outcomes designed to compensate for
adverse impacts of projects. The credits may become an emerging instrument to mobilize
financial resources toward nature-positive outcomes and are generating interest among many
governments, financial entities, and stakeholders at both global and European level. While
biodiversity credits are certainly not a panacea to close the biodiversity finance, they can
provide a sizable contribution.
Work is ongoing internationally to define and develop instruments for resource mobilisation
in favour of biodiversity. In this context, biodiversity credits and related tools could help to
address the concerns raised by countries with high forest cover and low levels of
deforestation, such as Gabon and Guiana, which are calling for more international funding
earmarked for the conservation and protection of tropical forests. It is important to offer
(183
)Sattler, Claudia, and Bettina Matzdorf. "PES in a nutshell: From definitions and origins to PES in practice—
Approaches, design process and innovative aspects." Ecosystem services 6 (2013): 2-11.
(184
)China has implemented large-scale PES programs, particularly for watershed protection, reducing erosion
and reforestation. Mexico has established PES programs to protect forests and watersheds. The UN's
Reducing Emissions from Deforestation and Forest Degradation (REDD+) program involves payments for
conserving forests and reducing carbon emissions. The United States pay alndowners and farmers for
watershed, biodiversity protection and the control of soil erosion.
(185
)Salzman, J., Bennett, G., Carroll, N., Goldstein, A. and Jenkins, M. ‘The global status and trends of
Payments for Ecosystem Services’, Nature Sustainability, 1(3), pp.136-144, 2018.
60
incentives to these countries to avoid deforestation and preserve their forests. At the same
time biodiversity credits, self-standing or part of voluntary carbon removals credits, must be
reliable, measurable and guarantee high-quality (including additionality, long-term duration
and sustainability), avoiding greenwashing. At this stage, there are several voluntary schemes
internationally, but without common methodologies and supervision. The Commission is
reflecting on how to address this issue and exploit the potential of biodiversity credits.
There are however other market-based instruments to support biodiversity: taxation (based,
for instance, on the “polluter pays principle”) and subsidies (186
). The advances in cost-benefit
analysis methodologies, which increasingly include environment-related impacts and a long-
term perspective, represent an opportunity for further biodiversity and climate friendly
investments, such as nature-based solutions. The European Investment Bank (EIB) provides
good examples about how these methodologies and approaches are already implemented (187
).
(186
)Romain Pirard, 2012, Market-based instruments for biodiversity and ecosystem services: A lexicon,
Environmental Science & Policy, Volumes 19–20, Pages 59-68, ISSN 1462-9011,
https://doi.org/10.1016/j.envsci.2012.02.001.
(187
)The EIB partnered with the NBI Global Resource Centre of IISD and provided funding for project
preparation activities and will probably provide financing for implementation. The EIB used these results to
understand the value of NBS compared to grey infrastructure, particularly regarding environmental impacts,
such as reduced erosion, carbon storage, and improved habitat quality/biodiversity.
61
ANNEX 10: State of play of GHG emissions and the energy system
1 TOTAL GHG EMISSIONS IN THE EU
After the 2021 strong rebound in greenhouse gas (GHG) emissions following the
unprecedented fall in 2020 due to the COVID-19 pandemic, EU emissions in 2022 are
expected to be back in line with its 30-years descending trend. According to provisional data,
total EU domestic GHG emissions (i.e., excluding LULUCF and international aviation)
decreased by 2.4% in 2022 compared to 2021, whilst EU GDP grew by 3.5% in the same
year. This translates into a reduction in GHG emissions of 30.4% compared to the 1990 base
year (or 29% when international aviation is included). Over the same period, there is an
approximated increase in reported GHG net removals from land use, land use change, and
forestry (LULUCF) of 14 million tonnes of CO2 equivalent compared to 2021(188
). As a
result, net GHG emissions for 2022 (i.e., including LULUCF) are expected to be 32.5% below
the 1990 level (or 31.1% when international aviation is included).
Figure 12: Historical EU GHG emissions
Source: EEA GHG data viewer (extracted 20/6/2023).
Emission reductions in the last three decades (1990-2021) were significant in the energy
industry (e.g., electricity and heat production, -42%), in the manufacturing industry (e.g., iron
and steel production, -48%) and in the industrial processes and product use industries (e.g.,
chemical industry, -65%; metal industry, -44%). Conversely, emissions in the transport sector
have increased, especially in road transportation (+16%) although they have been slightly
decreasing since 2010. While the agriculture sector has reduced emissions over 1990-2010
(by 22%), emissions since have stabilized or even very slightly increased. Finally, natural CO2
188
Approximated 2022 data could suggest a break to the declining trend in the LULUCF sink observed in recent
years. However, the assessment takes into consideration the large uncertainty of these data and as it will
possibly be subject to revisions.
62
sink role of land use, land use change, and forestry sector (LULUCF) has declined at a
worrying speed in the last decade, getting back to close to the 1990 level.
Policies promoting more efficient energy use, a growing deployment of renewable energy
supply and the use of less carbon intensive fossil fuels have played a key role in driving the
decarbonisation process so far. This has allowed continued decoupling of emissions and
economic growth, with the GHG emission intensity of GDP falling to 229 gCO2-eq/EUR in
2022, less than half the 1990 level.
Figure 13: GHG emissions and GDP development in the EU (1990 = 100)
Source: 2023 GHG EEA inventory data, AMECO and WB (189
).
2 EMISSIONS UNDER THE EMISSION TRADING SYSTEM
By 2022, the EU ETS had helped drive down emissions from power and industry installations
by 37.3% compared to 2005 levels.
Overall EU ETS emissions in 2022 decreased by 0.2% compared to the previous year. (190
)
This reflects a slight decrease in emissions from power and industry installations and a
continued rebound in emissions from aviation after the COVID-19 pandemic. Looking to
before COVID-19, however, emissions have remained on the decline. In 2022, emissions
were around 8% lower than in 2019.
Emissions from the energy sector and manufacturing decreased slightly by 1.8% compared to
2021, partially as result of the energy crisis and its impacts. EU verified emissions from
(189
)2022 GHG data from approximated GHG EEA inventory estimates. 1995-2022 GDP from AMECO (6-
DOMESTIC PRODUCT – 6.1 GROSS DOMESTIC PRODUCT – GDP, at constant prices (OVGD)) and
1990-1994 derived from WB (NY.GDP.MKTP.KD | GDP constant 2015 US$) with growth rate applied to
AMECO 1995.
(190
) Based on data from the EU Registry as of 30 June 2023.
63
aircraft operators increased significantly, by 75% compared to 2021, reflecting a continued
rebound of air traffic.
Figure 14: Historical evolution of ETS emissions
Note: Verified ETS emissions 2005-2022, Member States projections with existing measures 2021-2030, ETS cap
phases 2, 3 and 4, and accumulated surplus of ETS allowances 2008-2021; including UK (Northern Ireland), Norway
and Iceland; NB: adjusted for cap phase 4. (191
) Legend: bars (cap), light shade bars in 2014-16 (allowances
backloaded in phase 3), light shade bars since 2019 (feeds of allowances to the Market Stability Reserve), dash line
(verified emissions).
Source: Climate Action Progress Report 2023.
3 EMISSIONS UNDER THE EFFORT SHARING LEGISLATION
The Effort Sharing legislation covers emissions from domestic transport (excluding CO2
emissions from aviation), buildings, agriculture, small industry, and waste which account for
around 60% of total domestic EU emissions. The Effort Sharing legislation sets binding
national targets to reduce emissions in these sectors compared to 2005 levels, under the Effort
Sharing Decision (ESD) (192
) for the period 2013-2020 and under the Effort Sharing
Regulation (ESR) (193
) for the period 2021 to 2030.
In the period 2013 to 2020 all Member States met their effort sharing obligations under the
ESD in every year. The EU overachieved its 2020 emission reductions target by more than six
percentage points. EU-27 emissions covered by the ESD were 16.3% lower in 2020 than they
were in 2005. Compared to 2013, the EU-27 emissions were 7.2% lower in 2020. 2020 was
the last year covered by the ESD. Member States could not carry-over (bank) AEAs for use in
future years under the ESR.
Based on approximated data, emissions from the effort sharing sectors in 2022 were 3% lower
than in 2021. It followed the rebound of emissions in 2021, after the pandemic. The reduction
(191
)Emissions cap in the EU ETS (considering the 2023 revision of the ETS Directive, i.e. rebasing in 2024 and
2026, inclusion of the maritime transport sector in 2024, and the linear reduction factor of 4.3% in 2024-27
and of 4.4% from 2028), compared with verified emissions. Aviation is not included. Due to scope changes,
2005-7 figures are not directly comparable to the latest.
(192
)Decision No 406/2009/EC of 23 April 2009
(193
)Regulation (EU) 2018/842 of 30 May 2018, as amended by Regulation (EU) 2023/857 of 19 April 2023
64
in emissions resulted in particular from the buildings sector which showed an emission
decrease of more than 9% compared to 2021. Small industry showed the second largest
emission reduction with a decrease of almost 6% compared to 2021. The transport sector is
the largest sector under the ESR, accounting for over one third of total effort sharing
emissions, and the only one that saw its emissions increase, by over 2% from 2021 to 2022.
Figure 15: Historical evolution of GHG from ESR sectors
Note: From GHG inventory data (2005-2021) and approximated GHG inventory data (2022) as reported by Member
States under Regulation (EU) 2018/1999, compiled and checked by the EEA. The ESD AEAs are expressed in GWP AR4,
all other numbers are in GWP AR5. Figures include EU-27 only.
Source: EEA.
4 EMISSIONS UNDER THE LULUCF REGULATION
On EU level, the LULUCF sector absorbs more greenhouse gases than it emits, making it a
net carbon sink and thereby contributing to achieving the commitment. Nevertheless, carbon
removals have significantly decreased in recent years, and the land sink function declined at a
worrying speed in the last decade. The decreasing trend is mainly due to a decrease in
removals by an increase in harvest rates and to a limited extent, caused by reduced carbon
sequestration in ageing forests across certain areas. The increasing frequency of natural
disturbances such as windstorms, forest fires, and droughts introduces inter-annual variations
and impacts long-term trends (see Figure 16).
65
Figure 16: Historical evolution of GHG from LULUCF
Note: Gridded line shows the net LULUCF net removals.
Source: UNFCCC 2023.
5 RENEWABLES DEPLOYMENT UNDER THE RENEWABLE ENERGY DIRECTIVE
The Renewable Energy Directive is the legal framework for the development of clean energy
across all sectors of the EU economy, supporting cooperation between EU countries towards
this goal. The Renewable Energy Directive (2009/28/EC) was adopted in 2009 and set an EU
target of 20% renewables by 2020 and national binding targets.
Since that, the share of renewable energy sources in EU energy consumption has increased
from 12.5% in 2010 to 21.8% in 2021.
Given the need to speed up the EU’s clean energy transition, the Directive EU/2018/2001 was
revised and entered into force in 2018. It sets an overall European renewable energy target of
32% by 2030 and includes rules to ensure the uptake of renewables in the transport sector and
in heating and cooling. The directive sets common principles and rules for renewable energy
support schemes, sustainability criteria for biomass and the right to produce and consume
renewable energy and to establish renewable energy communities. It also establishes rules to
remove barriers, stimulate investments and drive cost reductions in renewable energy
technologies and empowers citizens and businesses to participate in the clean energy
transformation.
In July 2021, the Commission proposed another revision of the directive, raising the 2030
target to 40% (up from 32%), as part of the ‘Fit for 55’ package.
Less than a year later, following Russia’s military aggression against Ukraine and the need to
accelerate the EU’s independence from fossil fuels, the Commission proposed to further
increase the target to 45% by 2030.
On 30 March 2023, a provisional agreement was reached for a binding target of at least 42.5%
by 2030, but aiming for 45%. Building on the 2009 and 2018 directives, the current proposal
introduces stronger measures to ensure that all possibilities for the further development and
uptake of renewables are fully utilized. This will be key to achieving the EU's objective of
- 600
- 500
- 400
- 300
- 200
- 100
100
200
MtCO2-eq
Grassland
Cropland
Wetland
Settlements and
Other land
Harvested Wood
Products
Forest land
Net LULUCF Sink
66
climate neutrality by 2050. To support renewables uptake in transport and heating and
cooling, the proposal seeks to convert into EU law some of the concepts outlined in the
energy system integration and hydrogen strategies, published in 2020. These concepts aim at
creating an energy-efficient, circular, and renewable energy system that facilitates
renewables-based electrification and promotes the use of renewable and low-carbon fuels,
including hydrogen, in sectors like transport where electrification is not yet a feasible option.
This new legislation is likely to be formally adopted in October (vote in EP schedule on 12
September, and adoption at the Council on 9 October).
6 ENERGY EFFICIENCY DIRECTIVE
First adopted in 2012, the Energy Efficiency Directive (EED, Directive 2012/27/EU) (194
),
setting rules and obligations for achieving the EU’s ambitious energy efficiency targets, was
updated in 2018 and 2023 to reflect the increased targets and to adapt the measures to deliver
them.
The 2012 EED quantified the 20% energy efficiency target by 2020 and established a set of
binding measures to help the EU reach it.
In 2018, the 'Clean energy for all Europeans package' (195
) introduced the revised EED
(Directive 2018/2002) (196
) to update the policy framework to the 2030, having already in
mind the 2050 decarbonistion objective. The central feature was the establishment of a
prominent energy efficiency target for 2030, set at a minimum of 32.5% improvement
compared to the 2007 projections for the same timeframe, which translated into indicative
targets of 1,128 Mtoe of primary energy and 846 Mtoe for final energy consumption for the
whole EU by 2030 (197
).
In 2021, primary energy consumption in the EU reached 1,309 Mtoe, a 5.9% increase
compared with 2020, but still below the 2019 level (1,354 Mtoe). Data (198
) show that the EU
had a distance to reach the 2030 target of 16.0% in 2021 (Figure 17).
(194
)https://eur-lex.europa.eu/legal-content/EN/TXT/?qid=1399375464230&uri=CELEX:32012L0027
(195
)https://energy.ec.europa.eu/topics/energy-strategy/clean-energy-all-europeans-package_en
(196
)https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv:OJ.L_.2018.328.01.0210.01.ENG
(197
)Both targets refer to the post BrexitEU27. The initial EU28 targets were talking of 1,273 Mtoe of primary
energy and 956 Mtoe of final energy consumption.
(198
)https://ec.europa.eu/eurostat/web/products-eurostat-news/w/ddn-20221219-4
67
Figure 17: Primary energy consumption in the EU, distance to 2030 target
Unit: Mtoe
Source: Eurostat.
Final energy consumption reached 968 Mtoe in 2021, a 6.8% increase compared with 2020
and a 1.8% decrease compared with 2019. In 2021, final energy consumption was 14.4%
away from the 2030 target (Figure 18).
68
Figure 18: Final energy consumption in the EU, distance to 2030 target
Unit: Mtoe
Source: Eurostat.
To achieve the 2030 climate target, as set by the 2030 Climate Target Plan, and contribute to
ensuring energy security within the EU, the EED recast formally agreed on 24 July 2023 (199
)
significantly raises the EU’s ambition, by making it binding for EU countries to collectively
achieve an additional 11.7% reduction of final energy consumption by 2030, compared to the
2020 reference scenario projections (200
). This translates into an idicative target of 992.5 Mtoe
of primary energy and a binding target of 763 Mtoe for final energy consumption for the
whole EU by 2030. Furthermore, the EED reacst establishes ‘energy efficiency first’ as a
fundamental principle of EU energy policy, recognising its vital role in practical policy
applications and investment decision-making beyond the energy sector.
(199
)https://energy.ec.europa.eu/news/european-green-deal-energy-efficiency-directive-adopted-helping-make-
eu-fit-55-2023-07-25_en
(200
)https://energy.ec.europa.eu/topics/energy-efficiency/energy-efficiency-targets-directive-and-rules/energy-
efficiency-targets_en
69
Annex 11: The climate policy framework considered for the
analysis
The list of EU policies considered is presented in the tables below, organised by sector. This
list of EU policies is an updated version of the list of policies presented in Annex I of the EU
Reference Scenario 2020 report (201
). Some of the most recent policies mentioned in the list
have been proposed by the European Commission but have not been formally adopted
(negotiations are underway).
1 ENERGY EFFICIENCY POLICIES
Energy Efficiency
1
Ecodesign Framework Directive Directive 2009/125/EC
Stand-by Regulation
Commission Regulation (EC) No 1275/2008 as amended by
Commission Regulation (EU) No 801/2013
Office/street lighting Regulation Commission Regulation (EC) No 347/2010
Lighting Products in the domestic and Tertiary
Sectors Regulations
Commission Regulation (EU) 2019/2020
Commission Regulation (EC) No 244/2009
Commission Regulation (EC) No 245/2009
Commission Regulation (EU) No 1194/2012
External power supplies Regulation Commission Regulation (EU) 2019/1782
TVs Regulation (+labelling) Regulation Commission Regulation (EU) 2019/2021
Electric motors Regulation Commission Regulation (EC)No 640/2009
Freezers/refrigerators Regulation
Commission Regulation (EU) 2015/1095
Commission Regulation (EU) 2019/2019
Commission Regulation (EU) 2019/2024
Household washing machines Regulation Commission Regulation (EU) 2019/2023
Household dishwashers Regulations Commission Regulation (EU) 2019/2022
Air conditioners
Commission Regulation (EU) No 206/2012
Commission Regulation (EU) Regulation No 327/2011
Commission Regulation (EU) No 1253/2014
Commission Regulation (EU) 2016/2281
Circulators Regulation
Commission Regulation (EC) No 641/2009 as amended by
Commission Regulation (EU) No 622/2012 and
Commission Regulation (EU) 2019/1781
Water pumps Commission Regulation (EU) No 547/2012
Tumble driers Commission Regulation (EU) No 932/2012
Computers and servers
Commission Regulation (EU) No 617/2013
Commission Regulation (EU) 2019/424
Vacuum cleaners Commission Regulation (EU) No 666/2013
(201
)European Commission, DG for Climate Action, DG for Energy, DG for Mobility and Transport, De Vita,
A., Capros, P., Paroussos, L., et al. (2021), EU Reference Scenario 2020: Energy, transport and GHG
emissions - Trends to 2050.
70
Cooking appliances Commission Regulation (EU) No 66/2014
Power transformers
Commission Regulation (EU) No 548/2014
Commission Regulation (EU) 2019/1783
Heaters Regulation
Council Directive 92/42/EEC
Commission Regulation (EU) No 813/2013
Commission Regulation (EU) No 814/2013
Commission Regulation (EU) 2015/1185
Commission Regulation (EU) 2015/1189
Commission Regulation (EU) 2016/2281
Welding equipment Commission Regulation (EU) 2019/1784
Omnibus Commission Regulation (EU) 2021/341
Imaging equipment
Voluntary agreement – Report from the Commission to the
European Parliament and the Council on the voluntary
ecodesign scheme for imaging equipment
COM/2013/023 final
Game consoles
Voluntary agreement - Report from the Commission to the
European Parliament and the Council on the voluntary
ecodesign scheme for games consoles
COM/2015/0178 final
2
Energy Labelling Directive
and delegated Regulations covering:
• lamps and luminaires,
• air conditioners
• Electronic displays
• household washing machines
• household refrigerating appliances
• household dishwashers
• household electric tumble-driers
• Labelling of tyres Regulations
• Cooking appliances
Omnibus
Regulation (EU) 2017/1369
supplemented by Delegated Regulations and Commission
Directives
Commission Delegated Regulation (EU) No 874/2012
Commission Delegated Regulation (EU) No 626/2011
Commission Delegated Regulation (EU) No 1254/2014
Commission Delegated Regulation (EU) 2019/2013
Commission Delegated Regulation (EU) 2019/2014
Commission Delegated Regulation (EU) 2015/1094
Commission Delegated Regulation (EU) 2019/2016
Commission Delegated Regulation (EU) 2019/2018
Commission Delegated Regulation (EU) 2019/2017
Commission Delegated Regulation (EU) No 392/2012
Regulation (EU) 2020/740
Commission Delegated Regulation (EU) 2015/1186
Commission Delegated Regulation (EU) No 811/2013
Commission Delegated Regulation (EU) No 812/2013
Commission Delegated Regulation (EU) 2015/1187
Commission Delegated Regulation (EU) No 65/2014
Commission Delegated Regulation (EU) 2021/340 of 17
December 2020 amending Delegated Regulations (EU)
2019/2013, (EU) 2019/2014, (EU) 2019/2015, (EU)
2019/2016, (EU) 2019/2017 and (EU) 2019/2018
3 Energy Performance of Buildings Directive
Directive 2010/31/EU, as amended by Directive (EU)
2018/844, and Proposal for a revision of this directive
(COM(2021) 802 final)
4 Energy Efficiency Directive Directive (EU) 2023/1791
2 POWER GENERATION AND ENERGY MARKETS
Power generation and energy markets
1
Completion of the internal energy market
(including provisions of the 3rd
package).
Directive 2009/73/EC
Since March 2011, the Gas and Electricity
Directives of the 3rd
package for an internal EU
gas and electricity market are transposed into
national law by Members States and the three
Regulations:
Directive (EU) 2019/944
71
- on conditions for access to the natural gas
transmission networks
Regulation (EC) No 715/2009
- on conditions for access to the network for
cross-border exchange of electricity
Regulation (EU) 2019/943
- on the establishment of the Agency for the
Cooperation of Energy Regulators (ACER)
Regulation (EU) 2019/942
2 Energy Taxation Directive
Directive 2003/96/EC, and Proposal for recasting (COM(2021) 563
final)
3 Regulation on security of gas supply Regulation (EU) 2017/1938
4
Regulation on market integrity and transparency
(REMIT)
Regulation (EU) 1227/2011
5 Nuclear Safety Directive Council Directive 2009/71/Euratom
6 Nuclear Waste Management Directive Council Directive 2011/70/Euratom
7 Basic safety standards Directive Council Directive 2013/59/Euratom
8
Directive on the promotion of the use of energy
from renewable sources
Directive (EU) 2018/2001, as amended by Directive (EU)
2023/2413.
9
Guidelines on State aid for environmental
protection and energy 2014-20
2014/C 200/01
Guidelines on State aid for climate,
environmental protection and energy 2022
C/2022/481
10 Hydrogen and decarbonised gas market package
Proposal for a directive (COM(2021) 803 final), and Proposal for a
regulation (COM(2021) 804 final).
11 REPowerEU plan
Regulation (EU) 2023/435 amending Regulation (EU) 2021/241 as
regards REPowerEU chapters in recovery and resilience plans and
amending Regulations (EU) No 1303/2013, (EU) 2021/1060 and
(EU) 2021/1755, and Directive 2003/87/EC.
3 CLIMATE POLICIES
(Cross-sectorial) Climate policies
1 EU ETS Directive
Directive 2003/87/EC, as amended notably by Directive
2008/101/EC (aviation), Decision (EU) 2015/1814 (Market
Stability Reserve), Regulation (EU) 2017/2392 (aviation “stop
the clock” derogation), Directive 2018/410 (revision for 2030
climate and energy framework), Regulation (EU) 2023/435
(REPowerEU), Directive (EU) 2023/958 (aviation) and
Directive (EU) 2023/959.
2 Directive on the geological storage of CO2 Directive 2009/31/EC
3 GHG Effort Sharing Regulation
Regulation (EU) 2018/842, as amended by Regulation (EU)
2023/857.
4
European Commission proposal to revise the F-gas
Regulation
Proposal COM (2022) 150 final, to amend Directive (EU)
2019/1937 and repeal Regulation (EU) No 517/2014
(provisionally agreed by co-legislators in October 2023).
5 LULUCF Regulation
Regulation (EU) 2018/841, as amended by Regulation (EU)
2023/839.
Carbon Border Adjustment Mechanism (CBAM) Regulation (EU) 2023/956.
72
6
Communication from the Commission Guidelines on
certain State aid measures in the context of the
system for greenhouse gas emission allowance
trading post-2021.
2020/C 317/04
4 TRANSPORT-RELATED POLICIES
Transport-related policies
1
CO2 emission performance standards for new passenger cars
and light commercial vehicles
Regulation (EU) 2019/631, as amended by Regulation
(EU) 2023/851.
2
CO2 emission performance standards for heavy-duty
vehicles
Regulation (EU) 2019/1242, amending Regulations
(EC) No 595/2009 and (EU) 2018/956.
Proposal to amend Regulation (EU) 2019/1242 (COM
(2023) 88 final)
3
Improving testing procedures - real driving conditions ('Real
Driving Emissions' – RDE) and improved laboratory test
('World Harmonised Light Vehicle Test Procedure' – WLTP)
Commission Regulation (EU) 2018/1832
Commission Regulation (EU) 2017/1151
Commission Regulation (EU) 2017/1154
Commission Regulation (EU) 2016/646
Commission Regulation (EU) 2016/427
4 Regulation EURO 5 and 6, and EURO 7 standard proposal
Regulation (EC) No 715/2007, implemented by
Commission Regulation (EU) 2017/1151
Commission Proposal COM(2022) 586
5
Directive on the promotion of the use of energy from
renewable sources
Directive (EU) 2018/2001, as amended by Directive
(EU) 2023/2413.
6 Fuel Quality Directive
Directive 98/70/EC, as amended by Directive (EU)
2015/1513
7 Regulation Euro VI for heavy duty vehicles
Regulation (EC) No 595/2009, implemented by
Commission Regulation (EU) 582/2011
8 Eurovignette Directive on road infrastructure charging
Directive 1999/62/EC, as amended by Directives
2011/76/EU and (EU) 2022/362.
9
Directive on the Promotion of Clean and Energy Efficient
Road Transport Vehicles (in public procurement)
Directive 2009/33/EC, as amended by Directive (EU)
2019/1161
10
Regulation on the deployment of alternative fuels
infrastructure
Regulation (EU) 2023/1804, repealing Directive
2014/94/EU.
11 Directive on weights & dimensions
Council Directive 96/53/EC, as amended by Directive
2015/719/EU, Decision (EU) 2019/894 and
Regulation (EU) 2019/1242.
73
Transport-related policies
Proposal to amend Council Directive 96/53/EC
(COM(2023) 445 final)
12 End of Life Vehicles Directive
Directive 2000/53/EC, as amended by Directive (EU)
2018/849
13 Mobile Air Conditioning in motor vehicles Directive Directive 2006/40/EC
14 Directive on the sound level of motor vehicles
Regulation (EU) No 540/2014 as amended by
Regulation (EU) 2019/839
15 Roadworthiness Package
Directive 2014/45/EU, Directive 2014/46/EU,
Directive 2014/47/EU
16 Road infrastructure safety management Directive (EU) 2019/1936
17 General safety regulation Regulation (EU) 2019/2144
18 Intelligent Transport Systems Directive
Directive 2010/40/EU, as amended by Directive (EU)
2023/2661
19
Regulation concerning type-approval requirements for the
deployment of the eCall in-vehicle system
Regulation (EU) 2015/758
20 Fourth railway package
Directives (EU) 2016/798 on railway safety, Directive
(EU) 2016/797 on railway interoperability and the
Directive 2016/2370/EU regarding the opening of the
market for domestic passenger transport services by
rail and the governance of the railway infrastructure
21
Directive establishing a single European railway area
(Recast)
Directive 2012/34/EU
22
European Rail Traffic Management System European
deployment plan
Commission Implementing Regulation (EU) 2017/6
23 Regulation on electronic freight transport information Regulation (EU) 2020/1056
24
Regulation on noise-related operating restrictions at Union
airports
Regulation (EU) No 598/2014
25
Regulations governing the performance and charging
schemes as well as the network functions of the Single
European Sky
Commission Implementing Regulations (EU) No
390/2013, 391/2013 and 677/2011; later replaced by
Regulations (EU) 2019/317 and 2019/123
26 Inland waterways and port services
Directive 2016/1629/EU on technical requirements for
inland waterway vessels and the Regulation on non-
road mobile machinery (NRMM)
Regulation (EU) 2017/352 establishing a framework
for the provision of port services
27 Provision of port services Regulation (EU) 2017/352
28 European Maritime Single Window Regulation (EU) 2019/1239
74
Transport-related policies
29 Directive on the sulphur content of marine fuels Directive 2012/33/EU
30
Monitoring, reporting and verification of greenhouse gas
emissions from maritime transport
Regulation (EU) 2015/757
31
Regulation on ensuring a level playing field for sustainable
air transport – ReFuelEU Aviation
Regulation (EU) 2023/2405
32
Regulation on the use of renewable and low-carbon fuels in
maritime transport and amending Directive 2009/16/EC –
FuelEU Maritime
Regulation (EU) 2023/1805
33
Action Plan to boost long-distance and cross-border
passenger rail
Commission Proposal COM(2021) 810
34
Proposal for a Regulation on the accounting of greenhouse
gas emissions of transport services
Commission Proposal COM(2023) 441
35
Proposal for a Regulation on the use of railway
infrastructure capacity in the single European railway area
Commission Proposal COM(2023) 443
36 Proposal for a revision of the Combined Transport Directive Commission Proposal COM(2023)702
5 INFRASTRUCTURE, INNOVATION AND RTD FUNDING
Infrastructure, innovation and RTD funding
1 TEN-E guidelines Regulation (EU) 347/2013
2 Regulation establishing the Connecting Europe Facility Regulation (EU) 1316/2013
3
EEPR (European Energy Programme for Recovery) and
NER 300 (New entrants reserve) CCS and innovative
renewables funding programme
Regulation (EC) No 663/2009, ETS Directive 2009/29/EC
Article 10a (8), further developed through Commission
Decision 2010/670/EU and implementing decisions, e.g.
EC(2014) 4493 and C(2015) 6882
4 Horizon 2020 support to energy research and innovation
Energy research under H2020: info available here:
http://ec.europa.eu/programmes/horizon2020/en/area/ener
gy
5
European Structural and Investment Funds (202
):
European Regional Development Fund (ERDF) Regulation (EU) No 1303/2013
European Social Fund (ESF) Regulation (EU) No 1301/2013
Cohesion Fund (CF) Regulation (EU) No 1304/2013
European Agricultural Fund for Rural Development
(EAFRD)
Regulation (EU) No 1305/2013
European Maritime & Fisheries Fund (EMFF) Regulation (EU) No 508/2014
(202
)As of May 2021, a revision of the regulations of the European Structural and Investment Funds has been
agreed and is planned for publication.
75
Infrastructure, innovation and RTD funding
Social Climate Fund Regulation (EU) 2023/955
6 TEN-T guidelines Commission Proposal COM(2021) 812 final.
6 ENVIRONMENTAL POLICIES
Environment and other related policies
1 General block exemption Regulation
Commission Regulation (EU) 2014/651, Commission Regulation
(EU) 2017/1084, Commission Regulation (EU) 2023/1315
2 Landfill Directive Directive 99/31/EC
3 Urban Wastewater Treatment Directive
Directive 91/271/EEC, Directive 98/15/EEC, Implementing
Decision 2014/431/EU, Revision proposal COM(2022) 541 final
4 Waste Management Framework Directive Directive 2008/98/EC
5 Nitrate Directive Directive 91/676/EEC
6 Common Agricultural Policy (CAP)
e.g. Council Regulations (EC) No 1290/2005, No 1698/2005, No
1234/2007, No. 73/2009, Regulations (EU) No 1305-1308/2013,
Regulation (EU) 2020/2220
7
Industrial emissions (Recast of Integrated
Pollution and Prevention Control Directive
2008/1/EC and Large Combustion Plant Directive
2001/80/EC)
Directive 2010/75/EU, and revision proposal COM/2022/156
final/3
8
Directive on national emissions' ceilings for
certain pollutants
Directive 2001/81/EC, Directive (EU) 2016/2284
9 Water Framework Directive Directive 2000/60/EC
10 Substances that deplete the ozone layer
Relevant EU legislation implementing the Montreal protocol, e.g.,
Regulation (EC) No 1005/2009 as amended by Commission
Regulation (EU) 744/2010, Regulation (EU) No 517/2014,
Council Decision (EU) 2017/1541.
Commission proposal to revise the Ozone Depleting Substances
(ODS) Regulation (COM(2022) 151 final), provisionally agreed
by co-legislators in October 2023.
11 Nature Restoration Law Proposal COM/2022/304 final.
7 INTERNATIONAL POLICIES
Other policies at international level
1
International Maritime Organisation (IMO) International
convention for the prevention of pollution from ships
(MARPOL), Annex VI
2008 amendments - revised Annex VI (Prevention
of Air Pollution from ships)
Energy Efficiency Design Index (EEDI) and the
Ship Energy Efficiency Management Plan
(SEEMP), IMO Resolution MEPC.203(62)
GHG emission reduction targets agreed on in July
2023 as per MEPC 80/WP.12.
76
Other policies at international level
2
Voluntary agreement to reduce PFC (perfluorocarbons, potent
GHG) emissions in the semiconductor industry
3
International Civil Aviation Organisation (ICAO), Convention
on International Civil Aviation, Annex 16, Volume II (Aircraft
engine emissions) and Volume III (CO2 emissions standard for
aircraft)
77
8 IMPLEMENTATION OF POLICIES TO REDUCE NON-CO2 GHG EMISSIONS
Sector Gas Policy Regional
coverage
Policy description and implementation in
GAINS
Agriculture CH4 Feed-in tariffs or
other subsidies to
stimulate co-
digestion of manure
on farms
Italy, Netherlands,
Latvia, Sweden,
Cyprus, Austria,
Croatia, Germany
Reflected via assumptions on uptake of farm-
scale biogas technology consistent with
information from EurObserv'ER (2020) on
installed capacity. Future uptake follows trend
in biogas production from anaerobic digestion
as projected in the PRIMES model Reference
scenario.
CH4
&
N2O
EU Common
Agricultural Policy
(CAP) and EU
Nitrate Directive
(EEC/676/1991)
with revisions
EU-wide Reflected in GAINS through input of CAPRI
model data on trends in livestock numbers,
milk yield and fertilizer use.
CH4 Ban on burning of
crop residues
EU-wide Assumed not fully enforced. GAINS uses
information derived from satellite images
(e.g., MODIS) as approximate estimates of
the mass of crop burned on fields.
Waste &
wastewater
CH4 EU Landfill
Directive
(EC/31/1999) with
amendment
(EC/850/2018) and
EU Waste and
Packaging
Directives
(EC/851/2018,
EC/852/2018)
EU-wide Biodegradable waste diverted away from
landfills (relative 1990 by -25% in 2006, -
50% in 2009 and -65% in 2016). All landfill
sites equipped with gas recovery by 2009. By
2035, countries must not landfill more than
10% of MSW generated. Member states that
landfill more than 60% of MSW in 2013 are
given a 5 years grace period but must not
landfill more than 25% in 2035. GAINS
Reference scenario assumes future targets will
be met.
CH4 EU Waste
Management
Framework
Directive
(EC/98/2008)
EU-wide The following hierarchy is to be respected in
waste treatment: recycling and composting
preferred to incineration/energy recovery,
which in turn is preferred to landfill disposal.
Considered in GAINS when simulating
pathway for compliance with the Landfill
Directive target.
CH4 Decree on waste
landfill
Slovenia Decree on landfill of waste beyond EU
Landfill Directive. Includes partial ban on
landfill of biodegradable waste.
CH4 &
N2O
Legislation to
replace current
composting with
anaerobic digestion
of food waste
Germany In GAINS, the current composting of organic
waste is phased-out linearly and replaced with
anaerobic digestion between 2020 and 2050.
CH4 Ban on landfill of
biodegradable
waste.
Austria, Belgium,
Denmark,
Germany,
Netherlands,
Sweden
Complete ban on landfill of untreated
biodegradable waste. Reflected in GAINS.
78
CH4 EU urban
wastewater
treatment directive
(EEC/271/1991)
EU-wide GAINS reflects an "appropriate treatment" of
wastewater from urban households (all
agglomerations > 2000 people) and food
industry must be in place latest by end of
2005. This means discharge must ensure
receiving waters meet relevant quality
objectives.
Industry N2O,
PFCs
EU ETS Directive
(EC/29/2009):
Primary aluminum
production and
production of nitric
acid, adipic acid,
glyoxal and
glyoxylic acid.
EU-wide Industry needs to aquire tradable emission
permits under the EU emission trading system
(EU-ETS).
PFCs Voluntary
agreement in
semiconductor
industry
EU-wide Semiconductor producers to reduce PFC
emissions by 2010 to a level at 10 percent of
1995 emissions. Accounted for in GAINS to
the extent it is reflected in national emission
inventories to the UNFCCC.
F-gases HFCs,
PFCs,
SF6
EU F-gas regulation
(EC 517/2014)
EU-wide Phase-down of F-gas sold on the market,
banning of use in applications where
alternatives to F-gases are readily available,
and preventing emissions from existing use of
F-gases through leakage control and end-of-
life recovery.
HFCs EU MAC Directive
(EC 40/2006)
EU-wide Mobile air conditioners: replacing the use of
high GWP HFCs with cooling agents
GWP100 < 150 in all new vehicle models
placed on the market.
HFCs EU Directive on
end-of-life vehicles
(EC 53/2000)
EU-wide Scrapped mobile air conditioners: recovery
and proper handling
HFCs,
PFCs,
SF6
National F-gas
regulations more
stringent than EU
regulation
Austria ("HFKW-FKW-SF6-Verordnung"), Belgium (end-of-life
regulation from 2005 for large-scale refrigeration), Denmark
(deposit-refund scheme since 1992, tax since 2001 and ban on
import, sale and use since 2002), Germany ("Chemikalien-
Klimaschutzverordnung" specify maximum leakage rates),
Netherlands ("STEK" since 1992), Sweden (envirionmental fees
since 1998, specific regulation since 2007)
Energy CH4 European
Commission
Proposal
COM(2021) 805
final, for a
Regulation on
methane emissions
reduction in the
energy sector,
amending
Regulation (EU)
2019/942
EU-wide Improved measurement, reporting and
verification of energy sector methane
emissions. Leak detection and repair and a
ban on venting and flaring practices. A
methane transparency requirement on imports.
79
Annex 12: Non-CO2 climate impacts of the navigation and
aviation sectors
1 AVIATION
1.1 Scientific evidence
In its 1999 special report on aviation, IPCC (203
) explored the sector’s impacts on climate.
Since then, updated assessments and studies (204
) have been regularly published, improving
the understanding of non-CO2 aviation effects.
In the scientific literature, those effects are mostly expressed in terms of “Effective Radiative
Forcing” (ERF) (205
) (Figure 19). The ERF from the sum of non-CO2 aviation impacts yields
a net positive (warming) that is at least as large as those of CO2 alone. Despite uncertainties
regarding the scientific knowledge on non-CO2 aviation effects, its contribution to global
warming is clear.
It must also be noted that the non-CO2 ERF ratios in Figure 19 are not fixed in time and the
non-CO2 forcing from aviation is sensitive to the rate of growth of CO2, such that it grows
faster under a scenario of increasing CO2 emissions, but equally, falls more quickly if CO2
emissions are reduced (Figure 20). Therefore, the growth of the sector in coming years and
the fuels used will be determinant to the warming caused by the non-CO2 emissions.
(203
)IPCC (1999), Special Report Aviation and the global atmosphere
(204
)Sausen et al (2005), Aviation radiative forcing in 2000: An update on IPCC (1999); D.S. Lee et al (2009),
Aviation and global climate change in the 21st century; D.S. Lee et al (2020), The contribution of global
aviation to anthropogenic climate forcing for 2000 to 2018; Klower et al (2021), Quantifying aviation’s
contribution to global warming.
(205
)The “Radiative Forcing” (RF) metric stands for stratosphere-adjusted radiative forcing and it has been used
as a proxy for predicting global mean surface temperature change. It represents the instantaneous change in
total irradiation due to incoming short wave solar radiation minus the outgoing long wave terrestrial
radiation (difference between sunlight energy received by the Earth and the energy Earth radiates back to
space). In the Fifth Assessment Report (2013), in order to better take into account the complexities of
heterogeneous distribution of certain forcing agents, the IPCC introduced the “Effective Radiative Forcing”
(ERF) metric. ERF is considered to be a good predictor of the long-term change in global surface
temperature caused through rapid adjustments in the atmosphere (e.g., thermal structure of the atmosphere,
clouds, aerosols, etc.), while maintaining sea surface temperatures constant.
80
Figure 19: Global aviation contribution to anthropogenic climate forcing for 2000 to 2018
Source: Lee et al., 2020.
Figure 20: Quantifying aviation’s contribution to global warming
Source: Klöwer et al., 2021.
The main aviation non-CO2 climate agents are water vapour (H2O), nitrogen oxides (NOx),
sulphur dioxide (SO2), and soot particles, as well as the atmospheric processes caused by such
emissions, for example the formation of ozone (O3) and contrail cirrus.
81
As shown in Figure 19 the best estimates about the largest aviation non-CO2 impacts are
those from NOx and contrails. The effects on climate of NOx emissions (“net-NOx effect”)
depends largely on their interaction with background emissions (206
) and the location of the
emissions. NOx contributes to the production of ozone (O3) and at the same time to the
destruction of methane (CH4). This results generally in a net warming effect. Minimizing
NOx can increase CO2 (decreased fuel efficiency via increased fuel burn), while optimising
engines could lead to higher combustion temperatures and to more NOx emissions, which
implies finding a balance between CO2 and NOx emissions.
Water vapour emissions resulting from hydrocarbon combustion have small direct climate
effect for subsonic aircrafts at current cruise altitudes (up to 12-13 km), but they contribute to
the formation of contrails (condensation trails). Contrail cirrus clouds are artificial clouds
composed of ice crystals that form behind jet engines when the relative humidity in the engine
plume increases reaching saturation. They occur at cold ambient temperatures between -35°C
and -60°C. Water vapour condenses on condensation nuclei, with soot particles (207
) being the
effective nuclei. The water droplets freeze and grow as ice crystals until the humidity with
respect to ice drops below saturation. Contrails generally cool during the day and always
warm at night (208
).
When it comes to hydrogen-powered aircrafts, the climate effect of water vapour (main
exhaust product) needs to be further investigated and the warming effect will increase in the
case of higher altitudes (e.g., supersonic) where water vapour is emitted into the drier
stratosphere.
(206
)Background emissions refer to the levels of NOx and other emissions that already exist in the atmosphere
from various sources unrelated to aviation.
(207
)The non-volatile particulate matter (nvPM) often referred to as "soot" (or "black carbon"), represents the
inorganic and organic carbon in engine exhaust and plume. Soot emissions from aircraft engines contribute
to contrail formation, where the number and size of ice crystals depend on soot concentration. The aromatic,
and more precisely naphthalene content of jet fuel is associated with the production of soot particles. When
it comes to vPM, sulphate particles originate from sulphur (S) in aviation kerosene fuel, which is oxidised to
sulphur dioxide (SO2) during the combustion process and then to sulphuric acid to a minor extent in the
combustor and to a major part, in the ambient atmosphere. Sulphuric acid can form, or coat pre-existing
particles. These particles reflect solar radiation back to space as a “direct effect” and thus have a negative
radiative forcing (cooling). This effect is small but needs to be noted as hydrotreatment (treating with
hydrogen) of fuels to remove the impurities, and clean further the fuels, implies reduction of sulphur as well
(sulphur particles, particularly those generated from combustion processes, can have detrimental effects on
human health).
(208
)During the day, contrails clouds mostly reflect sunlight back into space, exerting a cooling effect. However,
at night, the Earth's surface emits thermal radiation, and contrails act as a barrier, trapping some of this
radiation within the atmosphere.
82
1.2 Policy context at global and EU level
At global level, in 2022 the IPCC (209
) stated that current sectoral levels of ambition vary,
with emission reduction aspirations in international aviation and shipping lower than in many
other sectors.
At the same time, the IPCC report noted that between 2010 and 2019, aviation grew
particularly quickly (on average, 3.3% per annum). With the end of the COVID-related travel
restrictions this trend is returning quickly (210
).
In October 2022, the 41st ICAO Assembly adopted a long-term global aspirational goal
(LTAG) for international aviation of net-zero carbon emissions by 2050 in support of the
UNFCCC Paris Agreement's temperature goal (211
). The ICAO LTAG does not cover non-
CO2 aviation effects.
At EU level, the 2006 Commission’s Impact Assessment (212
) on the inclusion of aviation in
the EU greenhouse gas Emissions Trading System (EU ETS), as well as Directive
2008/101/EC recognised that aviation has an impact on the global climate through the release
of non-CO2 emissions.
Article 30(4) of Directive 2003/87/EC, as amended by Directive (EU) 2018/410, required the
Commission to present an updated analysis of the non-CO2 effects of aviation, accompanied,
where appropriate, by a proposal on how to best address those effects. To fulfil that
requirement, the European Union Aviation Safety Agency (EASA) conducted an updated
analysis of the non-CO2 effects of aviation on climate change and published its study (213
) in
November 2020. The findings confirmed what had been previously estimated, namely that the
non-CO2 climate impacts of aviation activities are, in total, at least as significant as those of
CO2 alone.
The revised EU ETS Directive (214
), which concerns aviation's contribution to the Union’s
economy-wide emission reduction target and implementing a global market-based measure,
concludes that non-CO2 aviation effects can no longer be ignored in line with the
precautionary principle. Regulatory measures are thus needed to achieve reductions of non-
CO2 emissions in line with the Paris Agreement.
(209
)IPCC (2022), Special Report Global Warming of 1.5°C
(210
)ICAO forecasts complete and sustainable recovery and growth of air passenger demand in 2023
(211
)By applying the goal to hold the increase in the global average temperature to well below 2 degrees Celsius
above pre-industrial levels, and to pursue efforts to limit the temperature increase to 1.5 degrees Celsius, the
Paris Agreement encompasses de facto all anthropogenic activities contributing to the warming of climate,
aviation included.
(212
)COM(2006) 818 final
(213
)SWD(2020) 277 final
(214
)Directive (EU) 2023/958
83
Accordingly, from 1 January 2025, Member States shall ensure that each aircraft operator
monitors and reports the non-CO2 effects from each aircraft that it operates during each
calendar year to the competent authority after the end of each year. For this purpose, the EU
ETS aviation revised Directive instructs the Commission to adopt, by 31 August 2024, an
implementing act based on the principles for monitoring and reporting set out in Annex IV to
the EU ETS revised Directive, to include non-CO2 effects in a monitoring, reporting and
verification (hereinafter, MRV) framework. This MRV framework must contain, at a
minimum, the three-dimensional aircraft trajectory data available, ambient humidity, and
temperature to enable CO2 equivalents per flight to be produced. The EU ETS revised
Directive requires the Commission to ensure, subject to available resources, that tools are
available to facilitate and, to the extent possible, automatise the monitoring, reporting and
verification tasks in order to minimise any administrative burden. From 2026, the
Commission will publish the results from the MRV framework once a year. By 31 December
2027, based on the results of the application of the EU ETS MRV framework of non-CO2
aviation effects (i.e., monitoring, reporting and verifying CO2 equivalents from non-CO2
aviation effects), the Commission will submit a report and, where appropriate, a legislative
proposal after having first carried out an impact assessment to mitigate such effects by
expanding the scope of the EU ETS to include non-CO2 aviation effects.
In addition, additional financial support is available to reduce aviation’s non-CO2 climate
impacts from the EU ETS-funded Innovation Fund, which specifically provides for support
for electrification and to reduce the overall climate impacts from aviation (215
).
The provisional political agreement reached in April 2023 for sustainable aviation fuel
mandates for aviation (ReFuelEU Aviation) is another milestone in the direction of reducing
the GHG impact of aviation. This measure will reduce the CO2 impact of aviation. If the
characteristics of the fossil fuel share of aviation fuels are not modified, the measure will also
reduce the non-CO2 impacts of the sector. The agreement also requires monitoring and
reporting of aromatics, naphthalene and sulphur content of the aviation fuels supplied, by
EASA.
In its “Fly the Green Deal” report published in June 2022, the Advisory Council for Aviation
Research and innovation in Europe (ACARE) European Technology Platform, defines
quantitative targets for aviation non-CO2 effects in Europe:
- By 2035 new technologies, fuels and operational procedures in service result in a 30%
reduction in non-CO2 climate effects of all intra-EU flights and those departing the EU
relative to the 1990 baseline.
- By 2050 new technologies and operational procedures in service result in a 90%
reduction in NOx and non-volatile particulate matter (nvPM) emissions, and warming
contrail cirrus, from all intra-EU flights and those departing the EU relative to the year
2000.
(215
)Innovation Fund (INNOVFUND) Methodology for GHG Emission Avoidance Calculation Version 3.0 01
November 2023.
84
1.3 Mitigation technologies
A possible mitigation option for mitigation of non-CO2, as a co-benefit of reducing CO2 is
the use of sustainable aviation fuels. Nevertheless, their potential to address the climate
problem is currently uncertain. As shown by Becken et al (216
), further analysis is needed on
the level of effectiveness of SAFs in terms of reduced GHG footprint on a life-cycle analysis
(LCA) basis and displacement of emissions.
Other more immediate options to reduce non-CO2 effects relate to operational measures to
seek a climate-optimised flights (as the climate impact of non-CO2 emissions depends not
only on the amount, but also on the location and time of emission) and the use of lower
emissions, alternative kerosene. On the latter, research publications under Horizon 2020
projects (217
) demonstrated that the use of low-sulphur, low-aromatics and low-naphthalene
kerosene would have significant social benefits, as the climate benefits (and also the fuel cost
savings and air pollution benefits) exceed the additional production costs and the external
effects of emissions from fuel production.
Additionally, technical measures like improving the design of aircrafts (reducing weight and
optimising aerodynamics) and the efficiency and combustion characteristics of aircraft
engines, are promising as well, but subject to longer time spans compared to the two previous
options.
1.4 Non-CO2 effects in the context of the 2040 climate target
While the 2030 Climate Target Plan did not cover aviation non-CO2 effects, the 2040 Climate
Target Plan needs to explore those, in line with the latest scientific findings and agreement on
the EU ETS Directive. A qualitative approach is complimentary to a quantitative one when it
comes to reducing the non-CO2 effects from aviation. In this regard, identifying cost-effective
mitigation actions (218
) that reduce the overall climate impact from both CO2 and non-CO2
aviation emissions, whilst also accounting for the uncertainties surrounding non-CO2 effects,
will be required. Qualitative and quantitative considerations for reducing aviation non-CO2
effects will be further informed by the deliverables under the EU ETS Directive (see above),
expected on 31 December 2027.
Modelling tools supporting the definition of the current EU climate targets do not refer to
aviation non-CO2 effects. Nevertheless, a number of already existing modelling tools
demonstrate functions for producing figures on CO2 equivalence of aviation non-CO2 effects
(e.g., AirClim model assesses the climate impact of aircraft emissions (i.e., altitude, longitude,
and latitude of emissions) for a variety of previously calculated aviation scenarios over short-
and long-time horizons, including different routings and technological options. Other models
(216
)Becken et al (2023), Implications of preferential access to land and clean energy for Sustainable Aviation
Fuels, Science of The Total Environment 886, 163883. https://doi.org/10.1016/j.scitotenv.2023.163883
(217
)JET Fuel SCREENing and Optimization
(218
)Such actions need to take into account the uncertainties in non-CO2 effects as part of a risk-based
assessment in order to ensure confidence in robust mitigation gains.
85
exist as well (CoCIP, LinClim, OSCAR, etc.) and further analysis and eventual
intercomparison of those would inform the work on mitigation of aviation non-CO2 effects.
2 NAVIGATION
2.1 Scientific evidence
Maritime transport remains today heavily reliant on fossil fuels (219
), which, once combusted,
produce emissions of various greenhouse gases (GHG), including carbon dioxide (CO2) but
also methane (CH4) and nitrous oxide (N2O) which have global warming potentials much
higher than CO2 (220
).The amount of emissions produced is primarily a function of the amount
of fuel consumed, the characteristics of the fuel, the engine technology employed and its
operation, and any post-combustion emission controls in place (221
).
Other GHGs which might be associated to maritime transport activities, as fugitive emissions,
include Hydro Fluorocarbons (HFCs), Perfluorocarbons (PFCs), Sulphur Hexafluoride (SF6)
and Nitrogen trifluoride (NF3). These are mostly used on-board ships as refrigerants in
various types of machinery, including for air conditioning and cargo cooling processes (222
).
Furthermore, maritime transport activities produce other air pollutants such as carbon
monoxide (CO), oxides of nitrogen (NOx), non-methane volatile organic compounds
(NMVOCs), particulate matter (PM10 and PM2.5, commonly known as “black carbon”), and
sulphur dioxide (SO2). Although these latter pollutants are not direct greenhouse gases, some
of them (CO, NOx, NMVOCs, PM2.5) do contribute to climate change.
Methane
Small quantities of methane (CH4) are emitted to the atmosphere as a result of the combustion
of marine hydrocarbons fuels, as by-product of their incomplete combustion. Additional
amounts of methane can be released into the atmosphere as fugitive and slipped emissions,
when certain fuels and technologies are used on-board. This might occur when gas or dual
fuel engines are on-board or from the cargo tanks in Liquified Natural Gas (LNG) carriers.
Nitrous oxide
Nitrous oxide (N2O) is produced in small quantities during fossil fuel combustion when
nitrogen in the air or fuel is oxidized in the high temperature environment of the engine. N2O
is also produced as a by-product of the combustion of ammonia in ammonia-fuelled vessels.
(219
)The use of alternative, renewable fuels, remains today extremely low, see IMO Report of fuel oil
consumption data submitted to the IMO Ship Fuel Oil Consumption Database in GISIS (Reporting year:
2021), MEPC 79/6/1.
(220
)IPCC AR5 reports the global warming potential of methane as 28 and of nitrous oxide of 265.
(221
)CO2, CH4, and N2O emissions from transportation water borne navigation, in Good Practice Guidance and
Uncertainty Management in National Greenhouse Gas Inventories.
(222
)The impact of such other GHGs is not accounted for in the figures reported above (IMO, 2020) as deemed
negligible.
86
Black Carbon
As one component of fine particulate matter (PM2.5), black carbon is a small, strongly light-
absorbing dark particle which deteriorates air quality and causes health and environmental
issues. At global level, black carbon is the second largest cause of climate impacts from the
maritime sector and is contributing to the rapid decline in Arctic Sea ice (223
). Black carbon
emissions are mostly associated with the incomplete combustion of residual fuel oil, which
leads to higher black carbon emissions compared to distillate fuels. As a result of its dark
colour, black carbon absorbs a high proportion of incoming solar radiation and directly warms
the atmosphere. Black carbon has a relatively short atmospheric lifetime, depositing on the
Earth’s surface a few days up to a few weeks after emission. However, when black carbon
deposits onto light-covered surfaces, such as snow or ice, it reduces the albedo of the surface
leading to a warming effect. The largest sources of black carbon emissions from maritime
transport are from fossil fuel, biomass and biofuel combustion and its release by ships is
mainly influenced by the type of fuel used, engine characteristics and load. (224
)
Emissions trends
While the bulk of greenhouse gases (GHGs) emissions from maritime transport are CO2,
when black carbon is included in the calculation of CO2-equivalents (225
), black carbon
becomes the second most significant contributor at 6.85%, while the share of CO2, CH4 and
N2O go down to 91.32%, 0.48% and 1.35%, respectively (226
).
Figure 21: Composition of non-CO2 GHG gases in the maritime sector
(223
)Comer, B., Olmer, N., Mao, X., Roy, B. & Rutherford, D., ‘Black carbon emissions and fuel use in global
shipping’, International Council on Clean Transportation, 2015
(224
)The European Maritime Transport Environmental Report (EMTER).
(225
)Using a 100- year GWP of 900.
(226
)Fourth IMO GHG Study, 2020. The impact of other GHGs is not accounted for in the figures reported as
deemed negligible.
87
Source: Fourth IMO GHG Study (2020).
Over the period 2012-2018, CO2 emissions from international shipping increased by 5.6%.
Methane emissions increased by 150%, far more than the 28-30% increase in the use of LNG
as a marine fuel. This occurred as the LNG carrier fleet shifted from mostly using LNG as a
fuel in steam turbine combustion engines to a larger share of the fleet using LNG-powered
injection engines, which emit more unburnt methane. Black carbon emissions increased by
11.6% for total shipping (i.e., from 59 to 62 kilo tonnes) (227
). An increase in the emissions of
methane and nitrous oxide might be driven in the coming years by the deployment of dual
fuel and Liquified-Natural-Gas-powered ships (for methane) and by the growing use of new
fuels such as ammonia (for nitrous oxide) (228
).
2.2 Policy context at EU and global level
The “Fit for 55” Package included several proposals to address maritime transport’s climate
impact, thus ensuring that the sector would contribute to the EU overall climate ambition. In
this context, amendments to the EU Maritime MRV Regulation have been adopted in May
2023 (229
), parallel to the inclusion of the maritime sector in the European Emission Trading
System. The amended EU Maritime MRV Regulation recognises the increasing importance of
climate impacts from non-CO2 emissions by updating monitoring and reporting rules to allow
the inclusion of methane and nitrous oxide emissions already from the year 2024, in a tank-to-
wake logic (which accounts for emissions from both combustion and tank-to-wake slippage).
This will allow for an extension of the scope to methane and nitrous oxides (in addition to
CO2) under the ETS Directive as applied to the maritime sector from 2026 onwards.
Furthermore, the Commission will continue to assess every two years the overall impact of
shipping activities on the global climate, including through non-CO2 emissions or effects and
now also particulate matter with a global warming potential, not covered by the regulation.
Additional support to the decarbonisation of the maritime sector will be provided by the EU
ETS-funded Innovation Fund, where the Commission has stated that 20 million allowances
(i.e., about €1.6 billion with a price of €80 per allowance) should be used to reduce climate
impacts from maritime up to 2030. Special attention is given in the Innovation Fund to
addressing the maritime sector’s full climate impact, including from black carbon emissions.
In addition, the FuelEU Maritime Regulation, (230
) aims at boosting demand for renewable
and low-carbon fuels by setting targets for the annual GHG intensity of the energy used on
board ships (using a well-to-wake logic and accounting for the methane and nitrous oxides
emissions), and by encouraging zero-emission technology when ships are at berth in ports.
(227
)Fourth IMO GHG Study, 2020.
(228
)Study on EU ETS for maritime transport and possible alternative options of combinations to reduce
greenhouse gas emissions.
(229
)Regulation (EU) 2023/957 amending Regulation (EU) 2015/757 in order to provide for the inclusion of
maritime transport activities in the EU Emissions Trading System and for the monitoring, reporting and
verification of emissions of additional greenhouse gases and emissions from additional ship types.
(230
) Regulation (EU) 2023/1805 on the use of renewable and low-carbon fuels in maritime transport.
88
At the UN level, the EU is supporting the work at the International Maritime Organisation
(IMO) for the development of guidelines on life cycle GHG intensity of marine fuels, which
will allow for the calculation of emissions default values for fuels in a well-to-wake logic,
including methane and nitrous oxide emissions in addition to carbon dioxide. Furthermore,
the EU is supporting the work for the development of the IMO’s mid-term decarbonisation
measures, which will take the form of a global fuel standard and a global economic measure
and are to be adopted by 2025 and enter into force by 2027. Those measures should deliver on
the GHG reduction objectives of the 2023 IMO GHG Strategy (notably to reach net-zero
well-to-wake GHG emissions by or around 2050). The EU is also supporting the revision of
the IMO’s short-term decarbonisation measures, which should also support the attainment of
the 2023 IMO GHG Strategy goals.
Black carbon emissions are currently not directly regulated at international level. However,
both the Arctic Council and the IMO are considering the impacts of black carbon in the
Arctic. As part of these activities, the IMO agreed a reporting protocol and measurement
methods for black carbon emissions with a view to investigating policy options. In 2021, the
IMO approved a ban (with waivers) on the use of Heavy Fuel Oil and its carriage for use by
ships in Arctic waters after 1 July 2024 (231
) and adopted a resolution which urges Member
States and ship operators to voluntarily use distillate or other cleaner alternative fuels or
methods of propulsion that could contribute to the reduction of black carbon emissions from
ships when operating in or near the Arctic.
2.3 Mitigation options and technologies
The reduction of non-CO2 emissions from maritime transport can be pursued through
technologies already available in the market, while additional ones are currently under
development.
The application of currently available high-pressure dual-fuel injection engines could reduce
methane emissions compared to low pressure engines, as thanks to the resulting combustion
being nearly complete, methane slip is reduced to nearly zero (232
). Additional methane
emissions reduction technologies applied to the engine include exhaust gas recirculation
(EGR), engine tuning and control software, and engine component design optimization. (233
)
Nitrous oxide emissions can be reduced by using catalytic emission treatment technologies
that are well-known and commercially available. A wide range of different catalysts can be
used, in different temperature and gas conditions, with or without reducing agents. (234
)
Plasma reduction systems (PRS) are currently being developed and could potentially be
applied to reduce both methane and ammonia slip emissions. PRS systems, still in the early
(231
)See https://www.reuters.com/article/shipping-arctic-imo-idUKL8N2HY5IS.
(232
)Decarbonizing Maritime Transport: The Importance of Engine Technology and Regulations for LNG to
Serve as a Transition Fuel, Lindstad, 2020.
(233
)Reducing methane emissions onboard vessels, The Mærsk Mc-Kinney Møller Center for Zero Carbon
Shipping, October, 2022.
(234
)Managing emissions from ammonia-fueled vessels, The Mærsk Mc-Kinney Møller Center for Zero Carbon
Shipping, March, 2023.
89
stages of development, consist of a catalyst and an absorbent-free after-treatment technology
aimed at producing a non-thermal plasma. The processing of the exhaust gas by means of
plasma results in the conversion of pollutants in harmless molecules via a chain of chemical-
kinetic reactions.
As black carbon emissions are largely influenced by the type of fuel used and engine
characteristics, key available abatement technologies include fuel type selection (e.g., low-
sulphur distillate fuels) and fuel treatment, better engine maintenance, better fuel combustion,
and exhaust treatment systems. Operational practices aiming at improving fuel efficiency such
as slow-steaming and de-rating can further contribute to black carbon emissions
reduction (235
).
2.4 Non-CO2 effects in the context of the 2040 climate target
Modelling tools supporting the definition of the current EU climate targets refer to non-CO2
emissions from the maritime sector only in relation to N2O and CH4.
Black carbon from international maritime transport is estimated to account for about 2% of
total global black carbon emissions (236
) and between 8% to 13% of all black carbon diesel
emissions. (237
) Projections on the future impact of maritime black carbon emissions are
subject to considerable uncertainty but suggest the marine sector will maintain and even
increase (up to 35%) its share in total diesel black carbon emissions by 2030 compared to
2010 level (238
).
While maritime transport has traditionally relied on the use of conventional fossil fuels, today
several alternative fuels and energy technologies have the potential to decarbonise shipping,
including biofuels and biogas, e-fuels and e-gas, ethyl and methyl alcohols, hydrogen,
ammonia, and electricity. At present it remains unclear which of these will play the biggest
share in the energy transition of the sector but the composition of the future fuel mix of the
global fleet will affect the relative impact of the different greenhouse gases on total emissions
from maritime. Overall, the uptake of alternative fuels will reduce CO2 emissions and, to a
certain extent, non-CO2 emissions as well. In parallel, the decrease of CO2 emissions from
fossil fuel combustion will also increase the relative importance of non-CO2 emissions, such
as N2O emissions from ammonia combustion, CH4 from incomplete hydrocarbons combustion
(irrespective of their origin), or black carbon from biofuels. Wind assist technology also has a
significant potential to reduce GHG emissions from shipping.
The further reduction of non-CO2 emissions will be possible both through the deployment of
existing abatement technologies but also through regulatory measures incentivising the
(235
)Comer, B., et al., 2017, Black carbon emissions and fuel use in global shipping, 2015, International Council
on Clean Transportation.
(236
)Bounding the role of black carbon in the climate system: A scientific assessment, Bond et al., 2013, Journal
of Geophysical Research: Atmospheres, 118(11).
(237
)This share refers to the year 2010.
(238
)Azzara et al., 2015. Needs and opportunities to reduce black carbon emissions from maritime shipping. The
International Council on Clean Transportation. Working Paper 2015–2.
90
reductions. The upcoming inclusion of CH4 and N2O emissions into the ETS for the maritime
sector will create an incentive for their reduction, while regulatory developments on black
carbon are ongoing and further action may need to be considered.
91
Annex 13: Literature review of 2040 net GHG reductions
This annex provides a review of recent analyses (published or in preprint in 2023) of GHG
pathways to climate neutrality looking at the level of emissions in 2040.
Table 1 shows a range of reductions of net GHGs in 2040 compared to 1990 of around 85-
95%. To be noticed that the scope considered in the analyses varies from “domestic” to
“including international bunker fuels”.
The different analyses highlight how achieving 90% or more requires managing scale-up
challenges, such as the sustainable use of biomass for bioenergy, the large-scale development
of carbon capture or the supply of raw materials, but still lies within the feasibility limits of
fast technological development (239
). More sustainable lifestyles can contribute positively to
overcoming such challenges.
(239
)ESABCC (2023). Scientific advice for the determination of an EU-wide 2040 climate target and a
greenhouse gas budget for 2030–2050. DOI: 10.2800/609405.
92
Table 1. 2040 GHG level in recent analyses of 2040 climate targets for the EU
Projections Approach Level of net GHGs 2040 vs 1990 Scope
ESABCC (240)
Analysis of IPCC AR6 + more
recent scenarios
88-92% considering environmental risk and
technological challenge
Intra-EU
88-95% if technological challenge by 2030 can be
overcome
PBL (241)
Analysis of IPCC AR6
scenarios
86% for climate category C1
92% if selecting only trajectories meeting climate
neutrality by 2050
Intra-EU
ECEMF (242)*
Multi-model analysis based
on integrated assessment
models
84-89%
Including
international
bunker fuels
86-92% Intra-EU
PIK (243)*
Integrated assessment
model, under different
assumptions
87-91%
Including
intra-EU
aviation
Strategic
Perspectives (244)
CLIMACT “2050 Pathways
Explorer”
85-95%
Including
international
bunker fuels
CLEVER (245)
Sufficiency scenario, sectoral
approach
93% Domestic
Agora
Energiewende (246)
Sectoral modelling 89% Domestic
Note: *These publications are undergoing a scientific peer-review process.
The ESABCC analyses a large number of scenarios and excludes a vast majority of them on
the basis of concerns on data quality and plausibility, consistency with EU and global climate
goal and geophysical, technological and sociocultural feasibility criteria. 36 “filtered”
scenarios projecting a wide range of emission reduction outcomes are selected and further
assessed according to their environmental risk and technological deployment challenges. The
(240
)ESABCC (2023). Scientific advice for the determination of an EU-wide 2040 climate target and a
greenhouse gas budget for 2030–2050. DOI: 10.2800/609405. Scenario database:
https://data.ece.iiasa.ac.at/eu-climate-advisory-board/#/login?redirect=%2Fworkspaces
(241
) Hooijschuur, E, den Elzen, M.G.J., Dafnomilis, I. and van Vuuren, D.P. (2023), Analysis of cost-effective
reduction pathways for major emitting countries to achieve the Paris Agreement climate goal, The Hague:
PBL Netherlands Environmental Assessment Agency.
(242
)ECEMF, ECEMF Policy Brief: Insights on EU2040 targets based on a model intercomparison exercise of
EU Climate Neutrality Pathways, 2023. DOI 10.5281/zenodo.8337667 https://zenodo.org/record/8337668
(243
)Rodrigues et al: “2040 greenhouse gas reduction targets and energy transitions in line with the EU Green
Deal”, Nature Communication, 2023. Under Review.
(244
)Kalcher, L. et al., (2023). The post-2030 climate target debate starts now, Strategic Perspectives and
Climact. https://strategicperspectives.eu/the-post-2030-climate-target-debate-starts-now/
(245
)CLEVER, Climate neutrality, Energy security and Sustainability: A pathway to bridge the gap through
Sufficiency, Efficiency and Renewables – Final Report, 2023. https://clever-energy-scenario.eu/wp-
content/uploads/2023/08/CLEVER_final-report.pdf
(246
)Graf, A., et al. (2023). Breaking free from fossil gas. A new path to a climate-neutral Europe. Agora
Energiewende. A-EW_292_Breaking_free_WEB.pdf (agora-energiewende.de)
93
environmental risk considers the extent to which scenarios count on large-scale uses of carbon
capture (including removals) and bioenergy. Technological deployment challenges consider
the implication of conservative estimates for the deployment potential of PV and wind energy,
and hydrogen technologies. In the document, the levels at which the use or deployment of
certain mitigation options can represent an environmental risk or a technological challenges
are not defined as “hard” values, therefore examples from the literature are used. Out of the
36 filtered scenarios, 5 stays within the environmental risk and technological deployment
challenge levels, leading to a range of 88-92% emission reductions in 2040 (vs 1990). If the
challenges of deploying renewable energy can be overcome(247
), while still remaining within
the environmental risk boundaries, the numbers of possible scenarios increases to 7, leading to
a range of 88-95% emission reductions in 2040.
PBL shows a range of 76%-96% of domestic emission reductions for the EU for 2040 for
climate category C1 (248
), with a median value of 86%. The analysis follows a very similar
approach to the one taken by the ESABCC, since the values are based on all IAM scenarios
used in the IPCC AR6 report and its chapter on mitigation pathways compatible with long-
term temperature goal and following least-cost consideration. The PBL study complements
the ESABCC study since it also includes projections that do not reach net-zero in EU by
2050. Considering only scenarios in line with the EU climate target, hence reaching net-zero
in 2050, the range of net GHG emission reductions in 2040 is 84-97%.
PIK provides a range of emission reduction of 87-91% (including intra-EU aviation),
depending on emission levels and energy efficiency attained in 2030, availability of biomass
and development of CCS in the long run. The study indicates the challenges related to the
achievement of a highly electrified energy systems, including the need to invest significantly
on grid infrastructure, to implement a large amount of flexibility solutions, and to address the
strong contraction of gas network usage. It also mentions the requirements to limit the use of
bioenergy according to sustainability constraints and the uncertainty on the development of
carbon capture and carbon removal related to the creation of a robust regulatory framework
that covers permits, monitoring, cross-border collaboration, local storage acceptance,
remuneration and long-term liability across different EU countries.
ECEMF performs a multi-model intercomparison using 9 different models and provides a
range of 84-89% (including international bunker fuels) and 86-92% (including only intra-EU
(247
) ESABCC, Table 6, defines such technological challenges as installed capacities in 2030 of solar (900 GW),
wind (623 GW) and hydrogen (50 GW). In 2022, the total installed capacity of PV and wind in the EU were
both close to 200 GW, including newly installed capacity that year of about 40 GW for PV and 15 GW for
wind (source: Eurostat, Solar Power Europe, WindEurope).
(248
) Limit 1.5 °C with at least 50% probability, with limited or no overshoot. As per in Riahi, K., R.
Schaeffer, J. Arango, K. Calvin, C. Guivarch, T. Hasegawa, K. Jiang, E. Kriegler, R. Matthews, G.P. Peters,
A. Rao, S. Robertson, A.M. Sebbit, J. Steinberger, M. Tavoni, D.P. van Vuuren, 2022: Mitigation pathways
compatible with long-term goals. In IPCC, 2022: Climate Change 2022: Mitigation of Climate Change.
Contribution of Working Group III to the Sixth Assessment Report of the Intergovernmental Panel on
Climate Change [P.R. Shukla, J. Skea, R. Slade, A. Al Khourdajie, R. van Diemen, D. McCollum, M.
Pathak, S. Some, P. Vyas, R. Fradera, M. Belkacemi, A. Hasija, G. Lisboa, S. Luz, J. Malley, (eds.)].
Cambridge University Press, Cambridge, UK and New York, NY, USA. doi: 10.1017/9781009157926.005.
Table 3.2. Limited overshoot refers to exceeding 1.5°C global warming by up to about 0.1°C, high overshoot by
0.1°C-0.3°C, in both cases for up to several decades.
94
emissions). According to the paper, achieving such a level of ambitions requires a large effort
to scale up carbon capture up by 2040 up to an average of 305 MtCO2, and a fast scale up of
wind, solar, electric vehicles, and heat pumps.
Strategic Perspective analyses a 2040 net reduction between 85% and 95% (including
international bunkers). This is achieved with a strong contribution of nature-based removals
(i.e., around 470 MtCO2-eq of LULUCF in the case of a 95% reduction, i.e., above the
environmental risk threshold of 400 MtCO2 identified by the ESABCC and above the levels
considered in this impact assessment) and complemented by industrial based removals
(between 35 and 60 MtCO2), mostly from BECCS. The scenarios discussed also project
behavioural change trends: demand reduction plays a major role in decarbonisation of the
industry and is responsible for 15% of the sectoral emissions reductions in 2040; a shift to
other modes of transport, with public transport and “mobility as a service” reduces the car
fleet by 20% while increasing mobility options, and a switch to a healthier and plant-based
diet can contribute to reducing food demand by 12%.
The CLEVER scenario projects a reduction of 93% of emissions in 2040 vs 1990,
implementing a modelling approach based almost exclusively on sufficiency, efficiency, and
renewable energies. In the scenario, sufficency alone can be responsible for reducing final
energy consumption (FEC) by 20-30%, through a reduction of total passenger traffic by
around 21% in 2050 compared to 2019 through a mobility switch from road and air to active
and rail, and a reduction of industrial demand for energy intensive materials such as steel (-
15%) and cement (-38%). Additional efficiency measures, an increasing share of renewables
in the energy mix to above 50% and reduced meat (-40%) and milk (-20%) consumption,
complete a picture that reaches reductions above 90% with very limited carbon capture, and
no strong enhancement of the LULUCF net sink. The pathway prioritising these three specific
aspects is considered capable to limit the possible challenges and risks associated to the
ambitious target, such as: technical feasibility for deep renovation, material and metal
resource depletion, sustainability of bioenergy production, adaptation of electricity networks,
and timely delivery of large-scale new technologies (e.g., nature-based, and industrial carbon
removals, e-fuels and new nuclear).
Agora Energiewende suggests a domestic 2040 target of 89%, and its analysis focuses on
possible pathways to replace existing consumption of fossil gas. They describe uncertainties
related to a correct estimation of sustainable and affordable biomethane potential, as well as
the need to carefully manage the transition from gas (including LNG) to alternative sources
(electricity, hydrogen, and e-fuels) to adapt the corresponding infrastructure and avoid the risk
of stranded assets.
95
TABLE OF FIGURES
Figure 1: GHG emissions under different GHG emission accounting methods........................ 9
Figure 2: Major countries in extraction and processing of selected minerals and fossil fuels. 12
Figure 3: Issuance of green bonds in the EU ........................................................................... 23
Figure 4: Green bond share in total new issuance for EU and non-EU ................................... 24
Figure 5: Number of patent applications filed under the PCT in the EU by SGC................... 31
Figure 6: Global patent applications for SGC “Climate and Environment” ............................ 32
Figure 7: Available public funding by stage of the RD & D process ..................................... 34
Figure 9: Investment by fund and category of regions............................................................. 43
Figure 10: ERDF/CF climate expenditure by climate-relevant policy area............................. 44
Figure 11: Overview of territories in approved territorial just transition plans (Sept. 2023)... 45
Figure 12: Breakdown of expenditure supporting the green transition, by policy area ........... 46
Figure 13: Historical EU GHG emissions................................................................................ 61
Figure 14: GHG emissions and GDP development in the EU (1990 = 100) ........................... 62
Figure 15: Historical evolution of ETS emissions ................................................................... 63
Figure 16: Historical evolution of GHG from ESR sectors ..................................................... 64
Figure 17: Historical evolution of GHG from LULUCF ......................................................... 65
Figure 18: Primary energy consumption in the EU, distance to 2030 target ........................... 67
Figure 19: Final energy consumption in the EU, distance to 2030 target................................ 68
Figure 20: Global aviation contribution to anthropogenic climate forcing for 2000 to 2018.. 80
Figure 21: Quantifying aviation’s contribution to global warming ......................................... 80
Figure 22: Composition of non-CO2 GHG gases in the maritime sector ................................ 86
TABLE OF TABLES
Table 1. 2040 GHG level in recent analyses of 2040 climate targets for the EU .................... 92


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1
Table of contents
ANNEX 6: ANALYTICAL METHODS ....................................................................................................................3
1 COST OF CLIMATE CHANGE .....................................................................................................................3
1.1 LITERATURE REVIEW....................................................................................................................................... 3
1.2 TOOLS FOR COMPLEMENTARY ANALYSIS ............................................................................................................. 4
1.2.1 Economic analysis................................................................................................................................. 4
1.2.2 Analysing land and forestry.................................................................................................................. 4
2 ANALYSIS OF FUTURE GHG EMISSIONS ...................................................................................................5
2.1 MODELS ()................................................................................................................................................... 5
2.1.1 Main modelling suite for GHG emissions ........................................................................................ 5
2.1.2 Complementary tools on energy and industry CO2 emissions ........................................................ 8
2.2 LITERATURE REVIEW..................................................................................................................................... 12
2.3 HISTORICAL DATA ........................................................................................................................................ 12
2.3.1 Energy system in PRIMES .............................................................................................................. 12
2.3.2 Non-CO2 emissions in GAINS......................................................................................................... 12
2.3.3 LULUCF in GLOBIOM...................................................................................................................... 12
2.4 KEY ASSUMPTIONS....................................................................................................................................... 12
2.4.1 Population and GDP ...................................................................................................................... 12
2.4.2 Sectoral economic activity............................................................................................................. 14
2.4.3 Energy Prices Trajectory between 2020 and 2050 ........................................................................ 15
2.4.4 Technologies.................................................................................................................................. 16
2.4.5 Bioenergy potential....................................................................................................................... 20
2.5 POLICIES .................................................................................................................................................... 21
2.5.1 EU policies ..................................................................................................................................... 21
2.5.2 National Developments................................................................................................................. 28
3 SCENARIOS () ........................................................................................................................................ 31
3.1 SCENARIOS ................................................................................................................................................. 31
3.1.1 Common policy elements .............................................................................................................. 31
3.1.2 S1................................................................................................................................................... 35
3.1.3 S2................................................................................................................................................... 36
3.1.4 S3................................................................................................................................................... 37
3.1.5 LIFE ................................................................................................................................................ 38
3.2 MODELLING DRIVERS.................................................................................................................................... 42
3.3 COMPLEMENTARY ANALYSIS .......................................................................................................................... 44
3.3.1 Energy system modelling............................................................................................................... 44
3.3.2 Industry ......................................................................................................................................... 44
4 SOCIO-ECONOMIC ANALYSIS................................................................................................................. 46
4.1 MODELS ()................................................................................................................................................. 46
4.1.1 GEM-E3.......................................................................................................................................... 46
4.1.2 E3ME ............................................................................................................................................. 47
4.1.3 E-QUEST......................................................................................................................................... 47
4.2 COMPLEMENTARY INPUTS ............................................................................................................................. 48
ANNEX 7: COST OF CLIMATE CHANGE ............................................................................................................ 49
1 GLOBAL WARMING ............................................................................................................................... 49
2 IMPACTS OF CLIMATE CHANGE ............................................................................................................. 52
2.1 GLOBAL IMPACTS OF CLIMATE CHANGE AND RISKS OF CLIMATE TIPPING POINTS ........................................................ 52
2.1.1 A very wide range of impacts........................................................................................................ 52
2.1.2 Climate tipping points ................................................................................................................... 53
2.1.3 Impacts on ecosystems and biodiversity ....................................................................................... 56
2.2 IMPACTS ON SELECTED MOST VULNERABLE REGIONS ........................................................................................... 62
2
2.2.1 Africa ............................................................................................................................................. 63
2.2.2 Small Islands.................................................................................................................................. 65
2.2.3 Asia................................................................................................................................................ 67
2.3 IMPACTS IN THE EU...................................................................................................................................... 69
2.3.1 Health............................................................................................................................................ 73
2.3.2 Water stress and scarcity .............................................................................................................. 76
2.3.3 Flood risks...................................................................................................................................... 78
2.3.4 Infrastructure: Impacts on energy systems, transport systems and tourism ................................ 79
2.3.5 Impact of Climate Change on the Land system ............................................................................. 85
3 ECONOMIC COST OF CLIMATE CHANGE .............................................................................................. 104
3.1 EVIDENCE FROM RECENT EVENTS................................................................................................................... 104
3.2 ANALYSES ON GLOBAL ECONOMIC IMPACTS..................................................................................................... 107
3.3 SECTORAL ECONOMIC IMPACTS IN THE EU...................................................................................................... 110
3.3.1 The PESETA study ........................................................................................................................ 110
3.3.2 Other recent analyses.................................................................................................................. 111
3.3.3 Bottom-up analysis with the NEMESIS model ............................................................................. 112
3.4 THE LIMITATIONS OF ECONOMIC VALUATION WITH ECONOMIC MODELS ................................................................ 116
4 IMPACTS OF CLIMATE CHANGE ON BUSINESSES ................................................................................. 118
5 IMPACTS OF CLIMATE CHANGE ON SOCIETY AT LARGE ....................................................................... 121
6 CONCLUSIONS..................................................................................................................................... 122
TABLE OF FIGURES........................................................................................................................................ 124
TABLE OF TABLES ......................................................................................................................................... 125
3
Annex 6: Analytical methods
1 COST OF CLIMATE CHANGE
1.1 Literature Review
The analysis on the cost of climate change is based on a review of scientific literature,
including the reports by authoritative bodies, such as IPCC and WMO. The results from the
JRC PESETA IV study (1
), investigating the effects of climate change impacts on the EU at
sectorial level, as well as how impacts can be reduced with mitigation and adaptation policies,
and from the EU Horizon 2020 COACCH (CO-designing the Assessment of Climate CHange
costs) (2
) project, assessing the risks and costs of climate change in Europe, are also included.
The Annex 7 summarizes the current literature on the state of the climate globally, and the
impacts and risks of climate change, including on climate tipping points and on ecosystems
and biodiversity. Impacts on selected most vulnerable regions (Africa, Small Islands and
Asia) are described. This is followed by a focus on the European Union, with a review of the
literature on the observed and projected impacts of climate change on health, water scarcity,
flood risks, infrastructure, and on the land system.
Economic valuation of the cost of climate change is presented by first providing a brief
overview of the literature on the evidence of economic damages from past climate events
globally and in the EU, followed by the presentation of findings from studies estimating
damages from climate change under different warming scenarios. The limitations of economic
valuation with economic models are also explored.
Future emissions, climate change and related risks and impacts as well as adaptation and
mitigation options are explored in different modelled scenarios, which describe how the future
may develop. Those scenarios are based on a range of assumptions, including socio-economic
variables and mitigation. The Sixth Assessment Report of the Intergovernmental Panel on
Climate Change (IPCC) uses a core set of five illustrative Shared-Socio-economic Pathways
(SSP) scenarios, that span a wide range of societal and climatic futures. They correspond to
Representative Concentration Pathway (RCP) levels for radiative forcing at the year 2100 as
follows: RCP1.9, RCP2.6 (both SSP1 – ‘green growth’), RCP4.5 (SSP2 – ‘middle of the
road’), RCP7.0 (SSP3 – ‘regional rivalry’) and RCP8.5 (SSP5 ‘fossil fueled development’).
The PESETA IV study assesses sectorial climate change impacts in scenarios where
mitigation and adaptation action take place and warming is limited to 1.5o
C and 2o
C, and a
scenario without climate policy actions, and impacts are assessed at 3o
C global warming. The
COACCH project uses nine different combinations of climate change and socio-economic
scenarios, based on four SSPs (SSP1, SSP2, SSP3 and SSP4) and four RCPs (RCP2.6,
RCP4.5, RCP6.0 and RCP8.5). The evaluation of the macro-economic costs of a range of
climate hazards, done for this impact assessment using NEMESIS, considered two damage
scenarios: IPCC’s SSP1-1.9 (RCP1.9), and a SSP3-7.0 (RCP7.0) scenario.
(1
) Feyen L., Ciscar J.C., Gosling S., Ibarreta D., Soria A. (editors) (2020). Climate change impacts and
adaptation in Europe. JRC PESETA IV final report. EUR 30180EN, Publications Office of the European
Union, Luxembourg, ISBN 978-92-76-18123-1, doi:10.2760/171121, JRC119178.
(2
) COACCH – CO-designing the Assessment of Climate CHange costs, accessed 20.7.2023
4
1.2 Tools for complementary analysis
In complement to the comprehensive literature review and existing studies on climate change
impacts and costs mentioned above, the impact assessment makes use more specifically of
two models: NEMESIS for an economic analysis and GLOBIOM for impacts on the
LULUCF sector. A description of these two models is provided in the Modelling Inventory
and Knowledge Management System of the European Commission MIDAS (3
).
1.2.1 Economic analysis
An evaluation of the macro-economic costs of a range of climate hazards was carried out for
this impact assessment, using the NEMESIS macro-econometric model. The NEMESIS
model (New Econometric Model of Evaluation by Sectoral Interdependency and Supply) is a
sectoral detailed macroeconomic model for the European Union devoted to study issues that
link economic development, competitiveness, employment, and public accounts to economic
policies, and notably all structural policies involving long term effects. The essential purpose
of the model is to provide a consolidated framework to realise “business as usual" (BAU)
scenarios (or other alternative scenarios), up to 30 to 40 years, and to assess the
socioeconomic impact of the implementation of all additional policies not already
implemented in the BAU.
NEMESIS includes a detailed energy-environment module that allows the model to deal with
climate mitigation policies, at EU and EU-national level. In this Impact Assessment,
NEMESIS is used to assess the macro-economic impacts of climate-related weather events
and climate change in general. The analysis follows an approach similar to the one of the JRC
PESETA IV study mentioned in the literature review.
1.2.2 Analysing land and forestry.
The GLOBIOM model was used to project impacts of climate change and natural
disturbances on the LULUCF sector by different Representative Concentration Pathways
(RCP 2.6 and 7.0). CMIP6 climate data, four General Circulation Models along with
predicted changes in climate variables from RPCs were used as an input to 3PGmix for
forestry to analyse biophysical impacts on crop and forest productivities. These impacts were
then integrated into the GLOBIOM and G4M model to assess the changes in the LULUCF
sector.
The model projects regional impacts by different tree species and different types of natural
disturbances. This involves assessing the effect of climatic trends on temperature and
precipitation, using process-based models to estimate the effect of resulting temperature and
precipitation on productivity, and using equilibrium models to estimate the impacts and
adaptations on the agricultural market and the environment.
(3
) MIDAS: https://web.jrc.ec.europa.eu/policy-model-inventory/
5
2 ANALYSIS OF FUTURE GHG EMISSIONS
2.1 Models (4)
The projections for this Impact Assessment are performed with the help of state-of-the-art,
computational models for energy and GHG system analysis, which follow an approach based
on micro-economics, solve a price-driven market equilibrium, and integrate engineering and
economic representations for all sectors. The models use peer-reviewed assumptions and
detailed and up-to-date databases to produce projections per sector and per country.
Calibration ensures continuity between historical data and projections.
2.1.1 Main modelling suite for GHG emissions
The main modelling suite (Figure 1) is common to the one used for the Commission’s
proposal for Long Term Strategy (5
), the 2030 Climate Target Plan (6
), and the EU Reference
Scenario 2020 (7
) as well as for the most recent modelling exercises supporting the Fit for
55 (8
) and the REPowerEU (9
) policy frameworks.
Figure 1: Main modelling suite used for GHG projections.
The modelling capacity consists of a series of interlinked models well known to the modelling
community (10
). These are continuously improved with cutting edge features and are managed
(4
) The model-based analysis is a technical exercise based on a number of assumptions that are shared across
scenarios. Its results do not prejudge the future design of the post-2030 policy framework.
(5
) In-depth analysis in support of the commission communication COM (2018) 773
(6
) SWD (2020) 176 final
(7
) European Commission, EU reference scenario 2020: energy, transport and GHG emissions: trends to 2050,
Publications Office, 2021, DOI: 10.2833/3575
(8
) COM (2021) 550 final
(9
) SWD (2022) 230 final
(10
) See for instance Ringkjøb, H. K., et al. (2018). A review of modelling tools for energy and electricity
systems with large shares of variable renewables. Renewable and Sustainable Energy Reviews, 96, 440-459
and Angenendt, E., et al. (2018). Modelling and tools supporting the transition to a
bioeconomy. Bioeconomy: Shaping the Transition to a Sustainable, Biobased Economy, 289-316.
Economics
Energy
Land use &
agriculture
Non-CO2 GHG
Air pollution
GEM-E3
Population & GDP
PRIMES
POLES-JRC
GLOBIOM CAPRI GAINS
Framework conditions Economic structure
Global system EU energy system
EU
agriculture Global, EU
PRIMES-TREMOVE
EU transport system
Global &
EU forestry+LU
6
from a team of highly experienced staff who have been working alongside the European
Commission for many years in policy analysis, and therefore understand the scientific,
technical and policy requirements to carry out modelling exercises. The models combine
technical and economic methodologies assessing GHG pathways and associated system cost.
It allows to project the evolution of all GHG net emissions from the EU economy up to 2050.
The GHG pathways are assessed through high-quality sectoral-specific models: the PRIMES
and PRIMES-TREMOVE models are the core elements of the modelling framework for
energy, transport, and CO2 emission projections. The PRIMES model has been assessed and
used extensively by several services in the European Commission in the past, which has led to
significant model development and refinement over time. It is also used extensively by
Member States and stakeholders and has been at the basis of numerous refereed publications
in the past decades (11
).
The GAINS model was used as the main modelling tool to estimate air pollutant emissions
and their impacts on human health and the environment, as well as non-CO2 GHG emissions.
The GAINS model has been assessed and used extensively by several services in the
European Commission, which has led to significant model development and fine-tuning over
time. In addition, GAINS is extensively used by Member States and stakeholders and has
been at the basis of numerous peer-reviewed publications over the last decades (12
).
The GLOBIOM/G4M model-suite (called “GLOBIOM” in this impact assessment) was used
to cover all LULUCF-related GHG emissions in this impact assessment, biomass supply for
bioenergy, and aspects of biodiversity. GLOBIOM has been used extensively by the European
Commission in the past (13
) and has been refined and developed over time fitting the
Commission’s needs and Member States feedback. In addition, the model-suite is being
continuously enhanced in collaboration within large research consortia, including over 30
Horizon Europe and Horizon 2020 projects (14
). The models are the basis of more than 200
refereed publications (15
) and have been supporting national (16
) and international policy
processes (UN ICAO, IPCC, IPBES) (17
). GLOBIOM has also been frequently challenged in
model intercomparisons (18
).
(11
) PRIMES, selected publications: https://e3modelling.com/publications/
(12
) GAINS, selected publications: https://gains.iiasa.ac.at/models/gains_tech_reports.html
(13
) GLOBIOM/G4M was amongst others used in the following European Commission’s policy impact
assessments: European strategic long-term vision for a prosperous, modern, competitive and climate neutral
economy (COM (2018) 773); 2030 Climate Target Plan (SWD (2020) 176 final); proposal for a revision of
the LULLUCF Regulation under the Fit-for-55 policy package (COM (2021) 554 final); FMRL calculations
under the JRC Approach, UNFCCC (2011). Synthesis report of the technical assessments of the forest
management reference level submissions. Ad Hoc Working Group on Further Commitments for Annex I
Parties under the Kyoto Protocol Sixteenth session, part four Durban, 29 November 2011.
FCCC/KP/AWG/2011/INF.2.
(14
) e.g., https://www.lamasus.eu/; https://www.forestnavigator.eu/; https://brightspace-project.eu/
(15
) https://iiasa.github.io/GLOBIOM/publications.html#
(16
) E.g. EPA Technical Document, EPA-420-R-23-017.
(17
) ICAO: https://iiasa.ac.at/impacts/jan-2021/assessing-biofuels-for-transport; IPCC: Guivarch, C., et al.
(2022). Annex III: Scenarios and modelling methods. In: IPCC 2022: Climate Change 2022: Mitigation of
Climate Change. Contribution of Working Group III to the Sixth Assessment Report of the
Intergovernmental Panel on Climate Change. Eds. Shukla, A.R., et al., pp. 1842-1908 Cambridge University
7
The CAPRI model was used to assess impacts from agricultural, trade and environmental
policies on agriculture as well as biodiversity aspects linked to agriculture. The CAPRI model
is constantly updated and further developed through projects for different Commission
services (19
) including Horizon projects and assessments of the Common Agricultural
Policy (20
). It has proven its quality to assess agricultural GHG emissions in numerous peer-
reviewed publications (21
) and is used by several research teams in the field throughout
Europe (22
).
Three macro-economic models with distinct methodological underpinnings were used to
assess the socio-economic impact of the target options and assess the robustness of the key
findings. The JRC’s GEM-E3 was used as the core model and is a recursive dynamic
computable general equilibrium model. The model has underpinned numerous refereed
publications (23
). DG ECFIN’s E-QUEST model complemented the analysis. It is a variant of
QUEST, a dynamic stochastic general equilibrium model in the New-Keynesian tradition that
has been used by the European Commission for macro-economic policy and research for
decades and has led to numerous refereed publications (24
). Finally, Cambridge Econometrics’
E3ME macro-econometric model has been used as a third tool to assess the robustness of the
results. It has been used extensively by a range of stakeholders and has been the basis of many
refereed publications (25
). The POLES-JRC model is used to provide the global climate and
energy policy context (26
).
The Modelling Inventory and Knowledge Management System of the European Commission
MIDAS contains detailed model description, together with a list of impact assessments and a
Press. 10.1017/9781009157926.022.; IPBES (2019). Global assessment report on biodiversity and
ecosystem services of the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem
Services. Brondizio, et al. (edt’s). IPBES secretariat, Bonn, Germany. 1148 pages.
https://doi.org/10.5281/zenodo.3831673.
(18
) E.g., https://agmip.org/global-economics/; Fricko, O., Havlik, P, et al. (2017). The marker quantification of
the Shared Socioeconomic Pathway 2: A middle-of-the-road scenario for the 21st century. Global
Environmental Change 42 251-267.; Popp, A., Calvin, K., Fujimori, S., Havlik, P., et al. (2017). Land-use
futures in the shared socio-economic pathways. Global Environmental Change 42 331-345.
(19
) https://www.capri-model.org/doku.php?id=capri:project
(20
) European Commission, Joint Research Centre, Barreiro-Hurle, J., Bogonos, M., Himics, M. et al., Modelling
environmental and climatic ambition in the agricultural sector with the CAPRI model – Exploring the
potential effects of selected farm to fork and biodiversity strategies targets in the framework of the 2030
climate targets and the post 2020 Common Agricultural Policy, Publications Office, 2021,
https://data.europa.eu/doi/10.2760/98160
(21
) CAPRI, selected publications: https://www.capri-model.org/doku.php?id=capri:capri_pub
(22
) E.g., DG-JRC (IPTS, Seville and IES Ispra); European Centre for Agricultural, Regional and Environmental
Policy Research (EUROCARE)
(23
) JRC-GEM-E3, selected publications: https://joint-research-centre.ec.europa.eu/gem-e3/gem-e3-
publications_en
(24
) QUEST (E-QUEST), selected publications: https://economy-finance.ec.europa.eu/economic-research-and-
databases/economic-research/macroeconomic-models/quest-macroeconomic-model_en
(25
) E3ME, selected publications: https://www.e3me.com/how/papers/
(26
) The POLES-JRC model is the main tool used for the JRC “Global Energy and Climate Outlook” GECO
report series, which provides a detailed analysis of the evolution of global GHG emissions under national
climate and energy pledges and of global pathways compatible with the Paris Agreement temperature
objectives.
8
selection of most relevant peer-reviewed publications where the models have been used (27
).
A summary, including specific information on how the model has been applied in the impact
assessment, is reported in the Table 1 below.
Table 1: Models from the main modelling suite for GHG pathways
Model Main Purpose of the model in the Impact Assessment
CAPRI (28
) A global agro-economic model used to assess impacts on agriculture of agricultural, trade and
environmental policies. CAPRI provides results at a regional level and for economic and
environmental, biodiversity-related variables.
GAINS (29
) GAINS is an analytical framework for assessing future potentials and costs for reducing air
pollution impacts on human health and the environment while simultaneously mitigating climate
change through reduced greenhouse gas emissions. It explores synergies and trade-offs in cost-
effective emission control strategies so as to maximize benefits across multiple scales.
GLOBIOM (30
) GLOBIOM is a global bio-economic land use model covering the sectors of agriculture, forestry,
and bioenergy. The model has spatially explicit supply side representation covering different
management systems and land use activities. It simulates economic market equilibrium for the
analysis of economic as well as environmental consequences of future land use drivers and
polices. GLOBIOM is coupled with G4M (called “GLOBIOM” in this impact assessment)
G4M (31
) The model estimates the impact of forestry and land use change activities (forest management,
afforestation, and deforestation) on biomass and carbon stocks. G4M is coupled with GLOBIOM
(called “GLOBIOM” in this impact assessment)
PRIMES (32
) Energy system model designed to project the energy demand, supply, prices, trade, and emissions
for European countries and assess policy impacts.
PRIMES-
TREMOVE (33
)
PRIMES-TREMOVE simulates the transport modelling system and projects the evolution of the
demand for passenger and freight transport by mode, energy consumption by fuel and emissions.
The model is rich in the representation of policy measures and is used to assess policy impacts.
2.1.2 Complementary tools on energy and industry CO2 emissions
The analysis of the different target options uses a multi-model approach to cross-validate
results for several critical aspects of the analysis. Additional state-of-the-art models evaluated
independently the impacts on the energy system and industrial sector, increasing the
robustness of the conclusions.
In complement to the PRIMES model, the transformation of the energy system (energy and
industry CO2 trajectories, energy demand and supply, etc.) has been analysed with the peer-
reviewed POTEnCIA model, as well as by AMADEUS-METIS, EU-TIMES and POLES
models. The POTEnCIA model has been used in parallel to PRIMES, interacting with other
(27
) MIDAS: https://web.jrc.ec.europa.eu/policy-model-inventory/
(28
) CAPRI, selected publications: https://www.capri-model.org/doku.php?id=capri:capri_pub
(29
) GAINS, selected publications: https://gains.iiasa.ac.at/models/gains_tech_reports.html
(30
) GLOBIOM, selected publications: https://iiasa.ac.at/models-tools-data/globiom
(31
) G4M, selected publications: https://iiasa.ac.at/models-tools-data/g4m
(32
) PRIMES, selected publications: https://e3modelling.com/publications/
(33
) PRIMES TREMOVE, selected publications: https://e3modelling.com/publications/
9
sectoral models to produce similar energy system scenarios resulting from the main modelling
suite. AMADEUS-METIS, EU-TIMES and POLES have been used to indicate high-level
cost-effective decarbonisation pathways for the energy and industry CO2 sectors. The
FORECAST model has been used independently to study the impact of selected circular
economy actions on industrial decarbonisation pathways.
In complement to the GLOBIOM-G4M, for this impact assessment, forest sector related
results have been cross validated with the with the JRC forest sector carbon model
(FSCM) (34
), which includes the forest carbon model (EU-CBM-HAT) (35
) and the harvested
wood products (HWP) module. The models independently estimate the forest sink (emissions
and removals from forest land, i.e., the major component for the LULUCF net removal) and
the changes in carbon stocks in harvested wood products. Given the importance and the
uncertainty of the forest sink in the EU, the EU-CBM-HAT model has been used to reproduce
scenario S2 from GLOBIOM (with harmonization made for the main input data and
assumptions) to test the robustness of the results and to increase quality assurance.
2.1.2.1 POTEnCIA
The Policy Oriented Tool for Energy and Climate Change Impact Assessment
(POTEnCIA) (36
) is an energy system, peer-reviewed simulation model designed to compare
alternative pathways for the EU energy system, covering energy supply and all energy
demand sectors (industry, buildings, transport, and agriculture). Developed in-house by the
Joint Research Centre (JRC) to support EU policy analysis, POTEnCIA allows for the
evaluation of technology-focused policies, combined with policies addressing the decision-
making of energy users. POTEnCIA has been previously used by the European Commission
to model the use of conventional and biofuels in the EU Agricultural Outlook 2022-2032(37
)
and describe the technological outlook in the Clean Energy Technology Observatory (CETO)
Report 2023 (38
).
(34
) See: Pilli, R., Kull, S. J., Blujdea, V. N., & Grassi, G. (2018). The carbon Budget model of the Canadian
forest sector (CBM-CFS3): customization of the archive index database for European Union countries.
Annals of forest science, 75(3), 1-7.; Pilli, R., Alkama, R., Cescatti, A., Kurz, W. A., & Grassi, G. (2022).
The European forest Carbon budget under future climate conditions and current management practices.
Biogeosciences, 19(13), 3263-3284.; Pilli, R., Grassi, G., Kurz, W. A., Fiorese, G., & Cescatti, A. (2017).
The European forest sector: past and future carbon budget and fluxes under different management scenarios.
Biogeosciences, 14(9), 2387-2405.
(35
) European Commission, Joint Research Centre, Blujdea, V., Rougieux, P., Pilli, R. et al., The JRC Forest
Carbon Model – Description of EU-CBM-HAT, Publications Office of the European Union, 2022,
https://data.europa.eu/doi/10.2760/244051
(36
) POTEnCIA, references for policy support: https://web.jrc.ec.europa.eu/policy-model-
inventory/explore/models/model-potencia/references/, and selected publications:
https://web.jrc.ec.europa.eu/policy-model-inventory/explore/models/model-potencia/references/
(37
) European Commission, DG Agriculture and Rural Development, EU agricultural outlook for markets,
income and environment, 2022-2032, 2022.
(38
) Georgakaki, A., Kuokkanen, A., Letout, S., Koolen, D., Koukoufikis, G., Murauskaite-Bull, I., Mountraki,
A., Kuzov, T., Długosz, M., Ince, E., Shtjefni, D., Taylor, N., Christou, M. and Pennington, D., Clean
Energy Technology Observatory: Overall Strategic Analysis of Clean Energy Technology in the European
Union - 2023 Status Report, Publications Office of the European Union, Luxembourg, 2023,
doi:10.2760/150096, JRC135404.
10
2.1.2.2 AMADEUS-METIS, EU-TIMES, POLES
The EU-TIMES model (39
) is the multi-region European version of TIMES, which is designed
for analysing the role of energy technologies and their innovation needs for meeting European
policy targets related to energy and climate change. The EU-TIMES model is operated by
E4SMA and considers both the supply and demand sides and includes the following seven
sectors: primary energy supply (including transformation); electricity generation; industry;
residential; commercial; agriculture; and transport. EU-TIMES can consider policies that
affect either the entire energy system, sectors, group of technologies/commodities, or single
technologies/commodities.
The POLES-Enerdata model (40
) is a recognised multi-issue energy model that belong to the
Integrated Assessment Modelling (IAM) tools in support of the Paris Agreement (41
). It relies
on national energy balances combined with economic, policy and technological scenarios to
withdraw energy production, consumption, and greenhouse gas (GHG) emission projections.
The model is operated by Enerdata and provides a complete endogenous calculation from
upstream activities (supply, prices of several energies including oil, gas and coal) to final user
demand. POLES-Enerdata offers a mixed approach based on:
• a “top-down” modelling for sectorial demand, which is directly related to activity,
prices and technologies through econometric equations; for each key economic sector
energy consumption is distinguished between substitutable fuels and electricity; and
• a “bottom-up” approach for the power sector (explicit representation of each type of
technology as well as their costs).
The AMADEUS-METIS cluster is composed by two coupled models. METIS (42
) is an
Energy system peer-reviewed model well-known to the scientific community designed to
simulate the operation of electricity, gas and heat markets and to assess impacts of policy
initiatives on the European energy system and markets. METIS is operated by Artelys and
supports DG ENER’s evidence-based policy making, and it has been largely used in previous
modelling exercises underpinning the RES policy development and implementation (43
) or the
revision of the Gas Market Directive (44
), among others. In certain project and in this impact
assessement, it is coupled with the model AMADEUS, which is a bottom-up model owned by
(39
) EU-TIMES, description and selected publications: https://www.i2am-
paris.eu/detailed_model_doc/eu_times https://www.i2am-paris.eu/detailed_model_doc/eu_times
(40
) POLES-Enerdata description and selected publications https://www.enerdata.net/solutions/poles-model.html
(41
) https://www.i2am-paris.eu/detailed_model_doc/eu_times
(42
) METIS, selected publications: https://web.jrc.ec.europa.eu/policy-model-inventory/explore/models/model-
metis/references/
(43
) European Commission, Directorate-General for Energy, Torres Vega, P., Beaussant, O., De Vita, A.et
al., Technical support for RES policy development and implementation – Delivering on an increased
ambition through energy system integration: Final report, Publications Office, 2021. DOI 10.2833/86135.
(44
) European Commission, Directorate-General for Energy, Joint Research Centre, Bossmann, T., Cornaggia,
L., Vautrin, A.et al., Assistance to assessing options improving market conditions for bio-methane and gas
market rules – Final report, Publications Office, 2021, DOI 10.2833/912333.
11
Engie Impact and used to define the future energy demand (45
) and follows a detailed bottom-
up approach where the energy demand of each end-user is projected individually. The main
categories of end-users are the transport, residential, industry and tertiary sectors.
2.1.2.3 FORECAST
The FORECAST modelling platform aims to develop long-term scenarios for future energy
demand of individual countries and world regions until 2050. It is based on a bottom-up
modelling approach considering the dynamics of technologies and socio-economic drivers.
The model is owned by Fraunhofer ISI and allows to address various research questions
related to energy demand including scenarios for the future demand of individual energy
carriers like electricity or natural gas, calculating energy saving potentials and the impact on
greenhouse gas (GHG) emissions as well as abatement cost curves and ex-ante policy impact
assessments (46
). The model has been applied to a number of studies for the European
Commission, Member States or private entities (47
). The industrial module of the FORECAST
models is used in this exercise to address the impact of specific circular economy actions on
the energy and CO2 emissions of most energy-intensive industrial sectors.
2.1.2.4 JRC forest sector carbon model (FSCM)
The purpose of the JRC FSCM is to independently estimate the current and future forest
carbon dynamics, both as a verification tool (i.e., to compare the results with the estimates
provided by other models and/or Member States' GHG inventories) and to support to the EU
legislation (e.g., the recent EU Regulations 2018/841 and 2023/839). The JRC FSCM (48
) is a
state-of-the-art model containing two components: the forest carbon model (EU-CBM-HAT)
(49
) and the harvested wood products (HWP) module. The EU-CBM-HAT is an inventory-
based, yield and increment-curve-driven model, applying rules-based forest management and
distribution of the harvest demands that simulates the stand- and landscape-level carbon
dynamics of all forest carbon pools. The core of EU-CBM-HAT is the CBM-CFS3 model,
which has been applied in this Impact Assessment to estimate the forest carbon dynamics both
at EU and at the country level. The HWP module is plugged into EU-CBM-HAT outputs.
This implements the ‘production approach’ based on IPCC instantaneous oxidation and
default values, on the activity data submitted by the countries in the latest submission to
(45
) ENGIE, Trajectoires de décarbonation de l’Europe : le scenario ENGIE, 2023.
https://www.engie.com/decarbonation-scenario-engie
(46
) Fleiter T., et al. ‘A methodology for bottom-up modelling of energy transitions in the industry sector: the
FORECAST model’, Energy Strategy Reviews, Volume 22, 2018, pp 237-254.
(47
) FORECAST, projects and selected publications: https://www.forecast-model.eu/forecast-en/index.php
(48
) See: Pilli, R., Kull, S. J., Blujdea, V. N., & Grassi, G. (2018). The carbon Budget model of the Canadian
forest sector (CBM-CFS3): customization of the archive index database for European Union countries.
Annals of forest science, 75(3), 1-7.; Pilli, R., Alkama, R., Cescatti, A., Kurz, W. A., & Grassi, G. (2022).
The European forest Carbon budget under future climate conditions and current management practices.
Biogeosciences, 19(13), 3263-3284.; Pilli, R., Grassi, G., Kurz, W. A., Fiorese, G., & Cescatti, A. (2017).
The European forest sector: past and future carbon budget and fluxes under different management scenarios.
Biogeosciences, 14(9), 2387-2405.
(49
) European Commission, Joint Research Centre, Blujdea, V., Rougieux, P., Pilli, R. et al., The JRC Forest
Carbon Model – Description of EU-CBM-HAT, Publications Office of the European Union, 2022,
https://data.europa.eu/doi/10.2760/244051
12
UNFCCC in 2023. The model has been used globally in numerous publications and research
projects (50
).
2.2 Literature Review
In complement to the modelling work, the analysis makes use of an extensive review of
relevant published papers and reports by the scientific community, private stakeholders or
public entities. Whenever possible, projected numbers for the period 2030-2050 have been
extracted and compared against the values obtained by the specific modelling exercise
underpinning this impact assessment.
2.3 Historical data
2.3.1 Energy system in PRIMES
The modelling of the energy system has been calibrated on the 2023 edition of the Eurostat
complete energy balances, which provide comprehensive energy balances up to 2021 for all
EU Member States.
The associated CO2 emissions are derived from these energy balances and the emission
factors from the legislation on the monitoring and reporting of greenhouse gas emissions51
.
Calibration series allow to match emissions data from the 2023 GHG inventory.
2.3.2 Non-CO2 emissions in GAINS
Activity data has been updated with statistics to reflect 2020 as a historical year. Calibration
series allow to match emissions data from the 2023 GHG inventory.
2.3.3 LULUCF in GLOBIOM
Activity data on land use, agriculture and forestry has been updated based on historical data
and are aligned with the UNFCCC 2023 inventory data, reflecting 2021 as a historical year.
In addition, the initial land cover map for the base year of the models was updated from the
Corine Land Cover Version 2009 to the Corine Land Cover Accounting layer 2019.
2.4 Key Assumptions
2.4.1 Population and GDP
Broad socio-economic assumptions describing the expected evolution of the European
economy underpin all models used in this impact assessment. In particular, long-term
projections on population dynamics and economic activity are exogeneous variables, ie. used
as inputs into the energy model and to build the macro-economic baseline that underpins the
assessment of the socio-economic impacts of the mitigation trajectories.
(50
) For overview and selected publications:
https://forest.jrc.ec.europa.eu/en/activities/forestbioeconomy/modelling/
(51
) Commission Implementing Regulation (EU) 2018/2066 of 19 December 2018, Annex VI
13
Population projections rely on Eurostat’s long-term projections (EUROPOP2019) combined
with the short-term update of the projected population for the period 2022-2032 (52
). The
latter provides an update of the baseline long-term projection, together with two sensitivity
tests to assess the impact of the flow of refugees from Ukraine. The population assumptions
used here rely on Eurostat’s “very high number of refugees sensitivity test”, which assumes
that the influx of refugees occurs during 2022 and 2023, and that it is followed by annual
returns at a constant rate such that the remaining number of refugees at the end of 2031
amounts to 15% of the cumulated influx of refugees in 2022 and 2023. At EU level, this
translates into an increase in total population of 2.6 million people (+0.6%) compared to the
baseline. The increase is not evenly spread across Member States.
As of 2033, the population assumptions revert to EUROPOP2019 in terms of annual growth
rates, though not in levels, in order to account for the increase in absolute numbers due to the
inflow of refugees. The EU population is projected to remain broadly stable over the
projection period to 2050. However, there is a noticeable trend towards the ageing of the
population, with a 13% decline in the population aged 15 to 64 between 2020 and 2050 and
an increase in the dependency ratio from 55.5% to 76.1% (Figure 2).
Figure 2: Population assumptions
Source: Eurostat.
Economic projections have taken place in an unusually unstable context in the past few years,
as the EU and world economies were hit first by the COVID pandemic and second by
Russia’s war of aggression against Ukraine, with the ensuing sharp increase in international
energy prices. The GDP projections for 2022-2024 rely on the Autumn Forecast (53
) of the
Directorate General for Economic and Financial Affairs (DG ECFIN). From 2025 onwards,
the GDP growth projections converge to those prepared by DG ECFIN for the 2021 Ageing
Report (54
). The real GDP assumptions therefore integrate an update of short-term economic
projections and revert to the growth rates used for the 2020 Reference Scenario and the
(52
) EUROPOP2019 (proj_19n) and short-term update of the projected population (2022-2032) (proj_stp22),
which was the latest available projection at the time the key assumptions were adopted as a framework for
all models used in the impact assessment.
(53
) DG ECFIN. Autumn 2022 Economic Forecast: The EU economy at a turning point.
(54
) DG ECFIN. The 2021 Ageing Report: Underlying Assumptions and Projection Methodologies.
40.0%
45.0%
50.0%
55.0%
60.0%
65.0%
70.0%
75.0%
80.0%
240
280
320
360
400
440
480
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
2050
Million
people
Age dependency ratio (RHS) Total population Population age 15-64
14
modelling of policy scenarios in the impact assessments backing the Fit for 55 legislative
proposals. At EU level, real GDP is projected to be 40% higher in 2040 than in 2015, and
61% higher in 2050 compared to 2015 (Figure 3).
The short-term projections do not reflect DG ECFIN’s Winter 2023 Economic Forecast as
they became available after the cut off date of this exercise. The impact over the projection
horizon is nevertheless minimal, as the difference in EU GDP is less than 1% in 2024 between
the Winter 2023 forecast and the Autumn 2022 forecast and the COVID recession, the
recovery and the slowdown in activity in 2022-2023 are fully captured.
Figure 3: EU GDP (2015 = 100) and GDP growth (%)
Source: DG ECFIN.
2.4.2 Sectoral economic activity
Projections on the sectoral composition of GDP were prepared using the GEM-E3 computable
general economic model. It is projected that the EU economy will continue to become
increasingly services-oriented, with the sector’s share rising from close to 74% of total gross
value added (GVA) in 2016-2020 to 75.5% in 2040 and 76.4% in 2050. While the share of the
transport sector in total GVA declined significantly during the COVID pandemic, the
projections assume that this was only a temporary phenomenon, and that the sector’s share
remains broadly constant at around 5% of the total. This is consistent with recent economic
developments. The share of industry in total GVA is projected to decline from currently
around 17% to around 16% by 2050. In absolute terms, however, industrial GVA is still
projected to be 26% and 42% higher in 2040 and 2050 respectively compared to 2016-2020.
Energy intensive industries (iron and steel, non-ferrous metals, chemicals, non-metallic
minerals and pulp and paper) currently represent less than 5% of total GVA in the EU
economy. Their share is projected to decline by somewhat less than 1 percentage point by
2050, even though total output in these sectors is expected to continue growing, with GVA
projected to be 25% higher in 2040 than on average in 2016-2020 and 37% higher in 2050.
There are nevertheless some disparities within the energy intensive industries, with GVA in
iron and steel and in non-ferrous metals expected to grow very moderately, while more
sustained growth is expected in chemicals, pulp and paper and non-metallic minerals. In all
cases, an increase in the GVA intensity of output is projected, together with an increase in the
volume of production (with the exception of iron and steel).
In the construction sector, GVA is also projected to continue to grow, in part due to
renovations, but at a slightly lower pace than total GVA, as the moderate decline in
-6
-4
-2
0
2
4
6
90
100
110
120
130
140
150
160
170
201520172019202120232025202720292031203320352037203920412043204520472049
%
2015
=
100
Real GDP (2015 = 100) Real GDP growth (RHS)
15
population at EU level and ageing imply lower requirements for new constructions in the
residential sector. Overall, the share of the construction sector in total GVA is projected to
decline only marginally from around 5% of the total currently. In absolute terms, it is still
projected to be 27% and 40% higher in 2040 and 2050, respectively, compared to 2016-2020.
2.4.3 Energy Prices Trajectory between 2020 and 2050
Alongside socio-economic projections, EU energy modelling requires projections of
international fuel prices. The trajectories for the price of gas, oil and coal are those presented
in the Staff Working Document accompanying the REPowerEU plan (55
) (see Figure 4). The
projections of the POLES-JRC model – elaborated by the Joint Research Centre in the context
of the annual pubication of the Global Energy and Climate Outlook – are used to obtain long-
term estimates of the international fuel prices. These long-term projections are close to
assumed in the EU Reference Scenario 2020. They show an increasing trend for fossil fuel
prices in the long term due to depletion of conventional resources (that are replaced by more
expensive unconventional ones).
The fuel price trajectories take also into account structural changes in supply and demand. In
particular, the Russian invasion of Ukraine is expected to have long-term repercussions on gas
price as pipeline supply is replaced by more expensive LNG. Following a short-term peak,
gas price is assumed to remain higher than in the Fit-for-55-scenario in the long run. These
market considerations are interpolated to the long-term trend to obtain the trajectories shown
in Figure 4.
(55
) SWD Implementing the REPowerEU Action Plan: investment needs, hydrogen accelerator and achieving
the bio-methane targets, SWD(2022) 230 final.
16
Figure 4: International fuel prices
Source: REPower SWD(55
)
2.4.4 Technologies
The assumption on the development of technologies is an important driver of projections.
Mapping existing, emerging and new technologies and their future cost and performance is
crucial for better understanding the future evolution of GHG emissions.
For this impact assessment – and considering the rapidly changing context in the past few
years – the technology assumptions of the main model suite have been updated with respect to
those used in the Reference Scenario 2020 (56
). The update was based on a rigorous literature
review carried out by external consultants in collaboration with the JRC. The most important
updates are reported below while the assumptions are published in dedicated excel files for
energy technologies, transport, non-CO2 and LULUCF.
The following chapter defines the list of technologies considered for this impact assessment,
with their main characteristics including in particular their purchasing costs and level of
efficiency.
2.4.4.1 Energy technologies
For each technology the modelling considers a range, ordered from a more common category
to an advanced category. The technical and economic characteristics of each technology
category change over time as a result of learning by doing and economies of scale in
industrial production. Not all technology categories are considered as fully mature from a
(56
) https://energy.ec.europa.eu/data-and-analysis/energy-modelling/eu-reference-scenario-2020_en
17
user's perspective, but in general the users' acceptance of advanced technologies improves
over time. Policy assumptions may drive acceleration of learning-by-doing and users'
acceptance in the context of modelling a scenario. An advanced technology category is more
efficient than an ordinary one and in general more expensive to purchase at a given point in
time. However, depending on its learning potential, an advanced technology may, however,
become cheaper than an ordinary technology in the long term.
Power and Heat
The technologies described in the models for the power sector include the main technologies
for producing electricity from fossil fuels, nuclear fuel and renewables. The technology for
producing heat include boilers for the main fuels (including biomethane) and heat pumps used
in heat plants for both district heating and industry.
Compared to the Reference Scenario 2020, the segmentation of the solar PV market has been
improved and several cost assumptions revised (with, in particular, a moderate increase in PV
costs and a decrease in several heating technologies).
Domestic
It includes technologies for the buildings sector (residential and services). The values shown
include ranges of purchasing costs (that refer to total acquisition costs) and efficiency by
vintage (reference year of purchase), for several space and water heating technologies and
appliances.
Compared to the Reference Scenario 2020, a distinction is made between air-to-air and air-to-
water heat pumps. Their characteristics have been defined separately and their purchasing cost
has been adapted in a post-energy crisis context. Given also the growing importance of self-
consumption in the energy transition post-2030, small scale renewable technologies, such as
PV, Hydrogen-based CHP, batteries and other storage solutions have been included in the list
of available technologies.
Building renovation
Building renovation refers to average renovation costs by climate type and level of
renovation, as used in the PRIMES buildings module. Four climate types are considered
(Centre/West, North, South and East) and three levels of renovation (light, medium and deep),
differentiating when renovation occurs in windows, including walls, roof and basement. The
energy savings rate refers to a reference building (57
) as in the current stock of existing
buildings, not to savings in new constructions, which follow the buildings codes' insulation
standards. Investment costs, both in Euro per household and Euro per square meter, defines
the energy related expenditures needed to implement the indicated level of renovation of a
building, (excluding usual renovation expenditures needed for other purposes: structure,
finishing materials, decoration ...). Renovation costs are unchanged compared to those used in
the Reference Scenario 2020.
Industry
(57
) The model includes several house types, house ages and geographical categories. The reference building
aggregate all these categories in a single item.
18
The main assumptions described are investment costs, the level of learning by doing, and the
energy efficiency index for technologies used in the industrial sector. As for the domestic
sector, the model considers, for each technology, seven categories ordered from an ordinary
up to an advanced and a future category. Efficiency is expressed as an index compared to
2015 and an increase in its rate implies a more efficient technology. No significant update was
necessary compared to the assumption used in the Reference Scenario 2020.
Industrial carbon management
Industrial carbon management technologies have gained momentum in recent years with
expectations of decreasing cost-curves and new projects (58
) and are thus integrated in the
model assumptions. These technologies are defined mainly as Bioenergy with Carbon Capture
and Storage (BECCS) and Direct Air Carbon Capture and Storage (DACCS), which capture
fossil-fuel free carbon and store it permanently either underground or in materials. Biogenic
carbon that is captured and stored during the upgrading of biogas into biomethane is also
included in the modelling and the three technologies are differentiated across scenarios
according to level and timeline of uptake. Biochar is not represented, as it is assumed that all
products resulting from pyrolysis of biomass during production of biofuels is under gaseous
form and subsequently captured. Other removal technologies are not considered in the
analysis.
Renewable hydrogen, e-fuels and storage
Technologies for the production, transmission, and distribution of e-fuels (including
renewable hydrogen), as well as storage technologies, are included in this impact assessment.
For each technology, the following items are listed: Investment costs, Fixed Operation and
Maintainenance costs, Heat rate (ratio of energy input requirements over output), “Feedstock
input requirements” (feedstock input required to produce one unit of output from each
technology) and technical lifetime. Given the progress made in the development of these fuels
in recent years, an updated set of Reference Scenario assumptions has been employed.
Biofuels and biogsases
The list of biofuels and biogases available in the model includes all the liquid and gaseous
biomass-based energy technologies addressed by European policies. The model includes
different pathways to produce liquid and gaseous bioenergy from starch, sugar and oil crops,
as well as bioenergy from lignocellulosic biomass and algae based on biochemical and
thermochemical conversion processes. Regarding biogases, different processes are described
to produce biogas and biomethane from different feedstocks. For each technology and
pathway, the model contains detailed technical information including investment costs, fixed
operation and maintenance costs, lifetime, energy consumption factors and self-consumption
factors.
Transport technologies
The assumptions on transport technologies cover all transport modes, including passenger
cars, vans, trucks, buses, coaches, powered 2-wheelers, rail, inland waterways, shipping and
aviation. The assumptions describe the evolution of the investment costs of the various
(58
) IEA (2021). Is carbon capture too expensive?, IEA, Paris https://www.iea.org/commentaries/is-carbon-
capture-too-expensive
19
technologies until 2050 in 10-year time steps, and they are presented similarly for each mode
and technology: multiple efficiency improvement levels are available at different costs, for
each mode, each type of technology, and each time period. The efficiency improvements are
compared against a 2015 reference vehicle.
Present and future costs of technologies are based on a literature review. The costs of the
efficiency improvement options are assumed to improve over time, due to learning effects for
example. Compared to the assumptions made in the Reference Scenario 2020, the
segmentation of aircraft and Heavy-Duty Vehicle technologies has been improved, and
several cost assumptions have been revised based on more recent estimates (for instance, this
is the case for various vessel and aircraft technologies, as well as re-charging and re-fuelling
infrastructure).
2.4.4.2 Mitigation of non-CO2 GHG emissions
The assumptions used in the modelling of non-CO2 greenhouse gases in the GAINS model
have been updated from those employed in the Reference Scenario 2020. This update
benefitted from a dedicated consultation workshop held on 27 October 2022.
Emission factors, mitigation potentials and cost information of mitigation options have been
updated to the extent possible using newly available information.
Furthermore, the methodology to estimate CH4 emissions from gas distribution networks has
been further developed to reflect the impact of network material on leakage rates. Country-
specific information from EUROSTAT (2022) and national sources on the length of networks
from cast iron, steel, PE/PVC, and other materials, respectively, was coupled with
measurement information on average leakage rates for respective materials, and calibrated to
emissions from gas distribution networks reported to the UNFCCC.
New non-CO2 source sectors introduced are fugitive CH4 emissions from LNG import
terminals and CH4 and N2O emissions from the use of bunker fuels in international shipping.
Mitigation options targeting enteric methane from livestock were revisited to reflect the latest
state of knowledge, e.g., regarding the effectiveness and costs of feed additives 3-NOP and
red seaweed.
The vintage structure of wastewater treatment plants has been updated to better reflect
country-specific age structures of existing plants. This is important for the estimation of costs
as a shift to less emission-intensive technology is considerably less expensive when
implemented as part of a natural turnover of capital at the end of the plant lifetime than when
implemented pre-maturely.
2.4.4.3 LULUCF sector
The modelling of the LULUCF sector with GLOBIOM/G4M has been updated from that used
in the Reference Scenario 2020. This update benefitted from a dedicated consultation
workshop held on 27 October 2022.
Mid-term projections have been aligned with projections from the AGLINK model completed
for the EU Agricultural Outlook 2022, which is assumed to reflect the Common Agricultural
Policy at the time of publication.
As a new mitigation measure, rewetting of drained organic soils has been implemented in the
modelling framework, relying on data from the UNFCCC 2023 inventory, the IPCC wetlands
20
supplement (59
) and spatial explicit areas presented by the CAPRI model (60
) (Fellmann et al.,
2021).
Future climate change impacts on the agricultural and forest sectors have been estimated
based on CMIP6 data and subsequently implemented in GLOBIOM and G4M. The options
comprise scenarios from four climate models and three RCP scenarios, both with and without
CO2 fertilization effects. In addition, first steps have been taken towards the integration of
natural disturbances are done for the forest sector.
Furthermore, an update of the mitigation potentials of improving management of degraded
grasslands has been completed in GLOBIOM. An explicit representation of protected,
primary and likely-old-growth forests with a possibility of simulating different forest
management for the forests has been implemented in G4M.
2.4.5 Bioenergy potential
The analysis assumes a cap on the amount of the “gross available energy”(61
) from biomass
and waste at the level indicated by the ESABCC as the environmental risk level associated
“primary bioenergy use“ (9 EJ)62
in order to limit possible impacts on land-use and the
environment (63
). Furthermore, a restriction on the use of harvestable stemwood and forest
residues is implemented based on the scientific literature related to biodiversity and
sustainable wood biomass use (64
): all scenarios assume a cap on bioenergy from harvestable
stemwood (30 Mtoe) and from forest residues (20 Mtoe) (65
). The net imports of bioenergy
are capped at levels close to recent historical levels of around 10 Mtoe.
(59
) IPCC 2014, 2013 Supplement to the 2006 IPCC Guidelines for National Greenhouse Gas Inventories:
Wetlands, Hiraishi, T., Krug, T., Tanabe, K., Srivastava, N., Baasansuren, J., Fukuda, M. and Troxler, T.G.
(eds). Published: IPCC, Switzerland.
(60
) Fellmann, Thomas, et al. (2021). "Greenhouse gas mitigation technologies in agriculture: Regional
circumstances and interactions determine cost-effectiveness." Journal of Cleaner Production 317 (2021):
128406.
(61
) Gross available energy means the overall supply of energy for all activities in the EU, including for use in
international aviation and international maritime bunkers, and including net imports.
(62
) ESABCC (2023), Scientific advice for the determination of an EU-wide 2040 climate target and a
greenhouse gas budget for 2030–2050. Table 6.
(63
) Future analyses may assume other supply levels of biomass to stay within the sustainability boundaries, in
view of the on-going scientific debate.
(64
) Creutzig, F. et al., 2015; JRC, Biomass production, supply, uses and flows in the European Union, Policy
Report, 2023; Verkerk et al. 2019; Camia, A., Giuntoli, J., Jonsson, K., Robert, N., Cazzaniga, N.,
Jasinevičius, G., Avitabile, V., Grassi, G., Barredo Cano, J.I. and Mubareka, S., The use of woody biomass
for energy production in the EU, EUR 30548 EN, Publications Office of the European Union, Luxembourg,
2020, ISBN 978-92-76-27867-2, doi:10.2760/831621, JRC122719.
(65
) Historical levels from 2015 show biomass supply for bioenergy from harvestable stemwood of around 25
Mtoe and from forest residues of around 15 Mtoe.
21
2.5 Policies
2.5.1 EU policies
This section describes the elements of the EU legislative framework that have been
considered in the modelling analysis.
2.5.1.1 Climate legislation
The European Climate Law (66
) enshrines into law the EU’s commitment to become climate
neutral by 2050, thereby providing a clear direction of travel for the transition. Furthermore, it
expresses the EU’s commitment to reduce net GHG emissions by at least 55% in 2030
relative to 1990, as the European contribution to the achievement of the Paris Agreement
goals. As an essential part of the European Green Deal, the “Fit for 55” legislative package
established the policy framework to meet the 2030 climate target, ensuring a just and socially
fair transition, while strengthening innovation, preserving the competitiveness of EU industry
and promotiong a more efficient use of our natural resources.
The revised EU ETS Directive (67
) increases the ambition of the existing ETS emissions
reduction target from 43% to 62% by 2030, compared to 2005 levels, strengthening the
carbon price signal for power, centralised heat, industry and intra-EU aviation. The ETS
scope is extended to maritime transport (68
), and the global Carbon Offsetting and Reduction
Scheme for International Aviation (CORSIA) will be implemented through the EU ETS (69
).
The Carbon Border Adjustment Mechanism (CBAM) (70
) should ensure that the emissions
reduction efforts of the EU are not offset by increasing emissions outside its borders through
the relocation of production to non-EU countries or through increased imports of carbon-
intensive products.
(66
) Regulation (EU) 2021/1119.
(67
) Directive 2003/87/EC, as amended notably by Directive 2008/101/EC, Decision (EU) 2015/1814,
Regulation (EU) 2017/2392, Directive 2018/410, Regulation (EU) 2023/435, Directive (EU) 2023/958 and
Directive (EU) 2023/959.
(68
) Including CO2 emissions and, from 2026, CH4 and N2O emissions. The ETS covers all emissions that
occur at berth and within an EU port, all emissions produced during voyages between EU ports (as defined
by the MRV Regulation), and 50% of the emissions produced during voyages between an EU port and a
non-EU port.
(69
) Other important features of the revision of the ETS Directive include: (i) tightening of the ETS cap with a
two-step rebasing and an increasing linear reduction factor; (ii) updating the parameters of the Market
Stability Reserve including an extension of the intake rate of 24% until 2030; (iii) an obligation for the
Member States to spend the entirety of their emissions trading revenues on climate and energy-related
projects and to address social aspects of the transition; (iv) increasing the sizes of the Innovation Fund and
the Modernisation Fund; (v) phasing out gradually free allocation in the sectors covered by the new Carbon
Border Adjustment Mechanism over the period 2026-2034; (vi) requiring that installations benefitting from
free allocation, to avoid losing 20% of their free allocation, implement energy efficiency measures and
establish and implement a climate neutrality plan in the case of worst performing industrial emitters; (vii)
strengthening the rules on market transparency and making the mechanism in the event of excessive price
fluctuations automatic and more reactive; (viii) a requirement for the Commission to report by 31 July 2026
on the feasibility of including municipal waste incineration installations in the EU ETS from 2028 onwards.
(70
) Regulation (EU) 2023/956.
22
A separate emissions trading system (ETS2) will apply from 2027 onwards to combustion
fuels in road transport and buildings and additional sectors (71
), further incentivising and
ensuring an emission reduction of 42% compared to 2005 in the sectors covered. With the
extension to new sectors, around 75% of total EU emissions will be subject to carbon pricing,
making the ETS a crucial instrument to achieve the 2030 target.
The revised Effort Sharing Regulation (ESR) (72
) increases the EU greenhouse gas emission
reduction target from 30% to 40% by 2030, compared to 2005, for the sectors covered (i.e., all
sectors not covered by the ETS, excluding the LULUCF sector).
The new LULUCF Regulation (73
) sets an overall EU-level objective of 310 Mt CO2-eq of net
removals of greenhouse gases in the LULUCF sector in 2030. Binding national targets are
defined for each member state. The proposed EU-wide voluntary framework to reliably
certify high-quality carbon removals will boost innovative carbon removal technologies and
sustainable carbon farming solutions. Tackling climate change and ensuring healthy and
biodiverse ecosystems are intrinsically linked. Natural sinks are of crucial importance to
capture and store carbon. The new law to restore ecosystems such as wetlands and forests
(i.e., the Nature Restoration Law) will make an important contribution to maintaining,
managing and enhancing natural sinks and to increasing biodiversity while fighting climate
change.
The CO2 emission performance standards for new passenger cars and new light commercial
vehicles were revised and strengthened in line with the EU’s increased climate ambition (74
),
notably through setting a target to reduce CO2 emissions by 55% for new cars and by 50% for
new vans from 2030 to 2034 compared to 2021 levels, and a 100% reduction target from 2035
onwards. In February 2023, the European Commission proposed a more ambitious emission
reduction target for heavy duty vehicles (i.e., lorries, buses, coaches and trailers) through
updated CO2 performance standards (75
). If adopted, the proposal would reduce CO2
emissions per km from new heavy-duty vehicles by 90% by 2040, compared to the reference
period (July 2019 to June 2020). In addition, the proposal would ensure that all new city buses
are zero-emission vehicles as of 2030.
2.5.1.2 Energy legislation
For energy it includes the revised Renewable Energy Directive (76
) which sets a binding target
of at least 42.5% of renewable energy share in the energy mix in 2030. It includes a binding
sub-target for renewable hydrogen which requires 42% of hydrogen consumed in industry to
come from renewable fuels of non-biological origin (RFNBOs). In the transport sector, the
RED III regulatory framework includes the possibility for Member States to choose between a
new binding target of 14.5% reduction of greenhouse gas intensity in transport from the use of
renewables by 2030 or a binding target of at least 29% share of renewables within the final
(71
) That is to say, CO2 emissions from fuel combustion in industry not covered by the existing EU ETS.
(72
) Regulation (EU) 2018/842, as amended by Regulation (EU) 2023/857.
(73
) Regulation (EU) 2018/841, as amended by Regulation (EU) 2023/839.
(74
) Regulation (EU) 2019/631, as amended by Regulation (EU) 2023/851.
(75
) COM (2023) 88 final.
(76
) Directive EU/2018/2001, as amended by Directive (EU) 2023/2413.
23
consumption of energy in the transport sector by 2030. Further, it includes a binding sub-
target of 5.5% for advanced biofuels and RFNBO, including a minimum binding 1% level for
RFNBO. In the heating and cooling sector, the Directive introduces a mandatory annual
increase of the renewables share, namely 0.8 pp between 2021 and 2025, and 1.1 pp between
2026 and 2030.
It also includes the recast of the Energy Efficiency Directive (EED recast) (77
). The Directive
significantly raises the EU’s ambition, by making it binding for EU countries to collectively
achieve an additional 11.7% reduction of final energy consumption (FEC) by 2030 compared
to the projections of the 2020 EU Reference Scenario so that the Union’s final energy
consumption amounts to no more than 763 Mtoe. Member States shall make efforts to
collectively contribute to the indicative Union primary energy consumption (PEC) target
amounting to no more than 992,5 Mtoe in 2030.
In addition, in Article 8 of the EED recast, an annual energy savings obligation has been set,
with new savings each year of 1.49% of FEC on average, from 2024 to 2030. Articles 25-26
of the EED recast set targets and pathways for the heating and cooling technologies that can
be installed or supported. Article 5 in the EED recast asks Member States to ensure that the
total final energy consumption of all public bodies combined is reduced by at least 1.9% each
year, when compared to 2021.
The proposal (78
) for a revised Energy Performance of Buildings Directive (EPBD) (79
)
encourages the continuous improvement of the energy performance of the national building
stock through renovation, contributing to the long-term goal of a decarbonised building stock
by 2050. It includes measures for both existing and new buildings. Minimum Energy
Performance Standards (MEPS) trigger the energy efficient renovation of the worst
performing part of the existing building stock by mandating them to meet gradually
improving energy performances. The Zero-Emission Buildings provision – replacing the
current provision for nearly-zero energy buildings – requires that as of 2027 and 2030 new
public buildings and all new buildings respectively must be zero-emission buildings. “Zero-
Emission Building” refers to a building with a very high energy performance, where the very
small residual energy requirement is covered by regulated renewable energy or district
heating and cooling systems. Additionally, the EPBD proposal introduces notable new
provisions on national voluntary building renovation passport schemes, on rooftop solar
energy, on revision of the energy performance certificates, on the introduction of national
energy performance databases and on e-mobility.
The “Hydrogen and Gas Markets Decarbonisation” package (80
) should help to decarbonise
the EU gas market by facilitating the uptake of renewable and low carbon gases, including
hydrogen.
(77
) Directive (EU) 2023/1791 (recast).
(78
) COM(2021) 802 final.
(79
) Directive 2010/31/EU, as amended by Directive (EU) 2018/844.
(80
) Proposal for a directive (COM(2021) 803 final) and Proposal for a regulation (COM(2021) 804 final).
24
2.5.1.3 Transport policy
To complement the legislation on CO2 standards for vehicles, the Alternative Fuels
Infrastructure Regulation (AFIR) (81
) will ensure the supply of systems for re-charging and re-
fuelling zero-emission vehicles, ships and planes.
The ReFuelEU Aviation Regulation (ReFuelEU Aviation) (82
) aims to increase both demand
for and supply of sustainable aviation fuels (SAF), which are one of the key short- and
medium-term tools for decarbonising aviation. It should provide a way out of the situation
which is hindering their development: low supply and prices that are still much higher than
fossil fuels. ReFuelEU Aviation includes the obligation for aviation fuel suppliers to ensure
that all fuel made available to aircraft operators at EU airports contains a minimum share of
SAF from 2025 and, from 2030, a minimum share of synthetic fuels, with both shares
increasing progressively until 2050. In addition, this regulation establishes the obligation for
aircraft operators to ensure that the yearly quantity of aviation fuel uplifted at a given EU
airport is at least 90% of the yearly aviation fuel required, to avoid emissions related to extra
weight caused by tankering practices.
The FuelEU Maritime Regulation (83
) aims to increase the demand for and consistent use of
renewable and low-carbon fuels and reduce the greenhouse gas emissions from the shipping
sector. To this end, this regulation includes measures to ensure that the greenhouse gas
intensity of fuels used by the shipping sector will gradually decrease over time, by 2% in 2025
to as much as 80% in 2050 (compared to the reference value of 91,16 g CO2-eq/MJ), and a
special incentive regime to support the uptake of the so-called renewable fuels of non
biological origin (RFNBO) with a high decarbonisation potential. The regulation also includes
an obligation for passenger ships and containerships to use on-shore power supply for all
electricity needs while moored at the quayside in major EU ports as of 2030.
The European Commission’s Sustainable and Smart Mobility Strategy and Action Plan (84
)
outlines several milestones that are assumed to be met in the modelling analysis, particularly
the following ones: a) increase of rail freight traffic by 50% in 2030 and by 100% in 2050
relative to 2015; b) increase of high-speed rail traffic by 100% in 2030 and by 200% in 2050
relative to 2015; and c) increase of transport activity by inland waterways and short-sea
shipping (taken together) by 25% in 2030 and by 50% in 2050 compared to 2015.
To support the transition to a cleaner, greener and smarter mobility in line with the European
Green Deal and the Sustainable and Smart Mobility Strategy, the Commission proposed in
2021 (85
) to revise the TEN-T Regulation of 2013. It aims at reaching four main objectives: to
make transport greener and more efficient; to facilitate seamless transport, fostering
multimodality and interoperability between transport modes and better integrating the urban
nodes; to increase the resilience of TEN-T to climate change and other natural hazards; and to
improve the efficiency of the TEN-T governance tools. The objective is to facilitate that more
people take the train, and more goods are transported by rail, inland waterways, and short sea
(81
) Regulation (EU) 2023/1804.
(82
) Regulation (EU) 2023/2405.
(83
) Regulation (EU) 2023/1805.
(84
) COM (2020) 789 final.
(85
) COM (2021) 812 final.
25
shipping. To address the missing links and modernise the entire network, quality standards
should be improved. For this, major TEN-T passenger rail lines will allow trains to travel at
160 km/h or faster by 2040. Canals and rivers must ensure good navigation conditions for a
minimum number of days per year. Trans-shipment terminals should be improved, and piggy-
back services should be possible on the TEN-T’s rail network. All major cities should develop
sustainable urban action plans to promote zero-emission mobility. In addition to the core and
the comprehensive network, an extended core network will be introduced which should be
completed by 2040. The core network corridors should be merged with the rail freight
corridors to become European Transport Corridors. In 2021, the Commission also proposed to
update the the ITS Directive (86
), and the Action Plan to boost long-distance and cross-border
passenger rail (87
).
In addition, in July 2023 the Commission proposed the Greening transport package (88
)
including a proposal to increase the use of railway infrastructure capacity in the Single
European railway area, a proposal to revise the rules on weights and dimensions of heavy-
duty vehicles to enable (among other ambitions) the uptake of zero-emission vehicles, a
proposal on the accounting of the GHG emissions of transport services (CountEmissioEU),
and the revision of the Combined Transport Directive (89
). The first initiative includes
measures to better manage and coordinate international rail traffic. It is expected to increase
the passenger and freight rail capacity and punctuality, thus increasing the modal share of rail
transport. Secondly, the revision of the Combined Transport Directive incentivises the use of
intermodal freight transport through economic support to compensate for the price gap
between road-only and intermodal transport. It is expected to increase the modal share of rail
transport, inland waterway transport and short sea shipping. Thirdly, the CountEmissions EU
initiative will define rules for WTW GHG emissions accounting at the transport service level.
It will be based on a common methodology recently defined at global level (ISO 14083). The
emissions accounting at service level will not be mandatory but, if operators decide to
calculate emissions, they will have to do it according to CountEmissions EU. The impact is
expected to be a limited increase of the modal share of passenger and freight rail transport at
the expense of air and road transport. Finally, the revision of the Weights and Dimensions
Directive (WDD) provides for increasing the maximum gross vehicle weight (GVW) of new
zero-emission heavy goods vehicles by a maximum of 2 tonnes and the maximum length of
the vehicle combination by up to 90 cm. The weight allowance for zero-emission heavy goods
vehicles also applies to 2-axle rigid buses. The purpose of this measure is to compensate for
the weight and the size of zero-emission powertrains (i.e., weight of electric batteries and
space for hydrogen tanks) thus preventing the loss of payload capacity and/or range in
comparison with diesel vehicles. In addition, the revised WDD incentivizes the shift from
road-only to intermodal transport operations by allowing for extra height to accommodate
high-cube containers in intermodal transport and by aligning the definition of intermodal
transport with the Combined Transport Directive, to include all intermodal loading units.
(86
) Directive 2010/40/EU, as amended by Directive (EU) 2023/2661.
(87
) COM (2021) 810.
(88
) Proposal for a Regulation on the use of railway infrastructure capacity in the single European railway area
(COM (2023) 443), Proposal for a Revision of the Weights and Dimensions Directive (COM (2023) 445),
and Proposal for a Regulation on the accounting of greenhouse gas emissions of transport services (COM
(2023) 441)
(89
) Directive 92/106/EEC.
26
The International Maritime Organisation (IMO) adopted in July 2023 the “2023 IMO Strategy
on Reduction of GHG Emissions from Ships”, with enhanced targets to tackle harmful
emissions. The revised IMO GHG Strategy includes an enhanced common ambition to peak
GHG emissions from international shipping as soon as possible and to reach net-zero GHG
emissions by or around, i.e., close to 2050, taking into account different national
circumstances, whilst pursuing efforts towards phasing out the emissions, consistently with
the long-term temperature goal set out in Article 2 of the Paris Agreement. Indicative
checkpoints were also defined, specifying the targets to reduce the total annual GHG
emissions from international shipping by at least 20%, striving for 30%, by 2030, compared to
2008; and to reduce the total annual GHG emissions from international shipping by at least
70%, striving for 80%, by 2040, compared to 2008.
2.5.1.4 Energy Taxation
The proposal for a revised Energy Taxation Directive (90
), which regulates the taxation of
energy products and electricity, aims to: a) align the taxation of energy products and
electricity with the EU's energy, environment and climate policies; b) preserve and improve
the EU internal market by updating the scope of energy products and the structure of rates and
by rationalising the use of tax exemptions and reductions by member states; and c) preserve
the capacity to generate revenues for the budgets of the member states.
2.5.1.5 Legislation relevant for non-CO2 emissions
The proposal for a “Regulation on methane emissions reduction in the energy sector” (91
)
aims to track and reduce methane emissions in the energy sector. This is a crucial contribution
to climate action, as methane is the second most important greenhouse gas following carbon
dioxide. The proposal introduces new requirements for the oil, gas and coal sectors to
measure, report and verify methane emissions (MRV) at the highest standard. Operators will
need to carefully document all wells and mines, trace their emissions and take appropriate
mitigation measures to prevent and minimise methane emissions in their operations. Under
the new rules, operators will have to detect and repair methane leaks. Operators will need to
carry out surveys of methane leaks in different types of infrastructures at set intervals, using
devices with proposed minimum leak detection limits. Operators will then need to repair or
replace all leaking components above certain levels immediately after detection, and no later
than five days for a first attempt and 30 days for a complete repair. The operators will have to
prioritise repairs of larger leaks. Venting and flaring practices, which release methane into the
atmosphere, will be banned except for narrowly defined exceptional circumstances.
The proposals to revise the “Fluorinated Greenhouse Gas (F-gas) Regulation” and the “Ozone
Depleting Substances (ODS) Regulation”, presented by the European Commission in April
2022, aim at further reducing the emissions from these highly potent, human-made
greenhouse gases. The legislative proposal (92
) to update the “F-gas Regulation” (93
) aligns
this regulation with the European Green Deal, the European Climate Law, recent international
obligations on HFCs under the Montreal Protocol, and progress made and lessons learned.
(90
) COM (2021) 563 final.
(91
) COM (2021) 805 final.
(92
) COM (2022) 150 final.
(93
) Regulation (EU) No 517/2014.
27
The review is intended, in particular, to deliver higher ambition (e.g., through a tighter quota
system for HFCs and new restrictions on the use of certain F-gases in equipment), ensure
compliance with the Montreal Protocol’s requirements, improve enforcement and
implementation, and achieve more comprehensive monitoring. The proposal (94
) to revise the
“ODS Regulation” (95
) addresses the need to achieve a higher level of emission reduction in
view of the European Green Deal, improve the efficiency of some measures in the regulation,
ensure more comprehensive monitoring, and improve the coherence of the regulation with
other rules. The proposal would prevent climate-relevant and ozone-depleting emissions from
insulation foams during renovation or demolition activities.
EU legislation on the landfill of waste (96
) limits the type of waste that can be landfilled,
encourages recycling and promotes the recovery of landfill gas. More specifically, it
introduces restrictions on landfilling of all waste that is suitable for recycling or other material
or energy recovery from 2030, and it limits the share of municipal waste landfilled to 10% by
2035. In addition, it establishes rules for the mitigation and monitoring of landfill gas, and it
defines targets for the reduction of biodegradable municipal waste going to landfills, thus
reducing the source of landfill gas in the first place. Furthermore, the Waste Framework
Directive (97
) establishes targets for the separate collection of different waste types (to
increase recycling and reuse of materials), as well as targets for food waste reduction.
The Urban Wastewater Treatment Directive (UWWTD) in force since 1991 (98
) requires: the
collection and treatment of wastewater in all urban areas of more than 2000 people; secondary
treatment of all discharges from urban areas of more than 2000 people, and more advanced
treatment for urban areas of more than 10000 people in catchments with sensitive waters; pre-
authorisation of all urban wastewater discharges, discharges from the food-processing
industry and industrial discharges into urban wastewater collection systems; monitoring of the
performance of treatment plants and receiving waters; controls of sewage sludge disposal and
reuse, and treated wastewater reuse whenever it is appropriate. In October 2022, the
Commission proposed a revision of this Directive (99
), adapting it to the newest standards.
The revision aims to: reduce pollution, energy use and greenhouse gas emissions; improve
water quality by addressing remaining urban wastewater pollution; improve access to
sanitation especially for the most vulnerable and marginalised; make industry pay to treat
micropollutants; require EU countries to monitor pathogens in wastewater; and lead to a more
circular sector.
The Industrial Emissions Directive (IED) (100
) is the main EU instrument regulating pollutant
emissions from industrial installations. In 2022, the Commission adopted a proposal to revise
the IED (101
). One of the most relevant elements is that the revised Directive would cover
additional intensive farming and industrial activities, ensuring that sectors with significant
(94
) COM (2022) 151 final.
(95
) Regulation (EC) 1005/2009.
(96
) Directive 1999/31/EC, as amended by Directive (EU) 2018/850.
(97
) Directive 2008/98/EC.
(98
) Council Directive 91/271/EEC.
(99
) COM (2022) 541 final.
(100
)Directive 2010/75/EU.
(101
)COM (2022) 156 final/3.
28
potential for high resource use or pollution also curb environmental damage at source by
applying Best Available Techniques.
2.5.1.6 Carbon capture and storage
Several barriers still exist today to the development of the carbon capture and storage
technology. The public consultation highlighted that main factors hindering the development
of carbon capture (in association with storage) are cost of CCS, price signal, CO2 storage
availability and maturity of technology. Academic stakeholders as well as civil society
organisations rank price signals as the most difficult barrier, while business associations,
companies (including SMEs), EU citizens and public authorities rank cost as first.
To overcome these barriers and trigger a carbon capture and storage industry, the European
Commission has proposed in the Net-Zero Industry Act an annual injection capacity of at
least 50 million tonnes of CO2 to be achieved by 2030 (102
). This target is supported by
several CO2 storage projects that are currently in different stages of the exploration and
permitting process in the EEA.
To encourage the development of carbon industry, encompassing all capture and industrial
removals technologies, sources, applications and corresponding value chains, the “Industrial
Carbon management Strategy” aims at creating an industrial carbon management market by
2030 to support efforts in hard-to-abate sectors who need to apply carbon capture and storage,
carbon capture and utilisation or industrial carbon removals to become climate neutral.
2.5.2 National Developments
2.5.2.1 Long Term Strategies and National Energy and Climate Plans
The Governance of the Energy Union and Climate Action (‘Governance Regulation’) (103
)
requires EU Member States to communicate and implement integrated National Energy and
Climate Plans (NECPs) and to regularly report on their progress in implementing them, and to
submit Long-term strategies (LTS). NECPs are ten-year plans outlining a path to achieve the
Member States’ objectives, targets and contributions in five dimensions: decarbonisation
(greenhouse gas reduction and renewables), energy efficiency, energy security, internal
energy market and research, innovation and competitiveness. The NECPs for the period from
2021 to 2030 were submitted by 31 December 2019, and updates are to be submitted by 30
June 2024.
By 15 March 2023, and every two years, Member States need to take stock of the progress
achieved towards the objectives, targets and contributions set out in their initial plans and
submit it to the Commission as National Energy and Climate Progress Report (NECPR).
Eight Member States submitted a full progress report by the 15 March deadline, and ten more
submitted their progress report relatively close to the deadline. As of 24 August 2023, all
Member States submitted their NECPRs and only 4 of the submissions are still partial.
The policies and measures at national level included in the analysis are largely based on the
ones implemented during the modelling of the EU Reference Scenario 2020, which reflects
(102
)COM (2023) 161 final.
(103
) Regulation (EU) 2018/1999.
29
the first version of the NECPs (submitted in 2019). Furthermore, this Impact Assessment
takes into consideration LTS updates as of 1st
February 2023 (104
), and benchmarks, to the
extent possible, 2021 and, whenever available, 2023 projections for GHG emissions reported
in NECPRs.
Beyond long-term strategies and NECPRs, specific items concerning announced national
policies have also implemented and described in the following sections.
2.5.2.2 Nuclear
Policies for nuclear energy are based on National Energy and Climate Plans (105
) submitted by
Member States in 2019. These policies include political commitments by some Member
States (including Germany, Belgium and France) to either ban or reduce nuclear from their
power mix by 2035. These announcements were already included in Reference Scenario 2020
and projections for nuclear energy by Member States were published online (106
). Since then,
certain MS have announced increases (or lifetime extension) in their nuclear capacity.
In line with these announcements, the following capacity additions were taken into account in
the modelling:
• BE: Lifetime extension of around 2 GW of existing capacity until 2035, as of RPE
• CZ: Additional capacity of min 1.2 GW and with flexibility up to around 2 GW for 2040.
• FR: Maximum capacity cap of around 62 GW in 2035 and 64 GW in 2040 (107
).
• NL: Additional capacity of up to 3.2 GW in 2040, with flexibility of around 1.6 GW in
2035.
• PL: Maximum capacity cap of around 15 GW in 2040 (108
).
• SK: Possible additional capacity of around 2.4 GW in 2040.
These assumptions reflect the situation until March 2023. In June 2023, France has adopted
a law which, among others, removes the objective of reducing the share of nuclear power in
the electricity mix to 50% by 2035, as well as the capping of nuclear production capacity at
63.2 GW (109
). The impacts in the energy system of the 2023 French Law are discussed in
section 6.2.1. of the main document of the Impact Assessment.
(104
)European Commission, National long-term strategies (as of 1 February 2023) .
(105
)Regulation (EU) 2018/1999
(106
)https://energy.ec.europa.eu/data-and-analysis/energy-modelling/eu-reference-scenario-2020_en
(107
) This capacity is higher than in the REPowerEU scenario. In REPowerEU, nuclear capacity is forecast to
decrease from 63 GWe in 2030 to 36 GWe in 2040. Due to the planned further extension of plant lifetimes,
all capacity operational in 2030 could be assumed to be operational im 2040. Additional capacity of at least
1.65 GW could be assumed to be coming online in 2035. The potential 14 new plants announced would
correspond to roughly one per year on average and thus and additional ~8 GWe capacity (five plants) by
2040 could be a potential limit. This would correspond to 71.4 GWe.
(108
) This value is much higher than RPE. RTE (2022). Futures Energétiques 2050 – Chapitre 4 La production
d’électricité.
(109
)Related to the acceleration of procedures linked to the construction of new nuclear installations near existing
nuclear sites and the operation of existing installations.
30
Future analysis will include any resulting legislative changes by the Members States and the
update of the NECPs to deploy newly build nuclear capacities or extend further operating
lifetime of the existing ones. See Annex 8 and the box in Section 6.2.1 for more details (110
).
2.5.2.3 Projects for Carbon Capture, Utilisation and Storage
Market research identified 186 key companies worldwide active in the CCS business (111
).
24% of the key players are European or are active in the field through their European
subsidiaries. In the EU, companies have been mostly involved in project development in the
energy-intensive industries (steel, cement, chemicals) and in recent years the number of
announcements on carbon capture and storage projects have grown exponentially.
In view of the update of a previous published study on the topic (112
), the JRC screened
widely stakeholders’ activity to compile a list with all CO2 projects that are operational, in
construction, in a feasibility or pre-FID (financial investment decision) stage. The list includes
projects focusing either on the whole value chain (carbon capture, transportation and storage,
including storage in products) or to a single step: carbon capture only (often associated to a
certain industrial subsector), carbon storage only, or creation of a carbon terminal or
transportation hub. Considering a cut-off date of 1 May 2023, the total yearly capacity of
carbon capture and storage projects in the EU by 2030 corresponds to 64 MtCO2/y (capture)
and 71 MtCO2 (storage) (113
).
Member State also supported directly proposals of Projects of Common/Mutual Interest
(PCI/PMI) for the 6th
List under the TEN-E regulation, adding up to 34 MtCO2/y of transport
capacity in the period 2030-2032, that could increase up to a peak of 88 MtCO2/y.
These elements helped to define the assumptions for the maximum short-term (up to 2030)
potential and geographical distribution of CCS projects.
Concerning geographical distribution of capture projects, initially the CO2 will be captured in
industrial centres located in different Member States around the North Sea coast and its
hinterland, to be aggregated with onshore transport infrastructure for CO2. The storage
capacity will be concentrated primarily in the North Sea region (DK, NL), and, if business
cases allow, in the Adriatic and Black Sea. NO and UK also announced the construction of
several projects (114
),(115
),(116
), with an indicative storage capacity of around 110MtCO2/y by
2030.
(110
)As a consequence, French nuclear capacity is projected to decline in 2040 in the scenarios analised (see
Annex 8). Current estimates suggest tnat French nuclear capacity could actually increase to 54-71 GWe (as
discussed in footnote (107
). In the EU, this would translate to an estimated nuclear capacity of between 82
GWe and 101 GWe in 2040.
(111
) However, depending on the boundaries set for the value chain, other research suggests about 17 000
companies involved in all aspects of the CCUS supply chain including technology providers, services, legal
aspects (Kapetaki, 2022).
(112
)Morbee J, et al. The Evolution of the Extent and the Investment Requirements of a Trans-European CO2
Transport Network. EUR 24565 EN. Luxembourg (Luxembourg): Publications Office of the European
Union; 2010. JRC61201
(113
)JRC (2024). Tumara, D., Uihlein, A. and Hidalgo González, I. Shaping the future CO2 transport network for
Europe, European Commission, Petten, 2024, JRC136709.
(114
)Adomaitis, N., Kartit, D., ‘Factbox: Carbon capture and storage projects across Europe’, Reuters, 2023.
31
3 SCENARIOS (117)
The specific objectives of this initiative are to identify and assess pathways towards climate
neutrality in 2050 and an intermediate target for 2040.
3.1 Scenarios
All scenarios assessed aim at meeting climate neutrality by 2050. Three scenarios share the
same key assumptions (S1, S2, S3) and allow to compare three levels of GHG emissions in
2040. The analysis is complemented by a variant, “LIFE”, which illustrates the additional
impact of different assumptions on circular economy, mobility and the food system.
3.1.1 Common policy elements
The analysis factors in, to the extent possible, relevant policies as well as policy proposals
adopted up to May 2023. Table 2 shows an overview of the EU policies that were considered
in the definition of all scenarios. The table also shows whether the scenarios consider that
these policies have specific effects only up to 2030 or also beyond 2030.
(115
)Watt, R., ‘Five proposed UK carbon capture projects meet government's eligibility test’, Upstreamonline,
2021.
(116
)Northern Endurance Partnership Partners, Endurance Storage Development Plan: Key Knowledge
Document, 2021.
(117
)The model-based analysis is a technical exercise based on a number of assumptions that are shared across
scenarios. Its results do not prejudge the future design of the post-2030 policy framework.
32
Table 2: Main common legislative elements considered in all scenarios
Element
Status at
the time of
the analysis*
Quantitative effects/targets in
2030 (included in the modelling)
Quantitative effects/targets post-
2030 (included in the modelling)
Emission Trading System Directive Adopted Yes See discussion
Effort Sharing Regulation Adopted Yes No
LULUCF Regulation Adopted Yes No
CO2 emission standards for cars
and vans
Adopted Yes Yes
Alternative Fuel Infrastructure
Regulation
Adopted Yes Yes
FuelEU Maritime Adopted Yes Yes
ReFuelEU Aviation Adopted Yes Yes
Energy Efficiency Directive Adopted Yes No
Renewable Energy Directive Adopted Yes No
Energy Performance of Buildings
Directive
Proposal Yes No
Regulation on methane emissions
reduction in the energy sector
Agreed Yes Yes
CO2 emission standards for heavy-
duty vehicles
Proposal Yes Yes
Energy Taxation Directive Proposal Yes No
Intelligent Transport Systems
Directive
Adopted Yes Yes
TEN-T Regulation Agreed Yes Yes
Greening Freight Package Proposal Yes Yes
F-Gas Regulation Agreed Yes Yes
Net Zero Industry Act Proposed Yes No
Landfill Directive
Not recently
reviewed
Yes Yes
Waste Framework Directive
Not recently
reviewed
Yes Yes
Urban Wastewater Treatment
Directive
Proposal Yes Yes
Industrial Emissions Directive Proposal Yes Yes
Note: *“Adopted” means formally adopted by the European Parliament and European Council. “Agreed” means that a
political agreement between the co-legislators has been reached, but they have not yet formally adopted the act.
“Proposal” means proposed by the European Commission, but still under negotiation between the co-legislators. “Not
recently reviewed” means that this legislation is in force and has not been revised in recent years.
The ETS by default has no end date for the application of the Linear Reduction Factors (LRF)
that set the yearly emission reduction cap. However, the ETS will be reviewed in view of
being compliant with the 2040 climate target once that target has been set. Consequentely, the
analysis does not assume by default a prolonged unchanged application of the LRFs post-
2030. The analysis looks at the sectoral reductions compatible with the different 2040 target
levels, including for the sectors covered by the ETS.
3.1.1.1 Energy and industrial process CO2 emissions
By 2030, scenarios are defined in line with relevant Fit For 55 and REPowerEU policies:
33
• The Emission Trading System Directive (118
), targeting a reduction of 62% for the
sectors under the ETS1 and a reduction of 42% for the sectors under the ETS2, both
compared to 2005.
• The Effort Sharing Regulation (119
), setting national targets for Member States to
collectively contribute at EU level to an emission reduction of 40% compared to 2005
levels.
• The Renewable Energy Directive (120
), including the binding target for 2030 of at least
42.5%, but aiming for 45% (121
), and corresponding sectoral sub-targets.
• The Energy Efficiency Directive (122
), aiming at ensuring an additional 11.7%
reduction of energy consumption by 2030, compared to the 2020 Reference Scenario
projections.
• The revised Regulation on CO2 performance standards for new passenger cars and
vans (123
), with CO2 standards for new cars and vans established for years 2025 and
2030, namely -15% and -55% (-50% for vans) compared to 2021.
• The European Commission’s proposal for a revised Regulation of CO2 emission
standards for HDVs (124
), establishing CO2 performance standards of -43% for new
lorries and coaches and -100% for urban buses by 2030 (relative to the reference
period, 1 July 2019 – 30 June 2020).
• The FuelEU Maritime Regulation (125
), which establishes limits on the GHG intensity
of energy used on-board by ships, and the obligation to use on-shore power supply or
zero-emission technology while ships stay at EU ports.
• The ReFuelEU Aviation Regulation (126
), which specifies that, from 2025 onwards,
aviation fuel suppliers shall ensure that all aviation fuel made available to aircraft
operators at every Union airport contains a minimum share of sustainable aviation
fuels (SAF), including a minimum share of synthetic aviation fuels. The SAF share
targets in 2025 and 2030 are 2% and 6%, respectively.
• The Regulation on the deployment of alternative fuels infrastructure (127
), which sets
mandatory deployment targets for electric recharging and hydrogen refuelling
(118
)Directive 2003/87/EC, as amended by Directive (EU) 2023/959.
(119
)Regulation (EU) 2018/842, as amended by Regulation (EU) 2023/857.
(120
)Directive EU/2018/2001, as amended by Directive (EU) 2023/2413.
(121
)COM(2022) 230 final
(122
) Directive (EU) 2023/1791.
(123
)Regulation (EU) 2019/631, as amended by Regulation (EU) 2023/851.
(124
)COM(2023) 88 final
(125
) Regulation (EU) 2023/1805.
(126
) Regulation (EU) 2023/2405.
(127
) Regulation (EU) 2023/1804, repealing Directive 2014/94/EU.
34
infrastructure for the road sector, for shore-side electricity supply in maritime and
inland waterway ports, and for electricity supply to stationary aircraft.
• Other policies and proposals such as the Energy Taxation Directive (128
) and the
Energy Performance of Buildings Directive (129
).
Beyond 2030, the following policies will extend their application and implement additional
guidelines, i.e.:
• The CO2 performance standards for cars and vans establish that from 2035 onwards,
there should be no new vehicle which is not a zero-emission vehicle in the (regulated)
new fleet of that year.
• The CO2 standards for HDVs establishes a mandate to decrease CO2 emissions per
km from new lorries and coaches by 90% from 2040 onwards (relative to the reference
period 1 July 2019 – 30 June 2020), with intermediate targets for 2035 (64%). Note
that there is some degree of differentiation between scenarios, with some scenarios
having stricter CO2 standards for HDVs than others from 2040 or 2045 onwards.
• FuelEU Maritime defines a GHG intensity limits more stringent over time until 2050.
• ReFuelEU Aviation increases the minimum shares of sustainable aviation fuels as of
2030 (6%) over time until 2050 (70%). Note that there is some degree of
differentiation between scenarios, with some scenarios having stricter CO2 standards
for HDVs than others from 2035 onwards.
The scenarios remain neutral on the post-2030 evolution of the ETS, which will be reviewed
in 2026. Instead, modelling drivers are defined for one or more sectors (see 3.2). In addition
to the policies mentioned above, the following transport-related policies are included in the
analysis: the revision of the Intelligent Transport Systems Directive (130
), the revision of the
Trans-European Transport Network (TEN-T) Regulation (131
), the Action Plan to boost long-
distance and cross-border passenger rail (132
), and the proposed Greening freight
package (133
). These initiatives contribute towards the milestones of the Sustainable and Smart
Mobility Strategy and Action Plan (134
). The IMO Strategy on Reduction of GHG Emissions
(128
)Directive 2003/96/EC, and the European Commission’s proposal for recasting (COM(2021) 563 final).
(129
) Directive 2010/31/EU, as amended by Directive (EU) 2018/844, and the European Commission’s proposal
for a revision of this directive (COM(2021) 802 final).
(130
) Directive 2010/40/EU, as amended by Directive (EU) 2023/2661.
(131
) COM (2021) 812.
(132
) COM(2021) 810.
(133
)The “Greening freight package” includes: Proposal for a Regulation on the use of railway infrastructure
capacity in the single European railway area (COM (2023) 443); Proposal for a Revision of the Weights and
Dimensions Directive (COM (2023) 445); Proposal for a Regulation on the accounting of greenhouse gas
emissions of transport services (COM (2023) 441); and Proposal for a Directive as regards a support
framework for intermodal transport of goods (COM (2023) 702).
(134
)Particularly the milestones related to rail, inland waterways and short-sea shipping. See: COM (2020) 789
final.
35
from Ships (135
) is also reflected, with differentiation between scenarios. The modelling also
considers the impact of initiatives described in the Circular Economy Action Plan (136
).
Beyond policies, consolidated trends such as further electrification of the building sector
through sustained deployment of heat pumps, a more decarbonised and efficient power system
with a progressively higher share of renewable facilitated by system optimisation
(interconnection, storage and demand-side response) are also implemented.
3.1.1.2 Non-CO2 GHG emissions
In all scenarios, the evolution of non-CO2 GHG emissions is consistent with the relevant
existing legislation or legislative proposals, including the proposals for a revised Urban
Wastewater Treatment Directive (137
), a revised F-gas regulation (138
) and a revised Industrial
Emission Directive (139
). On top of that, the evolution of the non-CO2 GHG emissions from
the energy sector is driven by the decarbonisation of the energy sector and is consistent with
the proposal for a regulation to reduce methane emissions in the energy sector (140
).
3.1.1.3 LULUCF
The EU has agreed on a new target to achieve 310 MtCO2 of net removals in 2030 according
to the amended LULUCF regulation (141
). There is no specific post-2030 policy framework
related to LULUCF emissions.
3.1.2 S1
S1 aims at reaching net GHG emission reductions of close to 78.5% in 2040 compared to
1990, to be aligned with a “linear” trajectory between 2030 and 2050, and climate neutrality
in 2050.
3.1.2.1 Energy and industry CO2
The S1 scenario projects beyond 2030 the consolidated techno-economic policy trends that
delivers the 2030 target, while it delays a large uptake of novel technologies until after 2040.
The energy system gets further electrified, more efficient and decarbonised through a further
deployment of renewables. A very limited uptake of e-fuels, carbon capture and industrial
removals and additional deployment of bioenergy are projected until 2040. However, to
ensure climate neutrality in 2050, deployment of these technologies is projected to strongly
(135
) The 2023 IMO GHG Strategy states that GHG emissions from international shipping should reach net zero
close to 2050. It also introduces indicative checkpoints, namely: 1) to reduce the total annual GHG
emissions from international shipping by at least 20%, striving for 30%, by 2030, compared to 2008; and 2)
to reduce the total anual GHG emissions from international shipping by atleast 70%, striving for 80%, by
2040, compared to 2008.
(136
)COM(2020) 98 final.
(137
)COM (2022) 541 final.
(138
)COM (2022) 150 final.
(139
)COM/2022/156 final/3.
(140
)COM (2021) 805 final.
(141
)Regulation (EU) 2018/841, as amended by Regulation 2023/839.
36
accelerate after 2040. The CO2 standards for HDVs establish a mandate to decrease CO2
emissions per km from new lorries and coaches by 43% in 2030, 64% in 2035 and 90% from
2040 onwards (relative to the reference period 1 July 2019 – 30 June 2020). The minimum
shares of sustainable aviation fuels (SAF), related to ReFuelEU Aviation, are 20% in 2035,
34% in 2040, 42% in 2045 and 70% in 2050, and the minimum shares of synthetic aviation
fuels are 5% in 2035, 10% in 2040, 15% in 2045 and 35% in 2050. The IMO GHG emissions
reduction target for international shipping is set at the lower end of the range (i.e., 70% GHG
emissions reduction in 2040 relative to 2008).
3.1.2.2 Non-CO2 GHG emissions
By 2040 the S1 scenario assumes no further mitigation than delivered by the known policy
sectoral policies (for instance, the revised F-gas regulation, the Landfill Directive and the
revised Urban Wastewater Treatment Directive) and as a result of the decarbonising energy
sector.
By 2050, the mitigation options are fully deployed in all sectors (including agriculture) in
view of contributing to climate neutrality.
The evolution of non-CO2 GHG emissions from the agriculture sector is consistent with the
EU’s agriculture activity policy as reflected in the EU Agricultural Outlook 2022 (142
).
3.1.2.3 LULUCF
LULUCF net removals are driven by the evolution of bioenergy demand in the scenario.
In addition, in the last decade, the scenario assumes the same policy intensity as the one
necessary to achieve the 2030 LULUCF target (310 MtCO2 of net removals) (143
) in view of
contributing to climate neutrality by 2050.
3.1.3 S2
S2 aims at reaching net GHG emission reductions of at least 85% in 2040 compared to 1990
and climate neutrality in 2050.
3.1.3.1 Energy and Industry CO2
S2 builds on S1 and generates a faster decarbonisation of the energy system until 2040. It
projects by 2040 a higher deployment of novel technologies such as carbon capture and e-
fuels than S1. Carbon is mostly captured from fossil fuels in the industrial and power sector
and linked to carbon storage underground and in part to production of e-fuels. Industrial
carbon removals starts appearing in the energy system in the 2031-2040 decade, with relative
amount of BECCS and DACCS subject to uncertainties. A larger upscaling of current trends,
(142
)EC (2022), EU agricultural outlook for markets, income and environment, 2022-2032. European
Commission, DG Agriculture and Rural Development, Brussels.
(143
)Regulation (EU) 2018/841 (amended by Regulation 2023/839).
37
for instance development of renewables and increased use of biomass (144
), that lead to power
system close to full decarbonisation by 2040, is also assumed.
Compared to S1, the transport sector is characterised by a higher shift towards shared and
collaborative mobility services and multimodal travel, more efficient operation of freight
vehicles and delivery of goods (by optimising multi-modal delivery solutions), higher use of
intermodal freight transport and a larger uptake of renewable H2 and e-fuels. The CO2
standards for HDVs establish a mandate to decrease CO2 emissions per km from new lorries
and coaches by 43% in 2030, 64% in 2035, 90% in 2040 and 100% from 2045 onwards
(relative to the reference period 1 July 2019 – 30 June 2020). The minimum shares of
sustainable aviation fuels (SAF), related to ReFuelEU Aviation, are 21% in 2035, 36% in
2040, 44% in 2045 and 72.5% in 2050, and the minimum shares of synthetic aviation fuels are
6% in 2035, 12% in 2040, 17% in 2045 and 37.5% in 2050. The IMO GHG emissions
reduction target for international shipping is set at the mid-point of the range (i.e., 75% GHG
emissions reduction in 2040 compared to 2008).
3.1.3.2 Non-CO2 GHG emissions
The S2 scenario assumes the uptake of mitigation options in all sectors, notably in the
agriculture sector, where technologies to reduce CH4 emissions are assumed to be largely
deployed by 2040. In 2050, all the mitigation options required are fully deployed in all sectors
in view of contributing to climate neutrality.
3.1.3.3 LULUCF
LULUCF net removals are driven by the evolution of bioenergy demand in the scenario.
In addition, the scenario assumes over 2030-2050 the same policy intensity as the one
necessary to achieve the 2030 LULUCF target (310 MtCO2 of net removals) (145
).
3.1.4 S3
S3 aims at reaching net GHG emission reductions of at least 90% in 2040 compared to 1990
and climate neutrality in 2050.
3.1.4.1 Energy and Industry CO2
The S3 scenario assumes large and fast uptake of all mitigation options, including
development of novel technologies, already in the 2031-2040 decade. By 2040, S3 leads to a
fully decarbonised power system and industrial sector and a high share of e-fuels in all sectors
(including in hard-to-abate transport sectors, such as aviation and international shipping). This
is supported by wide deployment of carbon capture, covering all industrial process emissions
by 2040, and industrial carbon removals, compensating for the residual in the international
maritime and aviation sectors covered by the ETS and delivering carbon to produce e-fuels.
(144
) Eurostat, Complete Energy Balances European Union (27 countries) – 2021, 2023.
(145
)Regulation (EU) 2018/841 (amended by Regulation 2023/839).
38
Compared to S2, S3 shows a higher shift towards shared and collaborative mobility services
and multimodal travel, more efficient operation of freight vehicles and delivery of goods (by
optimising multi-modal delivery solutions), higher shift towards intermodal freight transport,
and a larger uptake of renewable H2 and e-fuels. The CO2 standards for HDVs establish a
mandate to decrease CO2 emissions per km from new lorries and coaches by 43% in 2030,
64% in 2035, 100% from 2040 onwards (relative to the reference period 1 July 2019 – 30
June 2020). The minimum shares of sustainable aviation fuels (SAF), related to ReFuelEU
Aviation, are 22% in 2035, 38% in 2040, 46% in 2045 and 75% in 2050, and the minimum
shares of synthetic aviation fuels are 7% in 2035, 14% in 2040, 19% in 2045 and 40% in
2050. The IMO GHG emissions reduction target for international shipping is set at the higher
end of the range (i.e., 80% GHG emissions reduction in 2040 relative to 2008). As a result of
high emission reductions levels achieved already in 2031-2040, decarbonisation rate slows
down in the decade 2041-2050 to smoothly achieve climate neutrality in 2050.
3.1.4.2 Non-CO2 GHG emissions
In 2040, the mitigation technology solutions are fully deployed in all sectors, including
agriculture, as for 2050 in view of contributing to climate neutrality. In particular, in addition
to the options deployed in S2, S3 builds on a large uptake by 2040 of technologies to reduce
N2O emissions from agriculture.
3.1.4.3 LULUCF
LULUCF net removals are driven by the evolution of bioenergy demand in the scenario.
In addition, the scenario assumes over 2030-2050 the same policy intensity as the one
necessary to achieve the 2030 LULUCF target (310 MtCO2 of net removals) (146
).
3.1.5 LIFE
The LIFE scenario aims at reaching net GHG emission reductions of at least 90% in 2040
compared to 1990 and climate neutrality in 2050.
3.1.5.1 Activity assumptions
LIFE considers a more sustainable lifestyle guided by consumer climate-friendy choices and a
more efficient use of the resources of the EU’s economy (energy, material, and land) , as well
as the food system departing from the three scenarios in terms of material use, energy
consumption and dietary changes. The assumptions unerpinning the LIFE analysis are
summarised in Table 3 and detailed in the following paragraphs.
(146
)Regulation (EU) 2018/841 (amended by Regulation 2023/839).
39
Table 3: Key features of the LIFE scenario
Sector
Domain of
Action Action or group of actions Impact on activity
Industry
Circular
Economy &
Sufficiency
Enhanced repair, reuse, renewal
and recyling of end-user products
Long-Term reduction of industrial activity
with respect to S1, S2 and S3 for the main
energy-intensive sectors: steel (-15%),
Aluminum (-20%), Paper (-20%), cement &
clinker (-25%) and petrochemicals (-15%)*
Extensions of product lifetime
(e.g., cars, buildings)
Circularity by design
Buildings Sufficiency
Optimisation of energy
consumption
Temperature setpoint lower in winter and
higher in summer in comparison with S1,
S2 and S3 of 0.5°C in 2030, 1°C in 2035
and 1.5°C from 2040 onwards.
Transport
and
mobility
Sufficiency
Stronger shift towards shared
mobility, active modes and
multimodal travel
Decrease in car transport activity (pkm) (-
5% in both 2040 and 2050 compared to
S1, S2 and S3.
Increase in average car occupancy rate:
1.65 and 1.75 passengers/trip in 2040 and
2050, respectively, compared to around
1.55 passengers/trip in both 2040 and
2050 in S1, S2 and S3.
Increase in passenger rail transport activity
(pkm) in 2040 (+4% to +6%, compared to
S1, S2 and S3, respectively) and in 2050
(+5% to +8%, compared to S1, S2 and S3,
respectively).
Decrease in international and domestic air
transport activity (pkm): -10% in 2040 and
-14% in 2050, compared to S1, S2 and S3.
Lower aviation demand and
stronger shift to rail
Land
Sector
Sustainable food
consumption
Dietary Change, Food Waste
reduction, more sustainable food
production
Reduction of primary agriculture, producer,
retail, and consumer food waste food
waste reduction of around 11 Mton in
2040.
Dietary change towards more sustainable
diets (25% shift towards optimal
sustainable and healthy diet 2040**).
Implementation of the objectives from the
Farm to Fork Strategy and Biodiversity
Strategy (reduction of at least 20% mineral
fertilisers application, 50% less pesticides
use, 25% organic farming on EU’s
agriculture land, 10% area of high-diversity
landscape features, and 50% reduction in
nutrient surplus from organic and synthetic
sources.)
Note: * Reductions are implemented linearly from 0% to the value stated in the period 2030-2050, see also Table 8 in
Annex 8. ** See section 3.1.5.3 for more details.
3.1.5.2 Energy and Industry CO2
The key principle for the energy and industrial sectors in LIFE is a more efficient use of
materials across the whole EU value chain, which is put into practice by a number of Circular
Economy (CE) and sufficiency actions, following and going beyond the Circular Economy
40
Action Plan (147
). Consumers pay more attention to what they buy, preferring more
sustainable products, and reusing, repairing, renewing, and recycling whenever possible.
Lifetime of products like cars is extended and renovation of houses is preferred to new
constructions. Existing buildings are used more effectively, and new ones are designed more
efficiently. As result, there is lower needs for carbon-intensive end-user products, while the
same level of services is maintained.
Supported by a larger deployment of smart energy management systems, consumers in
residential and service buildings also optimise their energy consumption via setting heating
and how water temperature set points that are lower in winter and higher in summer. The
differences between LIFE and the scenarios amount to 0.5°C in 2030, 1°C in 2035 and 1.5°C
from 2040 onwards.
In terms of mobility, LIFE assumes a stronger shift towards shared and collaborative mobility
services and multimodal travel, including sustainable urban transport (148
). Concerning air
transport, LIFE assumes that the adoption of video-conferencing tools at large scale reduces
the number of business trips. Furthermore, it assumes that increased awareness of the impacts
of aviation on climate change reduces the number of long-distance leisure trips, and
additionally results in a shift of some short distance leisure trips towards high-speed rail
(where available). These assumptions follow the same rationale as various external
studies (149
) (150
) (151
) (152
). The HDV CO2 emission standards, the ReFuelEU Aviation targets
(147
)COM/2020/98 final.
(148
) In line with EU policy on urban mobility (see, for example, the ‘European Declaration on Cycling’, COM
(2023) 566 final).
(149
) CLEVER, (2023). Climate neutrality, Energy security and Sustainability: A pathway to bridge the gap
through Sufficiency, Efficiency and Renewables, Final Report. https://clever-energy-scenario.eu/wp-
content/uploads/2023/06/clever_final_report-exec_summary.pdf. This study assumes a significant increase
in the EU’s average car occupancy rate (1.9 persons per car by 2050, i.e., a 19% increase relative to 2015)
and a significant modal shift to active mobility (10% of land km/capita by 2050, whereas this share was 7%
or lower in most EU countries in 2015) and collective transport (35% of land km/capita by 2050, i.e., 17
percentage points more than in 2015). In addition, it assumes a decrease in the air distance travelled (600 to
2 500 km/capita/year depending on the country by 2050, including international travel, whereas the value of
this indicator was around 3 000 m/capita/year in 2019 for the whole EU).
(150
)Kalcher, L. et al., (2023). Choices for a more Strategic Europe. Strategic Perspectives.
https://strategicperspectives.eu/wp-content/uploads/2023/07/Choices-for-a-more-Strategic-Europe.pdf –
The EU triple opportunity for energy security, reindustrialisation and competitiveness based on scenarios for
2040. This study describes two scenarios where the EU’s net GHG emissions decrease by 90% and 95% in
2040 relative to 1990, respectively. This study assumes an increase in the EU’s average car occupancy rate
(1.7 persons per car by 2040, i.e., a 6% increase relative to 2019) and a decrease in the air distance travelled
per capita per year (-1% to -20% in 2040 relative to 2015 levels in the two above-mentioned scenarios,
respectively). Furthermore, this study assumes significant changes in modal split. More specifically, for
urban transport, the modal share of cars and 2-wheelers is 64.5% in 2040 (i.e., 6.5 percentage points less
than in 2019), the share of public transport is 18.5% (i.e., 4.5 pp more than in 2019), and the share of active
modes is 17% (i.e., 2 pp more than in 2019). For inter-urban transport, the modal share of cars is 77.5% in
2040 (i.e., 2.5 pp less than in 2019), the share of rail is 12.5% (i.e., 1.5 pp more than in 2019), and the share
of buses/coaches is 10% (i.e., 1 pp more than in 2019).
(151
) EUROCONTROL (2022). Aviation Outlook 2050 – Main Report. This study assumes that, in Europe, the
number of flights increases by 44% between 2019 and 2050 in the “base” (or most-likely) scenario, but it
increases much less (by 19%) in the “low-growth” scenario.
(152
) International Energy Agency (2023). Net Zero Roadmap: A Global Pathway to Keep the 1.5 °C Goal in
Reach. This report describes a feasible pathway for the global energy sector to contribute to the Paris
41
and the IMO GHG emissions reduction target for international shipping are defined as for the
S3 scenario (see Section 3.1.4).
The analysis done with LIFE shows how climate action can answer societal needs in a lean
and efficiency way: it specifically captures some of the most relevant opportunities of higher
climate ambition emphasised by stakeholders in the public consultation, for instance
improving energy security (66% of all respondents), and economic signals for embracing
sustainable production and consumption models (70% of answers from business
organisations) and is in line with possible expected individuals changes in daily life and
willingness for action in changing consumption patterns of good and services.
3.1.5.3 Non-CO2 GHG emissions & LULUCF
LIFE evolves around a dietary change from consumers, the implementation of the Farm to
Fork Strategy (153
) and Biodiversity Strategy for 2030 (154
), and food waste reduction (155
).
Food diets can change in a comparably short time and recent history underlines the potential
for widespread changes, including on more diverse and healthier diets (156
). The scenario
assumes that a variety of different motives such as healthier diets, awareness of climate
impacts and animal welfare but also the increasing availability of meat alternatives leads to
dietary shifts. Furthermore, increased consumer awareness for food as a valuable resource
triggered by campaigns combined with the removal of systemic barriers to avoid food waste
lead to a reduction in food waste in LIFE.
The LIFE variant combines the following three main food-related features:
- It assumes a voluntary moderate food demand change by European citizens towards a
healthier diet. This shift is directed towards a more sustainable, climate-friendly and
healthy diet, as it is proposed by the EAT-Lancet Commission (157
). On average, the
dietary pattern of EU citizens moves gradually towards the suggested optimal
sustainable and healthy diet from the EAT-Lancet Commission by 25% in 2040. This
shift does not come with a decrease of the overall caloric intake but assumes a
substitution of some food products with others that are currently insufficiently
consumed (158
).
Agreement’s goal of limiting the rise in global temperatures to 1.5 °C above pre-industrial levels. The report
assumes that 9% of global aviation activity (expressed in passenger-km) is avoided in 2030 as a result of the
implementation of behavioural measures. This percentage is 20% in 2050.
(153
) COM (2020) 381 final
(154
)COM (2020) 380 final
(155
) Aligned with the legislative proposal by the European Commission on food waste (COM (2023) 420 final),
proposing a similar total reduction of food waste. Note that this proposal was not adopted in time to be
incuded in the main scenarios (S1, S2 and S3), and is therefore only reflected in LIFE.
(156
) Vermeulen, S.J., et al., ‘Changing diets and the transformation of the global food system’, Ann. N.Y. Acad.
Sci., 1478, 3-17, 2020.
(157
) Willet et al., ‘Food in the Anthropocene: the EAT–Lancet Commission on healthy diets from sustainable
food systems’, Lancet, 2019.
(158
) Figure.1; Willet et al., ‘Food in the Anthropocene: the EAT–Lancet Commission on healthy diets from
sustainable food systems’, Lancet, 2019.
42
- In parallel, a similar evolution of the food supply is projected, which is driven by the
objectives of the Farm to Fork Strategy and Biodiversity Strategy. Accordingly, the
scenario aims for a reduction of at least 20% mineral fertilisers application, 50% less
pesticides use, 25% organic farming on EU’s agriculture land, 10% area of high-
diversity landscape features, and 50% reduction in nutrient surplus from organic and
synthetic sources.
- In line with the Commission’s proposal on food waste reduction (159
), a similar
absolute reduction of food waste as in option 2 of the proposal is assumed (160
).
The exact steering towards the different objectives from the Farm to Fork and Biodiversity
strategy, the dietary changes, as well as the targets for the food waste reduction in the
modelling is technically difficult, which results in the overfullfillment of some targets and
missing the threshold for others in the LIFE scenario. Due to assumed projected changes from
the LIFE case with regard to food supply and demand, the land sector assumes certain land
use changes that take into account the decreasing livestock activity and food production for
meat and dairy products. More agricultural land for carbon farming and set aside land with
natural vegetation becomes available, which leads to higher potentials of nature-based
removal solutions. Moreover, assumptions on more extensive agriculture due to restrictions
on pesticide and fertilizer use as well as more organic agriculture and set aside land lead to
increased changes in the demand for land use for agricultural production.
In LIFE, in 2040, all non-CO2 GHG emitting sectors (including agriculture) deploy all the
mitigation technologies required (like in the scenarios). In 2050, the mitigation options
required are fully deployed in all sectors in view of contributing to climate neutrality.
However, the level of non-CO2 GHG emissions (both in 2040 and 2050) is expected to be
lower than in the other scenarios, mainly because of changes in agriculture activity.
3.2 Modelling drivers
The policies and trends described are translated into modelling assumptions and implemented
in the modelling tools to shape the different scenarios. The modelling assumptions can take
the form either of explicit elements within the policies, such as targets of CO2 performance
standards for cars and vans in a given year or induced by modelling drivers such as carbon
values applied to the different sectors, which reflect generic incentives altering investment
decisions towards abatement of GHG emissions.
The “carbon values” mentioned below (see Table 4) are used only as modelling drivers in the
different models used and for this specific analysis and do not represent a forecast of possible
future evolution of carbon prices. The expressed carbon values are the marginal abatement
cost per ton of CO2-eq covered in the respective scenario.
(159
)COM (2023) 420 final. This proposal was adopted in July 2023, and came too late to be implemented the
core scenarios S1, S2 and S3. It is implemented in the LIFE case.
(160
)Total food waste reduction in the proposal in option 2 was around 13 Mton from primary production,
processing and manufacturing, retail and consumption. In the LIFE variant a total food waste reduction of
around 11 Mton in 2040 (compared to 2020) was achieved with reductions from primary agriculture,
processing and distribution, as well as retail and households.
43
Table 4. Carbon values applied on emissions in the different sectors (excl. LULUCF)
EUR/tCO2-eq
2040
2050
S1 S2 S3 LIFE
Energy and industry CO2 (PRIMES
model) and non-CO2 covered by the ETS
(GAINS model)
160 240 290 250 470
Non-CO2 from sectors other than
agriculture (GAINS model)
0 240 290 250 470
Non-CO2 from agriculture (GAINS
model)
0 55 290 250 470
Note: Expressed in EUR’2023.
In 2040, the scenario S1 relies on the application of a carbon value on CO2 from fossil fuel
combustion and industrial processes and on the effect of known policies affecting non-CO2
GHG emissions by that time horizon. The scenario S2 equalises the carbon values applied to
CO2 from fossil fuel combustion, industrial processes and all non-CO2 emissions associated
to energy, industry and waste, while the same carbon value is applied in agriculture as in the
LULUCF sector (see below). The scenario S3 equalises the carbon values applied to all
sectors.
After 2040, all sectors need to reduce GHG emissions in order to contribute to meeting
climate neutrality by 2050.
Specific aspect of the LULUCF sector
The size of future LULUCF net removals bears many uncertainties because of external factors
such as climate change impacts or natural disturbances. In addition, implementing a high
potential of additional nature-based carbon removals with high carbon values would require
additional changes in land use. To represent these uncertainties, the analysis with the
GLOBIOM model thus looks at a range of carbon values for LULUCF:
- a “lower” carbon value of 0 €/tCO2-eq associated with the lower boundary for the
LULUCF net removals;
- a “central” carbon value of 50 €/tCO2-eq necessary to meet the 2030 target as a
‘central level’ for net LULUCF removals;
- an “upper” carbon value of 200 €/tCO2-eq associated with the upper boundary of the
LULUCF net removals.
To compute the overall net GHGs across the economy for the scenarios S1, S2 and S3, the
“central” carbon value is applied in 2040 and 2050 (see Table 5), except for S1 in 2040 where
the “lower” carbon value is applied. For more details, see Annex 8 section 1.8.
Table 5. Main carbon value applied for LULUCF
EUR/tCO2-eq
2040
2050
S1 S2 S3 LIFE
LULUCF (GLOBIOM model) 0 50 50 50 50
Note: Expressed in EUR’2020.
44
3.3 Complementary Analysis
3.3.1 Energy system modelling
Complementary modelling analyses are performed to assure the robustness of the results and
to investigate specific aspects of the emission trends, displaying also possible alternative
sectoral mitigation pathways.
The key assumptions for these analyses are shared across all models and harmonised to the
extent possible (reported in section 2.4 of Annex 6), and all resulting mitigation pathways
fulfil the 2030 and 2050 climate targets. Appropriate, high-quality modelling tools
complementary to the main modelling suite have been used (see section 2.1).
The sectoral distribution of the net GHG emissions and the role of carbon removals has been
investigated by combining projections for the emissions in the energy system modelled by
POTEnCIA, with the ones for the land sector developed by GLOBIOM and the non-CO2
emissions projected by GAINS. Three scenarios POTEnCIA-S1, POTEnCIA-S2 and
POTEnCIA-S3 follow the same logic as S1-S2-S3, except for the cap on the amount of the
biomass supply for bioenergy which is relaxed in the case of POTENCIA-S3 (see 2.4.5 of
Annex 6), and illustrate in a similar way the incremental uptake of the novel technology
options.
The domestic energy and industry CO2 emissions are also explored by modelling pathways to
climate neutrality via three other tools: EU-TIMES, POLES and AMADEUS-METIS. Each
model produces a single pathway, based on relevant common policy elements described in
section 3.1.1.1 and assuming overall cost-efficient decarbonisation of the energy and industry
CO2 sector. The amount of carbon capture in the period 2030-2050 stays within the maximum
threshold for feasibility indicated by the ESABCC (161
) and lies between the minimum carbon
captured in S1 and the maximum carbon captured in S3.
3.3.2 Industry
The impact of a group of selected Circular Economy (CE) action on the process of industrial
decarbonisation of specific energy-intensive sectors are studied projecting material
production, GHG emissions and energy demand in scenarios with (circular or CIRC) and
without (standard or STD) implementation of those CE actions. The modelling tool
FORECAST is used. Both scenarios assume already a well decarbonised energy system, with
a GHG reduction of approximately 95% for the EU industrial sector by 2050 compared to
1990. The scenarios also implement hydrogen and e-fuels only when electrification is not
possible and limit carbon capture to individual applications in sectors where emissions are
difficult to avoid and alternative mitigation strategies (e.g., fuel and process switch) are
lacking today, i.e., cement and lime production. The impact of CE actions across the whole
economy falls outside the scope of this complementary analysis.
(161
)ESABCC, Scientific advice for the determination of an EU-wide 2040 climate target and a greenhouse gas
budget for 2030–2050, 2023. Table 5.
45
4 SOCIO-ECONOMIC ANALYSIS
4.1 Models (162)
Three state-of-the-art macro-economic models with distinct methodological underpinnings
have been used to assess the socio-economic impacts of the target options and assess the
robustness of the key findings. These models have been employed by the European
Commission (163
), Member States and a variety of stakeholders in the past decades to assess
the impact of climate and energy policies. These models have been used for numerous
publications in peer-reviewed journals. Their methodological underpinnings are explained in
these peer-review publications. For each model, a detailed description can also be found in the
Modelling Inventory and Knowledge Management System of the European Commission
MIDAS (164
), together witha list of impact assessments and peer reviewed publications where
each of these models have been utilized.
This macro-economic analysis factors in the sectoral mitigation costs produced by the sectoral
models described in section 2.1.1.
4.1.1 GEM-E3
GEM-E3 is a large scale multi-sectoral recursive dynamic computable general equilibrium
(CGE) model that has been used to provide the sectoral economic assumptions as inputs for
this Impact Assessment and to assess socio-economic impacts of the scenarios. GEM-E3
produced consistent sectorial value added and trade projections matching exogenous GDP and
population projections by country taken from other sources such as the ECFIN t+10
projections for economic activity, Eurostat’s population projections and the Ageing Report.
The model was used to assess the impacts of the energy and climate targets on
macroeconomic aggregates such as GDP, employment and sectoral output.
This Impact Assessment has used mainly the European Commission’s JRC version JRC-
GEM-E3, while the GEM-E3-FIT version operated by E3Modelling was used to generate
exogenous assumptions on sectoral gross value added. Both models have underpinned
numerous publications in peer-review journals (165
), (166
). A detailed description is also
available in MIDAS (167
).
(162
)The model-based analysis is a technical exercise based on a number of assumptions that are shared across
scenarios. Its results do not prejudge the future design of the post-2030 policy framework.
(163
) For instance, the main modelling suite of Impact Assessement was used for the Commission’s proposals for
the Long-Term Strategy (COM (2018) 773), the 2030 Climate Target Plan (SWD (2020) 176 final), and the
Fit for 55 (COM (2021) 550 final).
(164
)MIDAS: https://web.jrc.ec.europa.eu/policy-model-inventory/
(165
) JRC-GEM-E3, selected publications: https://joint-research-centre.ec.europa.eu/gem-e3/gem-e3-
publications_en
(166
)GEM-E3 Model Manuel, E3-Modelling 2017. https://e3modelling.com/wp-content/uploads/2018/10/GEM-
E3_manual_2017.pdf
(167
)https://web.jrc.ec.europa.eu/policy-model-inventory/explore/models/model-gem-e3/
46
4.1.2 E3ME
E3ME is a global, macro-econometric model designed to analyse economic and
environmental policies. It includes:
- a high level of disaggregation, enabling detailed analysis of sectoral and country-level
effects of a wide range of scenarios.
- a capacity to describe social impacts (including unemployment levels and
distributional effects).
Its econometric specification provides a strong empirical basis for analysis. It can fully assess
both short and long-term impacts. Its integrated treatment of the world’s economies, energy
systems, emissions and material demands enables it to capture two-way linkages and
feedbacks between these components.
E3ME is frequently applied at national level, in Europe and beyond, as well as for global
policy analysis. It has been used extensively by a range of stakeholders and has been the basis
of many refereed publications (168
). A detailed description is also available in MIDAS. (169
)
In this impact assessment, it has been used to complement the assessment of the macro-
economic impacts of the energy and climate targets and assess the robustness of the results.
4.1.3 E-QUEST
QUEST is the global macroeconomic model that the Directorate General for Economic and
Financial Affairs (DG ECFIN) uses for macroeconomic policy analysis and research. It is a
dynamic stochastic general equilibrium model in the New-Keynesian tradition. Its
microeconomic foundations are derived from utility and profit optimisation. It includes
frictions in goods, labour and financial markets. It has been used for numerous publications
in peer-review journals (170
). A detailed description is also available in MIDAS (171
). There
are different versions of the QUEST model, estimated and calibrated, each used for specific
purposes.
In this impact assessment the E-QUEST model variant (a two-region, multisector model
specifically developed for climate and energy related policy analysis) is used. The main
innovation in this model compared to the standard DSGE models is the inclusion of energy
input substitution that allows for a more detailed description of the substitution possibilities
between different energy sources. E-QUEST has been used to complement the assessment of
the macro-economic impacts of the energy and climate targets.
(168
) E3ME, selected publications: https://www.e3me.com/how/papers/
(169
)https://web.jrc.ec.europa.eu/policy-model-inventory/explore/models/model-e3me/
(170
) QUEST (E-QUEST), selected publications: https://economy-finance.ec.europa.eu/economic-research-and-
databases/economic-research/macroeconomic-models/quest-macroeconomic-model_en
(171
)https://web.jrc.ec.europa.eu/policy-model-inventory/explore/models/model-quest/
47
4.2 Complementary Inputs
For the quantitative analysis of the regional impacts, we used regional emission data from the
Emissions Database for Global Atmospheric Research (EDGAR) (172
). Published by the Joint
Research Centre of the European Commission, it includes data on greenhouse gas emissions
at sub-national level (NUTS2) in the EU from 1 January 1990 to 1 January 2021.
For the SME test, we used the Structural Business Statistics from Eurostat, and in particular
the Enterprise statistics by size class and NACE Rev.2 activity, as well as data from the
Eurostat Farm Structure Survey.
(172
)Crippa, Monica; Guizzardi, Diego; Pagani, Federico; Pisoni, Enrico; (2023): GHG Emissions at sub-national
level (v1.0). European Commission, Joint Research Centre (JRC) [Dataset]
48
Annex 7: Cost of climate change
1 GLOBAL WARMING
Human-induced climate change is a threat to people and nature around the world. Its impact
on lives, livelihoods and nature are widespread, increasing and some are unavoidable.
Extreme events, including heatwaves, droughts and floods, are rising in frequency and
intensity, negatively affecting people, ecosystems, food systems, infrastructure, energy and
water availability, public health and the economy. In addition, the extent and magnitude of the
impacts taking place already are at the worst end of the spectrum estimate by scientists. The
only way to lessen the impacts of climate change is by limiting global warming and enhancing
adaptation action. The higher the level of global warming the more severe the impacts, and
the higher the chances of triggering irreversible effects (173
).
Figure 5: Global surface air temperature anomalies
Note: Monthly global surface air temperature anomalies (°C) relative to 1991–2020 from January 1940 to December
2023, plotted as time series for each year. 2023 is shown with a thick red line while other years are shown with thin
lines and shaded according to the decade, from blue (1940s) to brick red (2020s)
Source: ERA5. Credit: C3S/ECMWF.
Globally, the year 2023 was the warmest year on record, with global average temperatures
1.48o
C warmer than the 1850-1900 pre-industrial average. It was the first year on record when
(173
) IPCC 2023. Climate Change 2023: Synthesis Report. A Report of the Intergovernmental Panel on Climate
Change. Contribution of Working Groups I, II and III to the Sixth Assessment Report of the
Intergovernmental Panel on Climate Change [Core Writing Team, H. Lee and J. Romero (eds.)]. IPCC,
Geneva, Switzerland
49
every day exceeded 1o
C above the pre-industrial level. July and August 2023 were the hottest
two months on record, and the boreal summer (June to August) was the warmest ever
recorded. From June to December 2023 each month was warmer than the corresponding
month in any previous year, as shown in Figure 5, which shows global surface air
temperature anomalies relative to 1991–2020 for over 80 years (174
).
Table 6 shows that while the short-term evolution of global surface temperature is expected to
be similar across all representative concentration pathways (RCP), within only a few decades
from now it displays striking differences depending on the intensity of global mitigation
action in the coming years, between, on the one hand, a relatively contained climate change in
trajectories compatible with RCP2.6 or below and, on the other hand, a potentially very large
average global temperature increase with GHG trajectories above RCP4.5, which will
translate into still much stronger local and global impacts and increasing risks to cross tipping
points of the Earth climate system.
Table 6: Changes in the global surface temperature relative to 1850-1900 for different RCPs
Best estimate of near-term
temperature increase (2021-2040)
(℃) [Very likely range]
Best estimate for mid-term
temperature increase (2041-2060)
(℃) [Very likely range]
Best estimate for long-term
temperature increase (2081-2100)
(℃) [Very likely range]
RCP1.9 1.5 [1.2 - 1.7] 1.6 [1.2 - 2.0] 1.4 [1.0 - 1.8]
RCP2.6 1.5 [1.2 – 1.8] 1.7 [1.3 - 2.2] 1.8 [1.3 - 2.4]
RCP4.5 1.5 [1.2 - 1.8] 2.0 [1.6 - 2.5] 2.7 [2.1 - 3.5]
RCP7.0 1.5 [1.2 - 1.8] 2.1 [1.7 - 2.6] 3.6 [2.8 - 4.6]
RCP8.5 1.6 [1.3 - 1.9] 2.4 [1.9 - 3.0] 4.4 [3.3 - 5.7]
Note: The different Representative Concentration Pathways (RCP) are labelled after a possible range of radiative
forcing values (expressed in W/m2) in the year 2100.
Source: based on IPCC AR6 WG I (2021), Table SPM.1
The impacts of climate change are not distributed evenly across regions and social groups.
The communities that have historically contributed the least to global warming are
disproportionately affected. Vulnerable people, including the poor, women, children, the
elderly and Indigenous people, particularly in low-income countries and marginal
geographies, are most affected by the impacts of climate change including by water and food
insecurity and water-related extreme events such as floods and droughts. The most impacted
communities are in Africa, Asia, Central and South America, Small Islands and the Arctic
(175
).
(174
)https://climate.copernicus.eu/global-climate-highlights-2023
(175
) IPCC, 2022: Climate Change 2022: Impacts, Adaptation and Vulnerability. Contribution of Working Group
II to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change [H.-O. Pörtner, D.C.
Roberts, M. Tignor, E.S. Poloczanska, K. Mintenbeck, A. Alegría, M. Craig, S. Langsdorf, S. Löschke, V.
Möller, A. Okem, B. Rama (eds.)]. Cambridge University Press, Cambridge, UK and New York, NY, USA,
pp. 3–33, doi:10.1017/9781009325844.001
50
Figure 6: Annual mean temperature change (℃) at different levels of global warming
Source: IPCC AR6 WG I (2021) Figure SPM.5
With increasing GHG emissions, global warming will increase in all regions, but the pace of
change varies by region (Figure 6). Europe has been warming faster than any other continent,
at more than twice the rate of the global average over the past 30 years, with temperatures
increasing at an average rate of 0.5℃ per decade. Surface air temperature in Europe has
increased by 2.2℃ (five-year average up to 2023) above pre-industrial era, while the global
average for the same period is around 1.2℃ (176
), and this trend is projected to continue in the
future (Figure 7), increasing the severity of impacts.
The main risks associated with global warming for Europe are increased mortality and
morbidity of people due to heat stress, damages to species and ecosystems, expansion of fire-
prone areas, agricultural production losses, water scarcity impacting a wide range of users,
and risks associated with flooding. Impacts on socio-economic systems are projected to
intensify, including widespread damages to infrastructure and businesses. Beyond 2040 the
severity of impacts from climate change depends on the level of warming and can be multiple
times higher than currently observed. The level of risk in the future depends on the actions
taken in the near-term (177
).
(176
) Copernicus Climate Change Service (C3S), 2023: European State of the Climate 2022, Full report:
climate.copernicus.eu/ESOTC/2022.
(177
) IPCC, 2022: Climate Change 2022: Impacts, Adaptation and Vulnerability. Contribution of Working Group
II to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change [H.-O. Pörtner, D.C.
Roberts, M. Tignor, E.S. Poloczanska, K. Mintenbeck, A. Alegría, M. Craig, S. Langsdorf, S. Löschke, V.
Möller, A. Okem, B. Rama (eds.)]. Cambridge University Press, Cambridge, UK and New York, NY, USA,
pp. 3–33, doi:10.1017/9781009325844.001
51
Figure 7: Changes in local annual average temperature and precipitation in Europe
Note: Changes are from reference period (1981-2010), while the three global warming scenarios (1.5°C, 2°C, 3°C) are
defined compared to pre-industrial times.
Source: JRC PESETA IV final report (178
)
Climate change impacts human and natural systems in a number of ways, affecting
ecosystems, people, settlements and infrastructure, which will be discussed in the following
sections.
2 IMPACTS OF CLIMATE CHANGE
2.1 Global impacts of climate change and risks of climate tipping points
2.1.1 A very wide range of impacts
Anthropogenic climate change has resulted in widespread and adverse impacts on humans and
nature across the globe, disproportionately affecting the most vulnerable people and systems.
Increasing frequency and intensity of extreme events have led to human mortality from heat,
increases in areas burnt by wildfires, adverse impacts from tropical cyclones due to sea-level
rise and the increase in intensity of precipitation. Ecosystems are being severely damaged and
climate change has driven species globally to shift polewards or to higher elevations, caused
mass mortality events of species on land and in the ocean and at least one species extinction
(see section 2.1.3). Climate change and biodiversity loss are interdependent and exacerbating
(178
) Feyen L., Ciscar J.C., Gosling S., Ibarreta D., Soria A. (editors) (2020). Climate change impacts and
adaptation in Europe. JRC PESETA IV final report. EUR 30180EN, Publications Office of the European
Union, Luxembourg, ISBN 978-92-76-18123-1, doi:10.2760/171121, JRC119178.
52
each other. Climate change is also reducing food and water security, affecting, in particular,
communities in Africa, Asia, Central and South America, Small Islands and Arctic. Human
physical and mental health is also adversely affected by climate change, including through
extreme heat events, increased occurrence of certain diseases, increased exposure to wildfire
smoke, dust and aeroallergens, trauma from extreme weather and climate events, and loss of
livelihoods and culture (179
).
All of the above-mentioned impacts of climate change have implications for international
peace and security, including through potential migratory movements and displacement,
pandemics, social unrest, instability and insecurity (180
). The impacts of climate change can be
important drivers of migration and displacement, which are strongly influenced by other
socio-economic processes. They often emerge when other forms of adaptation are insufficient
or not viable. Currently, most climate-change related migrations happen within countries.
Most common hazards that result in displacement include tropical cyclones, flooding, and
drought. With increasing warming, extreme events are projected to increase in frequency and
intensity, which might lead to more people being displaced, especially in most exposed
areas (181
).
2.1.2 Climate tipping points
One of the biggest concerns and uncertainties associated with climate change is the triggering
of climate tipping points (Figure 8). Those are critical thresholds beyond which global or
regional climate reorganises from one stable state to another, which may lead to abrupt,
substantial, irreversible, and dangerous impacts for human and natural systems. Examples
include a sudden or substantial sea level rise, the release of greenhouse gases from a thawing
permafrost, and dieback of biodiverse biomes such as warm water corals or the Amazon
rainforest. Several tipping elements, defined as large-scale Earth system components, are now
increasingly unstable (182
) and a recent study (183
) found that the current level of global
warming already puts us at risk of crossing five tipping points. With any additional increment
of a degree of warming, this risk increases. Even within the Paris Agreement temperature
range of 1.5°C to below 2°C global warming, the world will be at risk of ten currently
(179
) IPCC, 2022: Climate Change 2022: Impacts, Adaptation and Vulnerability. Contribution of Working Group
II to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change [H.-O. Pörtner, D.C.
Roberts, M. Tignor, E.S. Poloczanska, K. Mintenbeck, A. Alegría, M. Craig, S. Langsdorf, S. Löschke, V.
Möller, A. Okem, B. Rama (eds.)]. Cambridge University Press, Cambridge, UK and New York, NY, USA,
pp. 3–33, doi:10.1017/9781009325844.001.
(180
) Joint communication to the European Parliament and the Council: A new outlook on the climate and
security nexus: Addressing the impact of climate change and environmental degradation on peace, security
and defence. 28.6.2023.
(181
) Cissé, G., R. McLeman, H. Adams, P. Aldunce, K. Bowen, D. Campbell-Lendrum, S. Clayton, K.L. Ebi, J.
Hess, C. Huang, Q. Liu, G. McGregor, J. Semenza, and M.C. Tirado, 2022: Health, Wellbeing, and the
Changing Structure of Communities. In: Climate Change 2022: Impacts, Adaptation and Vulnerability.
Contribution of Working Group II to the Sixth Assessment Report of the Intergovernmental Panel on
Climate Change [H.-O. Pörtner, D.C. Roberts, M. Tignor, E.S. Poloczanska, K. Mintenbeck, A. Alegría, M.
Craig, S. Langsdorf, S. Löschke, V. Möller, A. Okem, B. Rama (eds.)]. Cambridge University Press,
Cambridge, UK and New York, NY, USA, pp. 1041–1170, doi:10.1017/9781009325844.009.
(182
) T. M. Lenton, J. Rockström, O. Gaffney, S. Rahmstorf, K. Richardson, W. Steffen, H. J. Schellnhuber,
Climate tipping points - too risky to bet against. Nature 575, 592–595 (2019).
(183
) David I. Armstrong McKay et al., Exceeding 1.5°C global warming could trigger multiple climate tipping
points. Science 377, eabn7950 (2022). DOI:10.1126/science.abn7950.
53
identified tipping points being triggered, including the collapse of the Greenland and West
Antarctic ice sheets, die-off of low-latitude coral reefs and widespread abrupt permafrost
thaw.
Figure 8: The location of climate tipping elements.
Note: The location of climate tipping elements in the cryosphere (blue), biosphere (green), and ocean/atmosphere
(orange), and global warming levels at which their tipping points will likely be triggered.
Source: McKay et al. 2022 (184)
Due to large uncertainties in the timing of tipping points being triggered, some may occur
much sooner than previously estimated. One of such tipping elements is the Atlantic
Meridional Overturning Circulation (AMOC), the key overturning current system in the South
and North Atlantic oceans, that helps regulate the climate of the Northern Hemisphere. Its
collapse would have severe impact on the global climate system and could impact the stability
of other major tipping elements, including the Antarctic ice sheet, tropical monsoon system
and the Amazon rainforest. There is evidence that the strength of AMOC has been weakening
in the recent decades (185
) (186
) mainly as the result of the freshwater influx from the melting
of the Greenland Ice Sheet as well as increased river discharge into the Arctic Ocean due to
global warming. While the IPCC AR6 evaluated that an abrupt collapse before the end of the
century is unlikely to occur (187
), recent research (188
) suggests that it could actually occur
(184
) David I. Armstrong McKay et al., Exceeding 1.5°C global warming could trigger multiple climate tipping
points. Science 377, eabn7950 (2022). DOI:10.1126/science.abn7950.
(185
)Rahmstorf, S. et al. 2015. Exceptional twentieth-century slowdown in Atlantic Ocean overturning
circulation. Nature Climate Change 5, 475–480.
(186
)Boers, N. 2021. Observation-based early-warning signals for a collapse of the Atlantic Meridional
Overturning Circulation. Nat. Clim. Chang. 11, 680–688. https://doi.org/10.1038/s41558-021-01097-4
(187
)Fox-Kemper, B., H.T. Hewitt, C. Xiao, G. Aðalgeirsdóttir, S.S. Drijfhout, T.L. Edwards, N.R. Golledge, M.
Hemer, R.E. Kopp, G. Krinner, A. Mix, D. Notz, S. Nowicki, I.S. Nurhati, L. Ruiz, J.-B. Sallée, A.B.A.
Slangen, and Y. Yu, 2021: Ocean, Cryosphere and Sea Level Change. In Climate Change 2021: The
Physical Science Basis. Contribution of Working Group I to the Sixth Assessment Report of the
Intergovernmental Panel on Climate Change [Masson-Delmotte, V., P. Zhai, A. Pirani, S.L. Connors, C.
Péan, S. Berger, N. Caud, Y. Chen, L. Goldfarb, M.I. Gomis, M. Huang, K. Leitzell, E. Lonnoy,
54
much earlier, with a central estimate of 2050 (95% confidence interval between 2025-2095)
under current projections of future greenhouse gas emissions. If greenhouse gas emissions are
not urgently reduced, the expected tipping point could therefore be triggered much earlier
than previously estimated, with catastrophic impacts around the world, including on rain
patterns in Asia, South America and Africa, increased storm weather and decrease in
temperatures in Europe and increased sea level rise on the eastern coast of North America.
Reaching one climate tipping point could also result in triggering other ones with potentially
catastrophic impacts (Figure 9). Crossing multiple tipping points would have implications for
socio-economic and ecological systems in a timespan that is too short for them to adapt,
which could cause severe impacts. Regional impacts of crossing individual tipping points
include extreme temperatures, droughts, wildfires, and unprecedented weather, while globally
they could result in a release of a significant amount of greenhouse gases, causing climate
feedback loops and fast sea-level rise, leading to the global climate less suitable for human
existence (189
).
J.B.R. Matthews, T.K. Maycock, T. Waterfield, O. Yelekçi, R. Yu, and B. Zhou (eds.)]. Cambridge
University Press, Cambridge, United Kingdom and New York, NY, USA, pp. 1211–1362,
doi:10.1017/9781009157896.011.
(188
)Ditlevsen P and Ditlevsen S. 2023. 2023. Waiting for a forthcoming collapse of the Atlantic meridional
overturning circulation. Nature Communications: 12 (4245).
(189
) OECD, Climate Tipping Points – Insights for Effective Policy Action. 2022.
https://doi.org/10.1787/abc5a69e-en
55
Figure 9: The connectivity of tipping points
Source: Lenton et al (2019) (190).
2.1.3 Impacts on ecosystems and biodiversity
Climate change is one of the five main drivers of global biodiversity loss, together with
change of land and sea use, direct exploitation, pollution and invasive alien species (191
). This
fact seems to be known among respondents in the Public Consultation. The loss of
biodiversity and natural habitats was ranked at the first place both by individuals (77%) and
organisations (42%) on the question of which effects of climate change were most concerning
for respondents.
(190
) T. M. Lenton, J. Rockström, O. Gaffney, S. Rahmstorf, K. Richardson, W. Steffen, H. J. Schellnhuber,
Climate tipping points - too risky to bet against. Nature 575, 592–595 (2019).
(191
)PBES (2019) Global assessment report on biodiversity and ecosystem services of the Intergovernmental
Science-Policy Platform on Biodiversity and Ecosystem Services. Zenodo. Available at:
https://doi.org/10.5281/ZENODO.3831673
56
Terrestrial and freshwater ecosystems are adversely affected by climate change, which
impacts their ranges, phenology, physiology and morphology. Local population extinctions
due to climate change have been widespread, particularly affecting tropical regions and
freshwater habitats. Many species are shifting their ranges to higher latitudes or elevations,
altering community make-up. Particularly in northern latitudes exotic species can adapt to
climate change better than native ones, leading to potential new invasive species. Water
temperature of rivers and lakes has increased, and the extent and duration of ice cover has
decreased in past decades. With warming, primary productivity generally increased and
dissolved oxygen concentrations declined, affecting ecosystems. Climate change also
increases the wildlife disease severity, outbreak frequency and emergence of novel vectors
and diseases in new areas. Severity and extent of outbreaks of forest insect pests have
increased in the northern North America and northern Eurasia, and climate change is fostering
spread of invasive alien species, with ever increasing damages and costs (192
). Climate change
induced increases in area burned by wildfire, increasing tree mortality and biome shifts in
tropical, temperate and boreal ecosystems, are further damaging ecologic integrity.
Ecosystems provide various services critical for human health, wellbeing and livelihoods,
including climate regulation, food and water provision, provision of medicine and other
materials, water retention, protection against droughts, floods, urban heat and desertification,
and pollination, which are already negatively affected by climate change. Increasing global
warming levels will increase negative impacts on ecosystems, including increasing risk of
species extinction, biome shifts and increase in area burned by wildfires. Ecosystems also
remove carbon from the atmosphere and represent a carbon stock of more than four times the
amount of carbon currently in the atmosphere. Processes related to climate change including
wildfires, tree mortality, peatland drying and permafrost thaw, turn those ecosystems from a
carbon sink into a carbon source by releasing the carbon stored in those ecosystems into the
atmosphere, exacerbating positive climate feedbacks (193
)(194
). However, it is important to
clarify that the effects of climate change are often worsen by human intervention, through
unsustainable practices and natural resources depletion. For example, intensive forestry
practices (clear-cuts, monoculture plantations) exacerbate the risks of extreme weather events,
such as wildfires and floods (195
) (196
).
(192
)IPBES assessment on invasive alien species and their control (2023)
(193
)Parmesan, C., M.D. Morecroft, Y. Trisurat, R. Adrian, G.Z. Anshari, A. Arneth, Q. Gao, P. Gonzalez, R.
Harris, J. Price, N. Stevens, and G.H. Talukdarr, 2022: Terrestrial and Freshwater Ecosystems and Their
Services. In: Climate Change 2022: Impacts, Adaptation and Vulnerability. Contribution of Working Group
II to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change [H.-O. Pörtner, D.C.
Roberts, M. Tignor, E.S. Poloczanska, K. Mintenbeck, A. Alegría, M. Craig, S. Langsdorf, S. Löschke, V.
Möller, A. Okem, B. Rama (eds.)]. Cambridge University Press, Cambridge, UK and New York, NY, USA,
pp. 197–377, doi:10.1017/9781009325844.004.
(194
)United Nations Environment Programme (2021). Making Peace with Nature: A scientific blueprint to tackle
the climate, biodiversity and pollution emergencies. Nairobi. https://www.unep.org/resources/making-peace-
natur
(195
)Robbie S.H. Johnson, Younes Alila (2023) Nonstationary stochastic paired watershed approach:
Investigating forest harvesting effects on floods in two large, nested, and snow-dominated watersheds in
British Columbia, Canada, Journal of Hydrology, Volume 625, Part A, 129970, ISSN 0022-1694,
https://doi.org/10.1016/j.jhydrol.2023.129970
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)Lindenmayer, D.B., Kooyman, R.M., Taylor, C. et al. Recent Australian wildfires made worse by logging
and associated forest management. Nature Ecology and Evolution 4, 898–900 (2020).
https://doi.org/10.1038/s41559-020-1195-5
57
Wildfires pose risk to people and ecosystems, they are becoming more frequent and intense at
the global scale, and their likelihood is projected to further increase by the end of the century.
They result from complex interactions between climate, land-use and land management
practices, and demographics, and while some risks can be reduced with appropriate
management, including ecosystem restoration, the risk posed by wildfires cannot be entirely
eliminated. Climate change increases the frequency and magnitude of dangerous fire weather
through increased drought, heat, decreased humidity, dry lighting, and strong winds. Wildfires
affect the global carbon cycle by releasing CO2 into the atmosphere, further exacerbating
global warming. They cause loss of lives and livelihoods, impact health, devastate ecosystems
and degrade watersheds. Increased fire frequency can have catastrophic impacts on
biodiversity in fire-sensitive ecosystems and is especially damaging for long-lived plant
species. The impacts of wildfires can be long-lasting, including in biodiversity hotspots,
which might never fully recover. Very frequent fires can eliminate woody plant species which
are replaced with herbaceous and often annual species, or invasives weeds. Fire also changes
soil properties and increases soil erosion (197
). The recent wildfires in Greece, followed by
massive floods, are an example of how the loss of forest due to fires weakened the water
retention capacity of soils, leading to dramatic consequences.
Climate change is also altering the physical and chemical characteristics of the ocean,
affecting ocean and coastal species and ecosystems in every region. The seas and ocean are
one of the greatest sources of biodiversity and food, they regulate the climate, and are a major
carbon sink (198
). Warming, acidification and deoxygenation are changing the distribution and
abundance of species populations, altering ecological communities and leading to habitat loss
and/or damage, population declines, increased risks of species extirpations and extinctions
and the rearrangement of marine food webs.
The uptake of CO2 in the sea is the cause of ocean acidification. Change in pH affects
biological processes such as the primary production and reduces the carbonate available for
the calcification of marine calcifying organisms such as shellfish and plankton. Changes in
marine primary production will have an impact on the global carbon cycle and the absorption
of atmospheric CO2 in the ocean and reduce oceans capacity to mitigate climate change.
These rapid chemical changes are an added pressure on marine ecosystems (199
) and affect
food production from shellfish aquaculture and fisheries in some oceanic regions.
Marine heatwaves are increasing in frequency, duration and intensity and result in mass
mortalities of open-ocean, coastal and shelf-sea ecosystems including coral reefs, kelp forests
and mangroves. Climate change driven impacts are affecting industries, causing economic
losses, impacting physical and mental health and altering cultural and recreational activities
around the world (200
). In 2023 global average sea surface temperatures reached record levels
(197
) United Nations Environment Programme (2022). Spreading like Wildfire – The Rising Threat of
Extraordinary Landscape Fires. A UNEP Rapid Response Assessment. Nairobi
(198
) Report from the Commission to the European Parliament and the Council on the implementation of the
Marine Strategy Framework Directive (Directive 2008/56/EC) COM (2020) 259.
(199
)EEA, 2020, Ocean acidification. Indicator, European Environment Agency
(200
)Cooley, S., D. Schoeman, L. Bopp, P. Boyd, S. Donner, D.Y. Ghebrehiwet, S.-I. Ito, W. Kiessling, P.
Martinetto, E. Ojea, M.-F. Racault, B. Rost, and M. Skern-Mauritzen, 2022: Oceans and Coastal Ecosystems
and Their Services. In: Climate Change 2022: Impacts, Adaptation and Vulnerability. Contribution of
Working Group II to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change [H.-O.
Pörtner, D.C. Roberts, M. Tignor, E.S. Poloczanska, K. Mintenbeck, A. Alegría, M. Craig, S. Langsdorf, S.
58
for the time of year every month from April to December. In the boreal summer, marine heat
waves affected large sectors of the North Atlantic, parts of the North Pacific and Indian
Oceans, around New Zealand, the Gulf of Mexico, the Caribbean and the Mediterranean,
causing significant and devastating impacts on ocean ecosystems. Antarctic sea ice reached
record low extends for the corresponding month in 8 months of 2023 (201
) (202
).
In the North-East Atlantic region, the OSPAR Convention identified climate change as
causing fundamental and possibly irreversible changes to the oceans including a significant
risk for productivity and the long-term viability of marine ecosystems. Among the objectives
described in the Strategy of the OSPAR Commission for the Protection of the Marine
Environment of the North-East Atlantic 2030, one of them is to achieve seas resilient to the
impacts of climate change and ocean acidification.
Biodiversity hotspots, which are areas of exceptional biodiversity and/or high endemism, are
already affected by climate change. Climate change impacts are compounded by other
anthropogenic impacts, including habitat loss and fragmentation, over-exploitation and
pollution, which reduce ecosystem resilience. The risk of species extinction increases with
global warming and is particularly high for endemic species in biodiversity hotspots on
islands, on mountains and in the ocean (203
).
2.1.3.1 Estimated impacts of biodiversity loss and ecosystem degradation on economy
and human health
The impacts of climate change on biodiversity also have severe consequences for prosperity
and well-being: the impacts of climate change on biodiversity undermine the ability to build a
sustainable future based on healthy, functioning ecosystems. The economic importance of
biodiversity has become a consensus, even within the largest international economic financial
institutions, such as the OECD (204
), the World Bank (205
) or the World Economic
Forum (206
).
The World Economic Forum considers that US $44 trillion of economic value generation –
over half the world’s total GDP – is moderately or highly dependent on nature and its
Löschke, V. Möller, A. Okem, B. Rama (eds.)]. Cambridge University Press, Cambridge, UK and New
York, NY, USA, pp. 379–550, doi:10.1017/9781009325844.005
(201
)https://climate.copernicus.eu/global-climate-highlights-2023
(202
)https://wmo.int/publication-series/provisional-state-of-global-climate-2023
(203
)Costello, M.J., M.M. Vale, W. Kiessling, S. Maharaj, J. Price, and G.H. Talukdar, 2022: Cross-Chapter
Paper 1: Biodiversity Hotspots. In: Climate Change 2022: Impacts, Adaptation and Vulnerability.
Contribution of Working Group II to the Sixth Assessment Report of the Intergovernmental Panel on
Climate Change [H.-O. Pörtner, D.C. Roberts, M. Tignor, E.S. Poloczanska, K. Mintenbeck, A. Alegría, M.
Craig, S. Langsdorf, S. Löschke, V. Möller, A. Okem, B. Rama (eds.)]. Cambridge University Press,
Cambridge, UK and New York, NY, USA, pp. 2123–2161, doi:10.1017/9781009325844.018.
(204
)OECD (2019) ’Biodiversity: Finance and the Economic and Business Case for Action’. URL:
https://www.oecd.org/env/resources/biodiversity/biodiversity-finance-and-the-economic-and-business-case-
for-action.htm
(205
)World Bank (2021). The Economic Case for Nature: A Global Earth-Economy Model to Assess
Development Policy Pathways. Available at: http://hdl.handle.net/10986/35882.
(206
)World Economic Forum (2023). The Global Risks Report 2023. Geneva, WEF.
59
services, especially sectors such as construction, agriculture, and food and beverages (207
).
The European Central Bank considers that nearly 75% of all bank loans in the euro area are to
companies that are highly dependent on at least one ecosystem service, and that an integrated
approach to climate and nature is critical because they are interconnected and amplify the
effects of physical and transition risks (208
). Studies carried out at national level are
converging on the same conclusions: for example, 42% of the value of securities held by
French financial institutions (209
) and 44% of French gross value added appears to be 'heavily'
or 'very heavily' dependent on natural capital (210
).
Because of the economy's dependence on the state of biodiversity, the impacts of climate
change on biodiversity have major economic consequences. In 2020, the Global Futures
report by WWF estimated the economic costs of inaction on climate and ecological crises to
around USD 10 trillion in GDP by 2050 (211
). By modelling changes in the average abundance
of terrestrial species as an indicator of biodiversity and estimating biodiversity loss using a
function that relates expenditure to temperature change, the OECD estimated that the impacts
of climate change on biodiversity would entail significant costs for EU countries, ranging
from 0.5% to 1.1% of GDP, for RCP6.0 and RCP8.5, respectively (212
). A systematic
assessment of the climate change impacts on European forests and its capacity to deliver
ecosystem services show significant welfare losses in all forest European regions, when
considering cultural values, carbon sequestration and wood forest products (213
). Despite these
figures, there are still very large gaps in the evaluation of the economics costs associated to
the climate change impacts on biodiversity, starting with estimates of physical impacts, and
including all aspects of the economic valuation of biodiversity and ecosystem services (214
).
The latest IPBES report on invasive species (215
) estimates that the yearly cost of invasive
species in the global economy is already near EUR 400 billion. The authors underline that
(207
)WEF (2020) Nature Risk Rising: Why the Crisis Engulfing Nature Matters for Business and the Economy.
URL: https://www3.weforum.org/docs/WEF_New_Nature_Economy_Report_2020.pdf
(208
)European Central Bank (2023) The economy and banks need nature to survive. Available at:
https://www.ecb.europa.eu/press/blog/date/2023/html/ecb.blog230608~5cffb7c349.en.html
(209
)Svartzman, R. et al. (2021) ‘A “Silent Spring” for the Financial System? Exploring Biodiversity-Related
Financial Risks in France’, SSRN Electronic Journal [Preprint]. URL: https://doi.org/10.2139/ssrn.4028442.
(210
)Bouchet, V. et al. (2021) Évaluations économiques des services rendus par la biodiversité. DG Trésor. URL:
https://www.tresor.economie.gouv.fr/Articles/2021/12/09/evaluations-economiques-des-services-rendus-
par-la-biodiversite
(211
)Johnson, J.A., et al. 2020. Global Futures : modelling the global economic impacts of environmental change
to support policy-making. Technical Report, January 2020. URL: https://www.wwf.org.uk/globalfutures
(212
)OECD (2015) The Economic Consequences of Climate Change. OECD. URL:
https://doi.org/10.1787/9789264235410-en.
(213
)Ding, H. et al. (2016) ‘Valuing climate change impacts on European forest ecosystems’, Ecosystem
Services, 18, pp. 141–153. Available at: https://doi.org/10.1016/j.ecoser.2016.02.039.
(214
)COACCH (2018). The Economic Cost of Climate Change in Europe: Synthesis Report on State of
Knowledge and Key Research Gaps. Policy brief by the COACCH project. Available at:
https://www.ecologic.eu/sites/default/files/publication/2018/2811-coacch-review-synthesis-updated-june-
2018.pdf
(215
)IPBES (2023) Summary for Policymakers of the Thematic Assessment Report on Invasive Alien Species
and their Control of the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem
Services. Roy, H. E., Pauchard, A., Stoett, P., Renard Truong, T., Bacher, S., Galil, B. S., Hulme, P. E.,
Ikeda, T., Sankaran, K. V., McGeoch, M. A., Meyerson, L. A., Nuñez, M. A., Ordonez, A., Rahlao, S. J.,
60
invasive species play a key role in 60% of the extinctions of plants and animals, and they are
the sole responsible of 16% of the documented global extinctions.
By altering the composition and functioning of ecosystems, climate change impacts on
biodiversity have also serious health consequences. Climate change affects the health of
ecosystems, influencing shifts in the distribution of plants, viruses, animals, and even human
settlements. This can create increased opportunities for animals to spread diseases and for
viruses to spill over to humans (216
). In Europe, global warming is facilitating the spreading
of a number of diseases transmitted by mosquitoes such as zika fever, dengue and
chikungunya and transmitted by tick such as Lyme’s disease, thus exposing new populations
and regions for extended period to these diseases (217
). Human health can also be affected by
reduced ecosystem services, such as the loss of food, medicine and livelihoods provided by
nature, or by the direct consequences of climate change on ecosystems. For instance, wildfire
smoke impacts human health more than fine particles from other sources, including
automobiles emissions (218
). Zoonotic diseases are also a consequence of the combination of
biodiversity loss and climate change. Further warming will impact all forms of zoonoses be it
water, food, vector, rodent, or airborne origin and will also increase the emergence of novel
infections with pandemic potential (219
).
Since biodiversity underpins functions and services that are essential to agriculture, forestry
and fisheries, climate change impacts on biodiversity threatens food security, water security
and economic stability. At EU level, the ecosystem services provided by the Natura 2000
network alone are estimated to have a value of EUR 200-300 billion per year (220
). In France,
pioneering work on estimating the cost of inaction on climate change has shown that the
upper limit of the impact of biodiversity loss on economic activity could be up to EUR 80
billion and hundreds of thousands of direct jobs (221
).
As regards food systems, climate change impacts on biodiversity leads to multiple deleterious
consequences. In agriculture, climate change contributes significantly to the decline in density
and diversity of pollinators, thus reducing the pollination efficiency of crop species (222
). Such
Schwindt, E., Seebens, H., Sheppard, A. W., and Vandvik, V. (eds.). IPBES secretariat, Bonn, Germany.
https://doi.org/10.5281/zenodo.7430692
(216
)WHO (2021) Nature, biodiversity and health: an overview of interconnections. URL:
https://www.who.int/europe/publications/i/item/9789289055581
(217
)Semenza, J.C. and Paz, S. (2021) ‘Climate change and infectious disease in Europe: Impact, projection and
adaptation’, The Lancet Regional Health - Europe, 9, p. 100230. URL:
https://doi.org/10.1016/j.lanepe.2021.100230.
(218
)Aguilera, R. et al. (2021) ‘Wildfire smoke impacts respiratory health more than fine particles from other
sources: observational evidence from Southern California’, Nature Communications, 12(1), p. 1493.
Available at: https://doi.org/10.1038/s41467-021-21708-0.
(219
)The Lancet Infectious Diseases (2023), Twin threats: climate change and zoonoses, Volume 23, Issue 1,
Page 1, ISSN 1473-3099, https://doi.org/10.1016/S1473-3099(22)00817-9.
(220
)European Commission. Directorate General for the Environment. (2013) The economic benefits of the
Natura 2000 network :synthesis report. Available at: https://data.europa.eu/doi/10.2779/41957.
(221
)Delahais, A. and Robinet, A. (2023) The cost of inaction on climate change: what do we know? France
Stratégie. Available at: https://www.strategie.gouv.fr/english-articles/cost-inaction-climate-change-what-do-
we-know
(222
)Marshman, J., Blay-Palmer, A. and Landman, K. (2019) ‘Anthropocene Crisis: Climate Change, Pollinators,
and Food Security’, Environments, 6(2), p. 22. URL: https://doi.org/10.3390/environments6020022.
61
impacts can have costly consequences as EUR 15 billion of annual agricultural output is
directly attributed to pollination in the EU (223
). Climate change would increase the
prevalence of insect pests exacerbating yield loss of crops: in Europe, the accelerating
northward migration of agro-climatic zones (224
) might be accompanied with an increasing
spread of pest species and diseases, and mounting severity and economic impacts of
outbreaks (225
). Livestock sectors would also be heavily impacted, directly through animal
diseases and indirectly through decreased feed availability and quality (226
), or increased
attacks on livestock by predators driven to human-dominated areas in search of food (227
). In
marine ecosystems, global warming threats food security, as loss of fish habitats is modifying
the distribution and productivity of both marine and freshwater species thus affecting the
sustainability of fisheries and populations dependent on them (228
). In particular, loss of coral
reefs does not only mean loss of one of the most biodiverse ecosystems but will also have a
huge impact on people. Tens of millions of people depend on coral reefs for protein and other
services, and almost 500 million people, or 8% of the world’s population, live within 100 km
of a reef (229
).
2.2 Impacts on selected most vulnerable regions
Not all the regions are equally affected by climate change. Risk, as a potential for adverse
consequences, results from interactions between climate hazards, vulnerability, and exposure.
There are geographical, social and contextual determinants of vulnerability, and so
vulnerability differs across geographies, but also between and within societies and
communities (Figure 10). Communities most vulnerable to climate change are located in
West-, Central- and East Africa, South Asia, Central and South America and Small Island
Developing States and the Arctic (230
). Three of these most vulnerable regions are described in
more detail below.
(223
)Potts S., et al. (2015) Status and trends of European pollinators. Key findings of the STEP project. Pensoft
Publishers, Sofia. URL: http://step-project.net/img/uplf/STEP%20brochure%20online-1.pdf
(224
)Ceglar, A. et al. (2019) ‘Observed Northward Migration of Agro‐Climate Zones in Europe Will Further
Accelerate Under Climate Change’, Earth’s Future, 7(9), pp. 1088–1101. URL:
https://doi.org/10.1029/2019EF001178.
(225
)Skendžić, S. et al. (2021) ‘The Impact of Climate Change on Agricultural Insect Pests’, Insects, 12(5), p.
440. URL : https://doi.org/10.3390/insects12050440.
(226
)Godde, C.M. et al. (2021) ‘Impacts of climate change on the livestock food supply chain; a review of the
evidence’, Global Food Security, 28, p. 100488. URL: https://doi.org/10.1016/j.gfs.2020.100488.
(227
)Abrahms, B. (2021). Human-wildlife conflict under climate change. Science, 373(6554), 484–485.
https://doi.org/10.1126/science.abj4216
(228
)Salvatteci, R. et al. (2022) ‘Smaller fish species in a warm and oxygen-poor Humboldt Current system’,
Science, 375(6576), pp. 101–104. URL : https://doi.org/10.1126/science.abj0270.
(229
)Veron, J.E.N. et al. (2009) ‘The coral reef crisis: The critical importance of<350ppm CO2’, Marine
Pollution Bulletin, 58(10), pp. 1428–1436. https://doi.org/10.1016/j.marpolbul.2009.09.009.
(230
)IPCC, 2022: Summary for Policymakers [H.-O. Pörtner, D.C. Roberts, E.S. Poloczanska, K. Mintenbeck,
M. Tignor, A. Alegría, M. Craig, S. Langsdorf, S. Löschke, V. Möller, A. Okem (eds.)]. In: Climate Change
2022: Impacts, Adaptation and Vulnerability. Contribution of Working Group II to the Sixth Assessment
Report of the Intergovernmental Panel on Climate Change [H.-O. Pörtner, D.C. Roberts, M. Tignor, E.S.
Poloczanska, K. Mintenbeck, A. Alegría, M. Craig, S. Langsdorf, S. Löschke, V. Möller, A. Okem, B. Rama
(eds.)]. Cambridge University Press, Cambridge, UK and New York, NY, USA, pp. 3–33,
doi:10.1017/9781009325844.001
62
Figure 10: Map of human vulnerability.
Source: IPCC AR6 WG II (2022). Figure TS.7
2.2.1 Africa
African countries are highly vulnerable to anthropogenic climate change and are already
experiencing adverse and widespread negative impacts. Climate change has caused a loss of
biodiversity, reduced water availability and food security and led to the loss of life, and with
increasing global warming the impacts are projected to intensify. Heat waves, drought and
marine heatwaves have increased in frequency and intensity due to climate change (231
).
Africa has been warming more rapidly than the global average, and northern Africa has a
higher warming trend compared to other African regions. The number of extreme warm days
has been increasing over continental Africa. The rate of sea-level rise along African coasts is
above the global mean, particularly along the Red Sea and south-west Indian Ocean. Relative
sea-level rise is projected to continue, affecting the frequency and severity of coastal flooding.
Climate change has also affected glaciers in equatorial East Africa, which are retreating at a
rate faster than the global mean, and some are projected to disappear by 2030. Extreme and
high-impact events attributed to climate change were observed in Africa in the past years,
including extreme floods in South Sudan, and flooding in Niger, Congo, Benin, and Nigeria,
(231)Trisos, C.H., I.O. Adelekan, E. Totin, A. Ayanlade, J. Efitre, A. Gemeda, K. Kalaba, C. Lennard, C.
Masao, Y. Mgaya, G. Ngaruiya, D. Olago, N.P. Simpson, and S. Zakieldeen, 2022: Africa. In: Climate
Change 2022: Impacts, Adaptation and Vulnerability. Contribution of Working Group II to the Sixth
Assessment Report of the Intergovernmental Panel on Climate Change [H.-O. Pörtner, D.C. Roberts, M.
Tignor, E.S. Poloczanska, K. Mintenbeck, A. Alegría, M. Craig, S. Langsdorf, S. Löschke, V. Möller, A.
Okem, B. Rama (eds.)]. Cambridge University Press, Cambridge, UK and New York, NY, USA, pp. 1285–
1455, doi:10.1017/9781009325844.011.
63
where it contributed to the spread of cholera. In 2021 Somalia experienced persistent drought
conditions, affecting more than 3.2 million people and displacing 169 000 people. The same
year Madagascar experienced the worst drought in 40 years, causing 70% of the population of
southern Madagascar to lack access to basic drinking water (232
). In 2022, eastern Africa
experienced the fifth consecutive year of below average rainfall during the wet season,
exposing an estimated 37 million people to acute food insecurity due to drought and other
shocks (233
). In March 2023, Tropical Cyclone Freddy caused extreme rainfall and flooding in
Mozambique and Malawi. At least 844 fatalities were reported and over 659 000 people were
internal displaced. Fatalities were also reported in Madagascar and Zimbabwe. The heatwaves
in the summer of 2023 affected North Africa, while the Greater Horn of Africa saw unusually
large rainfalls amounts during the Gu rain season, displacing at least 1.4 million people, in
addition to the 2.7 million who were displace due to five consequitive seasons of drought. In
September 2023 Libya experienced extreme rainfall that caused devastating flooding and
heavy loss of life with 4345 confirmed deaths and more than 8500 people still missing (234
)
(235
).
With increasing global warming, mean temperature is projected to increase across Africa, and
temperatures extremes will increase over most of the continent. Eastern Sahel, eastern Africa
and central Africa are projected to receive increased mean annual rainfall, while it is projected
to decrease in southwestern and southern Africa and coastal northern Africa, which are
projected to experience increased meteorological and agricultural drought. For most of the
continent, except northern and southwestern Africa, increased frequency and intensity of
heavy precipitation is projected. With increasing climate change, reductions in economic
growth are projected for low- and middle-income countries.
IPCC WG II (2022) identified key risks for Africa (Figure 11) as species extinction and
damage to ecosystems, reduced food production, reduced water security, reduced energy
security, reduced economic growth and increased poverty, increased disease, mortality and
morbidity, damage to critical infrastructure and human settlements due to extreme events and
loss of natural and cultural heritage. At 1.5℃ global warming, all of the listed risks will
transition to high, and some become very high at below 2℃ global warming. At 1.5℃ a 9%
decline is maize yield is projected in West Africa and 20-60% reduction in wheat yield in
southern and northern Africa. Coffee and tea production in east Africa is projected to decline,
as well as sorghum production in west Africa. A more than 12% decline in marine fisheries is
projected for west Africa at 1.5℃ global warming, which could expose millions of people to
nutritional deficiencies. Climate change also increases the incidence of vector-borne diseases
including malaria (east and southern Africa), dengue and zika (north, east and southern
Africa). Decreased crop yields could expose millions of people to malnutrition, particularly in
central, eastern and western Africa. Heatwaves are projected to cause more than 15 additional
deaths per 100 000 people per year in parts of western, eastern and northern Africa.
(232
) World Meteorological Organization: State of the Climate in Africa 2021 (WMO-No. 1300). 2022. Chair,
Publications Board, WMO, Geneva, Switzerland, ISBN 978-92-63-11300-9
(233
) World Meteorological Organization (2023): State of the Global Climate 2022 (WMO-No. 1316). ISBN:
978-92-63-11316-0.
(234
)https://public.wmo.int/en/media/news/storm-daniel-leads-extreme-rain-and-floods-mediterranean-heavy-
loss-of-life-libya
(235
)https://wmo.int/files/provisional-state-of-global-climate-2023
64
Figure 11: Key risks for Africa increase with increasing global warming.
Source: IPCC AR6 WG II (2022). Figure 9.6
Climate change impacts health, livelihoods and food security of different communities and
social groups in Africa differently, depending on their social, cultural and geographical
context. The vulnerability of individuals to the impacts of climate change interacts with non-
climatic processes, including socio-economic processes. The most vulnerable groups include
pastoralists, fishing communities, small scale farmers and urban settlement residents. Women
are disproportionately affected by the impacts of climate change. Refugees and Internally
Displaced People are also particularly affected. Some of the most vulnerable regions in Africa
are the arid and semi-arid countries in the Sahelian belt and the greater Horn of Africa (236
).
2.2.2 Small Islands
Small islands are adversely affected by increasing temperature, sea-level rise, heavy
precipitation, increasing intensity of tropical cyclones, storm surges, droughts and coral
(236
) Trisos, C.H., I.O. Adelekan, E. Totin, A. Ayanlade, J. Efitre, A. Gemeda, K. Kalaba, C. Lennard, C. Masao,
Y. Mgaya, G. Ngaruiya, D. Olago, N.P. Simpson, and S. Zakieldeen, 2022: Africa. In: Climate Change
2022: Impacts, Adaptation and Vulnerability. Contribution of Working Group II to the Sixth Assessment
Report of the Intergovernmental Panel on Climate Change [H.-O. Pörtner, D.C. Roberts, M. Tignor, E.S.
Poloczanska, K. Mintenbeck, A. Alegría, M. Craig, S. Langsdorf, S. Löschke, V. Möller, A. Okem, B. Rama
(eds.)]. Cambridge University Press, Cambridge, UK and New York, NY, USA, pp. 1285–1455,
doi:10.1017/9781009325844.011.
65
bleaching. Climate change is already negatively impacting their ecosystems, infrastructure
and settlements, health and well-being, water and food security, economy and culture (237
).
The intensity and intensification rates of tropical cyclones have increased in the past decades.
They are threatening human life, settlements and infrastructure of small islands. In the past
years, most Caribbean islands were affected by at least one tropical cyclone of category 4 or
5. In 2017 for example, Tropical Cyclone Maria (category 5) adversely affected Dominica,
Saint Croix and Puerto Rico, causing over 3 000 casualties in Puerto Rico and Dominica
alone. The economic losses amounted to USD 69.39 billion in Puerto Rico. Dominica saw its
vegetation eradicated, 95% of houses destroyed and complete destruction of agriculture.
Economic losses amounted to 224% of its GDP (238
).
Small islands are among the most threatened on the planet by water insecurity. The reduction
on freshwater volume due to sea level rise and drought threatens freshwater stress, which
increases with increasing global warming.
Small islands, particularly those in the Pacific and Indian Ocean have experienced coral
bleaching and loss of coral abundance, which are increasing. It is projected that above 1.5℃
global warming 70-90% of reef building corals will be lost and at 2℃ global warming the loss
will increase to 99%, severely affecting multiple ecosystem services important to small island
communities.
Projected changes in wave climate superimposed on sea-level rise will increase coastal
flooding in small islands, which is a major concern, as a significant part of their population
lives in the low-elevation coastal zone. It is projected that the frequency, extent, duration and
consequences of coastal flooding will significantly increase from 2050.
IPCC WG II (2022) identified key risks for small islands as: loss of marine and coastal
biodiversity and ecosystem services, submergence of reef islands, loss of terrestrial
biodiversity and ecosystem services, water insecurity, destruction of settlements and
infrastructure, degradation of human health and well-being, economic decline and livelihood
failure and loss of cultural resources and heritage, all resulting in the reduced habitability of
islands (239
).
(237
) Mycoo, M., M.Wairiu, D. Campbell, V. Duvat, Y. Golbuu, S. Maharaj, J. Nalau, P. Nunn, J. Pinnegar, and
O.Warrick, 2022: Small Islands. In: Climate Change 2022: Impacts, Adaptation and Vulnerability.
Contribution of Working Group II to the Sixth Assessment Report of the Intergovernmental Panel on
Climate Change [H.-O. Pörtner, D.C. Roberts, M. Tignor, E.S. Poloczanska, K. Mintenbeck, A. Alegría, M.
Craig, S. Langsdorf, S. Löschke, V. Möller, A. Okem, B. Rama (eds.)]. Cambridge University Press,
Cambridge, UK and New York, NY, USA, pp. 2043–2121, doi:10.1017/9781009325844.017.
(238
) World Meteorological Organization: Notable Tropical Cyclones | World Meteorological Organization
(wmo.int). Accessed 29.6.2023.
(239
) Mycoo, M., M.Wairiu, D. Campbell, V. Duvat, Y. Golbuu, S. Maharaj, J. Nalau, P. Nunn, J. Pinnegar, and
O.Warrick, 2022: Small Islands. In: Climate Change 2022: Impacts, Adaptation and Vulnerability.
Contribution of Working Group II to the Sixth Assessment Report of the Intergovernmental Panel on
Climate Change [H.-O. Pörtner, D.C. Roberts, M. Tignor, E.S. Poloczanska, K. Mintenbeck, A. Alegría, M.
Craig, S. Langsdorf, S. Löschke, V. Möller, A. Okem, B. Rama (eds.)]. Cambridge University Press,
Cambridge, UK and New York, NY, USA, pp. 2043–2121, doi:10.1017/9781009325844.017.
66
2.2.3 Asia
Surface air temperature has been increasing across Asia, increasing the likelihood of
heatwaves, droughts, sand and dust storms, impacting the monsoon circulation, floods in
monsoon regions and melting of glaciers. Ecosystems are negatively impacted by global
warming, changes in precipitation, permafrost thawing and extreme events, which interplay
with non-climatic factors, increasing their vulnerability.
Coastal communities in Asia are affected by the sea level rise and ocean acidification,
affecting the multiple ecosystem services important for their lives and livelihoods. Urban
residents are also affected by climate change due to extreme events, including due to urban
heat-island effect.
Water supply and demand have been affected by climatic and non-climaxing factors, leading
to water stress conditions in most of Asia, which are projected to intensify with increasing
global warming. Hotter summers and decreased precipitation are increasing energy demand,
and winter savings do not compensate for the increased summer demand. Climate change is
also affecting food production in Asia and risks are projected to increase with increasing
global warming, which negatively affects fisheries, aquaculture, crop production and livestock
production, increasing food insecurity. Climate change is already causing economic losses
including through damage to infrastructure, disruptions in services and trade.
Climate change is affecting health and wellbeing of people across Asia, through heatwaves,
flooding, droughts and air pollution, increasing vector- and water-borne diseases,
undernutrition, mental health disorders and allergy related illness (240
).
Extreme events, including tropical cyclones, heavy precipitation and flooding, droughts,
heatwaves and wildfires, are increasing in frequency and intensity. Flood and storm events
attributable to climate change resulted in thousands of fatalities, millions of people affected
and causing significant economic damages in the past years. In 2022 the record-breaking
rainfall led to extensive flooding in Pakistan, causing more than 1 700 deaths and affecting 33
million people. Economic damages were estimated to amount to US $30 billion (241
) (242
). In
May 2023, an intense tropical cyclone Mocha triggered 1.7 million displacements across the
sub-region from Sir Lanka to Myanmar, and through India and Bangladesh. Only in
Myanmar, 148 lives were lost. The cyclone contributed to acute food insecurity in the
region (243
).
(240
) Shaw, R., Y. Luo, T.S. Cheong, S. Abdul Halim, S. Chaturvedi, M. Hashizume, G.E. Insarov, Y. Ishikawa,
M. Jafari, A. Kitoh, J. Pulhin, C. Singh, K. Vasant, and Z. Zhang, 2022: Asia. In: Climate Change 2022:
Impacts, Adaptation and Vulnerability. Contribution of Working Group II to the Sixth Assessment Report of
the Intergovernmental Panel on Climate Change [H.-O. Pörtner, D.C. Roberts, M. Tignor, E.S. Poloczanska,
K. Mintenbeck, A. Alegría, M. Craig, S. Langsdorf, S. Löschke, V. Möller, A. Okem, B. Rama (eds.)].
Cambridge University Press, Cambridge, UK and New York, NY, USA, pp. 1457–1579,
doi:10.1017/9781009325844.012
(241
) World Meteorological Organization (2023): State of the Global Climate 2022 (WMO-No. 1316). ISBN:
978-92-63-11316-0.
(242
) World Meteorological Organization (2022) State of the Climate in Asia 2021 (WMO-No. 1303). IBSN:
978-92063-11303-0.
(243
)https://wmo.int/files/provisional-state-of-global-climate-2023
67
Vulnerability of population to climate change differs by geography and socio-economic
context (Figure 12). Communities in semiarid, glacier-fed river basins and mega deltas are
particularly affected by climate change. Bangladesh is one of the world’s most vulnerable
countries to climate risks, including due to frequent floods, cyclones, droughts, heat waves
and storm surges. Agro-based economies, including India and Pakistan, are also particularly
vulnerable to extreme climatic condition.
Figure 12: Key risks related to climate change in Asia.
Source: IPCC AR6 WG II (2022). Figure FAQ 10.1.1
Different social groups are differentially affected by the impacts of climate change, and
women, Indigenous people, older and low-income groups are disproportionately affected. The
poor are among the most vulnerable, and in Asia, approximately 400 million people live in
extreme poverty, and more than a quarter of the population lives below the poverty line of US
$3.20 per day. Particularly in Southern Asia, a large share of the population also lacks access
to basic services (244
).
(244
) Shaw, R., Y. Luo, T.S. Cheong, S. Abdul Halim, S. Chaturvedi, M. Hashizume, G.E. Insarov, Y. Ishikawa,
M. Jafari, A. Kitoh, J. Pulhin, C. Singh, K. Vasant, and Z. Zhang, 2022: Asia. In: Climate Change 2022:
Impacts, Adaptation and Vulnerability. Contribution of Working Group II to the Sixth Assessment Report of
the Intergovernmental Panel on Climate Change [H.-O. Pörtner, D.C. Roberts, M. Tignor, E.S. Poloczanska,
K. Mintenbeck, A. Alegría, M. Craig, S. Langsdorf, S. Löschke, V. Möller, A. Okem, B. Rama (eds.)].
Cambridge University Press, Cambridge, UK and New York, NY, USA, pp. 1457–1579,
doi:10.1017/9781009325844.012
68
2.3 Impacts in the EU
Climate change is affecting people and ecosystems in Europe. All European regions have
already experienced increases in extreme weather events, increases in mean temperature and
extreme heat and decreases in cold spells (245
). Record high annual temperatures were
registered in Western Europe in 2022, with record glacier melting in the European Alps
(246
)(247
), the second lowest river flow on record and the second largest wildfire burnt area on
record. Droughts affected large areas of Europe in the spring and in the summer, and
exceptional heatwaves occurred in much of Europe in 2022 (248
). Further, in the summer of
2023 (June-August) the heatwaves yet again broke temperature records in several locations,
while record heat was also registered in the United States and in Asia. A recent study found
that such heatwaves would have been extremely unlikely without anthropogenic climate
change, and such maximum temperatures would have been virtually impossible to occur (249
).
Overall, 2023 was the second warmest year for Europe, after 2020. Temperatures were above
average for 11 months, and September was the warmest September ever recorded, with
temperatures exceeding the 1991-2020 average by 2.52°C. Europe experienced significant
wildfires, storms, and flooding. Heavy or record-breaking precipitation occurred in Italy,
Norway, Sweden and Slovenia, causing significant floods, while storms and associated
flooding affected Greece, parts of northern and western Europe and the Iberian
Peninsula (250
). Greece in particular experienced devastating wildfires, resulting in loss of life
and evacuations (251
).
Climate change affects all the regions in the world and therefore impacts Europe directly and
indirectly. It affects sectors and supply chains relevant for Europe including through impacts
on ecosystems, people (e.g., migration and displacement), financial flows and trade. This has
implications for food supply, security, and health and wellbeing. The impacts of climate
change vary between and within regions (Figure 13), with southern regions experiencing the
most severe effects, while northern and central regions could experience limited positive
impacts at lower levels of warming, alongside negative impacts. Above 2℃ of global
warming, mean precipitation is projected to increase in northern Europe in the winter and
decrease in the summer in the Mediterranean region. An increase in precipitation extremes is
projected for all regions except for the Mediterranean. Pluvial flooding is projected to
increase above 1.5℃ global warming level. The highest winter warming is projected to be
experienced by northern Europe and the biggest summer warming by the Mediterranean
region. The Mediterranean region is projected to be the most affected by droughts. Sea
(245
) Ranasinghe, R., at al., 2021: Climate Change Information for Regional Impact and for Risk Assessment. In:
Climate Change 2021: The Physical Science Basis. Contribution of Working Group I to the Sixth
Assessment Report of the Intergovernmental Panel on Climate Change. Cambridge University Press,
Cambridge.
(246
) World Meteorological Organization (WMO). 2022. State of the Global Climate 2022 (WMO-No. 1316).
ISBN: 978-92-63-11316-0
(247
) World Meteorological Organization (2023): State of the Climate in Europe 2022. ISBN 978-92-63-11320-7
(248
) Copernicus Climate Change Service (C3S), 2023: European State of the Climate 2022, Full report:
climate.copernicus.eu/ESOTC/2022
(249
) Zachariah M. et al 2023. Extreme heat in North America, Europe and China in July 2023 made much more
likely by climate change. Grantham Institute for Climate Change. https://doi.org/10.25561/105549
(250
)https://climate.copernicus.eu/global-climate-highlights-2023
(251
)https://atmosphere.copernicus.eu/2023-year-intense-global-wildfire-activity
69
surface warming and acidification have been observed over the past decades and are projected
to continue. Relative sea level rise has occurred along European coastlines and it is projected
to continue regardless of the warming level (252
). Extreme sea-level events will increase in
frequency and intensity, resulting in coastal flooding, and the retreat in shorelines along sandy
coasts will continue (253
).
(252
) Ranasinghe, R., A.C. Ruane, R. Vautard, N. Arnell, E. Coppola, F.A. Cruz, S. Dessai, A.S. Islam, M.
Rahimi, D. Ruiz Carrascal, J. Sillmann, M.B. Sylla, C. Tebaldi, W. Wang and R. Zaaboul, 2021: Climate
Change Information for Regional Impact and for Risk Assessment. In: Climate Change 2021: The Physical
Science Basis. Contribution of Working Group I to the Sixth Assessment Report of the Intergovernmental
Panel on Climate Change. [Masson-Delmotte, V., P. Zhai, A. Pirani, S. L. Connors, C. Péan, S. Berger, N.
Caud, Y. Chen, L. Goldfarb, M. I. Gomis, M. Huang, K. Leitzell, E. Lonnoy, J. B. R. Matthews, T. K.
Maycock, T. Waterfield, O. Yelekçi, R. Yu and B. Zhou (eds.)]. Cambridge University Press, Cambridge.
(253
) IPCC AR6 WG I. 2021. Regional fact sheet – Europe.
70
Figure 13: Observed and projected climate change impacts for different regions of Europe
Source: IPCC AR6 WG I (2021): Regional Factsheet Europe
IPCC AR6 WG II (2022) (254
) identified four key risks for Europe: i) heat, which will impact
human health and ecosystems; ii) loss in agricultural production; iii) water scarcity; and iv)
(254
) Bednar-Friedl, B., R. Biesbroek, D.N. Schmidt, P. Alexander, K.Y. Børsheim, J. Carnicer, E.
Georgopoulou, M. Haasnoot, G. Le Cozannet, P. Lionello, O. Lipka, C. Möllmann, V. Muccione, T.
Mustonen, D. Piepenburg, and L.Whitmarsh, 2022: Europe. In: Climate Change 2022: Impacts, Adaptation
and Vulnerability. Contribution of Working Group II to the Sixth Assessment Report of the
Intergovernmental Panel on Climate Change [H.-O. Pörtner, D.C. Roberts, M. Tignor, E.S. Poloczanska, K.
Mintenbeck, A. Alegría, M. Craig, S. Langsdorf, S. Löschke, V. Möller, A. Okem, B. Rama (eds.)].
Cambridge University Press, Cambridge, UK and New York, NY, USA, pp. 1817–1927,
doi:10.1017/9781009325844.015.
71
flooding (Figure 14). Risks are more severe at 2°C of global warming compared to 1.5°C.
While the EU has higher adaptive capacity compared to other regions of the world, there are
limits to adaptation and staying within 1.5℃ would increase EU’s ability to adapt to climate
change.
Figure 14: Key risks for Europe under low to medium adaptation
Source: IPCC AR6 WG II (2022). Figure 13.28.
Climate change impacts different social groups differently, with poor households being
disproportionately affected due to their lower capacity to adapt and recover from impacts.
Traditional lifestyles, for example Sámi reindeer herding, are also threatened by climate
change including due to unstable ice conditions, extreme weather conditions, more frequent
forest fires and changes in plant composition.
The results of the recent Public consultation on the EU climate target for 2040 revealed that
the effects of climate change that are of most concern to the respondents (in decreasing order):
i) the loss of biodiversity and natural habitats; ii) damage from natural hazards (floods,
wildfires, droughts, etc.) and rising sea levels; iii) loss of life due to natural hazards such as
heatwaves, floods, droughts or wildfires; iv) varying capacity of different social groups to
adapt (e.g. older people, persons with disabilities, displaced persons, low income households
and other vulnerable groups); v) spread of new diseases (e.g. malaria) and pandemics; vi) a
change of landscape and forests in areas they relate to or live in; vii) having to face changes in
their private lives or activities; viii) increasing material losses to their properties; ix) loss of
job or income due to changes in the sector in which they work.
The hazards induced by climate change that the respondents fear most are (in decreasing
order) i) heatwaves, ii) droughts, iii) lack of water, iv) floods and intense rain, v) wildfires, vi)
windstorms, and vii) rising sea levels.
Most of the respondents believe that the main climate change related impacts on society in
their country in the next 20 years will be i) natural disasters (e.g. fires, droughts or floods),
followed by ii) negative impacts on food production and iii) migration or refugee movements
due to climate change and environmental crises.
72
2.3.1 Health
Climate change is already affecting the health and well-being of people in Europe. The
record-breaking heatwave in the summer of 2022 resulted more than 60 000 (255
) fatalities in
Europe. The number of days with extreme heat stress has been increasing (Figure 15) and
heatvawes are projected to further increase in intensity and frequency (Figure 16). They
present a major health threat, exposing around 100 million Europeans per year to intense
heatwaves at 1.5℃ of global warming, 170 million per year at 2℃ and almost 300 million at
3℃ global warming, or more than half of European population. While Southern Europe will
continue to be most affected by intense heatwaves, Western and Central Europe will also be
impacted. Urban heat islands effect will increase urban temperatures, exposing an increasing
number of people to extreme heat (256
). Heat affects the elderly, pregnant women, children,
socially isolated people and those with pre-existing medical conditions the most (257
).
(255
) Ballester, J., Quijal-Zamorano, M., Méndez Turrubiates, R.F. et al. Heat-related mortality in Europe during
the summer of 2022. Nature Medicine 29, 1857–1866 (2023). https://doi.org/10.1038/s41591-023-02419-z
(256
) Feyen L., Ciscar J.C., Gosling S., Ibarreta D., Soria A. (editors) (2020). Climate change impacts and
adaptation in Europe. JRC PESETA IV final report. EUR 30180EN, Publications Office of the European
Union, Luxembourg, ISBN 978-92-76-18123-1, doi:10.2760/171121, JRC119178
(257
) Bednar-Friedl, B., R. Biesbroek, D.N. Schmidt, P. Alexander, K.Y. Børsheim, J. Carnicer, E.
Georgopoulou, M. Haasnoot, G. Le Cozannet, P. Lionello, O. Lipka, C. Möllmann, V. Muccione, T.
Mustonen, D. Piepenburg, and L.Whitmarsh, 2022: Europe. In: Climate Change 2022: Impacts, Adaptation
and Vulnerability. Contribution of Working Group II to the Sixth Assessment Report of the
Intergovernmental Panel on Climate Change [H.-O. Pörtner, D.C. Roberts, M. Tignor, E.S. Poloczanska, K.
Mintenbeck, A. Alegría, M. Craig, S. Langsdorf, S. Löschke, V. Möller, A. Okem, B. Rama (eds.)].
Cambridge University Press, Cambridge, UK and New York, NY, USA, pp. 1817–1927,
doi:10.1017/9781009325844.015.
73
Figure 15: Percentage of days with extreme heat stress for Southern Europe
Note: Percentage of July days with extreme heat stress index for Southern Europe, from 1950 to 2023.
Source: ERA5-HEAT. Credit: C3S/ECMWF.
Today heat stress causes more deaths in Europe than all other extreme weather-related events
(cold, flooding, storm, wildfire) combined (258
) (259
). Mortality from long-lasting heatwaves
has increased particularly strongly in central and eastern Europe since the 1950s (260
) (261
).
Other extreme events, including floods, wildfires and windstorms also represent major health
risks, and are projected to increase in frequency and intensity, affecting an increasing number
of Europeans.
(258
) European Academies' Science Advisory Council, EASAC (2019) The imperative of climate action to
protect human health in Europe. EASAC policy report 38.
(259
) Zhao Q., Guo Y., Ye T., Gasparrini A., Tong S., Overcenco A. 2021. Global, regional, and national burden
of mortality associated with non-optimal ambient temperatures from 2000 to 2019: a three-stage modelling
study. The Lancet Planetary Health. 5(7) 415-235. /doi.org/10.1016/S2542-5196(21)00081-4
(260
) Lorenz, R., Stalhandske, Z., & Fischer, E. M. (2019). Detection of a climate change signal in extreme heat,
heat stress, and cold in Europe from observations. Geophysical Research Letters, 46, 8363–8374.
(261
) van Daalen K.R. et al. 2022. The 2022 Europe report of the Lancet Countdown on health and climate
change: towards a climate resilient future. The Lancet Public Health. 7(11) 942-965.
https://doi.org/10.1016/S2468-2667(22)00197-9
74
Figure 16: Projected heat stress for Europe
Source: IPCC AR6 WG II (2022). Figure 13.23.
Air pollution is the largest environmental health risk in Europe and increases the incidence of
a range of diseases, including respiratory and cardiovascular diseases. Air pollutnts include
short-lived reactive gases such as ozone, and particulate matter (PM), which is a wide range
of particles suspended in the atmosphere and dangerous for human health. Methane, a
powerful short-lived climate forcer is a precursor of ozone, an important air pollutant. Human
activities that release GHG in the atmosphere also lead to the increase in concentration of
ozone and PM in the atmosphere. It is estimated that in 2015 approximately 391 000 of
Europeans (EU+UK) died prematurely due to long-term exposure to PM2.5 (262
). Climate
(262
) European Environment Agency, 2018. Unequal exposure and unequal impacts: social vulnerability
to air pollution, noise and extreme temperatures in Europe. EEA Report No 22/2018.
75
change can increase air pollution through extreme heat, desert dust, increases in wildfire due
to increases in temperature and changes in precipitation patterns (263
). Mortalities due to
exposure to PM2.5 are projected to increase by 73% at 2.5℃ global warming levels in
Europe. Premature mortalities from near-surface ozone exposure are also projected to increase
in Western, Central and Southern Europe and decrease in Northern Europe. Southern Europe
is projected to be particularly affected by reduced air quality due to wildfires. Indoor air
quality could also be decreased due to projected increases in flood risks and heavy
precipitation leading to mould and dampness (264
).
Changing climatic conditions in Europe have already facilitated outbreaks of vector-borne
climate sensitive infectious diseases including chikungunya, dengue, and West Nile fever.
Thick-borne Lyme disease and encephalitis are projected to expand in geographical range
further north and to higher elevations. Water-borne and food-borne disease outbreaks have
occurred due to extreme precipitation events and higher temperatures, and the risk is projected
to increase with increasing warming (265
).
Climate change contributes to the spread of some allergenic plants and the earlier start and
extension of the pollen season. The concentrations of air-borne pollen are projected to
increase across Europe. This could increase the prevalence of allergies.
Climate change related events also impact the mental health of Europeans. Extreme weather
events have been linked to post-traumatic stress disorder, anxiety, and depression (266
).
2.3.2 Water stress and scarcity
Water scarcity is already affecting many regions in Europe and currently around 11% of the
population in the European Union and the United Kingdom are living in water scarce regions.
Southern Europe is particularly affected, and it is projected that the conditions of water
(263
)WMO Bulletin: heatwaves worsen air quality and pollution. 6. September 2023. URL:
https://public.wmo.int/en/media/press-release/wmo-bulletin-heatwaves-worsen-air-quality-and-pollution
(264
) Bednar-Friedl, B., R. Biesbroek, D.N. Schmidt, P. Alexander, K.Y. Børsheim, J. Carnicer, E.
Georgopoulou, M. Haasnoot, G. Le Cozannet, P. Lionello, O. Lipka, C. Möllmann, V. Muccione, T.
Mustonen, D. Piepenburg, and L.Whitmarsh, 2022: Europe. In: Climate Change 2022: Impacts, Adaptation
and Vulnerability. Contribution of Working Group II to the Sixth Assessment Report of the
Intergovernmental Panel on Climate Change [H.-O. Pörtner, D.C. Roberts, M. Tignor, E.S. Poloczanska, K.
Mintenbeck, A. Alegría, M. Craig, S. Langsdorf, S. Löschke, V. Möller, A. Okem, B. Rama (eds.)].
Cambridge University Press, Cambridge, UK and New York, NY, USA, pp. 1817–1927,
doi:10.1017/9781009325844.015.
(265
) J.C. Semenza and S. Paz. 2021. Climate change and infectious disease in Europe: Impacts, projection and
adaptation. The Lancet Regional Health. Volume 9, 100230.
(266
) Bednar-Friedl, B., R. Biesbroek, D.N. Schmidt, P. Alexander, K.Y. Børsheim, J. Carnicer, E.
Georgopoulou, M. Haasnoot, G. Le Cozannet, P. Lionello, O. Lipka, C. Möllmann, V. Muccione, T.
Mustonen, D. Piepenburg, and L.Whitmarsh, 2022: Europe. In: Climate Change 2022: Impacts, Adaptation
and Vulnerability. Contribution of Working Group II to the Sixth Assessment Report of the
Intergovernmental Panel on Climate Change [H.-O. Pörtner, D.C. Roberts, M. Tignor, E.S. Poloczanska, K.
Mintenbeck, A. Alegría, M. Craig, S. Langsdorf, S. Löschke, V. Möller, A. Okem, B. Rama (eds.)].
Cambridge University Press, Cambridge, UK and New York, NY, USA, pp. 1817–1927,
doi:10.1017/9781009325844.015.
76
scarcity will increase in particular in regions that are already experiencing it (267
). In 2022 a
significant and prolonged drought affected much of Europe, especially during spring and
summer and contributed to numerous wildfires, affected ecosystems and society (268
)(269
). The
European Environment Agency estimates that water stress (i.e. when the demand for water
exceeds the available amount during a certain period or when poor quality restricts its use)
affects 20% of the European territory and 30 % of the European population on average every
year, while droughts cause economic damage of up to EUR 9 billion annually and additional
unquantified damage to ecosystems and their services (270
).
Water scarcity does not only affect the water sector, but also other interconnected sectors,
including agriculture, energy, fluvial transport and industry. Extraction of water amplifies
pressure on water resources and water dependent ecosystems. In Southern Europe,
agriculture, public water supply and tourism represent the key pressures on water resource
availability (271
).
In 2022 river discharge was the second lowest on record across all of Europe, and it came
after five consecutive years of below-average river flows. The affected area was the largest on
record, and 63% of all European rivers had below-average discharge (272
). The low water
levels on the River Po affected agricultural production and allowed the intrusion of saltwater
40 km inland, which impacted river ecosystems (273
). The flow patterns of the rivers are
affected also by the shrinking of glaciers and snow cover in the Alps, which has been
happening since the 19th
century as the result of increasing temperature and changes in
precipitation patterns. In winters high rainfall causes higher water discharges, increasing flood
risks. Lower extent and mass of glaciers and snow decrease the inflow of water into the rivers,
particularly during spring and summer. The flow of Rhône River for example, has decreased
significantly in the past 60 years and is projected to decrease further. The flows of some of its
tributaries have already been reduced by 30-40%. Climate change is projected to further
decrease river discharges (274
). Due to reduced river flow and sea level rise, seawater is
projected to intrude estuaries further upstream in the summer. These changes have major
impacts on water quality, energy generation, agriculture, forestry, tourism, and ecosystems.
The risk of water scarcity for Europe increases with higher global warming, and Southern
Europe will be exposed to more persistent droughts. For Southern Europe at 2℃ global
warming level, a 54% increase in population facing at least moderate levels of water shortage
(267
) Feyen L., Ciscar J.C., Gosling S., Ibarreta D., Soria A. (editors) (2020). Climate change impacts and
adaptation in Europe. JRC PESETA IV final report. EUR 30180EN, Publications Office of the European
Union, Luxembourg, ISBN 978-92-76-18123-1, doi:10.2760/171121, JRC119178
(268
) World Meteorological Organization (WMO). 2023. State of the Climate in Europe 2022 (WMO-No. 1320).
(269
) Copernicus Climate Change Service (C3S), 2023: European State of the Climate 2022, Full report:
climate.copernicus.eu/ESOTC/2022
(270
)European Environment Agency, 2021. Water resources across Europe — confronting water stress: an
updated assessment. EEA Report No 12/2021.
(271
) European Environment Agency, 2021. Water resources across Europe — confronting water stress: an
updated assessment. EEA Report No 12/2021.
(272
) Copernicus Climate Change Service (C3S).
(273
) World Meteorological Organization (2023): State of the Climate in Europe 2022. ISBN 978-92-63-11320-7
(274
)https://www.eaurmc.fr/jcms/pro_118307/fr/les-debits-d-etiage-du-rhone-en-baisse-sous-l-effet-du-
changement-climatique [Accessed on 2.8.2023].
77
is projected. At 3℃ global warming, water scarcity will become more widespread and severe,
and affect currently non water scarce areas of Western and Central Europe (275
). Southern and
south-western Europe is projected to be most affected, and river discharge reductions could
reach 40% in the summer in some basins. Drought frequency is projected to double over
nearly a quarter of the Mediterranean and a third of the Atlantic region.
In addition to the effects of climate change on water resources, in many European river
basins, water is over-abstracted, which impacts ecological processes, or it is returned to
surface water and groundwater with significant levels of pollution. Groundwater is often seen
as a solution to replace other freshwater sources, but over-exploitation has negative impacts
on the future availability of water and on biodiversity (276
).
2.3.3 Flood risks
Risk of coastal and river floods in Europe is projected to increase substantially over the 21st
century. Bosello and Leon (277
) find that coastal damages from sea-level rise and riverine
flooding are the main sources of GDP losses as a result of climate change, amounting to more
than 70% of all climate change related losses in the EU.
2.3.3.1 Coastal flooding
Sea level rise is already affecting European coastal areas, and compounded by storm surges,
rainfall and river runoff, risks of coastal flooding in Europe’s low-lying coasts will increase
with increasing global warming and affect an increasing number of people, particularly
beyond 2040 (278
). It is estimated that without mitigation, 2.2 million people in the EU
and UK could be exposed to coastal flooding by the end of the century. Moderate mitigation
action could reduce the damages by half and reduce the exposed population to 1.4 million
people per year. Adaptation action such as rising dykes would reduce exposed population and
damages by 60% and 90% respectively by 2100. Other solutions are also available, such as
green infrastructures/nature-based solutions (e.g. give rivers more space during floods,
restoring reefs, marshes or dunes), often more cost-efficient and with lower environmental
(275
) Bednar-Friedl, B., R. Biesbroek, D.N. Schmidt, P. Alexander, K.Y. Børsheim, J. Carnicer, E.
Georgopoulou, M. Haasnoot, G. Le Cozannet, P. Lionello, O. Lipka, C. Möllmann, V. Muccione, T.
Mustonen, D. Piepenburg, and L.Whitmarsh, 2022: Europe. In: Climate Change 2022: Impacts, Adaptation
and Vulnerability. Contribution of Working Group II to the Sixth Assessment Report of the
Intergovernmental Panel on Climate Change [H.-O. Pörtner, D.C. Roberts, M. Tignor, E.S. Poloczanska, K.
Mintenbeck, A. Alegría, M. Craig, S. Langsdorf, S. Löschke, V. Möller, A. Okem, B. Rama (eds.)].
Cambridge University Press, Cambridge, UK and New York, NY, USA, pp. 1817–1927,
doi:10.1017/9781009325844.015.
(276
)EEA (2021): Water resources across Europe — confronting water stress: an updated assessment, report
12/2021. Luxembourg: Publications Office of the European Union
(277
) Bosello F. and Leon C.J. 2022. Climate change impacts in the EU: new evidence from recent research.
EAERE Magazine, 16 Spring 2022 – Climate Impacts and Adaptation
(278
) Bednar-Friedl, B., R. Biesbroek, D.N. Schmidt, P. Alexander, K.Y. Børsheim, J. Carnicer, E.
Georgopoulou, M. Haasnoot, G. Le Cozannet, P. Lionello, O. Lipka, C. Möllmann, V. Muccione, T.
Mustonen, D. Piepenburg, and L.Whitmarsh, 2022: Europe. In: Climate Change 2022: Impacts, Adaptation
and Vulnerability. Contribution of Working Group II to the Sixth Assessment Report of the
Intergovernmental Panel on Climate Change [H.-O. Pörtner, D.C. Roberts, M. Tignor, E.S. Poloczanska, K.
Mintenbeck, A. Alegría, M. Craig, S. Langsdorf, S. Löschke, V. Möller, A. Okem, B. Rama (eds.)].
Cambridge University Press, Cambridge, UK and New York, NY, USA, pp. 1817–1927,
doi:10.1017/9781009325844.015.
78
impact, and come with many co-benefits including for biodiversity and human health and
well-being (279
).
2.3.3.2 Riverine and pluvial flooding
Climate change affects the frequency and intensity of climate and weather extremes, including
heavy precipitation. River flood hazards have increased in the Western and Central Europe in
the past decades and decreased in Southern Europe. In Europe, the past three decades had the
largest number of floods in the past 500 years, affecting an increasing number of people and
causing economic damages.
River flood hazards are projected to continue to increase in Central and Western Europe and
decrease in Northern and Southern Europe. Overall, damages from river flooding are
projected to increase with continued warming.
Pluvial flooding and flash floods constitute the majority of flood events in Europe and have
caused considerable impacts, including loss of human life and economic and non-economic
damages. With increasing global warming, the risk of pluvial flooding and flash floods are
also projected to increase (280
).
2.3.4 Infrastructure: Impacts on energy systems, transport systems and tourism
2.3.4.1 Energy systems
Climate extremes and changes in weather patterns are already impacting energy systems in
Europe. The most relevant long-term trends from an energy system perspective are changes in
ambient temperature and water inflow patterns and availability. Extreme events, including
heat waves, heavy precipitation events, storms and extreme sea level also impact energy
systems (281
), by increasing the risk of damaging critical energy infrastructure (282
). In recent
years, parts of Europe have experienced reductions and interruptions of power supply due to
water-cooling constrains on power plants during exceptionally dry or hot years, an increase in
the number of days where energy demand for cooling increases (known as cooling-days) and
decrease in heating-days (283
).
(279
)European Commission (2020) Nature-Based Solutions for Flood Mitigation and Coastal Resilience Analysis
of EU-funded Projects. Luxembourg: Publications Office of the European Union.
(280
)Bednar-Friedl, B., R. Biesbroek, D.N. Schmidt, P. Alexander, K.Y. Børsheim, J. Carnicer, E. Georgopoulou,
M. Haasnoot, G. Le Cozannet, P. Lionello, O. Lipka, C. Möllmann, V. Muccione, T. Mustonen, D.
Piepenburg, and L.Whitmarsh, 2022: Europe. In: Climate Change 2022: Impacts, Adaptation and
Vulnerability. Contribution of Working Group II to the Sixth Assessment Report of the Intergovernmental
Panel on Climate Change [H.-O. Pörtner, D.C. Roberts, M. Tignor, E.S. Poloczanska, K. Mintenbeck, A.
Alegría, M. Craig, S. Langsdorf, S. Löschke, V. Möller, A. Okem, B. Rama (eds.)]. Cambridge University
Press, Cambridge, UK and New York, NY, USA, pp. 1817–1927, doi:10.1017/9781009325844.015.
(281
) Troccoli (2018). Weather & climate services for the energy industry. DOI:10.1007/978-3-319-68418-5
(282
) Varianou Mikellidou et al. (2018). Energy critical infrastructures at risk from climate change: A state of the
art review.
(283
) Bednar-Friedl, B., R. Biesbroek, D.N. Schmidt, P. Alexander, K.Y. Børsheim, J. Carnicer, E.
Georgopoulou, M. Haasnoot, G. Le Cozannet, P. Lionello, O. Lipka, C. Möllmann, V. Muccione, T.
Mustonen, D. Piepenburg, and L.Whitmarsh, 2022: Europe. In: Climate Change 2022: Impacts, Adaptation
and Vulnerability. Contribution of Working Group II to the Sixth Assessment Report of the
Intergovernmental Panel on Climate Change [H.-O. Pörtner, D.C. Roberts, M. Tignor, E.S. Poloczanska, K.
79
The IPCC projects an increase in mean precipitation in Northern Europe, increase of river
flooding in Western and Central Europe and increased aridity and ecological droughts in the
Mediterranean area. Water availability is set to increase in northern Europe and decrease in
southern Europe with marked seasonal differences.
Thermal power plants (powered by fossil fuel, biomass or nuclear fuel) often rely on large
quantities of water for cooling. Thermal plants can suffer from reductions in generation in the
event of decreases in cooling water availability and increases in cooling water temperature.
Modelling shows that climate change can decrease usable water capacity for thermoelectric
power plants in certain regions of Europe by more than 15% in some cases by the midlle of
the century (284
). The effects can range from a decrease in power plant reliability, for instance
with extreme events leading to unplanned shutdowns and curtailments (285
), to a reduction of
performance and generation capacity of turbines (286
) due to a reduction of volume or increase
in temperature of cooling water (287
).
By definition, hydropower plants generate electricity from water streamflow or water
reservoirs. Variation in rainfall, snowfall, and snow and glacier melt will change inflow
patterns and affect plant productivity, resilience and reliability. Reduced availability of water
leads to reduced electricity generation, while increased streamflow above regulating capacity
can affect the functioning of hydropower plants. In case of hydropower used for flexibility
services, such as pumped hydro-storage technology, reliability of dispatching might also be
negatively affected by the increased variability of weather patterns. In a 2℃ scenario, water
resource and hydro production increases by 2050 in Northern Europe, while Southern Europe
experiences the opposite trend (288
).
Wind and PV do not rely on water for cooling or producing electricity and, at EU scale, they
are little impacted by climate change. The variation of wind energy potential linked to
changes in wind availability is less than 5% overall (289
), (290
) while studies have shown that
the projected range of variation for solar irradiance and temperature increase will only
marginally impact the PV potential in EU (291
). However, uncertainty still exists (292
) on the
Mintenbeck, A. Alegría, M. Craig, S. Langsdorf, S. Löschke, V. Möller, A. Okem, B. Rama (eds.)].
Cambridge University Press, Cambridge, UK and New York, NY, USA, pp. 1817–1927,
doi:10.1017/9781009325844.015.
(284
) EEA (2019). Adaptation challenges and opportunities for the European energy system.
(285
) Reuters (2018). France's EDF halts four nuclear reactors due to heatwave'.
(286
) Van Vliet, M. T. H., et al. (2016b), 'Multi-model assessment of
global hydropower and cooling water discharge potential under climate change'.
(287
) Van Vliet, M. T. H., et al. (2016c). 'Power-generation system vulnerability and adaptation to changes in
climate and water resources.
(288
) JRC (2018). Seasonal impacts of climate change on electricity production : JRC PESETA IV project
(289
) Moemken, J. et al. (2018). Future changes of wind speed and wind energy potentials in EURO-CORDEX
ensemble simulations
(290
) Scott Hosking, J., et al., (2018). Changes in European wind energy generation potential within a 1.5 °C
warmer world'
(291
) Jerez. S., et al. (2015). The impact of climate change on photovoltaic power generation in Europe
(292
) Yang et al. (2021). Climate Change and Renewable Energy Generation in Europe—Long-Term Impact
Assessment on Solar and Wind Energy Using High-Resolution Future Climate Data and Considering
Climate Uncertainties
80
spatial and temporal distribution of variations of wind availability and solar irradiance, which
can generate higher variation of PV and wind potential at the local level.
The spatial availability of biomass supply for bioenergy is also impacted by climate change:
climate change allows warm‑adapted tree species and warm‑season crops to expand
northwards in Europe, whereas southern Europe is projected to experience a decline in its
suitability for forest growth as a result of increasing heat and water stress and scaricity (293
).
The electricity grid, which will increase in size and importance as increasing renewables leads
to wider distribution of electricity supply, will be significantly impacted by extreme weather
events: heavy snowfall and icing can create ice sleeves around power line conductors,
windstorms, wildfires can cause trees to fall on overhead lines, heatwaves can create electric
faults in electricity cables (294
). Due to climate change alone, and in the absence of adaptation,
analysis shows that damages could triple by the 2020s, multiply six-fold by mid-century, and
amount to more than 10 times by the end of the century (295
), considerably increasing the cost
of the energy system.
Climate change will also modify the final energy demand in the building sector. An increase
in temperature reduces the demand for heating, while increasing the demand for cooling (296
).
Given that in the EU, heating demand is larger than cooling demand, the overall energy
demand will decrease, with this change being minor (5%) in the short term and becoming
more prominent only in the second half of the century (297
). In cold countries, a decrease of
total energy demand occurs, while warm countries will experience an increase of overall
energy demand and an increase in peak electricity demand due to cooling (298
).
The overall impact of climate change on the energy system will not simply be the sum of the
impacts applied to each energy technology separately. It will result from the interactions
between the extreme events and long-term trends applied to a dynamic system.
Accounting for the impact of climate change in the design of power plants and energy
infrastructure is an appropriate adaptation measure to limit potential future damage, minimise
costs, and ensure the security of power supply. Projections that include adaptation options,
such as faster development of wind and PV, extension of transmission lines and flexibilities,
and innovation in cooling technology have shown to increase the share of EU power
capacities that are unaffected by climate change, and decrease the cost of electricity for
customers (299
).
(293
) EEA (2017). Climate change adaptation and disaster risk reduction in Europe: enhancing coherence of the
knowledge base, policies and practices
(294
)Khatoon, N. (2023). Heatwave Triggers Unprecedented Power Cuts in Malta: A Deep Dive. Accessed on
26-7-2023
(295
) Forzieri et al (2018), Escalating impacts of climate extremes on critical infrastructures in Europe, Global
Environmental Change 48, 97–107
(296
) EEA (2019). Heating and cooling degree days (CLIM 047).
(297
) JRC (2019). Assessment of the impact of climate change on residential energy demand for heating and
cooling
(298
) Damm, A., et al. (2017) “Impacts of +2 °C global warming on electricity demand in Europe”.
(299
) JRC (2018). Seasonal impacts of climate change on electricity production: JRC PESETA IV project.
81
An integrated approach involving the private sector and EU and national policymakers will be
crucial to strengthen the energy market and policy framework to limit the impact of climate
change on the power system and ensure the development of a decarbonised, secure, climate-
resilient and cost-efficient EU energy system.
2.3.4.2 Transport
Climate change affect the transport sector through multiple impacts, including heatwaves, sea
level rise, floodings, wildfires, changes in precipitation, and other extreme weather events, all
of which impact transport infrastructures, operations and travel behaviour (Figure 17).
Climate change is also projected to impact passenger and freight transport due to shifts in
tourism and agricultural production (300
)(301
).
In Europe, the transport sector has already been affected by heatwaves, which caused road
melting and railway asset failures, and by extreme precipitation, floods and landslides which
damaged roads, railways and other infrastructure. With increasing warming, the risks are
projected to increase. In Northern Europe the higher number of freezing and thawing cycles of
construction materials increases risks to transport infrastructure (302
).
Railway transport can be affected by climate change in a variety of ways, which cause
disruption of railway operations and damage to infrastructure. Negative impacts of climate-
related events on railways include railway rail buckling, rail flooding, expansion of swing
bridges, damage to electrical equipment due to overheating, bridge scour, pavement
deterioration, damage related to coastal erosion and damage of sea walls (303
).
Port operations in parts of Northern, Western and Central Europe might be disrupted by sea
level rise, while ports in the Mediterranean could be affected by changes in wave agitation,
particularly beyond 2℃ global warming level (304
).
(300
) Gossling S., Neger C., Steiger R., and Bell R. (2023). Weather, climate change, and transport: a review.
Natural Hazards. DOI: 10.1007/s11069-023-06054-2
(301
) Koetse and Rietvels (2009). The impact of climate change and weather on transport: An overview of
empirical findings. Transport Research Part D: Transport and Environment. 14(3): 205-221.
(302
)Bednar-Friedl, B., R. Biesbroek, D.N. Schmidt, P. Alexander, K.Y. Børsheim, J. Carnicer, E. Georgopoulou,
M. Haasnoot, G. Le Cozannet, P. Lionello, O. Lipka, C. Möllmann, V. Muccione, T. Mustonen, D.
Piepenburg, and L.Whitmarsh, 2022: Europe. In: Climate Change 2022: Impacts, Adaptation and
Vulnerability. Contribution of Working Group II to the Sixth Assessment Report of the Intergovernmental
Panel on Climate Change [H.-O. Pörtner, D.C. Roberts, M. Tignor, E.S. Poloczanska, K. Mintenbeck, A.
Alegría, M. Craig, S. Langsdorf, S. Löschke, V. Möller, A. Okem, B. Rama (eds.)]. Cambridge University
Press, Cambridge, UK and New York, NY, USA, pp. 1817–1927, doi:10.1017/9781009325844.015.
(303
)Kostianaia E.A. and Kostianoy A. 2023. Railway Transport Adaptation Strategies to Climate Change at
High Latitudes: A Review of Experience from Canada, Sweden and China. Transport and
Telecommunication. 24(2):180-194.
(304
) Bednar-Friedl, B., R. Biesbroek, D.N. Schmidt, P. Alexander, K.Y. Børsheim, J. Carnicer, E.
Georgopoulou, M. Haasnoot, G. Le Cozannet, P. Lionello, O. Lipka, C. Möllmann, V. Muccione, T.
Mustonen, D. Piepenburg, and L.Whitmarsh, 2022: Europe. In: Climate Change 2022: Impacts, Adaptation
and Vulnerability. Contribution of Working Group II to the Sixth Assessment Report of the
Intergovernmental Panel on Climate Change [H.-O. Pörtner, D.C. Roberts, M. Tignor, E.S. Poloczanska, K.
Mintenbeck, A. Alegría, M. Craig, S. Langsdorf, S. Löschke, V. Möller, A. Okem, B. Rama (eds.)].
Cambridge University Press, Cambridge, UK and New York, NY, USA, pp. 1817–1927,
doi:10.1017/9781009325844.015.
82
Climate change impacts inland waterways, which are vulnerable to extreme events including
drought and flooding (305
). Low-water-level days present the most significant disruption in
inland navigation in Europe and cause significant economic impacts (306
).
Road traffic can be affected by high temperatures causing degradation of road surfaces,
flooding of infrastructure, closure of roads due to wildfire and wildfire smoke, and other
extremes (307
).
Air travel could be affected by climate change through multiple pathways, including poor
visibility, strong winds, and heavy precipitation. Airports are also impacted by inundation
from sea level rise and storm surges. Raising temperatures could reduce lift generation in
planes and affect air travel in Europe, (308
) and reduce maximum take-off total weight,
payload and climb rate. The projected changes in the North Atlantic jet stream could increase
clear-air turbulence in the transatlantic flight corridor, and impact flight times and fuel
consumption. Changing weather patterns might result in the need to increase maintenance
intervals and improve inspection methods to detect risks (309
).
(305
) Koetse and Rietvels. 2009. The impact of climate change and weather on transport: An overview of
empirical findings. Transport Research Part D: Transport and Environment. 14(3): 205-221.
(306
) A. Christodoulou, P. Christidis, B. Bisselink. Forecasting the impacts of climate change on inland
waterways. Transportation Research Part D: Transport and Environment; Volume 82, May 2020.
(307
)Gossling S., Neger C., Steiger R., and Bell R. 2023. Weather, climate change, and transport: a review.
Natural Hazards. DOI: 10.1007/s11069-023-06054-2
(308
)Bednar-Friedl, B., R. Biesbroek, D.N. Schmidt, P. Alexander, K.Y. Børsheim, J. Carnicer, E. Georgopoulou,
M. Haasnoot, G. Le Cozannet, P. Lionello, O. Lipka, C. Möllmann, V. Muccione, T. Mustonen, D.
Piepenburg, and L.Whitmarsh, 2022: Europe. In: Climate Change 2022: Impacts, Adaptation and
Vulnerability. Contribution of Working Group II to the Sixth Assessment Report of the Intergovernmental
Panel on Climate Change [H.-O. Pörtner, D.C. Roberts, M. Tignor, E.S. Poloczanska, K. Mintenbeck, A.
Alegría, M. Craig, S. Langsdorf, S. Löschke, V. Möller, A. Okem, B. Rama (eds.)]. Cambridge University
Press, Cambridge, UK and New York, NY, USA, pp. 1817–1927, doi:10.1017/9781009325844.015
(309
)Gossling S., Neger C., Steiger R., and Bell R. 2023. Weather, climate change, and transport: a review.
Natural Hazards. DOI: 10.1007/s11069-023-06054-2
83
Figure 17: Examples of climate change impacts on transport
Source: UNECE-WMO (310
)
2.3.4.3 Tourism
The tourism industry in Europe is a significant contributor to GDP and it is already affected
by the impacts of climate change, particularly by changes in snow-cover duration and depth,
and hotter summers. It is estimated that Southern Europe is already experiencing economic
losses, while the rest of Europe is experiencing smaller gains from the impact of climate
change on tourism.
Increasing global warming will affect mountain resorts due to increasing need for
snowmaking and decreasing stability of ropeway transport due to permafrost degradation in
high altitude areas. Summer tourism could be positively affected by higher temperatures in
Northern Europe, with the opposite trend in southern Europe. Coastal erosion and inundation
risk due to sea-level rise could decrease the amenity of European beaches (311
). A JRC
study (312
) also finds a clear north-south pattern in future tourism demand changes, with
northern regions experiencing gains and southern regions experiencing significant reductions.
This trend is projected to increase with increasing global warming.
(310
) UNECE-WMO. Climate Change Impacts and Adaptation for Transport Networks and Nodes.
https://unfccc.int/sites/default/files/resource/2.12UNECE-WMO_CCImpact_Transport.pdf (accessed in
July 2023)
(311
)Bednar-Friedl, B., R. Biesbroek, D.N. Schmidt, P. Alexander, K.Y. Børsheim, J. Carnicer, E. Georgopoulou,
M. Haasnoot, G. Le Cozannet, P. Lionello, O. Lipka, C. Möllmann, V. Muccione, T. Mustonen, D.
Piepenburg, and L.Whitmarsh, 2022: Europe. In: Climate Change 2022: Impacts, Adaptation and
Vulnerability. Contribution of Working Group II to the Sixth Assessment Report of the Intergovernmental
Panel on Climate Change [H.-O. Pörtner, D.C. Roberts, M. Tignor, E.S. Poloczanska, K. Mintenbeck, A.
Alegría, M. Craig, S. Langsdorf, S. Löschke, V. Möller, A. Okem, B. Rama (eds.)]. Cambridge University
Press, Cambridge, UK and New York, NY, USA, pp. 1817–1927, doi:10.1017/9781009325844.015
(312
) Matei, N.A., García-León, D., Dosio, A., Batista e Silva, F., Ribeiro Barranco, R., Císcar Martínez, J.C.,
Regional impact of climate change on European tourism demand, Publications Office of the European
Union, Luxembourg, 2023, doi:10.2760/899611, JRC131508
84
2.3.5 Impact of Climate Change on the Land system
Agriculture and forestry sectors are highly exposed to climate change but also crucial for
providing essential services. Decreasing the negative impacts of agriculture, forestry and
fisheries on the environment, and enhancing sustainable production and management of
natural resources that is resilient to climate change has become a priority across European
policies, including the Common Agricultural Policy (CAP) (European Commission 2021;
Alliance 2018), and the European Green Deal (313
).
The future development of the land sector is afflicted with large uncertainties. Future
conditions will be affected by climate change and natural disturbances. Climate change
impacts agriculture and forestry sectors, predominantly negatively (e.g., from lower rainfall,
increasing variability, extreme heat and pests) but also with some positive impacts (e.g. from
CO2 fertilisation, extended growing seasons and new crops in some latitudes), which
however, do not counterbalance the negative impacts. Extreme events affect production of
biomass and food both directly and indirectly, as well as negatively impact the potential to
mitigate climate change.
Effects of climate change on agriculture and forestry have been studied extensively although
models that have still severe limitations, as many aspects are not included. Yet an overall
picture emerges. European agriculture is already affected by climate change, including by
water stress and scarcity, heat, dry conditions, and extreme weather. Increasing global
warming will increase the risk of crop failure and decreased pasture quality, as well as making
production increasingly unpredictable. The effects differ strongly depending on the types of
crops or forests and depending on the region. Southern, Western and Central Europe are
projected to be most negatively affected. Agricultural zones are projected to shift, with overall
losses in maize and wheat yields, which are not compensated by regional gains in wheat.
Grassland biomass production is projected to decline, and a reduction in pollination is also
foreseen (314
). Climatic drivers interact with non-climatic ones, including unsustainable
practices, exceserbating the impacts on ecosystems and biodiversity. The use of chemicals in
agriculture, for example, importantly contributes to the reduction in pollination.
With climate change, disturbances in forests are increasing in frequency. European forests are
exposed in particular to wind disturbances, wildfires, and insect and fungus infestations. This
negatively impacts forest functions, including carbon sequestration and provision of wood
materials. The impacts of climate change on forests vary regionally and locally. Climate
change increases the frequency and magnitude of wildfires. In contrast to landscape fires,
which are critical to the healthy functioning of many ecosystems, wildfires are linked to
extreme fire weather and burn out of control, harming human and natural systems. According
(313
) Siddi, Marco. 2020. “The European Green Deal: Assessing Its Current State and Future Implementation,”
14.
(314
) Bednar-Friedl, B., R. Biesbroek, D.N. Schmidt, P. Alexander, K.Y. Børsheim, J. Carnicer, E.
Georgopoulou, M. Haasnoot, G. Le Cozannet, P. Lionello, O. Lipka, C. Möllmann, V. Muccione, T.
Mustonen, D. Piepenburg, and L.Whitmarsh, 2022: Europe. In: Climate Change 2022: Impacts, Adaptation
and Vulnerability. Contribution of Working Group II to the Sixth Assessment Report of the
Intergovernmental Panel on Climate Change [H.-O. Pörtner, D.C. Roberts, M. Tignor, E.S. Poloczanska, K.
Mintenbeck, A. Alegría, M. Craig, S. Langsdorf, S. Löschke, V. Möller, A. Okem, B. Rama (eds.)].
Cambridge University Press, Cambridge, UK and New York, NY, USA, pp. 1817–1927,
doi:10.1017/9781009325844.015.
85
to the IPCC (315
) hot weather conditions that provoke wildfires, increased throughout Europe
in the past decades and are projected to further increase and expand with increasing global
warming levels, particularly affecting Southern, Western and Central Europe.
Wildfires pose risk to people and ecosystems and result from complex interactions between
changing climate conditions such as increased drought, heat, and decreased humidity, and
human factors such as demographic trends, land-use, and land management practices. While
certain risks such as man-made ignition of wildfires (the main source of wildfires) can be
reduced with appropriate management, including ecosystem restoration, the risk posed by
wildfires cannot be entirely eliminated. Wildfires affect the global carbon cycle by releasing
CO2 into the atmosphere, further exacerbating global warming. They can cause loss of lives
and livelihoods, impact health, devastate ecosystems and degrade watersheds. The impacts of
wildfires can be long-lasting, including in biodiversity hotspots, which might never fully
recover. Moreover, frequent fires can eliminate woody plant species which are replaced with
herbaceous and often annual species, or invasives weeds, change soil properties and increases
soil erosion (316
). Like in the case of pollinators decline, unsustainable forestry practices affect
negatively the resilience of forests ecosystems. Scientific literature shows that more
biodiverse forests more resilient, multifunctional, productive, deliver more ecosystem services
and even capture more carbon (317
) (318
) (319
) (320
) (321
) (322
).
In addition to agriculture and forests, climate change is already impacting other ecosystems in
Europe and, interacting with non-climatic pressures such as intensive land use, and land use
change, it further reduces their resilience. Driven by global warming, the boundaries of
today’s biogeographical regions have started to shift. Modelling studies in the field suggest
that terrestrial ecosystems on up to half of Europe’s land area will experience major climate-
change shifts during this century, including many of today’s protected areas (323
) (324
). Many
(315
) IPCC (2022) AR6 WGII Climate Change 2022: Impacts, Adaptation and Vulnerability, pp. 1817–1927.
(316
) United Nations Environment Programme (2022). Spreading like Wildfire – The Rising Threat of
Extraordinary Landscape Fires. A UNEP Rapid Response Assessment. Nairobi
(317
)Lewis, S.L., Wheeler, Ch.E.; Mitchard, E.T.A. and Kock, A. (2019) “Restoring natural forests is the best
way to remove atmospheric carbon, in Nature, 68, 25-28, https://doi.org/10.1038/d41586-019-01026-8
(318)Van der Plas, F., Manning, P., Allan, E. et al. (2016) “Jack-of-all-trades effects drive biodiversity–
ecosystem multifunctionality relationships in European forests”, in Nature Communicationn 7, 11109.
https://doi.org/10.1038/ncomms11109
(319
)Peura, M., Burgas, D., Eyvindson, K., Repo, A. & Mönkkönen, M. (2018). Continuous cover forestry is a
cost efficient tool to increase multifunctionality of boreal production forests in Fennoscandia. Biological
Conservation 217; 104-112; https://www.sciencedirect.com/science/article/pii/S0006320717308170
(320
)Liang, J. et al. (2016) “Positive biodiversity-productivity relationship predominant in global forests”, in
Science, Vol 354, Issue 6309, doi: 10.1126/science.aaf8957
(321
)Pukkala, T. 2016. Which type of forest management provides most ecosystem services? Forest Ecosystems
3:9; https://forestecosyst.springeropen.com/track/pdf/10.1186/s40663-016-0068-5
(322
)Mori, A.S., Dee, L.E., Gonzalez, A. et al. Biodiversity–productivity relationships are key to nature-based
climate solutions. Nat. Clim. Chang. 11, 543–550 (2021). DOI: 10.1038/s41558-021-01062-1
(323
)Samuel Hoffmann, Severin D. H. Irl & Carl Beierkuhnlein (2019) Predicted climate shifts within terrestrial
protected areas worldwide. Nature Communications vol 10 N° 4787
(324
)Hickler et al. (2012) Projecting the future distribution of European potential natural vegetation zones with a
generalized, tree species-based dynamic vegetation model. In: Global Ecology and Biogeography, 21, 50–
63.
86
terrestrial species may not be able to keep up with the speed of northwards and uphill range
shifts, especially when suitable habitats are fragmented (no migration corridors), or for habitat
specialists and species with low mobility and reproduction rates. In fact, even though we are
only at the beginning of a period of rapid global warming, researchers are already
demonstrating its negative impacts on Europe’s nature and biodiversity, from the landscape
level down to the genetic diversity of individual species (325
). Relevant studies in the field also
indicate that the direct effects of changing climate conditions on nature will likely be
exacerbated indirectly by human land use change in response to global warming such as
further agricultural and forestry intensification (to compensate for projected productivity
losses or the expected greater virulence of pests) and growing competition for land and water
resources (326
). Together, all these effects risk exacerbating the rate of local and regional
habitat loss and species extinctions world-wide and also in Europe.
2.3.5.1 Forests and other ecosystems
2.3.5.1.1 Forests
Forests are highly dependent on and determined by the prevailing climatic conditions. It goes
beyond the climatic requirements and tolerances of individual tree species, as biodiverse
forests have developed as communities of species interdependent between them, with their
soils and hydrological conditions. Climatic zones are often identified by dominant tree
species of typical forest types, and the climatic characteristics of these zonal forest types tend
to be very narrow compared to the shifts in local climate due to climate change, with an
increasing share of otherwise natural forest becoming maladapted already.
Forest management in Europe has a long history of planting species outside their natural
ranges, most often conifers like Norway spruce, and usually in monoculture plantation. This
has been done mainly for commercial reasons, but also for ease of management or the rapid
re-establishment of vegetation in degraded/abandoned areas, often on soils heavily damaged
by agriculture, such as grazing. In all such cases short-term growth and/or success of
reestablishment took precedent over long-term site suitability and ecological stability. Today,
74% of EU forest area consists of even-aged stands, and one third of the forests comprise of
only one tree species (327)
. Whilst forest stands with these characteristics are more vulnerable
to stress and disturbances, forest-based industries and many forest managers preferred them
over more site-adapted and resilient mixed stands, for economic reasons: by standardizing
trees, they reduce management and harvesting costs and produce economies of scale, but at
the cost of more vulnerability and biodiversity and soil quality loss. With increasing impacts
of climate change, these land use and forest management choices start going awry. Rapidly
changing climatic conditions are having near-immediate effects (less than 20-40 years) with
abrupt shifts in tree abundances and forest composition (328)
. During the last few years, across
(325
)Exposito-Alonso, M., Exposito-Alonso, M., Gómez Rodríguez, R. et al. Natural selection on the
Arabidopsis thaliana genome in present and future climates. Nature 573, 126–129 (2019)
doi:10.1038/s41586-019-1520-9
(326
)See notably the IPPC special report on climate change and land and also the IPBES global assessment.
(327
) FISE - Forest Information System for Europe (2023) Forest biodiversity
(328
) J.W. Williams and K.D. Burke (2019) Past abrupt changes in climate and terrestrial ecosystems. In: T.E.
Lovejoy and L. Hannah (Eds.) Biodiversity and Climate Change. Yale University Press, New Haven &
London.
87
Europe, clear signals indicate that tree health is deteriorating (329) (330)
, forest zones and tree
ranges shift, and forested landscapes are beginning to transform.
2.3.5.1.1.1 Assessment of present and past impacts on forests
Analysis of both satellite retrievals and surface inventories of disturbance events are
confirming the increasing frequency and increasing overall area affected by the various types
of natural disturbances, with a relevant rise of wind disturbances (331)
, wildfires and bark-
beetle infestations, the latter particularly in central-European spruce forests (332)
. The JRC
PESETA IV study (333)
investigated the vulnerability of European forests to natural
disturbances and found that due to climate-driven disturbances, key forest functions, including
carbon sequestration and provision of wood materials could be seriously affected. In the
2000-2017 period, windstorms caused the largest biomass loss in both relative and absolute
terms (~38%, ~17 t ha-1), followed by fires (~24%, ~12.5 t ha-1) and insect outbreaks (~21%,
~9 t ha-1), with Northern and Mediterranean regions disproportionately affected. The
vulnerability of forests to natural disturbances depends more on a forest’s structural properties
than on climate and landscape features, however, changes in temperature and precipitation
patterns in the past decades increased the vulnerability of European forests to natural
disturbances in general and particularly to inset outbreaks.
Some of the notable climate-related disturbances in the past years include:
• The unprecedented droughts experienced since 2018 have triggered significant tree
dieback in many parts of Europe. For instance, satellite images of Germany show a
canopy cover loss of 501,000 ha between 2018-2021 (corresponding to 4.9% of
the total forest area) following the 2018-2019 drought (334
).
• Weakened by the droughts, Norway spruce stands crumbled under unprecedented
bark beetle attacks in Northern and Central Europe, with the Czech Republic
becoming Europe’s epicentre of these outbreaks. In 2017–2019, over 5% of the
Czech growing stock of Norway spruce was damaged each year, causing the total
depletion of spruce in some regions. The 2018-2020 drought years lead to the
largest documented outbreak of bark beetles in Sweden, which killed 17 million
m3 of spruce trees in the southern part of the country.
(329
) ICP Forests Brief No 5. http://icp-forests.net/page/icp-forests-briefs
(330
) Institut national de l’information géographique et forestière (IGN): Résultats 2022 de l’Inventaire forestier
national : une forêt française confrontée aux dérèglements climatiques. https://www.ign.fr/espace-
presse/resultats-2022-de-linventaire-forestier-national-une-foret-francaise-confrontee-aux-dereglements.
Accessed on 25/07/2023.
(331
) Senf, C. and Seidl, R.: Storm and fire disturbances in Europe: Distribution and trends, Glob. Chang. Biol.,
(November 2020), 1–15, doi:10.1111/gcb.15679, 2021.
(332
) Sebald, J., Senf, C. and Seidl, R.: Human or natural? Landscape context improves the attribution of forest
disturbances mapped from Landsat in Central Europe, Remote Sens. Environ., 262(May), 112502,
doi:10.1016/j.rse.2021.112502, 2021.
(333
) Forzieri G., Girardello M., Ceccherini G., Mauri A., Spinoni J., Beck P., Feyen L. and Cescatti A.
Vulnerability of European forests to natural disturbances, EUR 29992 EN, Publications Office of the
European Union, Luxembourg, 2020, ISBN 978-92-76-13884-6, doi:10.2760/736558, JRC118512
(334
) Thonfeld et al. 2022. A First Assessment of Canopy Cover Loss in Germany’s Forests after the 2018–2020
Drought Years. MDPI AG in Remote Sensing. doi.org/10.3390/rs14030562
88
• Some 40% of the fires registered in 2022, the hottest summer and the second worst
wildfire season on record in Europe, affected central and northern European
countries. Fire danger for Europe as a whole was higher for most of that year than
the 1991–2020 average (Figure 18) (335
). Total wildfire emissions from the EU
plus the UK from 1 June to 31 August 2022 were estimated at 6.4 Mton of carbon,
the highest level for these months since the summer of 2007 (336
).
Figure 18: Wildfire carbon emissions from EU
Note: Estimated total monthly wildfire carbon emissions from European Union countries (black bars) compared to the
average for the 2003–2019 reference period (grey bars).
Source: CAMS GFASv1.2 wildfire data record. Credit: CAMS/ECMWF
Reported data of the 34 member countries of the ‘Forest Europe’ process show a significant
increase in forest disturbances between 1950 and 2019, causing on an average of 43.8 million
m3 of disturbed timber volume per year. In the last 20 years, disturbances on average
accounted for 16% of the mean annual harvest in Europe. Whereas wind was statistically the
most important damaging agent, accounting for almost half of the damage during the study
period, bark beetle outbreaks – driven by warming and droughts - doubled their share in the
last 20 years (Figure 19) (337
).
(335
)Copernicus (2022) European State of the Climate 2022 https://climate.copernicus.eu/esotc/2022/wildfires
(336
)Copernicus (2022) CAMS: monitoring extreme wildfire emissions in 2022
https://atmosphere.copernicus.eu/cams-monitoring-extreme-wildfire-emissions-2022
(337
) Patacca, M. et al. (2023). Significant increase in natural disturbance impacts on European forests since
1950. Global Change Biology, 29, 1359– 1376. https://doi.org/10.1111/gcb.16531. See also McDowell, N.
G., Allen, C. D., Anderson-Teixeira, K., Aukema, B. H., Bond-Lamberty, B., Chini, L., ... & Xu, C. (2020).
Pervasive shifts in forest dynamics in a changing world. Science, 368(6494), eaaz9463.
89
Climate change must be expected to continue to expose Europe's forests to growing risks from
wildfires, outbreaks of biotic agents, wind throws, or a combination of these three. More than
60% of the biomass in European forests is exposed to these risks - over 33 billion tonnes in
total - putting the future role of forests for wood provision or carbon sequestration under
growing uncertainty (338
).
Figure 19: Reported forest damage in Europe by disturbance until 2019
Source: Patacca et al. (2023). Graph: EEA
2.3.5.1.1.2 Projections of future climate change impacts on forests
The effects of global warming on forest growth and productivity in today’s boreal zone may,
on balance, be positive, as tree growth in these regions should benefit from increasing
temperatures, longer growth seasons, and higher atmospheric CO2 levels (339)
(340
). At the
same time, even modest climate change may lead to major transitions in boreal forests (341
),
and the changing climate also incorporates great uncertainties with regard to the frequency
and magnitude of natural disturbances. These disturbances may become a major driver of
(338
) Forzieri G. et al (2020) Vulnerability of European forests to natural disturbances. JRC PESETA IV project –
Task 12. Luxembourg: Publications Office of the European Union / Forzieri, G., Girardello, M., Ceccherini,
G. et al. (2021) Emergent vulnerability to climate-driven disturbances in European forests. Nat Commun 12,
1081.
(339
) Lindner, M., Fitzgerald, J. B., Zimmermann, N. E., Reyer, C., Delzon, S., van Der Maaten, E., ... &
Hanewinkel, M. (2014). Climate change and European forests: what do we know, what are the uncertainties,
and what are the implications for forest management?. Journal of environmental management, 146, 69-83.
(340
) Forzieri, G., Dakos, V., McDowell, N.G., Ramdane, A. and Cescatti, A. (2022) Emerging signals of
declining forest resilience under climate change. Nature, 608, 534–539. Available from:
https://doi.org/10.1038/s41586-022-04959-9
(341
) Reich, P.B., Bermudez, R., Montgomery, R.A. et al. Even modest climate change may lead to major
transitions in boreal forests. Nature 608, 540–545 (2022). https://doi.org/10.1038/s41586-022-05076-3
90
forest dynamics and mediate changes in productivity (342
). Artificial spruce plantations are
suffering under unprecedented droughts and bark beetle infestations. But also beech - a
naturally dominant tree species across large regions of Europe’s forests - may experience a
progressive decrease of growth ranging from −20% to more than −50% by 2090, depending
on the region and climate change scenario (343
). Conversely, in Mediterranean forests where
water is the limiting factor, the future drier conditions in the region are expected to deteriorate
the productivity capacity and even existence of forests and increase tree mortality and wildfire
occurrence.
Importantly, whilst climate change impacts on forests do vary regionally and locally,
depending on a variety of factors, any projection is difficult and fraught with significant
uncertainty. In addition to the complex interplay of factors in regional exposure and
vulnerability to climate impacts, much depends also on the general evolution of climate
change itself, and the speed and scale at which its hazards come into force. The IPCC
emphasized that for any given level of warming, many climate-related risks are higher than
previously estimated (344
). In other words, current projections about the size of the climate
change impacts on nature and people could be underestimated and worse case scenarios
cannot be excluded. For example, a recent global assessment (345
) shows that statistically
implausible heatwaves have occurred in 31% of the world’s regions between 1959 and 2021,
with no apparent spatial or temporal pattern, and that therefore ‘impossible extremes’ could
occur anywhere and at any time.
Using the GLOBIOM model (see Annex 6, section 1.2 for description) to project natural
disturbances in Europe, wind is the most important disturbance agent, in terms of the total
damage, especially in Central and Northern Europe. Wind is predicted to still account for
approximately 50% of the total damage by the end of the century even though its increase in
disturbance activity due to climate change is less pronounced than other disturbances. In
Mediterranean regions, wildfires are the dominant agent and the projected increase in
temperature and reduction in precipitation in the region are expected to increase their
frequency and severity (346
).
Figure 20 shows the distribution of wind damage expected in the EU. The areas most prone to
damage are those located in the mountain forests of Central Europe, especially in France,
Germany, Austria, Czechia and Slovakia, while wind damages for the Mediterranean region
would be limited. Apart from mountain forests in Central Europe, the expected vulnerability
to wind damage is high in Sweden. Countries in Eastern Europe would display intermediate
damage caused by windstorms.
(342
) Reyer, C., Lasch-Born, P., Suckow, F., Gutsch, M., Murawski, A., & Pilz, T. (2014). Projections of regional
changes in forest net primary productivity for different tree species in Europe driven by climate change and
carbon dioxide. Annals of forest science, 71(2), 211-225.
(343
) Martinez del Castillo, E., Zang, C.S., Buras, A. et al. Climate-change-driven growth decline of European
beech forests. Commun Biol 5, 163 (2022). https://doi.org/10.1038/s42003-022-03107-3
(344
) IPCC (2022) AR6 WGII Climate Change 2022: Impacts, Adaptation and Vulnerability
(345
) Thompson, V., Mitchell, D., Hegerl, G.C. et al. The most at-risk regions in the world for high-impact
heatwaves. Nat Commun 14, 2152 (2023). https://doi.org/10.1038/s41467-023-37554-1
(346
)See as well IPCC (2022) AR6 WGII Climate Change 2022: Impacts, Adaptation and Vulnerability. In the
long term, lack of precipitation and heat will also reduce tree growth and possibly even make forest
regrowth impossible in some parts of the Mediterranean region.
91
Figure 20: Distribution of wind damage in the EU
Note: The figure shows the yearly expected damage in m³/ha/year, caused by windstorms in the EU forest area, as an
average over three periods (2030-2040, 2060-2070 and 2090-2100).
Source: GLOBIOM.
Insect damage is expected to occur mostly in temperate forests of Central Europe, where
European spruce bark beetle is the most important biotic disturbance agent. Insect damage is
expected to cause the second largest impact of disturbances, accounting for about 25% to 30%
of the total damage at the end of the century (347
). Similar to wind damage, the vulnerability to
insects is according to GLOBIOM modelling highest in Germany, Poland, Austria, Czechia
and Slovakia as shown in Figure 21. No major differences across forest types in relation to the
predicted insect damage were found in the models, however scientific literature traditionally
alerts about the lower resilience to pests and plagues of monoculture plantations (348
).
(347
)It should be noted that modelling damage by biotic agents for the medium and long term bears considerable
uncertainty due to many different drivers, complex interdependencies and non-linear relations.
(348
) Liu, C. L. C., Kuchma, O., & Krutovsky, K. V. ‘Mixed-species versus monocultures in plantation forestry:
Development, benefits, ecosystem services and perspectives for the future’, Global Ecology and
conservation, 15, 2018.
92
Figure 21: Distribution of insect damage in the EU
Note: The figure shows the yearly expected damage in m³/ha/year, caused by insect outbreaks in the EU forest
area, as an average over three periods (2030-2040, 2060-2070 and 2090-2100).
Source: GLOBIOM
The JRC PESETA IV study (349
) assessed the wildfire danger and vulnerability for Europe
and found that the number of days with high-to-extreme wildfire danger is expected to
significantly increase in the future through climate change, particularly in Mediterranean
Europe (Figure 22) due to drier and warmer conditions.
Figure 22: High-to-extreme fire danger by different levels of global warming
Note: Additional days per year with high-to-extreme fire danger, with reference to the situation in the control period
1981-2010, for different levels of global warming compare dot pre-industrial times.
Source: JRC PESETA IV (350
)
(349
)Costa, H., de Rigo, D., Libertà, G., Houston Durrant, T., San-Miguel-Ayanz, J., 2020. European wildfire
danger and vulnerability in a changing climate: towards integrating risk dimensions. Publications Office of
the European Union, Luxembourg, 59 pp. ISBN:978-92-76-16898-0 , https://doi.org/10.2760/46951
(350
)Costa, H., et al. 2020. European wildfire danger and vulnerability in a changing climate: towards integrating
risk dimensions. Publications Office of the European Union, Luxembourg, 59 pp
93
GLOBIOM modelling projects wildfires to account for roughly 15-20% of the total damage at
the end of the century and to occur mostly in the Mediterranean region with hotspots in
Portugal, Spain Italy and Greece as shown in Figure 23. Other projections (351
)(352
) estimated
similar results for regional hotspots of natural disturbances but showed sharper increase in
damaged volumes.
Figure 23: Distribution of wildfire damage in EU
Note: The figure shows the yearly expected damage in m³/ha/year, caused by wildfires in the EU forest area, as an
average over three periods (2030-2040, 2060-2070 and 2090-2100).
Source: GLOBIOM
In general, hotspots of damage to forests were observed in Scandinavia and mountain forests
of Central Europe. A driving factor for the disturbances in these areas might be related to the
large share of conifer forests. Spruce forests, which is the dominant species of montane
forests in central Europe, are particularly vulnerable to wind damage, due to the shallow root
system of the species.
Adaptation measures may increase the resilience of the forests and thereby the carbon sinks
and stocks, making it less vulnerable to natural disturbances and climate change. These
measures can play a key role in mitigating wind damage in European forests and aim at
increasing forest resilience towards environmental pressures on forest ecosystems.
Particularly, future species selection must take into consideration the risks of wind damage
and promote groups with higher stability (353
). Similarly, the selection of species plays an
important role in the resistance to fire occurrence (354
). Importantly, ambitious adaptation
measures for forests may prevent more dramatic sink losses in the future but require decades
(351
) Gregor, K., Knoke, T., Krause, A., Reyer, C. P., Lindeskog, M., Papastefanou, P., ... & Rammig, A. (2022).
Trade‐offs for climate‐smart forestry in Europe under uncertain future climate. Earth's Future,
e2022EF002796.
(352
) Seidl, R., Schelhaas, M. J., Rammer, W., & Verkerk, P. J. (2014). Increasing forest disturbances in Europe
and their impact on carbon storage. Nature climate change, 4(9), 806-810.
(353
) Albrich, K., Rammer, W., Thom, D., & Seidl, R. (2018). Trade‐offs between temporal stability and level of
forest ecosystem services provisioning under climate change. Ecological Applications, 28(7), 1884-1896.
(354
) Adámek, M., Jankovská, Z., Hadincová, V., Kula, E., & Wild, J. (2018). Drivers of forest fire occurrence in
the cultural landscape of Central Europe. Landscape Ecology, 33(11), 2031-2045.
94
of implementation. The rate of deliberate forest renewal and transformation is slow, and hence
most of today’s forest ecosystems, with their specific structural and functional traits, will still
be in place in 2040, exposed throughout the years to the rapidly changing climatic drivers.
Hence their effect between 2030 and 2040 will be limited. Adaptation to climate change may
therefore play a minor role for the achievement of the 2040 climate targets, but urgent action
is nevertheless needed.
Adaptation might also provide a challenge for forest management. Traditional forestry
systems and methods provide only limited direction for future forest management under
changing conditions. Climate change may result in forest types that are unfamiliar and
unprecedented, hence information on historical tree species compositions may often be of
little value for adaptive forest management. This lack of predictability calls for adaptive,
diversified and resilience-enhancing forest management systems with a preference for ‘no
regret’ practices which work under any climate scenario.
2.3.5.2 Agriculture
2.3.5.2.1 Water management
Water scarcity exacerbated by climate change (see section 2.3.2) is threatening agriculture in
particular, as 24% of Europe’s water abstraction is due to agriculture (355
). Analysis of
impacts of droughts on agriculture show reduced productivity on annual and perennial crops,
reduced availability of irrigation water and impacts on livestock farming. In turn, the
extraction of water for irrigation amplifies pressure on water resources. Hence the high
consumption of water contributes to decreasing groundwater levels and severe lack of water
availability in some European regions.
The share of irrigated agricultural land varies among European regions, with 60% of all
irrigated areas being located in Southern Europe, where 85% of all irrigation abstraction takes
place (356
). Southern Europe is also projected to experience less precipitation in the future and
more frequent and severe droughts, reducing the availability of water for irrigation. At the
same time, increased evapotranspiration rates due to increasing temperatures will further
increase crop water requirements. With increasing global warming irrigation water demand is
projected to increase in most irrigated regions in Europe, putting additional pressure on water
resources (357
).
While irrigation may look like a suitable adaptation option to avoid production losses, large-
scale or ground-water reliant irrigation can be a form of maladaptation, as it reduces
groundwater availability, reduces long-term potential for hydropower, and can increase
salinization, cost of water and reduce availability of water for aquaculture. It can also increase
expenses for farmers, affecting small-scale farmers the most (358
) (359
).
(355
) European Court of Auditors, ‘Sustainable water use in agriculture’, Special Report, 20, 2021.
(356
) European Environment Agency, 2021. Water resources across Europe — confronting water stress: an
updated assessment.
(357
) European Environment Agency, 2019. Climate change adaptation in the agriculture sector in Europe.
(358
) Bezner Kerr, R., T. Hasegawa, R. Lasco, I. Bhatt, D. Deryng, A. Farrell, H. Gurney-Smith, H. Ju, S. Lluch-
Cota, F. Meza, G. Nelson, H. Neufeldt, and P. Thornton, 2022: Food, Fibre, and Other Ecosystem Products.
In: Climate Change 2022: Impacts, Adaptation and Vulnerability. Contribution of Working Group II to the
95
2.3.5.2.2 Impacts on crops
Climate change is already affecting agriculture through warming and precipitation changes,
which has resulted in the northward movement of agro-climatic zones in Europe, earlier onset
of the growing season, and the changes in crop yields, forest productivity and livestock. While
for many years in Europe crop yields have been increasing, several studies suggest an
important role of climate change in the observed flattening of yield levels in Western Europe.
The combination of heat, drought and excessive rain have caused increased costs and
economic losses in annual and permanent crops (360
). Weather extremes due to compound
effect of cold winters, excessive autumn and spring precipitation and summer drought have
already caused production losses in the past years.
Climate change impacts agricultural crop productivity in various ways. The temperature
requirements of the crop, lower rainfall, increasing variability, the length of the growing
season and agronomic limitations such as whether a crop is cultivated under rainfed or
irrigated systems play an important role. An increase in CO2 concentration in the atmosphere
has an important impact on the photosynthesis of plants, which on average leads to an
increase in biomass productivity for crops, known as the CO2 fertilisation effect, which can
for some crops (e.g., wheat and barley) counterbalance some of the negative impacts of
drought and warming (361
).
The JRC PESETA IV study (362
) assessed the impact of climate change on crop yields in
Europe, assuming no enhanced yield from CO2 fertilization, and found that grain maize is
projected to be most affected with substantial yield reductions for most of the producing
countries in Europe. At 1.5o
C global temperature increase, maize yield would decrease by 3%
in Northern Europe and 7% in Southern Europe, and under 2.0C by 5% in Northern Europe
and 11% in Southern Europe (see Figure 24). Few Northern European countries could
experience low gains in yield of grain maize. Overall yield reductions are lower at lower
levels of warming. As grain maize is irrigated in most of Europe, these projections of impacts
Sixth Assessment Report of the Intergovernmental Panel on Climate Change [H.-O. Pörtner, D.C. Roberts,
M. Tignor, E.S. Poloczanska, K. Mintenbeck, A. Alegría, M. Craig, S. Langsdorf, S. Löschke, V. Möller, A.
Okem, B. Rama (eds.)]. Cambridge University Press, Cambridge, UK and New York, NY, USA, pp. 713–
906, doi:10.1017/9781009325844.007
(359
) Some municipalities in the EU have already increased their prices for water use from agriculture to due
water scarcity. Though many Member States apply different exemptions from the requirement for water
abstraction and have water pricing levels for agriculture that do not take recovery costs for water services
into account.
(360
) Stahl et al. 2016
(361
) Bednar-Friedl, B., R. Biesbroek, D.N. Schmidt, P. Alexander, K.Y. Børsheim, J. Carnicer, E.
Georgopoulou, M. Haasnoot, G. Le Cozannet, P. Lionello, O. Lipka, C. Möllmann, V. Muccione, T.
Mustonen, D. Piepenburg, and L.Whitmarsh, 2022: Europe. In: Climate Change 2022: Impacts, Adaptation
and Vulnerability. Contribution of Working Group II to the Sixth Assessment Report of the
Intergovernmental Panel on Climate Change [H.-O. Pörtner, D.C. Roberts, M. Tignor, E.S. Poloczanska, K.
Mintenbeck, A. Alegría, M. Craig, S. Langsdorf, S. Löschke, V. Möller, A. Okem, B. Rama (eds.)].
Cambridge University Press, Cambridge, UK and New York, NY, USA, pp. 1817–1927,
doi:10.1017/9781009325844.015.
(362
)Hristov, J., Toreti, A., Pérez Domínguez, I., Dentener, F., Fellmann, T., Elleby C., Ceglar, A., Fumagalli,
D., Niemeyer, S., Cerrani, I., Panarello, L., Bratu, M., Analysis of climate change impacts on EU agriculture
by 2050, EUR 30078 EN, Publications Office of the European Union, Luxembourg, 2020, ISBN 978-92-76-
10617-3, doi:10.2760/121115, JRC119632.
96
of climate change on yields assume sufficient irrigation water being available. However,
under rain-fed conditions (see Figure 25), European maize production is projected to collapse
around 2050, with yield losses higher than 23% in all EU countries and exceeding 80% in
some, rendering maize production unviable in regions with unsustainable water use and
projected decrease in precipitation.
97
Figure 24: Changes in grain maize yield from Climate Change impacts with irrigation
Note: Graph shows impacts under RCP8.5 for 1.5oC (left panel) and 2oC (right panel) under irrigated conditions (363
).
Ensemble mean changes of grain maize yield (% relative to the historical period) projected under the RCP8.5 for
1.5o
C (left panel) and 2o
C (right panel) warming conditions, and assuming irrigated conditions. Hatching denotes
areas with low models’ agreement (i.e. less than 66% of models agree in the sign of estimated changes).
Source: JRC PESETA IV
Figure 25: Changes in grain maize yield from Climate Change impacts without irrigation
Note: Impacts are assuming rainfed conditions without irrigation. Ensemble mean changes of grain maize yield (%
relative to the historical period) projected under the RCP8.5 for 1.5o
C (left panel) and 2o
C (right panel) warming
conditions, assuming that no irrigation will be possible (i.e. rain-fed). Hatching denotes areas with low models’
agreement (i.e. less than 66% of models agree in the sign of estimated changes)
Source: JRC PESETA IV
Regarding yield of wheat in Europe, JRC PESETA IV found large uncertainties in the impact
of climate change, mainly deriving from variable projections of precipitation, as wheat is
mostly rain-fed. Projections under RCP8.5 show increases of 5-16% in yield for Northern
Europe and losses of up to -49% in Southern Europe by 2050. Losses are slightly lower under
1.5o
C compared to 2o
C, most visible in the Iberian Peninsula and Italy (Figure 26). It is
(363
) In the cited PESETA IV report, the main results are obtained from the RCMs projections analysed for a 20-
year period when the mean global temperature increases reach 1.5 °C and 2 °C. In the ten RCP8.5 model
realisations the central year of these two periods ranges from 2018 to 2029 for the 1.5 °C warming
conditions, and from 2030 to 2044 for the 2 °C global warming conditions.
98
important to note that the impacts of extreme weather events including heat stress and
droughts are likely underestimated in these projections.
Figure 26: Changes in wheat yield from climate change
Note: Ensemble mean changes of wheat yield (% relative to the historical period) projected under the RCP8.5 for
1.5o
C (left panel) and 2o
C (right panel) warming conditions under rain-fed (no irrigation) conditions. Hatching denotes
areas with low models’ agreement (i.e. less than 66% of models agree in the sign of estimated changes).
Source: JRC PESETA IV
2.3.5.2.3 Regional differences
There are growing regional differences in agricultural production in Europe due to climate
change, and they are projected to further increase. With increasing warming, growing regions
for certain crops will shift or expand, and warming is projected to increase yields of some
crops. Southern Europe is projected to be most negatively affected, and reduced irrigation
water availability, heat and drought stress could lead to reduced profitability and
abandonment of farmland (364
).
The JRC PESETA IV study (365
) finds climate change could trigger yield losses and shocks to
European agriculture markets, with Southern Europe being the most negatively affected. The
increasing divergence of production between Southern (declining) and Northern (potentially
increasing) could impact the mutual reliance and trade patterns across EU countries, without
appropriate adaptation strategies. Overall, at 1.5o
C global warming, wheat yields could
increase by 5% in Northern Europe and decrease by 7% in Southern Europe. At 2o
C global
warming, yields of maize in Southern Europe could decline by more than 10%. With a
reduction in available irrigation water, crop losses could be much larger, and with no
(364
) Bednar-Friedl, B., R. Biesbroek, D.N. Schmidt, P. Alexander, K.Y. Børsheim, J. Carnicer, E.
Georgopoulou, M. Haasnoot, G. Le Cozannet, P. Lionello, O. Lipka, C. Möllmann, V. Muccione, T.
Mustonen, D. Piepenburg, and L.Whitmarsh, 2022: Europe. In: Climate Change 2022: Impacts, Adaptation
and Vulnerability. Contribution of Working Group II to the Sixth Assessment Report of the
Intergovernmental Panel on Climate Change [H.-O. Pörtner, D.C. Roberts, M. Tignor, E.S. Poloczanska, K.
Mintenbeck, A. Alegría, M. Craig, S. Langsdorf, S. Löschke, V. Möller, A. Okem, B. Rama (eds.)].
Cambridge University Press, Cambridge, UK and New York, NY, USA, pp. 1817–1927,
doi:10.1017/9781009325844.015.
(365
) Feyen L., Ciscar J.C., Gosling S., Ibarreta D., Soria A. (editors) (2020). Climate change impacts and
adaptation in Europe. JRC PESETA IV final report. EUR 30180EN, Publications Office of the European
Union, Luxembourg, ISBN 978-92-76-18123-1, doi:10.2760/171121, JRC119178
99
irrigation (rain-fed conditions) maize yield losses could reach 20% for all EU countries, and
up to 80% for some Southern European countries (for more detailed projections see 2.3.5.2.2).
In the GLOBIOM model, impacts of climate change were modelled for different regions in
the EU taking both negative as well as positive effects like CO2 fertilisation into account. On
average, crop yields decrease under all levels/scenarios of global warming, but this decrease is
disproportionately larger as global temperatures get higher. Under an RCP2.6 scenario,
average crop yields decrease by -2.2% in 2050, under an RCP7.0 scenario this has further
increased to -2.6%. The North of Europe is the only region experiencing an increase in
productivity because of climate change. Under RCP2.6 this is 1%, under RCP7.0 2.8%. The
other regions in Europe all experience a decrease in crop productivity, which is largest in the
Southern region (between -2.6% and -4.6% depending on the RCP). In the Central-East it
ranges between -1.4% and -1.8% and in the West, crop productivity decreases with an
increasing degree of warming, from -2.4% under RCP2.6 to -2.7% under RCP7.0. However,
these impacts of climate change on agriculture productivity for most regions can be
considered low, particularly in comparison with studies such as PESETA IV that find
significantly higher losses.
As a significant caveat to the reported results concerning the agricultural sector, the increase
in the risk of global synchronous crop failure of key staple crops will pose a risk that could
affect EU economies through food price inflation and potentially through food insecurity
domestically and globally, also impacting political stability. To illustrate, the probability of an
over 10% reduction of maize yield in top four major exporting countries (accounting for 87%
of global maize exports) may rise from zero in 2020 to 7% under 2 °C warming and 86%
under 4 °C warming (366
)
2.3.5.3 Biodiversity and other ecosystems
Climate change is already impacting land ecosystems in Europe, many of which are also
exposed to non-climatic hazards such as habitat loss and fragmentation, overexploitation,
altered hydrological regimes and pollution. Climate change mitigation can limit the likelihood
of larger climate change impacts on biodiversity and such actions can also help to increase
resilience and adaption to climate change (367
).
With increasing warming, risks for terrestrial ecosystems will continue to increase. Climate
change has resulted in local losses and range shifts of thermosensitive species including
insects, freshwater organisms, amphibians, reptiles, and birds. Amongst the most affected
(366
) Tigchelaar M. et al. 2018. Future warming increases probability of globally synchronized maize production
shocks. PNAS. 115 (26) 6644-6649. doi.org/10.1073/pnas.1718031115
(367
)Smith, P., J. Nkem, K. Calvin, D. Campbell, F. Cherubini, G. Grassi, V. Korotkov, A.L. Hoang, S. Lwasa,
P. McElwee, E. Nkonya, N. Saigusa, J.-F. Soussana, M.A. Taboada, 2019: Interlinkages Between
Desertification, Land Degradation, Food Security and Greenhouse Gas Fluxes: Synergies, Trade-offs and
Integrated Response Options. In: Climate Change and Land: an IPCC special report on climate change,
desertification, land degradation, sustainable land management, food security, and greenhouse gas fluxes in
terrestrial ecosystems [P.R. Shukla, J. Skea, E. Calvo Buendia, V. Masson-Delmotte, H.- O. Portner, D. C.
Roberts, P. Zhai, R. Slade, S. Connors, R. van Diemen, M. Ferrat, E. Haughey, S. Luz, S. Neogi, M. Pathak,
J. Petzold, J. Portugal Pereira, P. Vyas, E. Huntley, K. Kissick, M. Belkacemi, J. Malley, (eds.)].
https://doi.org/10.1017/9781009157988.008
100
groups of animals are insects, central components of many ecosystems (368
). In the last three
decades, the flying insect population in German protected areas has decreased by 76%. This
data is considered to be representative of what is happening in Europe as a whole (369
). Flying
insects include pollinators, key not only for biodiversity, but for food provision: pollinator-
dependent crops contribute to 35% of global crop production volume (370
). Progressive
subtropicalization is projected to occur in Southern Europe at 1.5℃ and in Western and
Central Europe at 3℃ global warming level. Permafrost thawing and degradation in European
Alps and Scandinavia has been observed and is projected to continue. Similar to forests,
inland wetlands and peatlands, which hold important carbon stocks, will continue to be
negatively affected by drought and warming. High latitude ecosystems are vulnerable to heat,
and loss of mass has occurred in most mountain glaciers particularly in the past two decades
(371
). The years 2022 and 2023 saw a record loss of glacier ice from European Alps, mainly
due to lack of snow, which contributed to summer drought conditions. In Switzerland,
glaciers lost around 10% of their remaining volume (372
) (373
).
The Alpine tundra occurs in high elevation zones of some of Europe’s mountain ranges, and
represents an important reservoir of freshwater resources and provides a habitat to unique
species. Most of it is located in the Pyrenees, the Alps and the Scandes. It is projected to be
greatly affected by global warming due to the tight ecological-climatic bands in the mountains
(374
). The JRC PESETA study assesses that under 3℃ of warming it would shrink by over
(368
)Harvey, J. A., Tougeron, K., Gols, R., Heinen, R., Abarca, M., Abram, P. K., Basset, Y., Berg, M., Boggs,
C., Brodeur, J., Cardoso, P., de Boer, J. G., De Snoo, G. R., Deacon, C., Dell, J. E., Desneux, N., Dillon, M.
E., Duffy, G. A., Dyer, L. A., … Chown, S. L. (2023). Scientists’ warning on climate change and insects.
Ecological Monographs, 93(1). https://doi.org/10.1002/ecm.1553
(369
)Hallmann CA, Sorg M, Jongejans E, Siepel H, Hofland N, Schwan H, et al. (2017) More than 75 percent
decline over 27 years in total flying insect biomass in protected areas. PLoS ONE 12(10): e0185809.
https://doi.org/10.1371/journal.pone.0185809
(370
)IPBES (2016): Summary for policymakers of the assessment report of the Intergovernmental Science-Policy
Platform on Biodiversity and Ecosystem Services on pollinators, pollination and food production. S.G.
Potts, et al. (eds.). Secretariat of the Intergovernmental Science-Policy Platform on Biodiversity and
Ecosystem Services, Bonn, Germany.
(371
) Bednar-Friedl, B., R. Biesbroek, D.N. Schmidt, P. Alexander, K.Y. Børsheim, J. Carnicer, E.
Georgopoulou, M. Haasnoot, G. Le Cozannet, P. Lionello, O. Lipka, C. Möllmann, V. Muccione, T.
Mustonen, D. Piepenburg, and L.Whitmarsh, 2022: Europe. In: Climate Change 2022: Impacts, Adaptation
and Vulnerability. Contribution of Working Group II to the Sixth Assessment Report of the
Intergovernmental Panel on Climate Change [H.-O. Pörtner, D.C. Roberts, M. Tignor, E.S. Poloczanska, K.
Mintenbeck, A. Alegría, M. Craig, S. Langsdorf, S. Löschke, V. Möller, A. Okem, B. Rama (eds.)].
Cambridge University Press, Cambridge, UK and New York, NY, USA, pp. 1817–1927,
doi:10.1017/9781009325844.015.
(372
)COPERNICUS, European State of the Climate 2022. European State of the Climate 2022 Summary |
Copernicus
(373
)https://wmo.int/files/provisional-state-of-global-climate-2023
(374
) Bednar-Friedl, B., R. Biesbroek, D.N. Schmidt, P. Alexander, K.Y. Børsheim, J. Carnicer, E.
Georgopoulou, M. Haasnoot, G. Le Cozannet, P. Lionello, O. Lipka, C. Möllmann, V. Muccione, T.
Mustonen, D. Piepenburg, and L.Whitmarsh, 2022: Europe. In: Climate Change 2022: Impacts, Adaptation
and Vulnerability. Contribution of Working Group II to the Sixth Assessment Report of the
Intergovernmental Panel on Climate Change [H.-O. Pörtner, D.C. Roberts, M. Tignor, E.S. Poloczanska, K.
Mintenbeck, A. Alegría, M. Craig, S. Langsdorf, S. Löschke, V. Möller, A. Okem, B. Rama (eds.)].
Cambridge University Press, Cambridge, UK and New York, NY, USA, pp. 1817–1927,
doi:10.1017/9781009325844.015.
101
75% compared to the reference period (1981-2010), with treeline moving by up to 8 meters
upwards per year. It is projected to be most affected in the Pyrenees, where it would virtually
disappear at 3℃ global warming level, while in the Scandes and Alps it would shrink by
around 87% and 75%, respectively. At 1.5℃ and 2℃ of global warming level, the overall loss
of extent would be 31-36% and 50% respectively, with Pyrenees most affected, losing 74% at
1.5℃ and above 90% at 2℃. The advance of treeline and shrinking of alpine tundra will
impact high mountain ecosystems including through changes in snowpack accumulation,
which will change mountain hydrology and affect low elevation biota. Cold-adapted species
of plants will decline, and warm-adapted species will increase. Cold mountain habitats and
their biota are projected to progressively decline, which will lead to extirpation of alpine plant
species (375
). To illustrate the massive shift of species due to climate change, Figure 27 shows
the change in forest types expected to occur in Europe until the end of the century based on a
moderate warming scenario.
Figure 27: Development of major tree species in Europe until 2100
Note: Projections are based on a moderate warming scenario A1B (IPCC 2007, AR4, WG 1)
Source: Hanewinkel et al. 2013 (376
)
Freshwater ecosystems are vulnerable to climate change and are projected to be affected by
the reduced river flow (made worse by increasing pressures on hydromorphology,
e.g. construction of new reservoirs), low oxygen, salinity incursion, eutrophication and
(375
) Barredo, J.I., Mauri, A., Caudullo, G., Impacts of climate change in European mountains — Alpine tundra
habitat loss and treeline shifts under future global warming, EUR 30084 EN, Publications Office of the
European Union, Luxembourg, 2020, ISBN 978-92-76-10717-0, doi:10.2760/653658, JRC115186.
(376
) Hanewinkel, M., Cullmann, D., Schelhaas, MJ. et al. ‘Climate change may cause severe loss in the
economic value of European forest land’ Nature Climate Change, 3, 203–207, 2013.
102
spread of invasive species. These will lead to loss of species, especially molluscs, fish and
insects. In line with the global trend, European lakes have been warming in the past decades.
Globally, the year 2022 was the warmest year on records for lakes, and the fourth warmest for
European lakes, which are warming at a rate of 0.33℃ per decade, which is faster than the
global rate of 0.23℃ per decade (377
).
Changes to the ocean, including sea warming, ocean acidification, deoxygenation and more
frequent marine heatwaves will affect both ocean ecosystems and the people relying on them
and will continue through the rest of this century (378
). Sea surface warming between 0.25℃
and 1℃ has already been observed over the past decade and is projected to continue
increasing, along with changes to salinity and pH. In 2022, sea surface temperatures across
Europe’s seas were the warmest on record. Record temperatures were observed in the
Mediterranean Sea, the Bay of Biscay, the English Channel and Irish Sea and in the
Norwegian Sea (379
). In the summer 2023 sea surface temperatures in the Mediterranean Sea
were again exceptionally high, locally exceeding 30℃, and reached more than 4℃ above
average in most of western Mediterranean (380
).
Habitat loss and northward distribution shifts of species have been observed, and marine
heatwaves have had severe impacts on marine ecosystems. Along with redistribution and
alterations in community composition, biodiversity decline has also been observed in some
sub-regions. With increasing global warming, risks to marine and coastal ecosystems will
further increase (381
).
Iin the Black Sea basin, climate change is recognised as an important pressure of the
Environment of the Black Sea (2009-2014/5). One of the consequences of temperature rise
due to climate change is the invasion of the Black Sea by Mediterranean-originated
species (382
).
Europe hosts some biodiversity hotspots, including Fenno-Scandia Alpine tundra and taiga,
European Mediterranean montane forests, Mediterranean forests, woodlands, scrub, Danube
(377
) COPERNICUS, European State of the Climate 2022. European State of the Climate 2022 Summary |
Copernicus
(378
)IPCC, 2022: Climate Change 2022: Impacts, Adaptation and Vulnerability. Contribution of Working Group
II to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change [H.-O. Pörtner, D.C.
Roberts, M. Tignor, E.S. Poloczanska, K. Mintenbeck, A. Alegría, M. Craig, S. Langsdorf, S. Löschke, V.
Möller, A. Okem, B. Rama (eds.)]. Cambridge University Press. Cambridge University Press, Cambridge,
UK and New York, NY, USA, 3056 pp., doi:10.1017/9781009325844
(379
) COPERNICUS, European State of the Climate 2022. European State of the Climate 2022 Summary |
Copernicus
(380
)Heatwaves, wildfires mark summer of extremes | World Meteorological Organization (wmo.int)
(381
)Bednar-Friedl, B., R. Biesbroek, D.N. Schmidt, P. Alexander, K.Y. Børsheim, J. Carnicer, E. Georgopoulou,
M. Haasnoot, G. Le Cozannet, P. Lionello, O. Lipka, C. Möllmann, V. Muccione, T. Mustonen, D.
Piepenburg, and L.Whitmarsh, 2022: Europe. In: Climate Change 2022: Impacts, Adaptation and
Vulnerability. Contribution of Working Group II to the Sixth Assessment Report of the Intergovernmental
Panel on Climate Change [H.-O. Pörtner, D.C. Roberts, M. Tignor, E.S. Poloczanska, K. Mintenbeck, A.
Alegría, M. Craig, S. Langsdorf, S. Löschke, V. Möller, A. Okem, B. Rama (eds.)]. Cambridge University
Press, Cambridge, UK and New York, NY, USA, pp. 1817–1927, doi:10.1017/9781009325844.015.
(382
)Oguz T. 2005. Long-Term Impacts of Anthropogenic Forcing on the Black Sea Ecosystem. Oceanography
18(2):112-121.
103
River delta, Balkan rivers and streams, Northeast Atlantic shelf marine and Mediterranean
Sea. Those are areas with exceptionally high species richness, including rare and endemic
species, where historic climatic variability was moderate. Biodiversity hotspots are projected
to be especially vulnerable to climate change due to limited geographic ranges of their
endemic species. Climate change will impact species abundance, diversity, area, physiology
and fisheries catch potential (383
).
Identifying and protecting climatic refugia, which are microhabitats that components of
biodiversity retreat to, is crucial for the survival, persistence and eventual expansion of biota
under anthropogenic climate change (384
).
3 ECONOMIC COST OF CLIMATE CHANGE
3.1 Evidence from recent events
The increase in the frequency and scale of extreme climate-related events in past decades is
well-documented, as is the causality with the global rise in temperatures. The global economic
losses and fatalities associated with such events are well documented, including by global
insurance and re-insurance companies.
Allianz reports, that the heatwave of 2023 which affected Southern Europe, the United States
and China may have cost 0.6% of GDP (385
). AON (386
) reports that direct economic losses
resulting from natural disasters amounted to US$ 313 billion in 2022 (in current prices). All
but US$ 9 billion of these costs were related to climate events. Since the beginning of the
century, AON estimates direct losses at an average of about US$ 300 billion. Looking back
further, the data indicates a clear rising trend in direct economic losses, starting around the
1980s (Figure 28).
(383
)Costello, M.J., M.M. Vale, W. Kiessling, S. Maharaj, J. Price, and G.H. Talukdar, 2022: Cross-Chapter
Paper 1: Biodiversity Hotspots. In: Climate Change 2022: Impacts, Adaptation and Vulnerability.
Contribution of Working Group II to the Sixth Assessment Report of the Intergovernmental Panel on
Climate Change [H.-O. Pörtner, D.C. Roberts, M. Tignor, E.S. Poloczanska, K. Mintenbeck, A. Alegría, M.
Craig, S. Langsdorf, S. Löschke, V. Möller, A. Okem, B. Rama (eds.)]. Cambridge University Press,
Cambridge, UK and New York, NY, USA, pp. 2123–2161, doi:10.1017/9781009325844.018.
(384
) Keppel et al. 2011. Refugia: identifying and understanding safe havens for biodiversity under climate
change. Global Ecology and Biogeography. doi.org/10.1111/j.1466-8238.2011.00686.x
(385
) Subran L., Groschl J. and Zimmer M. 2023. Global boiling: Heatwave may have cost 0.6pp of GDP.
Allianz Research. URL: https://www.allianz.com/en/economic_research/publications/specials_fmo/global-
heatwave-implications.html
(386
) AON. 2023. Weather, Climate and Catastrophe Insight.
104
Figure 28: Global economic losses from natural disasters since 1950
Note: Losses shown in billion US$ 2021
Source: AON (2023).
While the precise data differ according to the sources used and the methodologies used or the
scoped covered, the rising trend in climate-related economic damages is an unequivocal
finding across the board. The Swiss Re Institute (387
) estimates that natural catastrophes,
mainly climate-related, generated world-wide losses of US$ 270 billion in 2021 (Figure 29),
equivalent to 0.29% of global GDP. This compares to estimated losses of 0.23% of GDP on
average in the past decade. Of these losses, Swiss Re estimates that about US$ 110 billion
were covered by insurance. Globally, uninsured losses represent a large proportion of direct
losses.
Figure 29: Insured and uninsured losses from catastrophes (billion US$ 2021)
Source: Swiss Re Institute (2023).
A rising trend in direct economic losses from climate-related events is also observed in the
EU, particularly since the beginning of the 2010s. EEA reports that weather- and climate-
related extremes caused economic losses estimated at EUR 560 billion in the EU between
1980 and 2021, of which only EUR 170 billion (30%) were insured. Nearly 195,000 fatalities
have been caused by floods, storms, heat- and coldwaves, wildfires and landslides in that
time (388
). Hydrological and meteorological events are the main sources of direct losses in the
(387
) Swiss Re Institute. Sigma. Natural Catastrophes in 2021: the floodgates are open.
(388
) https://www.eea.europa.eu/ims/economic-losses-from-climate-related
105
EU, with the costliest single events arising mainly from riverine floods (Figure 30). For
example, the floods in the summer of 2021 in Belgium and Germany are estimated to have
caused economic losses of close to EUR 50 billion, in addition to more than 200
casualties (389
). Meteorological events, mainly heatwaves, are nevertheless the biggest
climate-related source of excess fatalities (abstracting from premature deaths related to
atmospheric pollution, as discussed in section 2.3.1). It is estimated that there were about
74 000 excess fatalities in the EU due to the heatwave of 2003, and around 60 000 excess
fatalities again during the heatwave of 2022 (390
).
Figure 30: Direct economic costs and fatalities from climate-related events in the EU
Source: EEA and Eurostat.
Economic costs of climate change are also being seen and felt at the individual level and the
increasing frequency and magnitude of impact are raising questions on the capacity of the
insurance sector to handle such risks in the future. For instance, insurance companies are not
offering home insurance to an increasing number of homes in the USA due to rapidly growing
exposure to extreme weather events like wildfires (391
). Difficulties in adequately insuring
homes is also set to increase in Australia due to flooding, with analysis suggesting one in
every seven homes in high-risk areas will see their home insurance become unaffordable or
unavailable already by 2030 (392
).
Europeans are currently underinsured in relation to weather events that will increase due to
climate change. Currently only a quarter of the total losses caused by extreme weather and
climate-related events across Europe are insured, indicating that there is an insurance
(389
) https://climate.copernicus.eu/esotc/2021/flooding-july
(390
) Ballester, J., Quijal-Zamorano, M., Méndez Turrubiates, R.F. et al. Heat-related mortality in Europe during
the summer of 2022. Nat Med (2023).
(391
) https://www.axios.com/2023/05/29/state-farm-home-insurance-california-wildfires
(392
) https://www.climatecouncil.org.au/wp-content/uploads/2022/05/CC_Report-Uninsurable-Nation_V5-
FA_Low_Res_Single.pdf
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
0
10
20
30
40
50
60
Fatalities
Billion
EUR
2022
Meteorological Hydrological Climatological 5-year moving average Fatalities
106
protection gap in Europe (393
). The protection gaps vary significantly among Member States,
and vary by climatic events, covering coastal floods, river floods, wildfires and windstorms.
3.2 Analyses on global economic impacts
Estimating global aggregate economic costs of climate change is challenging due to
uncertainties that characterize the impacts of climate change (see section 3.4).
Diverse methodologies are used in the literature for the assessment of costs of climate change
(394
), including biophysical process models, structural economic models, econometrics, hybrid
approaches (395
) and semi-qualitative methods based on expert elicitation (396
). Econometric
estimates tend to produce higher damage estimates than models. Further, studies use different
impact categories and different spatial and temporal scope.
Differences derive also from evaluation methods applied to assess climate impacts.
Monetizing mortality/morbidity from climate change for example can be done through
estimating macroeconomic impacts of loss of labour productivity, or through the value of
statistical life. There are ethical concerns to putting monetary value to non-economic losses,
such as loss of human life, loss of species, or intangible heritage. Quantification of costs of
climate change is nonetheless useful as it provides at least a partial picture of ranges of
economic damages, the impact categories, and differences between direct and indirect costs.
Costs can be presented as:
- Aggregate or systemic costs (aggregate GDP losses from climate change)
- Direct costs of climate change impacts: (method for economic costs that does not
consider market adjustments)
- Indirect costs (such as weakening economic growth, lower asset values)
- Transmission mechanisms (e.g., trade effects: can exacerbate or smoothen losses from
climate change)
The IPCC Special Report on Global Warming of 1.5°C (2018) (397
) states that 2°C degrees of
warming is projected to lead to lower aggregated economic growth due to climate change in
(393
) EIOPA, “The dashboard on insurance protection gap for natural catastrophes in a nutshell”,
https://www.eiopa.europa.eu/system/files/2022-12/dashboard-on-insurance-protection-gap-for-natural-
catastrophes-in-a-nutshell.pdf
(394
) Bosello F. and Leon C.J. 2022. Climate change impacts in the EU: new evidence from recent research.
EAERE Magazine, 16 Spring 2022 – Climate Impacts and Adaptation.
(395
) O'Neill, B., M. van Aalst, Z. Zaiton Ibrahim, L. Berrang Ford, S. Bhadwal, H. Buhaug, D. Diaz, K. Frieler,
M. Garschagen, A. Magnan, G. Midgley, A. Mirzabaev, A. Thomas, and R.Warren, 2022: Key Risks Across
Sectors and Regions. In: Climate Change 2022: Impacts, Adaptation and Vulnerability. Contribution of
Working Group II to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change [H.-O.
Pörtner, D.C. Roberts, M. Tignor, E.S. Poloczanska, K. Mintenbeck, A. Alegría, M. Craig, S. Langsdorf, S.
Löschke, V. Möller, A. Okem, B. Rama (eds.)]. Cambridge University Press, Cambridge, UK and New
York, NY, USA, pp. 2411–2538, doi:10.1017/9781009325844.025.
(396
) Bosello F. and Leon C.J. 2022. Climate change impacts in the EU: new evidence from recent research.
EAERE Magazine, 16 Spring 2022 – Climate Impacts and Adaptation.
(397
) Hoegh-Guldberg, O., D. Jacob, M. Taylor, M. Bindi, S. Brown, I. Camilloni, A. Diedhiou, R. Djalante, K.L.
Ebi, F. Engelbrecht, J.Guiot, Y. Hijioka, S. Mehrotra, A. Payne, S.I. Seneviratne, A. Thomas, R. Warren,
and G. Zhou, 2018: Impacts of 1.5ºC Global Warming on Natural and Human Systems. In: Global Warming
of 1.5°C. An IPCC Special Report on the impacts of global warming of 1.5°C above pre-industrial levels
and related global greenhouse gas emission pathways, in the context of strengthening the global response to
107
2100 compared to 1.5°C of warming. The mean net present value of the costs of damages
from global warming in 2100 for 1.5°C is US $54 trillion, and US $69 trillion for 2°C,
relative to 1961–1990. This includes costs associated with climate change-induced market and
non-market impacts, impacts due to sea level rise, and impacts associated with large-scale
discontinuities.
The IPCC AR6 Working Group II report (2022) (398
) confirms that global aggregate economic
impacts generally increase with higher degree of global warming. However, due to the wide
range of damage estimates and lack of comparability between methodologies, the report does
not provide a robust range of estimates but recognizes that global aggregate economic impacts
could be higher than estimated in the previous report.
The latest IEA Net Zero Roadmap report (399
) finds that without increasing policy ambition by
2030, limiting global average temperature to 1.5o
C by 2100 will become much harder, as
higher levels of CO2 removal from the atmosphere will be necessary after 2050. Such delay
in climate action would cost the world an additional US $1.3 trillion per year.
A recent study by van der Wijst et al. (2023) (400
) estimates that global damages from climate
change would reach 10-12% of GDP by 2100 under a 3℃ global warming scenario, and 2%
of GDP under a well below 2℃ global warming scenario. With increasing warming losses
increase rapidly (Figure 31), and after the mid-century the economic benefits of climate action
become increasingly apparent. They conclude that the economic benefits of reduced damages
from climate change substantially outweigh the cost of climate change policy, even when
some climate damages, such as impacts on health and biodiversity, are not accounted for
(Figure 32).
the threat of climate change, sustainable development, and efforts to eradicate poverty [Masson-Delmotte,
V., P. Zhai, H.-O. Pörtner, D. Roberts, J. Skea, P.R. Shukla, A. Pirani, W. Moufouma-Okia, C. Péan, R.
Pidcock, S. Connors, J.B.R. Matthews, Y. Chen, X. Zhou, M.I. Gomis, E. Lonnoy, T.Maycock, M.Tignor,
and T. Waterfield (eds.)]. Cambridge University Press, Cambridge, UK and New York, NY, USA, pp. 175-
312. https://doi.org/10.1017/9781009157940.005.
(398) O'Neill, B., M. van Aalst, Z. Zaiton Ibrahim, L. Berrang Ford, S. Bhadwal, H. Buhaug, D. Diaz, K. Frieler,
M. Garschagen, A. Magnan, G. Midgley, A. Mirzabaev, A. Thomas, and R.Warren, 2022: Key Risks Across
Sectors and Regions. In: Climate Change 2022: Impacts, Adaptation and Vulnerability. Contribution of
Working Group II to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change [H.-O.
Pörtner, D.C. Roberts, M. Tignor, E.S. Poloczanska, K. Mintenbeck, A. Alegría, M. Craig, S. Langsdorf, S.
Löschke, V. Möller, A. Okem, B. Rama (eds.)]. Cambridge University Press, Cambridge, UK and New
York, NY, USA, pp. 2411–2538, doi:10.1017/9781009325844.025.
(399
)International Energy Agency. 2023. Net Zero Roadmap: A Global Pathway to Keep 1.5o
C Goal in Reach.
URL: https://www.iea.org/reports/net-zero-roadmap-a-global-pathway-to-keep-the-15-0c-goal-in-reach
(400
) van der Wijst, KI., Bosello, F., Dasgupta, S. et al. New damage curves and multimodel analysis suggest
lower optimal temperature. Nature Climate Change, 13, 434–441 (2023). https://doi.org/10.1038/s41558-
023-01636-1
108
Figure 31: Example of damage functions as used in Integrated Assessment Models
Note: Model using quantile regression, showing 5th (low estimate), 50th (medium) and 95th (high) percentiles.
Source: van der Wijst et al. (2023).
Figure 32: Benefit-cost ratios for the Cost-benefit analysis
Note: Benefit-cost ratios for the cost-benefit analysis scenario using the medium damage function (50th percentile):
a, Policy costs (dotted lines) and avoided damages (benefits, solid lines) over time for the scenario with medium
discounting. b, BCR: total discounted avoided damages divided by the total discounted mitigation costs. REMIND is not
calibrated for the lowest discount rate. The numbers above the bars correspond to the exact value of the benefit-cost
ratio.
Source: van der Wijst et al. (2023).
The economic impacts vary between region and social groups (Figure 33). With increasing
global warming levels, Africa and the Middle East are projected to experience the highest
damages from climate change, followed by Asia and Latin America (401
). While economic
(401
) van der Wijst, KI., Bosello, F., Dasgupta, S. et al. New damage curves and multimodel analysis suggest
lower optimal temperature. Nature Climate Change, 13, 434–441 (2023). https://doi.org/10.1038/s41558-023-
01636-1
109
impacts on poorer countries and households account for a smaller share of aggregate losses in
GDP terms, the impact on welfare and wellbeing can be substantial (402
).
Figure 33: End of century damages for the five macro-regions for two scenarios
Note: The damages are split into three types (direct temperature-related damages, direct sea-level-rise damages and
indirect damages from GDP loss accumulation). The damages are shown for the year 2100 in the RCP6.0 scenario (a)
and the RCP2.6 scenario (b). Both scenarios assume optimal sea-level-rise adaptation. This figure does not show
intra-regional differences; only the population-weighted average per macro-region is shown.
Source: van der Wijst et al. (2023).
3.3 Sectoral economic impacts in the EU
3.3.1 The PESETA study
The impacts of climate change will also affect European economies. The JRC PESETA IV
study assessed the impacts of climate change in broader economic terms for seven impact
(402
) O'Neill, B., M. van Aalst, Z. Zaiton Ibrahim, L. Berrang Ford, S. Bhadwal, H. Buhaug, D. Diaz, K. Frieler,
M. Garschagen, A. Magnan, G. Midgley, A. Mirzabaev, A. Thomas, and R.Warren, 2022: Key Risks Across
Sectors and Regions. In: Climate Change 2022: Impacts, Adaptation and Vulnerability. Contribution of Working
Group II to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change [H.-O. Pörtner, D.C.
Roberts, M. Tignor, E.S. Poloczanska, K. Mintenbeck, A. Alegría, M. Craig, S. Langsdorf, S. Löschke, V.
Möller, A. Okem, B. Rama (eds.)]. Cambridge University Press, Cambridge, UK and New York, NY, USA, pp.
2411–2538, doi:10.1017/9781009325844.025.
110
categories: river floods, coastal floods, agriculture, energy supply, droughts, windstorms and
human mortality. They used a static approach, assuming current size and structure of the
economy. The full economic impacts of climate change were not assessed, and the assessment
also did not consider the impact of passing climate tipping points. It finds that exposing
present economy to 1.5℃, 2℃ and 3℃ global warming would result in annual welfare loss
of, respectively, EUR 42 billion/year (0.33% of GDP), EUR 83 billion/year (0.65% of GDP)
and EUR 175 billion/year (1.38% of GDP). In this study human mortality from extreme heat
accounts for the dominant part of economic climate impacts, however, it strongly depends on
the monetary value that is put on human life. River flood damage is projected to increase six-
fold at 3℃ global warming, reaching EUR 43 billion per year by the end of the century,
compared to the current losses estimated at EUR 7.8 billion per year (EU + UK), and
exposing 500 000 people to river flooding per year, compared to 170 000 today. Limiting
warming to 1.5℃ would decrease the number of people exposed by 230 000 and halve the
economic impacts. Without strong adaptation action, coastal flood losses would rise sharply
due to sea level rise, and at 3o
C global warming level, annual economic damages in the
EU+UK would reach EUR 240 billion by 2100, compared to EUR 1.4 billion per year today.
2.2 million people would be exposed to coastal flooding compared to 0.1 million today.
Moderate mitigation action would reduce economic losses by half (to EUR 111 billion per
year) and people exposed to 1.4 million per year. Even with strong mitigation, adaptation will
continue to be necessary to limit impacts from flooding. The benefits of adaptation are long-
lasting and avoided damage grows in time and with increasing global warming levels. At 3o
C
global warming, losses from drought would increase from EUR 9 billion per year today to
EUR 45 billion per year in 2100. Current annual losses from drought are estimated to be
around EUR 9.4 billion (EU+UK), with Spain, Italy and France being the most impacted. The
largest share of the losses comes from agriculture, followed by the energy sector and public
water supply. At 1.5℃ global warming level, losses from drought in EU+UK could reach
EUR 25 billion per year by the end of the century, EUR 31 billion at 2℃ global warming and
EUR 45 billion at 3℃ global warming (403
) (404
).
3.3.2 Other recent analyses
Bosello and Leon (2022) (405
) review recent studies on the economic costs of climate change
for the EU and find that macroeconomic losses can be higher than previously estimated.
Extreme events and impacts on infrastructure are the main drivers, as well as health impacts
on mortality and impacts on labour productivity. In the literature they assess, coastal damages
from sea-level rise and riverine floods account to more than 70% of GDP market losses,
stressing the importance of infrastructural adaptation. They conclude that staying within the
Paris Agreement temperature range would greatly reduce the macroeconomic and welfare
losses compared to higher global warming scenarios.
(403
) Feyen L., Ciscar J.C., Gosling S., Ibarreta D., Soria A. (editors) (2020). Climate change impacts and
adaptation in Europe. JRC PESETA IV final report. EUR 30180EN, Publications Office of the European
Union, Luxembourg, ISBN 978-92-76-18123-1, doi:10.2760/171121, JRC119178
(404
)Cammalleri C., Naumann G., Mentaschi L., Formetta G.(a), Forzieri G., Gosling S.(b), Bisselink B., De Roo
A., and Feyen L., Global warming and drought impacts in the EU, EUR 29956 EN, Publications Office of
the European Union, Luxembourg, 2020, ISBN 978-92-76-12947-9, doi:10.2760/597045, JRC118585.
(405
) Bosello F. and Leon C.J. 2022. Climate change impacts in the EU: new evidence from recent research.
EAERE Magazine, 16 Spring 2022 – Climate Impacts and Adaptation.
111
The COACCH project (406
), (407
) (Co-designing the Assessment of Climate Change Costs)
considers the economic costs of climate change in Europe for the following categories: energy
demand and supply, labour productivity, agriculture, forestry, fisheries, transport, sea-level
rise, and riverine floods. The study finds that the economic cost of climate change for Europe
is high even for central scenarios in the mid-century, and with higher warming the costs
increase significantly later in the century. Ambitious climate mitigation will therefore provide
major economic benefits in Europe by reducing climate damages, and those benefits are
projected to be more pronounced later in the century. In the next two decades some impacts
are unavoidable and can be reduced with adaptation action, which can deliver high benefit to
cost ratio.
The Swiss Re Institute (408
) explicitly simulated for some of the uncertainties that are often
unaccounted-for in the literature. It attempted to factor in impact variables such as the impact
of supply chain disruptions, migration and biodiversity. It also treated the potential for tail
risk parameter uncertainty by applying multiplicative factors to the accumulated economic
impact from the quantified and proxied risk channels. While basing a multiplicative factor
itself on anything other than expert judgement is difficult, excluding tail risk parameter
uncertainty altogether amounts to a de facto choice to apply a multiplicative factor of 1. The
results suggest up to 8% of GDP loss by mid-century in Europe on a path of 2-2.6°C global
warming, and up to 10.5% of GDP loss on a path to 3.2°C of global warming, as against up to
2.8% of GDP loss in a well below 2°C scenario.
All of the assessed studies find large regional disparities within Europe. The magnitude of
welfare losses in Southern Europe and South-Eastern Europe are estimated to be several times
larger than in Northern Europe.
3.3.3 Bottom-up analysis with the NEMESIS model
3.3.3.1 Approach
An evaluation of the macro-economic costs of a range of climate hazards was carried out for
this impact assessment, using the NEMESIS macro-econometric model. (409
) The study builds
on a comprehensive review of the literature that assesses the impact of individual
impacts/hazards. It integrates 9 different types of hazards or sectors affected: (1) coastal
floodings; (2) river floodings; (3) droughts; (4) labour productivity; (5) agriculture;
(6) forests; (7) fisheries; (8) energy demand; (9) energy supply. These are integrated into the
model via capital destruction, changes in production or input availability, changes in
productivity and changes in consumption. As far as capital destruction is concerned, the
modelling assumes that 30% of damages are supported by the insurance sector, and that no
public support is provided for uninsured damages. Such damages therefore increase costs for
firms and/or imply income losses for households.
(406
) COACCH (2021a). The Economic Cost of Climate Change in Europe: Report on The Macro-Economic
Cost of Climate Change in Europe. Policy brief by the COACCH project. Published September, 2021.
(407
) COACCH (2021b). COACCH (2021). The Economic Cost of Climate Change in Europe: Synthesis Report
on Interim Results. Policy brief by the COACCH project. Editors: Paul Watkiss, Jenny Troeltzsch, Katriona
McGlade, Michelle Watkiss. Published July 2021.
(408
) Swiss Re Institute (2021) The economics of climate change | Swiss Re
(409
) https://www.erasme-team.eu/en/the-nemesis-model/
112
The “climate damage” scenarios assess the 9 types of hazards / sectoral impacts individually
and combined. The macro-economic impacts are evaluated in comparison with a baseline
where no climate hazards are taken into account. Two damage scenarios were modelled, each
with its respective baseline: (1) a “net zero emissions” scenario, where the EU achieves
climate neutrality by 2050 and the rest of the world implements measures so as to align with
the IPCC’s RCP1.9 pathway, which reaches an increase in global temperatures of 1.6°C
around 2050 and 1.4°C around 2090; and (2) a “no action” scenario where the EU acts in
accordance with the Reference 2020 scenario and the world develops along the IPCC’s
RCP7.0 pathway, which reaches an increase in global temperature of 2.1°C around 2050 and
3.6°C around 2090.
While the literature on the bottom-up assessment of impacts of individual hazards or sectoral
effects is relatively rich, including specifically on the EU and its Member States, there are
also divergences on the scale of the impacts. The integration of the bottom-up impacts into
NEMESIS was therefore carried out based on three levels: (1) the bottom quartile of the
literature; (2) the average; and (3) the top quartile. As the literature tends to be relatively
conservative in terms of impacts, the results described herein are mainly those based on the
top quartile of impacts.
3.3.3.2 Shorter term
Looking at the shorter time horizon of the IPCC’s RCPs to 2050-2060, the difference between
the no action and the net zero emissions scenarios is significant from a macro-economic
perspective, but not extremely stark. Under the no action scenario, climate damages are
estimated to reduce EU GDP by up to 1% by 2030 (top quartile), with damages increasing to
1.7% by 2040 and 2.3% by 2050. Losses under the net zero emissions scenario are more
limited at 0.8% by 2030 (top quartile) and increasing less over time than under the no action
scenario with a negative impact of 1.2% by 2040 and 1.5% by 2050. This is related to the fact
that the trajectories in terms of global warming are very similar up to 2050. Looking over this
period, the modelling shows that GDP losses – which fully abstract from human impacts – are
moderate and similar under the two scenarios at first, but that they become much more
significantly over time as the climate warms further. This generates a widening divergence of
impacts across the two scenarios over time, with rising cumulative negative impacts from a
higher degree of warming. The main drivers for the negative impacts are labour productivity,
river floodings, droughts and coastal floodings in a longer time horizon (Figure 34). Looking
beyond GDP, the macro-economic modelling also highlights that the cost of a warming
climate in terms of employment would be large. By 2050, employment under the “no action”
scenario (top quartile) is projected to be close to 1.3% below baseline, which is equivalent to
a loss of about 2.4 million jobs.
113
Figure 34: EU GDP losses under SSP1-1.9 (RCP1.9) and SSP3-7.0 (RCP7.0) (2020-2060)
Source: NEMESIS model.
3.3.3.3 Higher degrees of global warming
The difference in temperatures between the RCP1.9 and RCP7.0 become stark in the second
half of the century: by around 2050, the global temperature increase of the two explored
pathways differs only by 0.5°C, while in the subsequent decades that gap significantly
increases to about 2.2°C before the end of the century (see Table 6 in this Annex).
The impact on GDP of such temperature difference was therefore estimated with a simple
linear extrapolation of the full modelling results between 2020 and 2060, building on the
estimated impacts for given temperature increases between these two points of time in the
explored SSPs. This approach thus provides a rough estimation that is likely on the
conservative side given that it assumes a linear relationship between warming levels and
economic impacts. It nevertheless provides an estimate of economic impacts under higher
increases in global temperatures.
Assuming a linear extrapolation of damages to 2100 would yield a loss of employment of
almost 4% under the “no action” scenario, with only a small loss of about 0.4% under the “net
zero emissions” scenario. The relative loss in terms of employment is smaller than the impact
in terms of GDP as the labour market is expected to adjust to some extent, including with a
reduction in real wages that would limit the fall in terms of total employment. This would
nevertheless have additional negative welfare impacts, which are not measured here.
Looking beyond that time frame, however, the cost of failing to keep the global warming
trend to within the Paris Agreement’s most ambitious objective of 1.5°C become very large.
By around 2090, with a global warming level of around 3.6°C, the EU economy could face
costs of about 7% of GDP (top quartile, Figure 35). This estimate is in line with global
analyses for similar temperature increase.
114
Figure 35: EU GDP losses from climate hazards under different SSPs
Note: Different shared socioeconomic pathways (SSP) implemented SSP1-1.9 and SSP3-7.0 Upper illustrates the
timeline change per SSP, lower illustrates different warming levels per different areas.
Source: NEMESIS model and own extrapolation.
In addition, this estimate is likely very conservative for the reason mentioned above (linear
extrapolation of results up to 2060), because the bottom-up literature tends to be conservative
itself, and because a range of factors are not taken into consideration in this analysis,
including the impacts of climate change on ecosystem services (including access to water) or
the effects on tourism. Further, it must be noted that this analysis focuses strictly on macro-
economic indicators and that it does not take into accounts impacts on health and mortality.
The modelling also shows that regions of the EU will be affected in contrasted manners, even
if all face large overall costs arising from some hazards or others, and from broad economic
interactions across the EU. The region most affected includes Southern and Mediterranean
countries, while those facing somewhat smaller impacts are mostly in the north of Europe
(Figure 36).
-8.0%
-7.0%
-6.0%
-5.0%
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
2020 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070 2075 2080 2085 2090 2095 2100
%
change
in
GDP
from
baseline
SSP3-7.0 SSP1-1.9
-9.0%
-8.0%
-7.0%
-6.0%
-5.0%
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
1.1 1.2 1.3 1.4 1.5 1.8 2.1 2.3 2.5 2.7 2.9 3.0 3.2 3.4 3.6 3.8 4.0
%
change
in
GDP
from
baseline
Global temperature change
EU CY/EL/ES/HR/IT/MT/PT/SI BE/DE/DK/FR/IE/LU/NL
AT/BG/CZ/HU/PL/RO/SK EE/FI/LT/LV/SE
Linear extrapolation
115
Figure 36: GDP losses by 2100 under the SSP1-1.9 and SSP3-7.0 pathways
Source: NEMESIS model and own extrapolation.
3.4 The limitations of economic valuation with economic models
What we know from science about the scale of the physical changes that can be expected at
different levels of global warming also provides a check for the plausibility of economic
impact projections. The difference in average global temperatures between pre-industrial
times (mid-19th century) and the peak of the last ice age (the Last Glacial Maximum) is
estimated to have been around 5°C. Policies implemented by the end of 2020 are projected to
result in 3.2°C , with a range of 2°C – 3.3°C global warming by 2100 (410
), and such degree of
warming could result in a very different world from the one we know today. The nature and
the scale of changes in the natural systems are such that the exact socio-economic impacts on
the global economy and societies are shrouded with uncertainty. Further, uncertainties in
predicting the physical and socio-economic impacts of climate change increase significantly
with higher degrees of warming, which makes it difficult to extrapolate on the basis of the
impacts of lower levels of warming.
Extrapolating historical trends has limitations in predicting how economies would fare under
climatic conditions that may depart radically from those that characterised the past centuries
and millennia. As economic damage functions are calibrated with observations that relate to
relatively small historical temperature changes and even weather variations, it is natural that
large uncertainty concerns any extrapolation of damages from stronger temperature variations.
Assessing economic costs of climate change also involves challenges due to the global and
long-term nature of climate change, involvement of non-market values, gaps in the ability to
quantify impact channels involving ecosystem services, the interaction of risk drivers in
complex or cascading risks, non-linearity and irreversibility of phenomena, and climate,
socioeconomic and system response uncertainties. Most studies do not account for the
(410
)IPCC, 2023: Summary for Policymakers. In: Climate Change 2023: Synthesis Report. A Report of the
Intergovernmental Panel on Climate Change. Contribution of Working Groups I, II and III to the Sixth
Assessment Report of the Intergovernmental Panel on Climate Change [Core Writing Team, H. Lee and J.
Romero (eds.)]. IPCC, Geneva, Switzerland, 36 pages. (in press).
-9.0%
-8.0%
-7.0%
-6.0%
-5.0%
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
%
change
in
GDP
from
baseline
No action Net zero emissions
116
probability of high-impact events. These considerations further reinforce the likelihood that,
as a rule, the literature tends to underestimate the economic impacts of global warming.
Despite their potential catastrophic effects, some impacts of climate change, such as climate
tipping points (see section 2.1.2) are characterized by the level of uncertainty that prevents
them from being considered in economic models with precision, and so they are often not
accounted for. This results in the underestimation of economic impacts of climate change,
which could be several-fold larger than currently estimated.
Table 7 provides a snapshot of the range of damages in terms of % of GDP that are estimated
in the literature, employing different methods and functional forms and a range of
geographical coverage. Direct comparability is therefore limited, but it is nevertheless
interesting to note the very substantial variation of estimates in scenarios of global warming
that are roughly in the same class.
117
Table 7: Examples of climate related damage functions
Model (author) dT (°C)(a) damage (% of
GDP) (b)
Method Remarks
Tol (2018) 1
2
6
-0.7
0.6
6.3
Estimated on the basis of point
estimates from a literature
survey
PESETA IV (Feyen
et al, 2020)
1.5
2
3
0.3
0.7
1.4
several impact channels
modelled
Estimate for EU
PESETA III (Ciscar
et al. 2018)
4 1.9 several impact channels
modelled
Estimate for EU
PAGE 09 (Hope,
2011a)
3 Just under 2% several impact channels
modelled
Estimate for EU
DICE 2016R
(Nordhaus, 2016)
3
6
2.0
8.2 estimated on the basis of point
estimates from a literature
survey
ENV-Linkages
(OECD, 2015)
1.5
4.5
1.0
3.3
examination of different
sectoral impacts
Damages by 2060
COACCH (Watkiss
et al, 2019)
2.4
4.3
3
10
Multi-model examination of so
far 3 sectors: coastal floods,
river floods, transport
infrastructure
Estimates for EU. RCP 4.5 (0.7 trn
EUR pa) and RCP 8.5 (2.6 trn EUR
p.a). %age for 2085 based on
1.5% GDP growth
Howard and
Sterner (2017)
3
3
7-8
9-10
Literature survey, adjusting for
duplication and omitted variable
bias
Global. For the first estimate
catastrophic damages are
excluded, and for the second
catastrophic risks are included
Burke et al (2017) 2
4
18
43
Impact of observed
temperature variations on
labour and agriculture
Global. Long-run, differentiated
response scenario as reported.
Note: (a) global mean surface temperature change compared to pre-industrial level; (b) loss of GDP compared to no-
climate-change baseline by 2100 (unless otherwise stated).
Source: adapted from Dimitrijevics et al (2021) (411
)
4 IMPACTS OF CLIMATE CHANGE ON BUSINESSES
The vulnerability of European businesses to climate change depends on the region, type of
risk, sector and business characteristics. Climate related events including floods, droughts,
heatwaves, heavy precipitation, sea level rise and changing rainfall patterns can seriously
affect business assets. They can lead to business interruptions and job losses, they can impact
working conditions, occupational safety and health, labour productivity and even induce
short-term and long-term migration of workers (412
). A study by S&P Global (413
) finds, that
by 2050s over 90% of the world’s largest companies will see at least one asset financially
exposed to climate risks, and for more than a third of these companies at least one asset will
(411
)Dimitrijevics et al. 2021. Quarterly Report on the Euro Area (QREA), Vol. 20, No. 1
(412
)International Labour Organization. Frequently Asked Questions on Climate Change and Jobs. URL:
https://www.ilo.org/global/topics/green-jobs/WCMS_371589/lang--en/index.htm
(413
)Ritchie G. 2022. 90% of World’s Biggest Firms Will Have at Least One Asset Exposed to Climate Risk,
Fresh Data Show. Bloomberg, 15th
of September 2022.
118
lose at the minimum 20% of its value. An extensive study by the European Central Bank (414
)
assessed the resilience of non-financial corporates (NFCs) and euro area banks to climate
risks, under various assumptions in terms of future climate policies over the next 30 years. It
found that the effects of climate change would increase over time and would
disproportionately affect certain geographies and sectors. The increased frequency and
intensity of natural disasters would affect the production plants located in the areas exposed to
natural hazards and could cause significant damage, interrupt production process, and
potentially lead to business failure. Early transition to a zero-carbon economy comes with
clear benefits, as short-term costs of the transition are smaller than the costs of climate change
in the medium- to long-term. Without climate action, the impacts of climate change on
corporates and banks most exposed to climate risks would become very significant, and
significantly and negatively affect their creditworthiness.
European industrial and service sectors are affected by climate change in multiple ways, both
directly and indirectly, though damage to assets, increased insurance costs, increased
operating and maintenance costs, disruptions in transport, and reduced revenues. European
businesses are affected by climate hazards both inside the EU and internationally through
impacts on supply chains (415
). While all segments of the EU economy are and will continue
to be affected by climate change, some sectors are more exposed than others, notably
agriculture (see section 2.3.5.2), tourism (see section 2.3.4.3), fisheries and forestry (see
section 2.3.5.1.1).
Smaller businesses have relatively higher capital constrains and hence less resources than
larger companies to face such risks. They are less able to react to climate events and
implement efficiency changes (416
). Small companies have started to experience the impact of
climate change on their operation, as reported by the European Investment Bank in its 2022
overview on SMEs. Collier and Ragin (417
) indicate that the higher frequency of extreme
events due to climate change will imply higher costs for small businesses. According to the
International Labour Organization, SMEs are less equipped than large companies to plan and
invest in adaptation measures (418
).
Climate change already affects the construction, agriculture, manufacturing, transportation,
banking and insurance sectors through reduced productivity, losses from floods, water
scarcity and droughts. Pulp and paper, chemical and plastic manufacturing are also impacted,
as well as sectors relying on shipping, hydropower and water supply. The financial and
insurance sector is affected through impacts in the customer and financial markets. Many
(414
)Alogoskoufis S. et al. 2021. ECB economy-wide climate stress test. Occasional Paper Series, No 281 /
September 2021.
(415
)COACCH (2021). The Economic Cost of Climate Change in Europe: Business Policy brief by the COACCH
project. Published November 2021. Copyright: COACCH, 2021.
(416
)World Trade Organizarion. 2022. Small Businesess and climate change. MSME Research note 3. World
Trade Organization Centre William Rappard, Rue de Lausanne 154, CH-1211 Geneva 21, Switzerland
(417
)Collier B. and M. Rajin, “As climate risk grows, so will costs for small businesses”. Harvard Business
Review, August 2022.
(418
)Enabling business mitigation and adaptation to climate change Green policies and the role of Employer and
Business Membership Organization. International Labour Organization. December 2022
119
sectors will be exposed to multiple risks, and through indirect effects through supply chains,
transport, and electricity networks (419
).
While currently damages are mainly related to floods and storms, heat and drought will
become major drivers in the future. Floods represent one of the most important risks with
large economic impact for businesses, both from damage and loss of assets, and from costs of
disruption, lost time and lost production. Floods can also disrupt transport, leading to travel
delays and costs, and affecting supply chains. As the risk of floods is projected to increase in
many parts of Europe (see section 2.3.3), damages to business are also projected to increase.
This is expected to impact the insurance premiums for floods, translating into higher costs for
businesses.
Heatwaves negatively affect work and labour productivity and can lead to health risks for
workers. The COACCH (Co-designing the Assessment of Climate Change Costs) project
estimated that in Europe the loss of labour productivity in industrial and construction sector
due to higher temperatures could reach 3% at RCP4.5. However, there are significant regional
differences across Europe, with southern Europe being disproportionately affected, while
some colder regions could see gains in labour productivity.
Climate change related events in one country can propagate along the supply chain and
indirectly lead to adverse economic impacts in another country. COACCH study found that
due to the increased frequency of extreme climate events and associated productivity shocks,
export performance can be significantly reduced in the future. It is projected that tropics and
sub-tropics will experience the largest impacts on exports due to stronger climate impacts. As
Europe is strongly integrated in global production networks, it has less concentrated supply
chains compared to some other regions, however, it is nonetheless vulnerable to supply chain
shocks with can lead to reduced export performance. The impacts vary between countries and
sectors, with largest impacts on the sectors with least diversified supply chains, including the
food sector, mining and quarrying and electricity, gas and water sectors (420
).
In a survey carried out by the European Central Bank (421
)in 2022, respondents -including
from 90 large and mostly multinational companies - mentioned a range of physical risks from
climate change for their companies. They were related to the sourcing of raw materials,
integrity of production facilities, infrastructure, supply chains, logistics and labour conditions.
Damage to physical assets and infrastructure is of particular concern to the companies
dependent on or operating in the agricultural sector, manifactouring sector with potentially
vulnerable supply chains, construction and the transport sectors.
(419
) Bednar-Friedl, B., R. Biesbroek, D.N. Schmidt, P. Alexander, K.Y. Børsheim, J. Carnicer, E.
Georgopoulou, M. Haasnoot, G. Le Cozannet, P. Lionello, O. Lipka, C. Möllmann, V. Muccione, T.
Mustonen, D. Piepenburg, and L.Whitmarsh, 2022: Europe. In: Climate Change 2022: Impacts, Adaptation
and Vulnerability. Contribution of Working Group II to the Sixth Assessment Report of the
Intergovernmental Panel on Climate Change [H.-O. Pörtner, D.C. Roberts, M. Tignor, E.S. Poloczanska, K.
Mintenbeck, A. Alegría, M. Craig, S. Langsdorf, S. Löschke, V. Möller, A. Okem, B. Rama (eds.)].
Cambridge University Press, Cambridge, UK and New York, NY, USA, pp. 1817–1927,
doi:10.1017/9781009325844.015
(420
) COACCH (2021). The Economic Cost of Climate Change in Europe: Business Policy brief by the
COACCH project. Published November 2021. Copyright: COACCH, 2021.
(421
) Kuil F., Morris R. and Sun Y. 2022. The impact of climate change on activity and prices – insights from a
survey of leading firms. URL: https://www.ecb.europa.eu/pub/economic-
bulletin/focus/2022/html/ecb.ebbox202204_04~1d4c34022a.en.html
120
5 IMPACTS OF CLIMATE CHANGE ON SOCIETY AT LARGE
One of the largest uncertainties in climate science is the crossing of climate tipping points (see
section 2.1.2 of this Annex). Tipping point impacts will cascade through socio-economic and
ecological systems over timeframes that are short enough to defy the ability and capacity of
human societies to adapt, leading to severe effects on human and natural systems (422
). For
example, rapidly and permanently altered growing conditions could impact crop yields, which
can affect local food availability and global food prices.
Multiple tipping point impacts can be far reaching, leading to never seen before climatic
conditions emerging. The interaction of reductions in glacial melt from the Himalayan icecap
which provides drinking and irrigation water for downstream communities, in combination
with rising sea level, could lead to water shortages and flooding. These impacts, together with
anticipated heat spikes, could make living conditions for hundreds of millions of people in
low lying areas such as Bangladesh and Vietnam untenable, leading to mass migration (423
).
Climate change could impact many areas of society, and lead to cascading and interacting
impacts, ranging from migration and conflict to health and mortality impacts, political
instability, to food, fuel and water shortages (424
). Climate change is a growing concern for
European Union security and defence, affecting military infrastructure, military capabilities,
missions and operations (425
).
Climate models often do not capture many of the most severe impacts from climate change,
such as tipping points. There are certain challenges and limitations that these tools might
never be able to overcome because of the uncertainty of climate change or because of the
limitations of modelling and data (426
). The inability to capture all interactions between
sectors affected by climate change and the interaction between climate change impacts
themselves, suggests that modelling results are currently on the conservative side (427
).
The warming levels at which elements such as the polar ice sheets, the Atlantic Meridional
Overturning Circulation, or the Amazon rainforest, might tip to alternative states are largely
unknown. Progress is being made to couple individual earth system models, but substantial
further work is required to accurately represent tipping point interactions and to predict when
individual subsystems might cross tipping points (428
). Given that much progress is required to
(422
) OECD, Climate Tipping Points – Insights for Effective Policy Action. 2022.
https://doi.org/10.1787/abc5a69e-en
(423
) S. Trust, et al., The Emperor’s New Climate Scenarios, The Institute and Faculty of Actuaries,
https://actuaries.org.uk/media/qeydewmk/the-emperor-s-new-climate-scenarios.pdf
(424
) L. Kemp et al., Climate Endgame: Exploring catastrophic climate change scenarios:
https://www.pnas.org/doi/pdf/10.1073/pnas.2108146119
(425
) European Commission, Joint Research Centre, Tavares da Costa, R., Krausmann, E., Hadjisavvas, C.,
Impacts of climate change on defence-related critical energy infrastructure, Publications Office of the
European Union, 2023, https://data.europa.eu/doi/10.2760/03454
(426
) The United Nations Environment Program Finance Initiative (UNEP FI), 2023 Climate Risk Landscape:
https://www.unepfi.org/themes/climate-change/2023-climate-risk-landscape/
(427
) S. Trust, et al., The Emperor’s New Climate Scenarios, The Institute and Faculty of Actuaries,
https://actuaries.org.uk/media/qeydewmk/the-emperor-s-new-climate-scenarios.pdf
(428
) Key findings and Recommendations from the H2020 projects on Tipping Points: TiPES, COMFORT,
TiPACCs
121
improve the representation of tipping points, it is possible that their impact is currently
underestimated, and they may be crossed earlier than anticipated.
As a consequence of climate models not capturing tipping points and potentially
underestimating risks, the users of these models in other sectors are thus also underestimating
the impacts of climate change. Climate modelling is increasingly being used in the financial
services sector to inform investment decisions and manage risk, as such, there is a risk that
financing decisions being taken today are not as climate-change resilient as they should
be (429
).
Along with physical climate tipping points, the field of socio-economic tipping points and
social tipping processes has been receiving increasing attention in the past years. Climate-
induced socio-economic tipping points have been defined as “a climate change induced,
abrupt change of a socio-economic system, into a new state of fundamentally different
quality, beyond a certain threshold that stakeholders perceive as critical” (430
). Examples
include potential collapse of insurance markets due to extreme weather risks, migration from
coastal areas due to extreme sea level rise or a major climatic shock, and land abandonment
and price spike due to climate induced agriculture shocks (431
).
6 CONCLUSIONS
Anthropogenic climate change is a threat to humans and nature, and it is already causing
widespread and adverse impacts, which disproportionately affect the most vulnerable people
and systems. The only way to lessen the impacts is by strong mitigation and adaptation action.
Insufficient climate action will lead to increasing global warming, which will result in even
more severe negative impacts, some of which will be irreversible. In the next decades, climate
risks could become multiple times higher than currently observed. One of the biggest
concerns is the triggering of climate tipping points, which could lead to sudden and
substantial impacts, too short for societies and ecosystems to adapt. Potential impacts include
extreme sea-level rise, extreme temperatures, droughts and wildfires, and release of
significant amount of greenhouse gases, accelerating global warming.
Globally, communities the most vulnerable to climate change are located in Africa, Asia,
Central and South America, Small Islands and Arctic.
Europe is warming twice as fast as the global average and all its regions have already been
affected by the impacts of climate change. Droughts, floods and wildfires have increased in
frequency and intensity, and affected the health and wellbeing and the economy, and impacted
ecosystems. With increasing warming, the impacts of climate change are projected to
intensify, and they will differ between different regions, with Southern regions experiencing
the most negative impacts. Climate change also affects different social groups differently,
disproportionately affecting the poorer households. Climate change is projected to result in
(429
) S. Trust, et al., The Emperor’s New Climate Scenarios, The Institute and Faculty of Actuaries,
https://actuaries.org.uk/media/qeydewmk/the-emperor-s-new-climate-scenarios.pdf
(430
)COACCH (2021). The Economic Cost of Climate Change in Europe: Report on Climate and Socio-
Economic Tipping Points. Policy brief by the COACCH project, page 3.
(431
)Kees C H van Ginkel et al 2020 Environmental Research Letters 15 023001 DOI: 10.1088/1748-
9326/ab6395
122
substantial economic damages in Europe, which will increase with higher degrees of
warming.
123
TABLE OF FIGURES
Figure 1: Main modelling suite used for GHG projections........................................................ 5
Figure 2: Population assumptions ............................................................................................ 13
Figure 3: EU GDP (2015 = 100) and GDP growth (%)........................................................... 14
Figure 4: International fuel prices ............................................................................................ 16
Figure 5: Global surface air temperature anomalies ............................................................... 48
Figure 6: Annual mean temperature change (℃) at different levels of global warming ......... 50
Figure 7: Changes in local annual average temperature and precipitation in Europe.............. 51
Figure 8: The location of climate tipping elements.................................................................. 53
Figure 9: The connectivity of tipping points............................................................................ 55
Figure 10: Map of human vulnerability. .................................................................................. 62
Figure 11: Key risks for Africa increase with increasing global warming. ............................. 64
Figure 12: Key risks related to climate change in Asia............................................................ 67
Figure 13: Observed and projected climate change impacts for different regions of Europe.. 70
Figure 14: Key risks for Europe under low to medium adaptation.......................................... 71
Figure 15: Percentage of days with extreme heat stress for Southern Europe......................... 73
Figure 16: Projected heat stress for Europe ............................................................................. 74
Figure 17: Examples of climate change impacts on transport.................................................. 83
Figure 18: Wildfire carbon emissions from EU....................................................................... 88
Figure 19: Reported forest damage in Europe by disturbance until 2019................................ 89
Figure 20: Distribution of wind damage in the EU.................................................................. 91
Figure 21: Distribution of insect damage in the EU................................................................. 92
Figure 22: High-to-extreme fire danger by different levels of global warming....................... 92
Figure 23: Distribution of wildfire damage in EU ................................................................... 93
Figure 24: Changes in grain maize yield from Climate Change impacts with irrigation......... 97
Figure 25: Changes in grain maize yield from Climate Change impacts without irrigation ... 97
Figure 26: Changes in wheat yield from climate change......................................................... 98
Figure 27: Development of major tree species in Europe until 2100..................................... 101
Figure 28: Global economic losses from natural disasters since 1950 .................................. 104
Figure 29: Insured and uninsured losses from catastrophes (billion US$ 2021) ................... 104
Figure 30: Direct economic costs and fatalities from climate-related events in the EU........ 105
Figure 31: Example of damage functions as used in Integrated Assessment Models............ 108
Figure 32: Benefit-cost ratios for the Cost-benefit analysis.................................................. 108
Figure 33: End of century damages for the five macro-regions for two scenarios ................ 109
Figure 34: EU GDP losses under SSP1-1.9 (RCP1.9) and SSP3-7.0 (RCP7.0) (2020-2060)113
Figure 35: EU GDP losses from climate hazards under different SSPs................................. 114
Figure 36: GDP losses by 2100 under the SSP1-1.9 and SSP3-7.0 pathways....................... 115
124
TABLE OF TABLES
Table 1: Models from the main modelling suite for GHG pathways......................................... 8
Table 2: Main common legislative elements considered in all scenarios ................................ 32
Table 3: Key features of the LIFE scenario ............................................................................. 39
Table 4. Carbon values applied on emissions in the different sectors (excl. LULUCF).......... 43
Table 5. Main carbon value applied for LULUCF................................................................... 43
Table 6: Changes in the global surface temperature relative to 1850-1900 for different RCPs
.................................................................................................................................................. 49
Table 7: Examples of climate related damage functions........................................................ 117


EN EN
EUROPEAN
COMMISSION
Strasbourg, 6.2.2024
SWD(2024) 63 final
PART 1/5
COMMISSION STAFF WORKING DOCUMENT
IMPACT ASSESSMENT REPORT
Part 1
Accompanying the document
COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN
PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL
COMMITTEE AND THE COMMITTEE OF THE REGIONS
Securing our future
Europe's 2040 climate target and path to climate neutrality by 2050 building a
sustainable, just and prosperous society
{COM(2024) 63 final} - {SEC(2024) 64 final} - {SWD(2024) 64 final}
Offentligt
KOM (2024) 0063 - SWD-dokument
Europaudvalget 2024
1
Table of contents
1.1 LEGAL OBLIGATION AND APPROACH...............................................................................................................................7
1.2 CLIMATE CHANGE AND COST OF INACTION ......................................................................................................................8
1.3 INTERNATIONAL CONTEXT .........................................................................................................................................10
1.4 EXISTING EU POLICY FRAMEWORK ..............................................................................................................................11
1.4.1 Progress towards the 2030 climate target................................................................................................11
1.4.2 The “Fit for 55” package and the European Green Deal...........................................................................13
3.1 LEGAL BASIS ...........................................................................................................................................................16
3.2 SUBSIDIARITY: NECESSITY OF EU ACTION......................................................................................................................16
3.3 SUBSIDIARITY: ADDED VALUE OF EU ACTION.................................................................................................................16
4.1 GENERAL OBJECTIVE.................................................................................................................................................17
4.2 SPECIFIC OBJECTIVES ................................................................................................................................................18
4.3 INTERVENTION LOGIC ...............................................................................................................................................21
5.1 CURRENT POLICY FRAMEWORK...................................................................................................................................22
5.1.1 The Climate Law and the Fit-for-55 package ............................................................................................22
5.1.2 What would happen to the net GHGs emissions by 2040 with a continuation of the current policy
framework?.............................................................................................................................................................22
5.1.3 Approach for the assessment of the 2040 climate target.........................................................................24
5.2 TARGET OPTIONS.....................................................................................................................................................25
5.2.1 Discarded target levels..............................................................................................................................26
5.2.2 Considered target levels............................................................................................................................26
5.2.3 Emission profiles and cumulative GHG emissions under the different target options..............................27
5.3 THE POLICY SCENARIOS BEHIND THE TARGET OPTIONS ()..................................................................................................28
5.3.1 Scenarios S1, S2 and S3.............................................................................................................................29
5.3.2 LIFE – more sustainable lifestyles..............................................................................................................30
6.1 GHG EMISSIONS .....................................................................................................................................................34
6.1.1 Net GHG emissions....................................................................................................................................34
6.1.2 Carbon capture and carbon removals.......................................................................................................37
6.1.3 GHG emissions in the LIFE sensitivity case ................................................................................................39
6.2 EVOLUTION OF THE ENERGY SYSTEM AND ASSOCIATED RAW MATERIAL NEEDS......................................................................40
6.2.1 The energy system ....................................................................................................................................40
6.2.2 Raw materials needs.................................................................................................................................46
6.3 ENVIRONMENTAL AND HEALTH IMPACTS ......................................................................................................................47
6.3.1 Benefits of climate change mitigation ......................................................................................................47
6.3.2 Health impacts..........................................................................................................................................48
6.3.3 Environmental impacts .............................................................................................................................50
6.4 THE SOCIO-ECONOMIC IMPLICATIONS OF MITIGATION ()..................................................................................................51
6.4.1 Macro-economic impacts..........................................................................................................................51
6.4.2 Investment needs......................................................................................................................................55
6.4.3 Energy system costs and other mitigation costs.......................................................................................59
6.4.4 Social impacts and just transition .............................................................................................................65
7.1 EFFECTIVENESS .......................................................................................................................................................71
7.1.1 Specific objectives .....................................................................................................................................71
7.1.2 Financial and technological feasibility ......................................................................................................74
7.2 EFFICIENCY.............................................................................................................................................................79
7.3 COHERENCE ...........................................................................................................................................................80
7.4 SUBSIDIARITY..........................................................................................................................................................81
7.5 PROPORTIONALITY...................................................................................................................................................82
7.6 SUMMARY .............................................................................................................................................................83
2.1. OVERVIEW OF RESPONSES ....................................................................................................................................96
2.2. METHODOLOGICAL APPROACH AND CAMPAIGN IDENTIFICATION...................................................................................98
2
2.3. RESULTS FROM THE GENERAL SECTION OF THE QUESTIONNAIRE....................................................................................98
2.4. RESULTS FROM THE EXPERT SECTION OF THE QUESTIONNAIRE ................................................................................... 102
3.1. OVERVIEW OF POSITION PAPERS ......................................................................................................................... 104
3.2. METHODOLOGICAL APPROACH ........................................................................................................................... 105
3.3. FOCUS ON POSITION PAPERS RECEIVED FROM PUBLIC AUTHORITIES ............................................................................ 105
4.1. RESULTS FROM THE ANALYSIS OF POSITION PAPERS................................................................................................. 107
STEP 1/4: IDENTIFICATION OF AFFECTED BUSINESSES ............................................................................................................ 117
STEP 2/4: CONSULTATION OF SME STAKEHOLDERS ............................................................................................................. 120
STEP 3/4: ASSESSMENT OF THE IMPACT ON SMES............................................................................................................... 121
STEP 4/4: MINIMISING NEGATIVE IMPACTS ON SMES .......................................................................................................... 125
3
Glossary
Term or acronym Meaning or definition
AFOLU
Agriculture, Forestry and Other Land Use, i.e., IPCC sectors 3 (Agriculture) and 4 (LULUCF) combined. The
term ‘land sector’ is used as synonym.
BECCS Bioenergy with Carbon Capture and Storage
BioCCS
Carbon capture and storage of biogenic CO2 emissions originated from the combustion of biomass to produce
energy (BECCS) or from the processing of biomass in industrial applications
Biogenic carbon Carbon Dioxide resulting from upgrade of biogas to biomethane
CAP EU’s common agricultural policy
Carbon capture CO2 captured from industrial processes, power and heat production, biogas upgrade and direct air capture.
Carbon Pool
means the whole or part of a biogeochemical feature or system within the territory of a Member State and within
which carbon, any precursor to a greenhouse gas containing carbon, or any greenhouse gas containing carbon is
stored
CBAM Carbon Border Adjustment Mechanism
CCS Carbon Capture and Storage (permanently underground and in materials)
CCU Carbon capture and usage
CH4 Methane
Circular Economy
A circular economy moves away from the conventional consumption model and aims to decouple economic
activity from the consumption of finite resources. Products, raw materials and resources are kept in circulation
through maintenance, recycling, reuse or refurbishment. Thereby the generation of waste is minimized.
CO2 Carbon dioxide
DACC Direct Air Carbon Capture. The carbon captured can be stored (DACCS) or used.
DACCS Direct Air Carbon Capture and Storage
EAF Electric Arc Furnace
E-fuels
Electro-fuels, manufactured using captured carbon dioxide or carbon monoxide. Note that e-fuels are not the
same as RFNBOs (see RFNBO definition in this glossary).
EJ Exajoule
ESABCC
European Scientific Advisory Board on Climate Change
ESABCC(2023). Scientific advice for the determination of an EU-wide 2040 climate target and a greenhouse gas
budget for 2030–2050. DOI: 10.2800/609405
ESR Effort Sharing Regulation
ETS Emissions Trading System
ETS1 Existing ETS extended to also include maritime shipping
ETS2 New ETS covering buildings, road transport and fuels for additional sectors
EUR Euro, unless specified otherwise, all monetary figures are expressed in constant 2023 prices (“EUR2023”)
FEC
Final Energy Consumption: the total energy consumed by end users, such as households, industry and agriculture.
It is the energy which reaches the final consumer’s door and excludes that which is used by the energy sector
itself
Fit-for-55 package
Package of legislation makes all sectors of the EU’s economy fit to meet the 2030 climate target of a reduction of
its net greenhouse gas emissions by at least 55% by 2030.
GAE
Gross Available Energy: the overall supply of energy for all activities of a country (defined as: Primary
production + Recovered & Recycled products + Imports – Export + Stock changes).
4
GHG Greenhouse gas(es)
GHG budget
Total volume of net greenhouse gas emissions that are expected to be emitted over a given period. The European
Climate Law refers to the 2030-2050 period.
Greenhouse gases
Greenhouse gases from the Kyoto Protocol: Carbon dioxide (CO2); Methane (CH4); Nitrous oxide (N2O);
Hydrofluorocarbons (HFCs); Perfluorocarbons (PFCs); Sulphur hexafluoride (SF6).
Gross Available
Energy (GAE)
Overall supply of energy for all activities of a country.
Gross GHG
emissions
Total GHG emissions excluding the contribution of industrial carbon removals and of net LULUCF removals.
HFCs Hydrofluorocarbons
ICE Internal Combustion Engine
Industrial Carbon
Management
Technologies, infrastructures, policies and business models for the capture of carbon dioxide (CO2), its transport,
storage, and utilisation as feedstock in industrial processes. The CO2 can be captured from process or energy
emissions of industrial installations, also referred as point source emissions, or directly from the atmosphere with
Direct Air Carbon Capture (DACC) installations.
Industrial Carbon
Removals
BECCS, DACCS and biogenic carbon
IPCC The Intergovernmental Panel on Climate Change
Land sector Synonym for AFOLU sector.
Lignocellulosic
Crops
Refers to a range of plants rich in cellulose, hemicelluloses, and lignin including wood from forestry, short
rotation coppice, such as willow and poplar, and energy crops, such as energy grasses and reeds. The latter is
produced to serve as biomass for the production of advanced / second-generation biofuels.
LNG Liquefied Natural Gas
LRF Linear Reduction Factors of the ETS
LULUCF Land Use, Land Use Change and Forestry
LULUCF net
removals
Aggregated emissions from and nature-based carbon removals in the LULUCF sector creates a net removal in the
EU, as the sector absorbs more greenhouse gases than it emits.
MACC
Marginal Abatement Cost Curve, which shows the marginal cost of additional reductions in greenhouse gas
emissions.
MFF Multiannual financial framework
Mha Million hectares
MIDAS Modelling Inventory and Knowledge Management System of the European Commission
MRV Monitoring, Reporting and Verification
N2O Nitrous oxide
Nature-based
removals
Nature-based removals are a collection of approaches using the potential of healthy ecosystems to both reduce
and remove emissions. They are either enhancing the ability of healthy ecosystems to sequester carbon dioxide by
making ecosystems more resilient whilst preserving or enhancing locally adapted biodiversity and the
ecosystems’ wide range of ecosystem services or restore a degraded ecosystem so that it no longer emits harmful
greenhouse gas emissions. Nature-based removals can be one of several functions of nature-based solutions.
Nature-based
solutions
Solutions that are inspired and supported by nature, which are cost-effective, simultaneously provide
environmental, social, and economic benefits and help build resilience. Such solutions bring more, and more
diverse, nature and natural features and processes into cities, landscapes, and seascapes, through locally adapted,
resource-efficient and systemic interventions. Nature-based solutions must therefore benefit biodiversity and
support the delivery of a range of ecosystem services.
NDC Nationally Determined Contribution
5
NECP
National Energy and Climate Plans. This analysis uses the NECPs as submitted in 2019 by the Member States
and analysed by the Commission in 2020. The current NECP update runs in parallel with the preparation of this
Impact Assessment and could not be taken into account.
PFCs Perfluorocarbons
RFNBO
“Renewable Fuels of Non-Biological Origin” are liquid or gaseous fuels, the energy content of which is derived
from renewable sources other than biomass. This term designates renewable hydrogen but also its derivatives
(e.g., e-fuels).
RRF Recovery and Resilience Facility
SDG Sustainable Development Goal
SF6 Sulphur hexafluoride
Sink / (carbon)
removal
Means any process, activity or mechanism that removes a greenhouse gas, an aerosol, or a precursor to a
greenhouse gas from the atmosphere via natural and technological solutions. It includes industrial carbon
removals and certain nature-based carbon removals that remove carbon dioxide from the atmosphere (CO2).
Source / emission
Means any process, activity or mechanism that releases a greenhouse gas, an aerosol or a precursor to a
greenhouse gas into the atmosphere
UNFCCC United Nations Framework Convention on Climate Change
6
References to policy documents
Policy document Reference
EU Biodiversity Strategy for 2030 COM/2020/380 final
2030 Climate Target Plan COM(2020) 562 final
CO2 standards for cars and vans Regulation (EU) 2023/851
Critical Raw Materials Act (proposal) COM(2023) 165 final
EU’s Long-Term Strategy – A Clean Planet for all A
European strategic long-term vision for a prosperous,
modern, competitive and climate neutral economy
COM (2018) 773 final
Complemented by: “In-depth analysis in support of the Commission
Communication COM(2018) 773”
ETS Directive Directive 2003/87/EC (amended by Directive (EU) 2023/958)
European Climate Law Regulation (EU) 2021/1119
Farm to Fork Strategy COM/2020/381 final
Fluorinated greenhouse gases Regulation (proposal) COM/2022/150 final
Governance Regulation
Regulation (EU) 2018/1999 on the Governance of the Energy Union
and Climate Action
Green paper for a 2030 framework for climate and
energy policies
COM(2013) 169 final
Greening Freight Transport package COM(2023) 440 final
Industrial Emissions Directive (proposal) COM(2022) 156 final/3
Net Zero Industry Act (proposal) COM(2023) 161 Final
Regulation of methane emissions reductions in the
energy sector (proposal)
COM/2021/805 final
Urban waste-water treatment Directive (proposal) COM(2022) 541 final
2023 State of the Energy Union Report COM(2023) 650 final
1 INTRODUCTION: POLITICAL AND LEGAL CONTEXT
1.1 Legal obligation and approach
This report accompanies a Communication on the EU climate target for 2040 in view of
implementing the European Climate Law, which enshrines in law the EU’s commitment
to become climate neutral by 2050 and the EU’s 2030 climate target to reduce net
greenhouse gas (GHG emissions) by at least 55% in 2030 relative to 1990. This initiative
does not aim at developing and committing on the post-2030 policy framework
implementing that 2040 climate target at this stage.
The Climate Law mandates the Commission to make a legislative proposal, as
appropriate, for a Union-wide 2040 climate target within 6 months of the global
stocktake under the Paris Agreement, which will be completed at the Conference of the
Parties in December 2023. The 2040 target will also inform the EU’s future post-2030
Nationally Determined Contribution (NDC) that all Parties must submit to the UNFCCC
by 2025 (under Article 4(9) of the Paris Agreement).
The Climate law also calls on the Commission, when making the proposal for the Union
2040 climate target, ‘at the same time, to publish in a separate report the projected
indicative Union greenhouse gas budget for the 2030-2050 period’ taking into account
the advice of the European Scientific Advisory Board on Climate Change (see box).
The European Scientific Advisory Board on Climate Change (ESABCC), set up
under the 2021 European Climate Law (article 3), serves as an independent point of
reference for the EU on the science of climate change. Its tasks include providing
scientific advice and issuing reports on existing and proposed Union measures, climate
targets and indicative greenhouse gas budgets. In June 2023, it published advice (1
)
recommending a 2040 target for the EU to reduce net GHG emissions in the range of
90-95% compared to 1990.
The “GHG budget” for the EU for 2030 to 2050 is defined in the Climate Law as the
total volume of EU net greenhouse gas emissions expected to be emitted in that period
(2
). It combines a “carbon” budget (cumulative CO2 emissions) with cumulative
emissions of non-CO2 GHGs (3
). The GHG budget is strongly dependent on the level of
net GHG emissions reached in 2040, as the intermediate point between 2030 and 2050,
and is used to assess the climate performance of the 2040 climate target and the fairness
of the EU’s contribution to global climate action (4
).
(1
) ESABCC (2023). Scientific advice for the determination of an EU-wide 2040 climate target and a
greenhouse gas budget for 2030–2050. DOI: 10.2800/609405.
(2
) European Climate Law, Article 4(4).
(3
) Non-CO2 GHG emissions defined in the Kyoto Protocol: CH4, N2O, SF6, PFCs and HFCs. They are
converted into “CO2 equivalent” using the global warming potential for a 100-year time horizon from the
IPCC Fifth Assessment Report (“AR5”).
(4
) According to the IPCC, given the nearly linear relationship between cumulative CO2 emissions and
increases in global surface temperature, cumulative CO2 emissions are relevant for understanding how past
and future CO2 emissions affect global surface temperature. IPCC Sixth Assessment report (AR6),
Working Group 1 “The physical science”, Technical summary, Table TS.3 | Estimates of remaining carbon
budgets and their uncertainties.
8
This impact assessment thus assesses different levels of net GHG emissions in 2040 and
the associated sectoral pathways bridging 2030 to climate neutrality by 2050. It does not
assess the post-2030 energy and climate policy framework, to be developed at a later
stage.
The assessment of the 2040 climate target will largely be determined by two main
dimensions: on the one hand the GHG budget measuring the climate performance of the
target and the fairness of the contribution of the EU to the global climate agenda and, on
the other hand feasibility, including costs, technological deployment and trade-offs.
1.2 Climate change and cost of inaction
Climate change will remain the defining challenge of the coming decades, shaping the
future of the global society and economy through its impacts and our response. The
harmful impacts of global warming are increasing in scale and frequency, with
devastating effects on people, nature, and economic systems across the globe. Droughts,
heatwaves, floods, wildfires and storms are becoming more frequent and severe,
impacting wider areas and hurting more people, businesses, critical infrastructure,
ecosystems, and affecting our ability to sustain prosperity and stability in the long run.
This is happening alongside interrelated challenges of biodiversity loss and natural
resource depletion, unsustainable use of natural resources, including water, raw
materials, and land, increasing the risk of crossing further planetary boundaries (5
)(6
) and
decreasing the stability and resilience of natural and human systems. This reduces their
capacity to both mitigate and adapt to climate change and leads to further negative
impacts.
As recently confirmed by the work of the Intergovernmental Panel on Climate Change
(IPCC) (7
), the scientific evidence is unequivocal: emissions of greenhouse gases (GHG)
from human activities are at the root of global warming observed since at least the 1950s.
The scale of changes in the climate system is already unprecedented, but with every
additional increase in warming, the risks for society and nature will increase and become
more difficult to manage. The last eight years have been the warmest on record at global
level and 2023 was the warmest year with several regions of the globe seeing record-
(5
) A safe operating space for societies is defined by planetary boundaries to man-made perturbation of
nine critical Earth-system processes: climate change, ocean acidification, stratospheric ozone, global
phosphorus and nitrogen cycles, atmospheric aerosol loading, freshwater use, land use change, biodiversity
loss, and chemical pollution. Crossing such boundaries can lead to catastrophic impacts for societies. See
Rockström J. et al., Planetary boundaries: Exploring the safe operating space for humanity. Ecol. Soc. 14,
32 (2009). http://www.ecologyandsociety.org/vol14/iss2/art32/
(6
) Richardson, Katherine, Will Steffen, Wolfgang Lucht, Jørgen Bendtsen, Sarah E. Cornell, Jonathan F.
Donges, Markus Drüke et al. "Earth beyond six of nine planetary boundaries." Science Advances 9, no. 37
(2023): eadh2458.
(7
) IPCC, 2023: Sections. In: Climate Change 2023: Synthesis Report. Contribution of Working Groups I,
II and III to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change [Core Writing
Team, H. Lee and J. Romero (eds.)]. IPCC, Geneva, Switzerland, pp. 35-115, doi: 10.59327/IPCC/AR6-
9789291691647
9
breaking temperatures (8
). Globally, the year 2023 was 1.48o
C warmer than the pre-
industrial level9
. According to the World Meteorological Organization (10
), Europe is
warming twice as fast as the global average, with annual average temperature reaching
2.3°C above pre-industrial (1850-1900) average in 2022, compared to the global average
of 1.15°C.
With current NDCs and policies, the world is not on track to meet the Paris Agreement
objectives of limiting the temperature increase to well below 2°C above pre-industrial
levels and pursuing efforts to limit the temperature increase to 1.5°C above pre-industrial
levels. Exceeding this threshold will result in additional adverse impacts, some of which
will be irreversible, and further constrain our adaptation options. Accelerated action is
essential to avoid the worst impacts of climate change and requires deep, rapid and
sustained greenhouse gas emissions reductions in all sectors and regions, while stepping
up adaptation efforts (11
).
The experienced cost of climate change is continuously increasing, and with increasing
global warming, the impacts are expected to become even more severe and widespread in
the coming decades. Without urgent climate action globally, several parts of the climate
system are increasingly likely to reach irreversible tipping points, with devastating
consequences, leading to uncharted and high-risk conditions for human and natural
systems. Heatwaves, floods, wildfires, and other climate-related factors are already
adversely affecting human health and well-being. All countries and regions are
concerned, but least developed regions and low-income population groups are
particularly exposed and vulnerable to climate change.
It is estimated that global damages from climate change could reach 10-12% of GDP by
the end of the century. However, such estimates are conservative, since they do not
include the wider impacts on society and natural systems, notably in the most exposed
countries and regions, with likely knock-on regional or global effects on geo-political
stability and security. In addition, given the difficulty in doing so, most economic
analyses do not represent the impacts of crossing climate tipping points, which are
increasingly likely with every incremental increase in global warming, and which will
significantly impact the global economy. Looking forwards, the cost of unmitigated
climate change will greatly exceed the cost of reducing GHG emissions, both in
magnitude and extent. A growing number of analyses and estimates point to the high
costs already incurred now by our economies due to floods, droughts, heatwaves and
other climate change related events. And this is without taking into account the human
suffering caused by these events.
(8
) European State of the Climate 2022 | Copernicus
(9
) https://climate.copernicus.eu/global-climate-highlights-2023
(10
) World Meteorological Organization, 2023. State of the Climate in Europe. WMO-No. 1320.
(11
) IPCC. AR6 Synthesis Report: Climate Change 2023; AR6 Climate Change 2022: Impacts, Adaptation
and Vulnerability; AR6 Climate Change 2022: Mitigation of Climate Change; AR6 Climate Change 2022:
The Physical Science Basis.
10
1.3 International context
The urgent need for stronger action to tackle climate change comes at a time of multiple
global crises. The COVID-19 pandemic severely hit the global economy, especially in
2020, and resulted in temporary GHG emissions reductions in the EU and across the
globe. Global emissions rebounded in 2021-2022 and reached a new high in 202212
.
Globally, the longer lasting impacts of the pandemic, including increases in extreme
poverty, gender and social inequality, and impacts on health exacerbate vulnerability to
climate change and lead to compound impacts. With the Fit-for-55 package, REPower
EU, NextGenerationEU and the Multiannual Financial Framework for 2021-2027, the
EU has developed a collective response to the economic crisis caused by the pandemic
that allows it to continue to drive the twin green and digital transition.
The pandemic has also revealed global supply chain vulnerabilities. Increasing geo-
economic and geopolitical tensions, together with Russia’s illegal, unprovoked, and
unjustified war of aggression against Ukraine, are further impacting global trade and
investment flows, increasing the risk of trade restrictions and supply chain disruptions.
These developments highlight the vulnerability that can result from dependencies in
strategically important sectors, including access to critical raw materials, which are
necessary for the twin transition (13
). As other countries grasp the strategic importance of
decarbonising their economies, there is intense competition for the materials, skills,
technologies and investments needed to secure essential supply chains and for a share of
the global market of the products and services of the future.
As a response, Europe is taking necessary steps towards open strategic autonomy to
protect its strategic interests and collective security, and to strengthen the resilience of its
supply chains to external shocks, including through stronger international cooperation
with likeminded third countries and the proposed Net Zero Industry Act and European
Critical Raw Materials Act. The EU is investing in European industrial capacity to
manufacture net-zero technologies and in deploying these technologies to meet the EU’s
2050 climate objective.
The high energy prices and geopolitical tensions following Russia’s military aggression
against Ukraine have exacerbated the need for the EU to ensure its energy security and
robustness of its supply chains for raw materials and net-zero technologies. This has
highlighted the economic and strategic vulnerabilities that come with dependence on
fossil fuels, the main drivers of climate change. The energy crisis brought about by the
war has made very clear the need to step up the transition to clean energy, energy
(12
) Total GHG emissions (without LULUCF) reached 53.8 GtCO2-eq in 2022. See JRC EDGAR database
and report: GHG emissions of all world countries, Publications Office of the European Union,
Luxembourg, 2023, doi:10.2760/953322, JRC134504.
(13
) 2023 Strategic Foresight Report: Sustainability and people's wellbeing at the heart of Europe's Open
Strategic Autonomy.
11
efficiency and climate neutrality in the EU and globally (14
) whilst avoiding the creation
of new strategic dependencies.
The EU has intensified its Climate and Energy Diplomacy, guided by regular Council
Conclusions from the EU Foreign Affairs and Environment ministers. The 2022 EU
external energy engagement strategy as part of the REPowerEU Plan has been
strengthened, outlining how the EU supports a global, clean, and just energy transition to
ensure sustainable, secure and affordable energy. Meanwhile, however, in 2022 subsidies
for fossil-fuel consumption reached a record $7 trillion globally (7.1% of world GDP)
(15
).
In December 2023 at COP28, the first Global Stocktake (GST) will assess (16
) the
progress towards the goals of the Paris Agreement.
1.4 Existing EU policy framework
1.4.1 Progress towards the 2030 climate target
Over the past decades, the EU has developed and regularly updated a comprehensive set
of climate, energy, and other relevant enabling policies that have allowed a decoupling of
economic activity from GHG emissions (Figure 1) and spurred the development of clean
energy (17
).
Figure 1: GHG emissions and GDP development in the EU since 1990
Source: GHG from EEA GHG data viewer (extracted 20/6/2023), GDP in real terms from AMECO and WB
(14
) State of the Energy Union 2022. Report from the Commission to the European Parliament, the Council,
the European Economic and Social Committee and the Committee of the Regions.
(15
) Black, Simon, Antung Liu, Ian Parry, and Nate Vernon (2023). “IMF Fossil Fuel Subsidies Data: 2023
Update.” Working paper, IMF, Washington, DC.
(16
) [Placeholder for GST conclusions]
(17
) Annex 10 provides a summary of the evolution of GHG emissions under the different climate
legislation instruments and of the energy system. A more detailed analysis can be found in the Climate
Action Progress Report (GHG emissions) and in the State of the Energy Union Report (energy).
67
-32
-40
-20
0
20
40
60
80
1990 1992 1994 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
%
vs
1990
GDP GHG emissions
12
Provisional data (18
) for 2022 show that total EU net GHG emissions decreased by
around 3% compared to 2021, whilst EU GDP grew by 3.5%. 2022 emissions therefore
continued their descending trend with reductions compared to 2019 of 5.6%. Emissions
covered by the current ETS reduced by 0.2% compared to 2021 (and are 8% below the
2019 pre-COVID and pre-war level) while emissions under the ESR, decreased by 2.9%.
Net removals from the Land Use, Land-use Change and Forestry (LULUCF) sector show
a break In their recent declining trend, with an expected increase in carbon sinks of 6%
compared to 2021.
Exceptional events over the last 3 to 4 years have made the assessment of GHG emission
trends more complex and continue to have an impact on 2022 emissions. The COVID-19
lockdowns and restrictions led to an unprecedented but temporary drop in GHG
emissions of 8% in 2020. In 2021, the economic recovery affected regions and sectors
differently. Some sectors, such as the transport sector and travel-related emissions,
recovered fully only in 2022. The energy crisis that started in 2021 continued in 2022,
exacerbated by Russia’s unprovoked and unjustified invasion of Ukraine, which drove
energy prices to record highs, particularly gas prices.
Overall, the EU’s domestic GHG net emissions are on a clear downward path, falling
steadily over the last 5 years. The transformation of the energy sector has been the main
driver of the decarbonisation of the EU economy over the last decades, through
improvement of the energy intensity of the economic activity and decarbonisation of the
energy mix (19
).
Still, in view of meeting the 2030 climate target, the pace of emission reductions will
need to pick up and almost triple the average annual reduction achieved over the last
decade. Relative to past mitigation efforts, the most significant cuts in emissions are
needed in buildings and transport, where the pace of decarbonisation has remained
sluggish or even moving in the opposite direction. At the same time, action in the
LULUCF sector is essential to enhance carbon removals. Although reaching the
emissions cuts required from agriculture looks achievable when looking at the evolution
over the past three decades, the lack of substantial progress in recent years is a concern,
calling for a gear change. (20
)
The energy crisis highlighted how dependence on imported fossil fuels makes Europe
vulnerable to geopolitical threats. The EU responded collectively and effectively to
Russia’s weaponisation of its energy supplies. A series of emergency legislative
measures ensured that Europe avoided major energy supply disruptions and is now better
prepared. However, deeper structural changes are needed to mitigate Europe’s
(18
) The Governance Regulation ((EU) 2018/1999) requires Member States to report approximated GHG
inventories annually by 31 July. Based on this reported data, the EEA compiles a Union approximated
GHG inventory or, if a Member State has not communicated its approximated GHG emissions by that date,
on the basis of EEA’s own estimates. This provides an early estimate of GHG emissions ahead of the full
GHG inventory.
(19
) Climate Action Progress Report 2023 accompanying SWD. Section 3.2
(20
) Climate Action Progress Report 2023
13
vulnerability. The EU needs to accelerate the energy transition to ensure affordable,
reliable access to energy for households and businesses.
The “Fit for 55” package sets the EU on a path to reach its climate targets in a fair, cost-
effective, and competitive way. Most of the key proposals in the package have been
adopted by co-legislators and EU policies are now aligned with the updated 2030 target
set in the European Climate Law. Implementing the new legislation under the Fit for 55
package will enable the EU and its Member States to reduce net GHG emissions by at
least 55% compared to 1990 levels by 2030 (21
).
1.4.2 The “Fit for 55” package and the European Green Deal
The European Climate Law enshrines the EU’s commitment to become climate neutral
by 2050 in law, providing a clear direction of travel for the transition. It expresses the
EU’s commitment to reduce net GHG emissions by at least 55% in 2030 relative to 1990,
as the EU contribution to achieving the Paris Agreement goals. An essential part of the
European Green Deal, the ‘Fit for 55’ legislative package provided the policy framework
to meet the 2030 climate target, ensuring a just and socially fair transition, while
strengthening innovation and preserving the competitiveness of EU industry (22
).
The Fit-for-55 package includes the following adopted or agreed proposals: reform of
the EU Emissions Trading System (ETS) and the Market Stability Reserve (MSR); a
new, self-standing ETS for buildings, road transport and fuels for additional sectors
(ETS2); revised Effort Sharing Regulation (ESR); the Carbon Border Adjustment
Mechanism (CBAM); the Social Climate Fund (SCF); a revised Land Use, Land-Use
Change and Forestry (LULUCF) Regulation; updated CO2 emission standards for cars
and vans; the Alternative Fuel Infrastructure Regulation (AFIR); FuelEU Maritime;
ReFuelEU Aviation; the Energy Efficiency Directive (EED); Renewable Energy
Directive (RED); the Regulation on methane emissions reduction in the energy sector;
and the associated revision of the Regulation on Fluorinated Greenhouse Gases.
The Fit-for-55 and associated proposals that are still under negotiation with the co-
legislators at the time of drafting this report are: the Energy Performance of Buildings
Directive (EPBD); the Hydrogen and decarbonised gas market package; the proposal for
a revised Energy Taxation Directive; and the revision of the Regulation on CO2 emission
standards for heavy-duty vehicles.
(21
) The legislation as adopted is estimated to result in a net domestic reduction of GHG emissions of 57%
by 2030 compared to 1990. An overview of targets is presented in Chapter 1 of the staff working document
– ‘Technical information’ accompanying the Climate Action Progress Report 2023.
(22
) This ambition has been mirrored by the EU’s closest neighbours (Western Balkans, Moldova, Ukraine
and Georgia) through the adoption of the 2030 climate targets, in line with the clean energy package, in the
framework of the Energy Community Initiative.
14
REPowerEU plan, the EU’s reply to the energy crisis derived from Russia’s military
aggression against Ukraine, stepped up EU’s renewable energy and energy efficiency
ambitions. Renewables and energy efficiency measures reduce both emissions and
dependency on imported fuels: there is no contradiction between the Green Deal and
REPowerEU. The forthcoming final updates of the National Energy and Climate Plans,
to be submitted in June 2024, will also be a key instrument for Member States and the
EU to achieve the 2030 climate target.
The EU enabling framework to support the transition to climate neutrality has been
expanding. The EU Emissions Trading System (ETS) reduces emissions and generated
more than EUR 150 billion in auction revenues (23
), which Member States are to use to
support climate action. At least 30% of the EU’s multiannual financial framework’ for
2021-2027 and of NextGenerationEU (potentially, over EUR 670 billion) are to be spent
on climate related investments. Increasing provisions to address the needs of the most
vulnerable include the Just Transition Fund for the most affected territories that must
cease fossil-fuel related activities, transform and restructure carbon-intensive industries,
and invest in future-proof jobs opportunities and training. The Social Climate Fund
supports social cohesion and will mobilise EUR 86.7 billion from 2026 to 2032 using
revenues from the ETS2, alongside the Modernisation Fund that supports clean energy
investments in lower-income Member States and the Innovation Fund, one of the world’s
largest funds for the demonstration of innovative net-zero technologies, with revenues
from the EU ETS.
The Green Deal Industrial Plan accelerates the transition to climate neutrality by
reinforcing European industry’s lead in the supply of clean technologies and products
while ensuring global cooperation and making trade work for the green transition. It
promotes a simpler and predictable framework for the skills and access to finance needed
for the transition. This includes making best use of the Innovation Fund, simplified
granting of State aid to accelerate the transition (24
), the Net Zero Industry Act to
strengthen and scale-up European manufacturing capacity for net-zero technologies and
the Critical Raw Materials Act to ensure a secured and sustainable supply of raw
materials important for the green and digital transition.
As a follow-up to the Farm to Fork Strategy and the Biodiversity Strategy for 2030, the
EU has also made several proposals to enhance nature-based solutions that can mitigate
climate change and enhance ecosystems’ resilience to climate change. Relevant
legislative and policy proposals include the Carbon Removal Certification Framework,
the Nature Restoration Law, the Circular Economy Action Plan, the Framework for
Sustainable Food Systems, and the Soil Monitoring Law.
(23
) Revenues from the ETS calculated in the period 2012-2022 and until 31 August 2023 (COM(2019) 557
final/2, COM(2020) 740 final, SWD(2021) 308 final, and EEX for most recent data).
(24
) There are possibilities for simplified granting of State aid under the Temporary Crisis and Transition
Framework and the recently revised General Block Exemption Regulation. While State aid can help
incentivise and accelerate the green transition by supporting relevant initiatives, it needs to comply with the
applicable rules, which foresee among others, that it should be limited to the minimum amount necessary
and that it should address situations where State intervention is needed, e.g. due to the presence of market
failures.
15
This comprehensive framework should enable the EU to meet its commitments under the
Paris Agreement. In doing so, it provides an important example to encourage other
Parties to the United Nations Framework Convention on Climate Change (UNFCCC) to
take more ambitious commitments and put in place the measures needed to implement
these, driving the global transition to climate neutrality.
2 PROBLEM DEFINITION
The core problem this initiative aims to tackle is the absence of an EU-wide, economy-
wide ambition level for 2040, in terms of net greenhouse gas emission reduction, as an
interim target to climate neutrality in 2050.
An intermediate climate target for 2040 needs to be set to provide much needed
predictability for Member States, stakeholders, investors, and EU decision makers for the
decisions needed to achieve climate neutrality by 2050, including decisions taken in the
coming years to meet the EU’s 2030 target.
As set out in section 1.4 above, the EU needs to step up the existing pace of emissions
reductions across all sectors to meet its 2030 target. The ‘Fit-for-55” legislation’ adopted
in 2023 allows the EU to exceed the -55% reduction by 2030, when fully implemented,
but requires a focus on implementation, including through the updated NECPs that
Member States will submit to the Commission in June 2024.
Many decisions taken now by the EU, Member States and other actors have implications
for EU greenhouse gas emissions that extend well beyond 2030.
This need for certainty is set out in the European Climate Law, which calls on the
Commission to come forward with a proposal for a 2040 climate target within six months
of the global stocktake. Implementation of the Climate Law requires an intermediate
2040 climate target to set the pace for EU-wide reductions of net GHG emissions over
2030-2050.
The 2040 climate target will provide essential information to allow the definition in the
coming years of the future climate, energy, and wider enabling framework, to meet the
2040 target. The post-2030 policy framework will be designed during the next
Commission mandate (25
).
Finally, a 2040 target is needed that reflects the scale of the global challenge and that
ensures that the EU continues to lead by example to push ambitious global action.
Limiting global warming to the Paris Agreement temperature target of 1.5o
C requires
GHG emissions to be at net zero globally by the early 2050s (26
). The remaining global
(25
) The approach of first agreeing the ambition level and then the policy framework to implement the
target was also used in previous cycles to set the 2020 and 2030 climate and energy targets.
(26
) IPCC, 2023: Summary for Policymakers. In: Climate Change 2023: Synthesis Report. Contribution of
Working Groups I, II and III to the Sixth Assessment Report of the Intergovernmental Panel on Climate
Change [Core Writing Team, H. Lee and J. Romero (eds.)]. IPCC, Geneva, Switzerland, pp. 1-34, doi:
10.59327/IPCC/AR6-9789291691647.001
16
carbon budget compatible with this objective, estimated at 500 GtCO2 (27
) from the start
of 2020, is being depleted at a rate of above 40 GtCO2 per year (28
). As global climate
action is delayed and GHGs continue to accumulate in the atmosphere, climate change is
accelerating and the risk of reaching irreversible tipping points in the climate system,
with unknown and potentially catastrophic consequences for humans and ecosystems, is
increasing.
The adoption of a 2040 climate target is needed for the definition of the new NDC that
the EU will submit the UNFCCC by 2025 as required under the Paris Agreement. Its
absence would compromise the EU’s contribution to the global climate agenda at a
moment when new momentum for global climate action is urgently needed.
3 WHY SHOULD THE EU ACT?
3.1 Legal basis
According to Article 11 of the Treaty on the Functioning of the European Union (TFEU),
environmental protection requirements must be integrated into the Unio’'s policies and
activities, in particular with a view to promoting sustainable development. Articles 191 to
193 of TFEU further clarify that Union policy shall preserve, protect, and improve the
quality of the environment; protect human health; and promote measures at the
international level to deal with regional or worldwide environmental problems. Article
191 cites climate change as an example of this type of problem. This initiative responds
to the legal requirement under the European Climate Law Article 4(3), which calls on the
Commission to make a legislative proposal, as appropriate, for a Union-wide 2040
climate target within 6 months of the global stocktake referred to in Article 14 of the
Paris Agreement (29
).
3.2 Subsidiarity: Necessity of EU action
Climate change is a trans-boundary problem. For trans-boundary problems, individual
action is unlikely to lead to optimal outcomes. Instead, coordinated EU action can
effectively supplement and reinforce national and local action. Coordination at the
European level enhances the effectiveness of climate action. EU action is justified on
grounds of subsidiarity in line with Article 191 of the Treaty on the Functioning of the
European Union.
3.3 Subsidiarity: Added value of EU action
A Union-wide climate target for 2040 will have implications across the entire EU
economy. It is needed to guide a wide range of EU policies and will require EU level
policy responses, beyond climate policy. The impacts on economic activity, employment,
(27
) with 50% likelihood of limiting global warming to 1.5 degrees
(28
) Forster, P. M., et al. (2023). Indicators of Global Climate Change 2022: annual update of large-scale
indicators of the state of the climate system and human influence, Earth Syst. Sci. Data, 15, 2295–2327,
https://doi.org/10.5194/essd-15-2295-2023.
(29
) The first global stocktake taking place end of 2023.
17
cohesion, environment, energy, transport, food security, health, affordability,
distributional effects, trade, and international relations are policy areas better considered
at EU level.
Coordinated EU policies and support measures have a much bigger chance of leading to
a true transformation via 2040 and towards EU climate neutrality by 2050. Through
coordinated action it will be possible to take the different capabilities of Member States
and regions to act into account and to use the power of the EU single market as a driver
for cost-efficient change.
Coordinated climate action at EU level is also of importance for international climate
action. Since 1992, the EU has worked to develop joint solutions and push for a global
agreement to fight climate change. These efforts helped to reach the Paris Agreement in
2015. International climate policy and climate diplomacy are stronger due to climate
policy coordination at EU level, even more crucial in a world in which the EU accounts
for only around 7% of global GHG emissions (30
). The assessment of pathways for
setting a Union-wide climate target for 2040 will be a powerful example for the EU’s
closest neighbours and international community. It is also a necessary step for
determining the EU’s Nationally Determined Contribution under the Paris Agreement to
be communicated in 2025. Without it, the EU and its Member States risk undermining
their capacity to stimulate climate action at the global level.
4 OBJECTIVES: WHAT IS TO BE ACHIEVED?
4.1 General objective
The general objective of this initiative is to propose a Union-wide, economy-wide GHG
target for 2040 that will put the EU on an effective, cost-efficient, and just trajectory
towards climate neutrality by 2050, as called for under the European Climate Law.
What is not an objective of this initiative and Impact Assessment?
This initiative does not:
o Evaluate the suitability or coherence of the existing 2030 energy and climate
policy framework (for an overview see Section 1.4) for the period 2031-2040;
o Develop a new post-2030 energy and climate policy framework to implement the
2040 GHG ambition level.
The objectives of this initiative are more like those of the 2013 Green paper for a 2030
framework for climate and energy policies or the EU’s 2018 Long Term Strategy than
like the 2030 Climate Target Plan of September 2020, as the latter already outlined
possible updates of the then existing framework for 2030.
(30
) Data for year 2021, excluding international shipping and aviation. Source: EDGAR
18
4.2 Specific objectives
The adoption of a GHG target for 2040 aims at ensuring that the EU achieves its climate
neutrality target in 2050 while respecting its other long-term priorities. The analysis in
this impact assessment will evaluate the different target options according to their ability
to deliver on the following seven specific objectives.
SO1: Ensure that climate neutrality is delivered
Reaching the emissions reduction target of 2030 will largely happen through fast
emission reductions in sectors with low abatement costs, such as power generation.
Beyond this date, the contribution of hard-to-abate sectors (e.g., transport, some
industrial processes) to the mitigation effort must significantly increase. Some sectors,
such as agriculture and air travel, will not be able to cut their GHG emissions to zero in
the coming decades, because they deliver goods and services that can only be partially
substituted or there are inherent limits to the GHG mitigation options available to them.
Science is clear that large amounts of compensating “negative” emissions (“carbon
removals”) will be needed in the EU and globally by the second half of the century (31
) to
meet the goals of the Paris Agreement, and, after 2050, the EU economy should generate
net negative emissions (32
).
This specific objective thus relates to the degree to which a given 2040 target level
entails GHG abatement in the different sectors, including through the contribution of
carbon removals, already in the first decade 2031-2040 to avoid delaying such actions to
the last decade, which would jeopardize reaching the objective of climate neutrality by
2050.
SO2: Minimise the EU’s GHG budget
According to IPCC AR6 report there is a near-linear relationship between cumulative
anthropogenic CO2 emissions and the global warming they cause. The remaining global
“carbon budget” (i.e., the cumulative CO2 emissions) corresponding to the Paris
Agreement temperature goals is decreasing every year (see Annex 14).
The Climate Law refers to the “GHG budget” as the cumulative net GHG emissions over
2030-2050, which is used in this impact assessment to measure the climate performance
of the different 2040 target options and the corresponding contribution of the EU to the
global climate agenda.
SO3: Ensure that the transition is just
The transition towards climate neutrality will need to be socially just and fair in order to
succeed.
The pace of action will have important implications for households, as consumers,
investors, and workers. Economic and social inequalities mean that many households do
not have the resources or incentives to make the necessary investments in low-carbon
(31
) IPCC (2018). Special Report on 1.5°C. Frequently Asked Questions Chapter 4 (FAQ 4.2).
(32
) European Climate Law, article 2
19
goods (e.g., electric vehicles, building renovations) that would allow them to reduce their
energy costs and GHG emissions without measures to support action. Achieving climate
neutrality will lead to the disappearance of jobs in fossil fuel extraction and GHG-
intensive sectors, but also to the diversification of existing sectors and jobs and the
emergence of new ones. The level of ambition for 2040 affects the investments that need
to be made already before 2030, for example in manufacturing capacity of net-zero
technologies, in building renovations, and in servicing of net zero equipment, which all
require additional skilled workers.
Determining the ambition level for 2040 has implications for planning and funding of
social, redistributive, education, training, and employment policies, and can serve as an
opportunity to address social and employment inequalities.
SO 4: Ensure that the long-term competitiveness of the EU economy is maintained
The transition to climate neutrality will engender deep economic transformations that
have important implications for the competitiveness of the EU economy. Some historical
European industries, such as car manufacturing and energy intensive manufacturing, will
have to invest in new low-carbon production processes and products. The transition will
also lead to investment in innovations that drive productivity and competitiveness.
The EU’s partners and other key players have understood the strategic importance of
investing in the industries and technologies needed for the transition to climate neutrality
(33
). The global demand for materials, skilled people, technologies, and investments in
clean industries will increase steadily as other major economies embark on the climate
transition. There is strong competition to seize market shares and first-mover advantages
(34
) in the growing global market clean products and services. The post-2030 policy
framework will need to build on the Green Deal Industrial Plan and the Net-Zero
Industry Act.
SO 5: Provide predictability for the deployment of best-available, cost-effective, and
scalable technologies
Climate neutrality by 2050 and negative net emissions after 2050 hinge on the very
important deployment of several climate-neutral technologies that are not currently
deployed at scale. The faster these become affordable for companies and households, the
easier the path to climate neutrality. This requires removing barriers to innovation,
deployment, and finance for key technologies and to develop new skills for new jobs.
New supply chains are needed to ensure that affordable and effective clean solutions are
available to all, including for sustainable lifestyle choices.
(33
) Annex 3 of the Staff Working Document on investment needs assessment and funding availabilities to
strengthen EU’s Net-Zero technology manufacturing capacity (SWD(2023) 68 final: the US Inflation
Reduction Act of 2022provides major investments to reduce US GHG emissions (USD 370 billion
estimated by Congress. In China, support to New Energy Vehicle manufacturers over the past decade
(including consumer subsidies and rebates, exemption from sales tax, R&D and public procurement) is
estimated at more than USD 100 million.
(34
) Strategic Perspectives (2023). Competing in the new zero-carbon industrial era. Assessing the
performance of five major economies on key decarbonisation technologies.
20
SO 6: Ensure the security of supply of energy and resources
The COVID pandemic and Russia’s military aggression against Ukraine demonstrated
how supply chain disruptions and energy crises can negatively affect the EU economy. A
sharp decrease in the EU’s reliance on imported fossil fuels will be an important co-
benefit of the transition towards climate neutrality. However, supply disruptions (e.g., of
clean energy technologies, raw materials, water, or components) have the potential to
slow the green transition and make it more expensive and the EU needs to avoid
replacing one strategic dependence, for example on Russian fossil fuels, with another.
The EU’s reliance on imports of many critical raw materials and components necessary
for the low-carbon transition can lead to vulnerabilities if supply is too concentrated.
SO 7: Ensure environmental effectiveness
The pathway to climate neutrality needs to be one that protects and enhances
biodiversity, water resources, air quality, food security, and other essential natural
services needed for our sustainable development. It should also reduce the risk of climate
disasters and support adaptation to climate change to ensure an adequate response to the
increasing impacts of climate change. Setting a 2040 target and pathway from 2030-
2050, allows anticipation and exploitation of synergies between climate neutrality,
biodiversity, and other environmental objectives.
Table 3 maps these seven specific objectives to Article 4(5) of the Climate Law. The
consideration (h) “fairness and solidarity between and within Member States” will
depend on the future framework.
21
Table 1: Mapping of the Specific Objectives to Article 4(5) of the Climate Law
Specific Objectives Climate Law Article 4(5) “When proposing the Union 2040
climate target […], the Commission shall consider the following:”
SO 1: Ensure that climate neutrality is delivered (Climate Law article 2)
SO 2: Minimise the EU’s GHG budget (a) “the best available and most recent scientific evidence,
including the latest reports of the IPCC and the Advisory Board”
(b) “the [..] costs of inaction”
(l) “international developments and efforts undertaken to achieve
the long-term objectives of the Paris Agreement and the ultimate
objective of the UNFCCC”
(m) “existing information on the projected indicative Union
greenhouse gas budget for the 2030-2050 period“
SO 3: Ensure that the transition is just (b) “the social […] impacts”
(c) “the need to ensure a just and socially fair transition for all”
(g) “energy affordability”
SO 4: Ensure that the long-term competitiveness
of the EU economy is maintained
(b) “the economic impacts, including the costs of inaction”
(d) “cost-effectiveness and economic efficiency”
(e) “competitiveness of the Union’s economy, in particular small
and medium-sized enterprises and sectors most exposed to carbon
leakage”
SO 5: Provide predictability for the deployment
of best-available, cost-effective and scalable
technologies
(k) “investment needs and opportunities”
(f) “best available cost-effective, safe and scalable technologies”
(g) “energy efficiency and the ‘energy efficiency first’ principle,
[…] and security of supply”
SO 6: Ensure the security of energy supply of the
European Union.
(g) “energy [..] security of supply”
SO 7: Ensure environmental effectiveness (b) “the environmental impacts, including the costs of inaction”
(i) “the need to ensure environmental effectiveness and
progression over time”
(j) “the need to maintain, manage and enhance natural sinks in the
long term and protect and restore biodiversity”
4.3 Intervention logic
Figure 2 summarises the intervention logic, mapping the core problem to the general
objective and the seven specific objectives.
Figure 2: Intervention logic
22
5 WHAT ARE THE AVAILABLE TARGET OPTIONS?
5.1 Current policy framework
5.1.1 The Climate Law and the Fit-for-55 package
This impact assessment aims to identify the most appropriate 2040 target level to bring
the EU to climate neutrality by 2050. This 2040 target level is framed by the two existing
climate targets, as defined in the European Climate Law: the 2030 climate target and the
climate neutrality objective by 2050. The “Fit-for-55” package is the policy framework
that implements the 2030 climate target.
5.1.2 What would happen to the net GHGs emissions by 2040 with a continuation of the
current policy framework?
With the “Fit-for-55” policy framework, the EU economy meets its 2030 climate target
of a domestic reduction of net (35
) GHG emissions of at least 55% compared to 1990
levels. While the “Fitfor-55" policy framework is designed for the period up to 2030, a
limited part of the legislative package includes explicit, sectoral, post-2030 GHG
emissions targets. In the absence of a review, the current design of the EU ETS Directive
also applies beyond 2030.
This section looks at the net GHG emissions reductions that would theoretically be
reached in 2040 with a continuation of this framework. Figure 3 (36
) depicts the GHG
trajectories for 3 main categories: (1) LULUCF net removals, (2) non-CO2 emissions, (3)
CO2 from energy, transport and industrial processes, a large part of which are covered by
the ETS.
(35
) GHG emissions after deduction of carbon removals
(36
) A further description of the implied emission reductions under the prolongation of the current policy
framework, including unchanged "linear reduction factors” in the ETS, can be found in Annex 6, section 4.
23
Figure 3: Theoretical 2030-2040 GHG emissions with the current policy framework
Note: ETS1 and ETS2 apply their respective linear reduction factor in 2030 onwards (corresponding to yearly
reductions of about 90 MtCO2 in ETS1 and 63.2 MtCO2 in ETS2), “Rest energy, transport & industrial CO2” is
derived from the EU Reference Scenario 2020 (37), non-CO2 is from GAINS model (assuming no specific
mitigation), LULUCF is from GLOBIOM (assuming no mitigation post-2030).
(1) In the absence of a policy for LULUCF beyond 2030, modelling shows that (1)
LULUCF net removals would be limited to -220/-230 MtCO2-eq.
(2) About half of current non-CO2 emissions (38
) currently come from agricultural
activities (e.g., enteric fermentation, use of fertilisers and manure management). Without
any dedicated post-2030 GHG mitigation policy objective, the agricultural activities
would still be significant emitters by 2050. Legislative initiatives such as the review of
the fluorinated greenhouse gases Regulation, the Regulation of methane emissions
reductions in the energy sector, the revision of the Industrial Emissions Directive, or the
revision of the urban waste-water treatment Directive will reduce the “other” non-CO2
emissions by a third over 2030-2040. By 2040, total non-CO2 emissions with still be too
large (around 460 MtCO2-eq, 10-15% lower than in 2030), notably in agriculture.
(3) A small part of CO2 emissions from energy, transport and industrial processes are
not under the ETS (39
). The revised ETS will cover sectors which currently represent
more than 90% of CO2 emissions from energy, transport, and industrial processes. In the
absence of any new post-2030 legislation, the emissions outside the ETS would decrease
only very little over time, reaching together around 100 MtCO2 in 2040. The ETS sets an
emissions cap reducing every year by a “Linear Reduction Factor” (LRF) both for
“ETS1” (the existing ETS extended to cover also maritime shipping) and for “ETS2” (the
new system covering buildings, road transport and the remaining energy-related CO2
(37
) https://energy.ec.europa.eu/data-and-analysis/energy-modelling/eu-reference-scenario-2020_en
(38
) Excluding non-CO2 emissions from the LULUCF sector and the very small share of non-CO2 GHGs
covered by the ETS that will follow the same pattern as discussed in the related paragraph.
(39
) Part of CO2 emissions from industrial processes, as well as CO2 emissions from fossil fuel combustion
in the agriculture sector (2.6% of total 2021 CO2 emissions included in GHG inventories categories 1 and
2), inland waterways transport (0.6%) and rail transport (0.1%).
24
from industry). Without a change to the current LRFs after 2030, the cap under ETS1
reaches almost zero in 2040 (40
), and the cap under ETS2 reaches zero in 2044.
In addition, the transport-related emissions under the ETS are also covered by specific
instruments with explicitly defined post-2030 targets: CO2 standards for vehicles in road
transport, limits on the GHG intensity on energy used in the maritime sector and shares
of sustainable advanced fuels in aviation emissions.
The resulting theoretical net GHG emissions under an unchanged policy framework
would amount to -88% in 2040 compared to 1990. This reduction level is therefore
considered as the “baseline” climate target for 2040 to which other target levels are
compared.
This “baseline” target level goes beyond the reductions of net GHGs corresponding to the
“linear” trajectory linking the 2030 climate target and climate neutrality in 2050 referred
to in the Climate Law (Article 8)(41
), which translates into a reduction of net GHG
emissions compared to 1990 of 78% (77.5% if starting from 55% reduction in 2030 or
78.5% in 2040 considering the estimated EU-wide net domestic GHG emissions cut by
57% by 2030 compared to 1990 under the Fit-for-55 legislation as adopted (42
)).
5.1.3 Approach for the assessment of the 2040 climate target
The impact assessment is framed by the 2030 climate target and by the objective of
climate neutrality by 2050. Up to 2030, the impact assessment reflects and fully
implements the Fit-for-55 policy framework and associated targets.
Table 2 shows all explicitly defined and impact-assessed policies with concrete impacts
on GHG emissions beyond 2030. These policies are included in all 2040 climate target
options and accompanying analytical scenarios (see section 5.3), but these policies alone
are neither sufficient to meet the 2040 target options considered nor climate neutrality by
2050.
(40
) While the cap in Article 9 of the EU ETS Directive (stationary and maritime) would reach close to zero
already in 2039 and zero in 2040, the allowances issued due to Art 3c (aviation) of the Directive are above
0 until 2044 included, getting to zero from 2045.
(41
) The Climate Law Article 8(1) refers to an indicative linear trajectory which sets out the pathway for the
reduction of net emissions at Union level on which the Commission shall base its assessments on Union
progress and measures and national measures.
(42
) See the Climate Action Progress Report 2023.
25
Table 2: Pieces of legislation considered in the default post-2030 framework
GHG and sector Legislation
Status at the time of
the analysis
CO2 emissions in
transport
CO2 emission standards for cars and vans Adopted
CO2 emission standards for heavy-duty vehicles Proposal
TEN-T Regulation Agreed
Alternative Fuel Infrastructure Regulation Adopted
Intelligent Transport Systems Directive Adopted
Greening Freight Package Proposal
ReFuelEU Aviation Adopted
FuelEU Maritime Adopted
CH4 from the energy
sector
Regulation on methane emissions reduction in the energy sector Agreed
F gases F-Gas Regulation Proposal
Methane from waste
Landfill Directive Not recently reviewed
Waste Framework Directive Not recently reviewed
Urban Wastewater Treatment Directive Proposal
Methane from
agriculture
Industrial Emissions Directive Proposal
GHG emissions from
the energy sector
Energy Taxation Directive Proposal
Note: “Adopted” means formally adopted by the European Parliament and European Council. “Agreed” means
that a political agreement between the co-legislators has been reached. “Proposal” means proposed by the
European Commission. “Not recently reviewed” means that this legislation is in force and has not been reviewed
in recent years.
The rest of the post-2030 policy framework is still to be defined, or to be reviewed so
that it can be aligned with achieving climate neutrality by 2050 and with the 2040 climate
target once that target has been set. This applies to the ETS Directive, which already
foresees a review (43
) in view of being compliant with the 2040 climate target. As a
result, this assessment of the 2040 target does not assume a prolongation of unrevised
ETS provisions after 2030 within the default post-2030 policy framework.
The impact assessment uses economic modelling to analyse the evolution of sectoral
emissions and the contribution of technologies that are necessary to meet different 2040
target levels and climate neutrality by 2050.
5.2 Target options
This impact assessment aims to identify the most appropriate 2040 target level to bring
the EU to climate neutrality by 2050 and to contribute to international action to fight
climate change. The different target options considered in this impact assessment are
therefore focused on different levels of net GHG emissions reduction in 2040 compared
to 1990.
(43
) Including the EU ETS Directive, which foresees a review in 2026, including in view of being in line
with the Union’s 2040 climate target (Article 30(3) of Directive 2003/87/EC).
26
5.2.1 Discarded target levels
The assessment discards target levels below 75%. A target lower than 75% has the lowest
support in the Public Consultation, from citizens, civil society organisations, businesses,
and academic institutions alike, with less than 10% of support across all replies. A target
lower than 75% is below the linear trajectory and would imply a complete break in the
trend of GHG emission reductions compared to 2021-2030 and even a slowdown
compared to the average 2011-2030 (see Table 3). It would also mean that steeper
emissions reductions would be needed between 2041–2050, with a substantial risk, due
to postponing more of the decarbonisation effort to the last decade, that the EU does not
reach its legal objective of net climate neutrality by 2050. This option has the highest
corresponding GHG budget (at least 23 GtCO2-eq), so the lowest climate performance,
and is thus not consistent with the EU commitments to global climate action.
The assessment also discards target levels above 95%. In its analysis for the
recommendation on the 2040 target, the ESABCC concludes that all scenarios with 2040
emissions reductions above 95% exceed one or more of the environmental risk levels or
limits used to rule out pathways not considered feasible, based on levels of carbon
capture deployment, carbon removals from the land sink or bioenergy use. No other
recently published scientific publication on a 2040 climate target for the EU to get to
climate neutrality by 2050 has analysed or projects reductions of above 95% by 2040
(see Annex 13).
5.2.2 Considered target levels
The assessment therefore focuses on target levels between 75% and 95%. It looks at three
climate target levels articulated around (i) the linear trajectory between 2030 and 2050
and (ii) the 85-95% range for an EU 2040 climate target compatible with the 1.5°C long-
term temperature goal that is analysed in the scientific literature, including the ESABCC
(see Annex 13).
- Target Option 1: a net GHG reduction target in 2040 of up to 80%
This target option is compatible with a linear trajectory of net GHG emissions
between the existing 2030 climate target and the 2050 climate neutrality objective
referred to in the Climate Law (Article 8), which would lead to a reduction level of 78%
(see section 5.1.2). This option is significantly lower than the “baseline” target level of
88% (see section 5.1.2).
Among the three options assessed, this option gets the largest share of responses to the
public consultation from businesses (nearly 30%) and public authorities (37%), but the
lowest share among research organisations (15%), individuals (11%) and civil society
organisations (8%).
In view of the comparison with the other target options, target option 1 is analysed
through scenario S1 described in Section 5.3 and Table 4 and further described in Annex
6.
27
- Target Option 2: a net GHG reduction target in 2040 of at least 85% and up to
90%
This target option is compatible with the level of net GHG reductions that would be
reached in the case of a prolongation of the current policy framework (-88%).
It matches the lower half of the 85-95% range provided by recent scientific literature on
1.5°C-compatible trajectories to bring the EU to climate neutrality by 2050, including the
lower end of the range analysed by the ESABCC considering the challenges of short-
term technological scale-up by 2030 (88-92%). It remains lower than the range
recommended by the ESABCC (90-95%).
This option gets a large share of responses to the public consultation by research
organisation (35%), and some support by businesses (22% for SMEs and 24% for large
businesses) and individuals (24%).
In view of the comparison with the other target options, target option 2 is analysed
through scenario S2 described in Section 5.3 and Table 4 and further described in Annex
6.
- Target Option 3: a net GHG reduction target in 2040 of at least 90% and up to
95%
This option corresponds to the range recommended by the ESABCC. It also matches
the higher half of the 85-95% range analysed by recent scientific literature on 1.5°C-
compatible trajectories to bring the EU to climate neutrality by 2050.
A target above 90% is the clear preferred option for individuals (46%) and aggregated
across all organisations (30%). It is, in particular, favoured by civil society organisations
(63%) and is supported by research institutions (35%) as much as option 2. SMEs
support this option (21%) as much as the target option 2. It gets 19% of support from
public authorities and 13% from large businesses that participated to the public
consultation.
In view of the comparison with the other target options, target option 3 is analysed
through scenario S3 described in Section 5.3 and Table 4 and further described in Annex
6.
5.2.3 Emission profiles and cumulative GHG emissions under the different target
options
Table 3 and Figure 4 allow to compare the different target options in terms of their net
GHG reduction profiles and their associated cumulative net GHG emissions of 2030-
2050 (the “GHG budget”). Each target option corresponds to a level of net GHG
reductions in 2040. For each target option, the “GHG budget” is calculated assuming
net GHG emissions reaching zero in 2050 and linear trajectories of net GHGs
between 2030 and 2040 and between 2040 and 2050.
28
Table 3: GHG budget and annual reduction of GHG emissions of each target option
GHG budget
2030-2050
(GtCO2-eq)
Yearly reductions (% 1990 levels)
1991-2010
2011-
2030
2021-
2030
2031-
2040
2041-
2050
Target level
below 75% More than 23
-0.9% -2.0% -2.8%
-1.8% -2.5%
1 (linear, 78%) 21 -2.2% -2.2%
2 (at least 85%) Up to 18 -2.8% -1.5%
3 (at least 90%) Up to 16 -3.3% -1.0%
Figure 4. Profile of the net GHG emissions over 1990-2050
Note: The net GHG emissions reflect the scope of the European Climate Law, i.e., all domestic net
emissions (as under the UNFCCC inventories), international intra-EU aviation, international intra-EU
maritime, and 50% of international extra-EU maritime from the MRV scope. 2022 values are based on
EEA proxies. The intra-EU / extra-EU international aviation split is estimated based on air transport
activity data (passenger-kilometres). The intra-EU / extra-EU international maritime split is based on
MRV information for recent years and applied backwards to 1990.
Source: EEA, Eurostat.
5.3 The policy scenarios behind the target options (44)
The quantitative assessment of the target options is done through analysis based on
economic modelling, building on three “representative” scenarios (S1, S2, S3), which all
reach climate neutrality in 2050 but through different net GHG levels in 2040. These
scenarios allow to assess the reduction of GHG across sectors and the contribution of
different technologies, like carbon capture, to the different 2040 target levels. Each of
these scenarios directly correspond to the three target options assessed, i.e. target option
1, 2, and 3, respectively. They are used to carry out the comparison of the impacts of the
(44
) The model-based analysis is a technical exercise based on a number of assumptions that are shared
across scenarios. Its results do not prejudge the future design of the post-2030 policy framework
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1990 2000 2010 2020 2030 2040 2050
%
of
1990
emissions
target 2 (85-90)
target 3 (90-95)
target 1 (linear)
FF55
historical
29
three target options assessed (section 7) and the choice of the preferred target option
(section 8).
Another variant (LIFE) allows an assessment of the sensitivity of the analysis to assumed
societal trends that can change the future evolution of GHG emissions. This variant
serves to open the debate on the role of such trends in the context of meeting climate
neutrality by 2050. In practice for the analysis, the LIFE scenario is set to be compatible
with target option 3. However, the associated conclusions are relevant for and can be
applied to all the target options.
5.3.1 Scenarios S1, S2 and S3
To ensure comparability across target options, the three scenarios (S1, S2, S3) share the
same key assumptions on: 1/ socio-economic assumptions (in terms of population,
economic activity, industrial production, and food production), 2/ technology costs
(described in Annex 6, section 2.4), and 3/ common “default” policy elements applying
post-2030 (described in Annex 6, section 3).
All three scenarios build on the continuation and upscaling of the current trends driving
decarbonisation towards 2030, notably electrification of energy demand, deployment of
renewables, and improvements in energy efficiency. Specific assumptions on more
sustainable lifestyle (see 5.3.2) are not implemented.
The scenarios mainly differ with respect to the uptake over 2030-2040 of novel
technologies to meet different levels of net GHG emissions in 2040. These technologies
include, among others, advanced biofuels and the development of lignocellulosic
bioenergy crops, precision agriculture, e-fuels, or the development of a carbon
management industry.
- S1: up to 2040, this scenario relies essentially on the Fit-for-55 energy trends,
which allow it to deliver a target in 2040 that is the “linear” reduction path of net
GHGs between 2030 and 2050. It does not assume specific mitigation of non-
CO2 emissions beyond their default evolution within the current framework, for
instance in agriculture, or in the LULUCF sector.
Beyond 2040 though, all sectors need to drastically reduce GHG emissions in
view of meeting the climate neutrality objective by 2050 and all technologies
need to be deployed.
- S2: to reach a reduction of at least 85% by 2040, this scenario combines the
energy trends reflected in S1 with a further deployment of carbon capture and e-
fuels as well as substantial reductions of GHG emissions in the land sector,
including non-CO2 emissions in the agriculture sector and carbon removals in the
LULUCF-sector.
- S3: to reach a reduction of at least 90% by 2040, this scenario builds on S2 and
relies on a fully developed carbon management industry by 2040, with carbon
capture covering all industrial process emissions and delivering sizable carbon
removals, as well as higher production and consumption of e-fuels than in S2 to
further decarbonise the energy mix.
30
Table 4 provides a detailed overview of the building blocks of the scenarios S1, S2 and
S3. The analysis is based on the 2019 NECPs, and specific national policies until March
2023 are included. More elements can also be found in Annex 6 (section 3).
5.3.2 LIFE – more sustainable lifestyles
In addition to the three core scenarios that are used to compare the 2040 target options, a
complementary variant (LIFE) looks at the sensitivity of the analysis to key societal
trends related to more sustainable lifestyles, resulting from changes in the consumer
preferences, from circular economy measures related to the use of energy and materials,
as well as from changes in mobility and the food system (45
). “LIFE” is not attached to
a specific target option and is not used to compare the different target options. It
serves to illustrate how these demand-side driven actions can complement the
supply-side technology deployment analysed in the core scenarios.
LIFE assesses the impact of a shift in consumption patterns to more sustainable
alternatives leading to a more efficient use of natural resources. For example, consumers
use products longer, repair more goods, shift to a “sharing economy” and products as a
service, reduce energy consumption by controlling heating and cooling temperature
settings, and adopt more sustainable mobility patterns led by shared mobility and active
transport modes such as increased bike use. For the food system, LIFE assumes that
consumers gradually shift to healthier and more sustainable diets (46
), while production
follows the Farm to Fork Strategy and Biodiversity Strategy objectives, in particular
reducing nutrient surplus and fertilisers needed to bring nature and biodiversity back to a
healthy state and reducing food waste (47
). The analysis does not make assumptions on
the drivers for these shifts in consumption patterns, which can be the result of societal
trends, changing social norms and preferences, voluntary actions, or incentivising
policies.
Table 4 describes the main building blocks of LIFE; detailed assumptions are described
in section 3 of Annex 6. In practice in this analysis, the LIFE variant is set so that it aims
at reaching net GHG reductions of at least 90% compatible with target option 3, in other
words providing a different GHG mitigation picture that allows a direct comparison with
the overall level of reductions in the core scenario S3. The results provide an indication
of the order of magnitude of the reduction in the costs and technological investment
needed to reach the 2040 GHG ambition level in the default common set of assumptions
used in the three core scenarios, and that can instead be achieved through these demand-
(45
) The food system means the actors and activities involved from the production to the consumption of
food products from agriculture and forestry, fisheries, and aquaculture, including food governance actors
and institutions and the interactions with neighbouring systems (economic, ecological, social, etc.).
(46
) The right food environment can create and accelerate the shift towards healthier, less resource intensive
and more plant-based diets. See for instance: European Commission Group of Chief Scientific Advisors,
Scientific Advice Mechanism (SAM), ‘Towards Sustainable Food Consumption – Promoting healthy,
affordable, and sustainable food consumption choices’, Scientific Opinion No.14, 2023
(47
) The food waste proposal (COM (2023) 420 final) was not adopted in time to be factored in the core
scenarios and is therefore only reflected in “LIFE”.
31
side changes. The conclusions from the analysis of the LIFE variant are relevant for and
can be applied to all the target options.
Table 4: Overview of the scenario building blocks by 2040
S1 S2 S3 LIFE
Rationale
Continuity of existing decarbonisation
trends up to 2040: improvement of energy
efficiency, electrification of energy
demand, deployment of renewables in the
power system
Similar as S1, but S2 also includes a wider
diffusion of novel technologies by 2040
(carbon capture, e-fuels)
Similar as S2, but S3 assumes a faster and
wider uptake of novel technologies over
2031-2040 (carbon capture, e-fuels)
Assumes more sustainable lifestyles and a
move towards a more circular and shared
economy. It translates into a different
evolution of demand patterns for energy
use in buildings, transport, in relation with
materials management towards or in the
food system
Industry
Electrification of energy consumption, some development of e-fuels by 2040 More e-fuels by 2040 than in S2 Enhanced circularity entails comparatively
lower needs for primary production of
materials, and so lower needs for carbon
capture
Very limited carbon capture in industrial
processes
Deployment of carbon capture Further deployment of carbon capture
Buildings
Further electrification through sustained deployment of heat pumps Lower thermostat settings for heating and
cooling temperature deliver additional
energy savings
Low average annual renovation rate in
2031-2040 and high in 2041-2050
Similar average renovation rate in 2031-
2040 and 2041-2050
High average annual renovation rate in
2031-2040 and low in 2041-2050
Transport EU Sustainable & Smart Mobility Strategy and Action Plan: milestones achieved (particularly with regard to rail, inland waterways and short-sea shipping)
Road transport
CO2 standards for cars and vans: -100% vs
2021 from 2035 onwards
CO2 standards for cars and vans as in S1 + Higher car occupancy & some shift from car to
active modes (walking, cycling) and public transport, driven by a shift towards shared and
collaborative mobility services and multimodal travel
As in S3 plus stronger shift towards shared
and collaborative mobility services and
multimodal travel, including sustainable
urban transport; ‘smart’ charging
CO2 standards for HDVs: -90% vs 2019 from 2040 (-100% for buses), more efficient
operation of freight vehicles and delivery of goods by optimising multi-modal delivery
solutions, higher use of intermodal freight transport
CO2 standards for HDVs: -100% vs 2019
from 2040, more efficient operation of
freight vehicles and delivery of goods by
optimising multi-modal delivery solutions,
higher use of intermodal freight transport
Maritime
transport
FuelEU Maritime GHG intensity targets: -31% in 2040 and -80% in 2050 (vs 2020)
Lower end of the IMO GHG reduction
target range (-70% in 2040 vs 2008)
Mid-point of the IMO target range (-75% in
2040 vs 2008)
Higher end of the IMO target range (-80% in 2040 vs 2008)
Aviation
ReFuelEU Aviation SAF mandates (34% in
2040 and 70% in 2050; including a sub-
mandate for synthetic aviation fuels and
H2: 10% in 2040 and 35% in 2050)
Slightly more ambitious fuel mandates than
in S1 (SAF: 36% in 2040 and 72.5% in
2050; synthetic aviation fuels and H2: 12%
in 2040 and 37.5% in 2050), incentives for
the deployment of zero-emissions aircraft
Slightly more ambitious fuel mandates than
in S2 (SAF: 38% in 2040 and 75% in 2050;
synthetic aviation fuels: 14% in 2040 and
40% in 2050), incentives for the
deployment of zero-emissions aircraft
As in S3 plus fewer business trips and long
trips compared to scenarios, modal shift to
rail (particularly for short trips)
33
S1 S2 S3 LIFE
Power system
Limited remaining CO2 emissions in 2040,
share of renewables in total electricity
production increases compared to 2030
Close to decarbonised in 2040, larger
deployment of renewables
Fully decarbonised in 2040, the system
operates mostly with renewables
The deployment of renewables is facilitated by system optimisation (interconnections, storage and demand-side response). Nuclear according to MS policies until March 2023; plays a
comparable role in all scenarios.
Bioenergy
Moderate increase by 2040 compared to
current, stabilises over 2041-2050
Larger increase by 2040 compared to current, and slightly declines after 2040
H2 & e-fuels Some increase in 2040 above 2030 levels
Stronger increase than in S1, notably in the
transport sector
Stronger increase than in S2 in all sectors
Carbon capture
Limited uptake in 2031-2040 and large
deployment in 2041-2050
Deployment in 2031-2040, in particular in
industrial processes, maintained in 2041-
2050
Further deployment in 2031-2040 to cover
remaining energy and industrial process
emissions
Carbon
removals
Very limited uptake of BECCS by 2040
Some deployment of BECCS and DACCS
by 2040
Higher deployment by 2040 of both
BECCS and DACCS
Circularity
Circular economy trends limiting raw
materials needs
Food system
Continuation of current trends based on the Agricultural Outlook 2022 Change towards more sustainable food
diets, reduction of food waste objectives
leading to additional reduction of
agriculture GHG
Very limited GHG reductions in agriculture
GHG in agriculture decrease further thanks
to larger deployment of technological
options
GHG in agriculture decrease further thanks
to full deployment of technological options
LULUCF
Small increase of forest land and decrease
in grassland
Policy intensity to cover mitigation costs equivalent to meeting the 2030 target
Higher land-use change with bigger increase of forest land, additional wetland and
cropland while stronger decrease of grassland
More available land for carbon farming and
high-diversity elements such as set aside
and fallow land with natural vegetation
through land-use change in grassland and
cropland
Non-land-
related non-
CO2 GHG
emissions
Non-land-related non-CO2 emissions
slowly decline, combining current policy
framework and transformation of the
energy system
Non-land-related non-CO2 emissions decline further thanks to additional mitigation
6 WHAT ARE THE IMPACTS OF THE TARGET OPTIONS?
The impacts of the different 2040 target options are illustrated by the three scenarios S1,
S2 and S3 (48
) presented in the previous section. Section 6 shows the impact of these
scenarios and complements the analysis by quantifying the impact of changing lifestyles
as shown by the LIFE sensitivity analysis.
A more detailed analysis on the sectoral GHG evolution and associated technological
deployment attached to each scenario can be found in Annex 8.
6.1 GHG emissions
6.1.1 Net GHG emissions
The net GHG emissions analysed in this impact assessment correspond to the Union-
wide GHG emissions and removals regulated in Union law (49
).
Table 5 shows the sectoral net GHG emissions in the different scenarios serving to
analyse the 2040 target options. All scenarios achieve climate neutrality in 2050.
(48
) The model-based analysis is a technical exercise based on a number of assumptions that are shared
across scenarios. Its results do not prejudge the future design of the post-2030 policy framework.
(49
) European Climate Law, Article 2. They cover all domestic emissions, LULUCF, international intra-EU
aviation, international intra-EU maritime, and 50% of international extra-EU maritime from the MRV
scope.
35
Table 5: Sectoral net GHG emissions
2015 2040 2050
S1 S2 S3 S3**
Reduction vs 1990 - % -24% -78% -88% -92% -101%
Net GHG Emissions (target scope)* 3592 1051 578 356 -38
Power and district heatingA
1031 120 8 -10 -39
Other energy sectorsB
237 71 45 11 -19
IndustryC
605 267 181 89 16
Residential & servicesD
519 119 92 75 19
Other non-energy sectorsE
130 33 26 25 22
Domestic transport 780 190 143 120 7
AgricultureF
385 351 302 271 249
Waste management 120 65 52 52 28
LULUCF net removals -322 -218 -316 -317 -333
International transport (target scopeG) 107 52 46 41 11
International Transport (memo items)
233 124 113 106 27
Note: *Calibration residuals to GHG inventory 2023 are allocated to relevant sectors. A: Includes removals from
BECCS. B: Includes removals from DACCS. C: includes CO2 from fossil fuel combustion in industry and CO2 from
industrial processes. D: Includes fossil fuel combustion CO2 emissions in agriculture. E: CO2 fugitive emissions
and non-CO2 emissions from direct use or specific products. F: GHG inventory “category 3”. G: international
intra-EU aviation, international intra-EU maritime (MRV) and 50% of international extra-EU maritime (MRV).
**S1 and S2 values for 2050 are similar to S3 and represented in more details in Annex 8.
Source: PRIMES, GAINS, GLOBIOM.
Scenario S1 projects emissions following a linear trajectory between 2030 and climate
neutrality 2050, reaching around 1050 MtCO2-eq in 2040. This requires limited
development by 2040 of advanced mitigation options like carbon capture or e-fuels. A
higher uptake under S2 of e-fuels, carbon capture, further abatement in agriculture and
dedicated mitigation actions in the LULUCF sector lead to stronger emission reductions
of 88%, with net GHG emissions reaching around 580 MtCO2-eq. S3 achieves a steeper
reduction of around 92% (around 350 MtCO2-eq), compared to S2, based on rapid
deployment and scale up of novel technologies by 2040.
LULUCF net removals have experienced rapid changes of the past years, and the future
evolution of this sector is uncertain. The level can vary depending on the effect of
policies or climate change impacts (see section 1.8 in Annex 8). When this uncertainty is
included in the calculation of the net GHG emission reduction in 2040, each scenario still
remains within the range of their respective target option, namely S1 corresponding to
target option 1 (up to 80%), S2 corresponding to target option 2 (85-90%) and S3
corresponding to target option 3 (90-95%).
The importance of net removals from LULUCF was confirmed in the public consultation,
where nearly 50% of citizens asked for a stronger reliance on the LULUCF sink given
36
uncertainty about the deployment of industrial removals. Among organisations, views
were more divided between civil society organisations demanding a stronger reliance on
the LULUCF sink, research institutions and public authorities favouring a balanced
approach, and business associations and companies favouring either a balanced approach
or a stronger reliance on industrial removals. However, when asked about the most
relevant solutions for fighting climate change, citizens and all stakeholder groups
uniformly indicated nature-based solutions for the LULUCF sector (afforestation,
reforestation, and forest restoration, as well as peatland restoration) as being the most
important solutions.
Energy supply emissions (“power and district heating”, as well as “other energy sectors”)
remain positive (180 MtCO2-eq) in the case of S1 but get close to zero in S2 (about 50
MtCO2-eq) and reach zero in S3 in 2040. The decarbonisation of the energy sector is
possible thanks to the availability of a broad set of technologies to generate carbon-free
electricity (notably renewables) and to the development of carbon capture and carbon
removals in S2 and S3 (see 6.1.2), as well as to the reduction of methane emissions from
the decreased use of fossil fuels. Emissions in industry are cut by 56-84% compared to
2015, due to electrification, implementation of new manufacturing technologies,
innovation in processes, use of alternative materials or sources such as RFNBOs and
cleaner supply chains. Contribution of the gradual uptake of hydrogen and development
of carbon capture to industrial emission reduction is seen in S2 and goes further in S3,
where solid fossil fuels virtually disappear, and all process CO2 emissions are captured.
Residential and service emissions decrease by 77-85% compared to 2015, depending on
the scenario, driven by a sustained deployment of heat pumps and renovation of building
envelopes.
Transport emissions drop by 69-78% compared to 2015, primarily due to large-scale
deployment of electric vehicles in road transport in all scenarios, along with a further
switch from fossil fuels to e-fuels and advanced biofuels in maritime, aviation and road
transport in S2 and S3.
In the agricultural sector, where GHG emissions remained relatively stable over the last
10 years, GHG emissions decrease by around 10% compared to 2015 in S1 and by
between 22% and 30% with more ambitious reductions in S2 and S3, driven by
technological improvements in breeding, mitigation of enteric emissions, manure
management and fertiliser application. The waste management sector reduces CH4
emissions in all scenarios by more than half compared to 2015. These results are broadly
in line with the public consultation results, which show that energy supply, agriculture
and transport are expected to be the sectors most affected by the green transition after
2030 (50
).
50
In the energy supply sector, the public consultation respondents expect a strong decrease in fossil fuel
consumption coupled with a transition to renewable energy sources. In the agriculture sector, respondents
expect significant changes in production methods, land management practices and consumer behaviour.
Finally, in the transport sector, they expect a transition to electric vehicles and alternative fuels, along with
a modal shift to the lowest carbon-intensive modes.
37
6.1.2 Carbon capture and carbon removals
The role of carbon capture and carbon removals is an important differentiating factor
for the 2040 climate ambition, which is in general also acknowledged by stakeholders in
the public consultation. While civil society organisations, research institutions and
citizens largely agree on the need for separate targets for GHG emissions, nature-based
removals and industrial removals, businesses and public authorities’ views are more
evenly divided between three separate targets and one single target. The nature of this
divergence lies in different opinions on the potential and challenges to scale up industrial
removals and to which extent removals should be used to compensate for residual GHG
emission reduction.
The modelling results in Table 6 show that while annual capture remains lower than 100
MtCO2 in S1, it reaches around 220 MtCO2/year in S2, and around 350 MtCO2/year in
S3, where most emissions from the power system and industrial processes are captured
and industrial carbon removals technologies are well deployed. The crucial role of carbon
capture to reach high levels of decarbonisation of the industrial system by 2040 is a
common finding across the various models used for the detailed analysis (see Annex 8)
and in line with the public consultation, where all stakeholder groups would prioritise
capturing CO2 from non-energy industrial processes over other applications. The
captured carbon is used to produce e-fuels (the consumption of which varies across
scenarios – see section 6.1.3) or stored, with injection rates for storage in 2040 close to
150 MtCO2/year in S2 and 240 MtCO2/year in S3. CO2 implemented in materials is
projected to develop mostly in the 2041-2050 decade.
38
Table 6: Industrial carbon capture and use
2040 2050
Carbon Captured – MtCO2/year S1 S2 S3 S3*
By Source 86 222 344 452
Industrial Processes 37 123 137 136
Power (fossil fuels) 26 41 32 55
Power (biomass) and DACC** 16 54 153 232
Biogenic (upgrade of biogas into biomethane) 7 4 22 30
By Application (use and storage) 86 222 344 452
E-fuels 43 75 101 147
Synthetic materials 0 0 0 59
Underground storage 42 147 243 247
Note: *S1 and S2 values for 2050 are similar to S3 and represented in more details in Annex 8. **Includes
carbon for storage (DACCS) and use.
Source: PRIMES.
As described in the results of the public consultation (51
), alongside deep reductions of
gross GHG emissions, carbon removals are expected to play an important role in the
coming decades to get to climate neutrality by 2050 and negative emissions thereafter
(Table 7).
Table 7: Industrial removals and net LULUCF removals
2040 2050
S1 S2 S3 S3**
Gross GHG
emissions (MtCO2-
eq)
1273 943 748 411
Total Removals
(MtCO2-eq)
-222 -365 -391 -447
Industrial Removals
(MtCO2)
-4 -49 -75 -114
LULUCF net removals
(MtCO2-eq)
-218 -316 -317 -333
Note: **S1 and S2 values for 2050 are similar to S3 and represented in more details in Annex 8.
Source: PRIMES, GAINS, GLOBIOM.
Gross GHG emissions (52
) are projected to reduce by between 75% (S1) and 85% (S3) in
2040 and around 92% in 2050 compared to 1990, providing the biggest contribution to
(51
) 61% of the position papers analysed, commented on carbon removals, with many of them indicating
removals would be instrumental to reach climate neutrality, if complementary to GHG emission reduction
at source.
(52
) Gross GHG emissions are defined as the actual GHG emissions excluding the contribution of industrial
removals and LULUCF net removals, that are included of the calculation of “net GHG” emissions as
measured for the EU’s climate objectives in 2030 and by 2050.
39
climate neutrality, but still leaving residual GHG emissions. This result, in line with the
lowest gross GHG emissions by 2050 of 390 MtCO2-eq presented by the ESABCC (53
),
shows that removals are required to compensate emissions that cannot be abated due to
extremely high abatement costs or technical unfeasibility. Carbon removals can either be
achieved through the LULUCF sector as nature-based removals or technically as
industrial carbon removals derived from carbon capture.
LULUCF net removals are projected to contribute significantly over 2030-2050 in
scenarios S2 and S3 with net removals of around -320 MtCO2-eq (see Table 7).
The role of industrial removals remains much more limited in the short run, given the
need to fully develop some aspects of the technology to ensure large-scale deployment
(54
). They become significant by 2040 to meet higher climate targets, with about -50
MtCO2 in S2 and -75 MtCO2 for S3, representing close to 25% of the total carbon
capture. To reach climate neutrality by 2050, the analysis projects industrial removals of
more than -100 MtCO2, complementing land-based removals in the LULUCF sector. All
pathways modelled therefore need a strong LULUCF net removal complemented by
industrial removals to put the EU on the path towards climate neutrality.
Table 8 provides an overview of the GHG emissions from agriculture, forestry and other
land use (“AFOLU”, combining net emissions from agriculture and LULUCF) across the
different scenarios. Emissions in the sectors reach net zero ahead of 2040 in S2 and S3,
later in case fossil fuel related CO2 emissions in agriculture are included in S1.
Table 8: Emissions from the agriculture sector and LULUCF net removals
2040 2050
S1 S2 S3 LIFE S1 S2 S3 LIFE
Agriculture (category 3) +
133 -14 -46 -150 -92 -83 -84 -195
LULUCF net removals
Agriculture (categories 3 &
1) + LULUCF net removals
165 15 -19 -122 -73 -64 -66 -175
Note: Category 3 refers to the UNFCCC agricultural sector; category 1 to energy use in agriculture.
Source: GAINS, GLOBIOM, PRIMES.
6.1.3 GHG emissions in the LIFE sensitivity case
Table 9 summarises the impact of the LIFE sensitivity analysis on GHG emissions. The
case achieves the same reductions in net GHG emissions as S3, but through a different
distribution of emissions across sectors.
The difference of emissions in LIFE compared to S3 results from a more sustainable food
system and associated land use, which reduces the net emissions from the land sector by
about 100 MtCO2-eq, combining a cut in emissions from agriculture of about 60
(53
) ESABCC, Figure 37.
(54
) Key barriers for the roll-out of carbon capture are investment and operating costs, regulatory
implementation, complexity of full chain infrastructure projects, as well as public acceptance.
40
MtCO2-eq and significant additional removals from the LULUCF sector of around 40
MtCO2-eq in 2040. This lowers the need for carbon capture and industrial carbon
removals. In parallel, an increased Circular Economy and more sustainable mobility
contribute to limiting the emissions in the energy and industry sector, which are
intermediate between S2 and S3.
Table 9: Comparison of GHG in the LIFE case with the core scenarios
MtCO2-eq 2040
S1 S2 S3 LIFE
Net GHG emissions 1051 578 356 353
of which from the land sector* 133 -45 -46 -150
of which from agriculture 351 302 271 209
of which from energy and industry** 918 593 402 503
Carbon capture 86 222 344 278
Carbon removals -222 -365 -391 -387
of which industrial removals -4 -49 -75 -27
of which LULUCF net removals -218 -316 -317 -360
Note: *Emissions from agriculture and net removals from the LULUCF sector. **Includes other non-land
sectors like waste management, as well as industrial carbon removals
Sources: PRIMES, GAINS, GLOBIOM
6.2 Evolution of the energy system and associated raw material needs
6.2.1 The energy system
Climate policy and energy security go hand in hand as the decline of fossil fuels has
profound consequences for the EU’s energy dependence. Import dependency (the share
of imports in GAE), decreases from 61% in 2019 to 34% in S1, 29% in S2 and 26% in
S3 in 2040. Due to the decline of domestic production and a continued need for oil
imports, a large decrease in import dependency requires deeper decarbonisation. In 2050,
the dependency is reduced to only 15%, more than half associated with non-energy uses
of fuels. High demand for renewables, storage and novel technologies may lead to new
dependencies for raw materials or technology imports from non-EU countries.
41
Table 10 summarises the main results for the evolution of the energy system from the
PRIMES model. These results are validated by the findings of four other energy system
models that have been used in the context of this impact assessment (i.e., POTEnCIA,
METIS, EU-TIMES and POLES – see Annex 6). More details on the evolution of the
energy system can be found in Annex 8.
Deep changes in the energy mix underpin the decarbonisation of energy supply.
Continued energy efficiency improvements reduce the need for energy. Gross available
energy (GAE) decreases from approximately 1450 Mtoe (or 61 EJ) in 2021 to around
1020 Mtoe (43 EJ) in 2040 (around 30% reduction), with limited differences across
scenarios S1, S2 and S3. LIFE entails further reduction of GAE by 24 Mtoe (1 EJ). After
2040, GAE remains practically constant as energy savings are compensated by the
additional energy required for renewable hydrogen production by electrolysis, and direct
air capture.
Fossil fuels use decreases and renewable energy increases (in particular, wind and solar
power). By 2040, fossil fuel supply for energy use will decrease by more than 70%
compared to today. The measures foreseen in LIFE reduce fossil fuel use by an additional
10 Mtoe (0.4 EJ); by 2050 only small amounts of fossil fuel remain (approximately 150
Mtoe or 6.2 EJ), in large part used for non-energy purposes and long-distance transport.
More than half of all fossil fuels used in the EU in 2050 are used in the non-energy sector
as feedstock for chemical processes (plastic, fertilisers, etc.). The phase out of fossil
natural gas imports from Russia accelerates the transition trajectory. The consumption of
natural gas, biomethane and biogas reaches approximately 105 – 155 Mtoe by 2040 (4.5
– 6.5 EJ). In 2050, the consumption of those gaseous fuels in the EU is still between 70
and 80 Mtoe for all scenarios (3.0 – 3.5 EJ). Oil is the last fossil fuel to reduce, and
consumption in 2050 is estimated at approximately one fourth of that in 2020. Coal is
almost completely phased out by 2040.
Climate policy and energy security go hand in hand as the decline of fossil fuels has
profound consequences for the EU’s energy dependence. Import dependency (the share
of imports in GAE), decreases from 61% in 2019 to 34% in S1, 29% in S2 and 26% in
S3 in 2040. Due to the decline of domestic production and a continued need for oil
imports, a large decrease in import dependency requires deeper decarbonisation. In 2050,
the dependency is reduced to only 15%, more than half associated with non-energy uses
of fuels. High demand for renewables, storage and novel technologies may lead to new
dependencies for raw materials or technology imports from non-EU countries.
42
Table 10: Summary of key energy indicators
2030 2040 2050
S1 S2 S3 S3**
Policy relevant indicators
Energy-related CO2 reductions vs 2005 -58% -83% -90% -94% -103%
RES share in Gross FEC 42.4% 65% 72% 75% 89%
FEC reduction vs 2015 (55) -19% -34% -34% -36% -40%
Energy indicators - Supply
Gross Available Energy (Mtoe) 1160 1022 1021. 1018 1032
- Fossil fuels 663 375 311 275 150
- of which for non-energy use 96 96 96 96 80
- of which captured 1.8 11.5 13.2 13.3 24
- Nuclear 139 129 129 129 142
- Renewables 328 482 544 613 691
Net imports (Mtoe) 572 347 298 267 153
Import dependency (%) 50% 34% 29% 26% 15%
Hydrogen production (Mtoe)(56) 9 60 76 100 185
e-Fuels production (Mtoe) 2 15 27 37 60
Energy indicators – Power generation
Gross electricity generation (TWh) 3362 4563 4899 5212 6922
Net installed power capacity (GW) 1617 2181 2377 2525 3256
- Fossil fuels 238 172 164 156 142
- Nuclear 94 71 71 71 71
- Renewables 1285 1939 2142 2298 3027
Storage and flexibility options (GW) 172 213 254 275 238
Final Energy
Final Energy Consumption (Mtoe) 764 622 614 604 555
Electricity share in FEC 33% 48% 50% 51% 62%
e-Fuels share in FEC 0% 1% 3% 5% 7%
Note: GAE does not include ambient heat from heat pumps. E-Fuels include power-to-liquid and power-to-gas
fuels but not hydrogen. Storage technologies include only battery and pumped-hydro storage, whose decline
between 2040 and 2050 is due to the projected increased use of power-to-X technologies. The analysis is
based on the 2019 NECPs and national legislation as of March 2023. **S1 and S2 values for 2050 are similar
to S3 and represented in more details in Annex 8.
Source: PRIMES.
(55
)Note that the 2030 energy efficiency is expressed as % reduction compared to the projection of the
2020 Reference scenario (not compared to 2015).
(56
) Renewable hydrogen is a rapidly evolving technology and sector. The modelling results for 2030 in
this table reflects the EU RFNBO targets, and associated hydrogen production, as per the revision of the
Renewable Energy Directive under the Fit-for-55 package. However, the modelling for the future design of
the post-2030 policy framework will take into account the updates of the National Climate and Energy
Plans due in June 2024.’
43
Renewables gradually become the backbone of the EU energy system. The share of
renewables in GAE grows from 17% in 2021 to 50% – 60% in 2040. The share of wind
and PV in GAE increases to 27% – 34% in 2040. The use of biomass and waste is also
projected to increase by 30% in S2 and S3 representing approximately 20% of the GAE
share in 2040 (57
). This evolution is mostly driven by advanced liquid biofuels and
biomethane, while direct consumption of solid biomass is projected to decrease. The
future role of bioenergy will have to be integrated into a sustainable circular bioeconomy,
following the cascading principle. The conviction of renewables becoming the backbone
of the EU energy system is shared throughout the public consultation, where across all
stakeholder groups and citizens renewable energy from wind, solar or hydro was
consistently rated as the most relevant solution for the energy transition towards carbon
neutrality. This notion was also supported in many position papers arguing for an
enhanced use of renewable energies. Stakeholders, in particular from science, civil
society, and EU citizens identified the expansion of renewable energies as among the
most important challenges for the EU to reach its climate ambition.
Renewable hydrogen as energy vector appears as a key technology of the future EU
energy system, including to produce e-fuels (both gaseous and liquid) and to contribute
to decarbonise the hard-to-abate sectors (such as aviation and maritime transport, among
others). In the next two decades, there are large differences in hydrogen scale-up across
scenarios. In 2040, the S3 scenario projects more than 60% more hydrogen production
than S1, with most of the difference related to demand for e-fuels. LIFE reduces demand
for renewable hydrogen by around 15 Mtoe with circular economy measures and
consumption patterns (that reduce the need for certain materials). In 2050, hydrogen
consumption reaches up to 185 Mtoe (7.7 EJ). Imports of RFNBOs pick up after 2035,
but in low amounts due to still relatively high costs. Hydrogen and the development of
clean fuels are regarded as particularly important for the EU’s energy transition towards
climate neutrality by business associations and companies (both SME’s and large
industries).
(57
) In the scenarios considered, the “gross available energy” from biomass is capped at 9 EJ, the
environmental risk level for “primary bioenergy use“ indicated by the ESABCC – see Annex 6. Future
analyses may assume other supply levels of biomass to stay within the sustainability boundaries, in view of
the on-going scientific debate.
44
Member States revision of their nuclear energy policy
Recent announcements by several Member States show a renewed interest in nuclear
energy. A “nuclear alliance” has been set up by some Member States and is led by
France. Among other policy changes, France has adopted a law in June 2023 that
abolishes the objective of reducing the nuclear power share in the electricity mix to
50%, as well as the capping of nuclear production capacity at 63.2 GW. In addition,
several operators have either already obtained licence or announced plans for further
lifetime extensions of nuclear plants. Other changes include life extension of nuclear
plant in Hungary and Finland. These legal changes added approximately 18 GW of
capacity to the European nuclear fleet in 2040 (of which France accounts for about 17
GW), compared to the assumptions Section 2.5.2.2 of Annex 6 (that already include the
plans adopted up to March 2023 and in particular additional nuclear capacity in
Bulgaria, Czechia, Finland, Hungary, Netherlands, Poland, Romania, Slovenia and
Slovakia). Due to the lead time of new nuclear plants, nuclear capacity in 2030 is
unchanged compared to the original policy assumptions.
This scenario variant discusses how this legal revision changes the energy system and
GHG emissions compared to the results in the S3 scenario.
With the new French legislation of June 2023, the installed capacity of nuclear plants in
France reaches 54 GW by 2040 (an increase compared to 37 GW projected before the
change of the law). In 2040, the share of nuclear energy in the power mix of France
reaches 38% of total electricity generated compared to 27% before the June 2023
change of the law. (This compares to a share of nuclear in power generation in 2020 of
72%. This difference between 2020 and 2040 is mainly due to the electricity
consumption increasing considerably - which is partly matched by more renewables).
With the new French policy, the installed capacity of nuclear plants in Europe reaches
88 GW by 2040 (compared to 71 GW in the previous S3 scenario and 94 GW in 2030).
Compared to the results shown in Climate policy and energy security go hand in hand
as the decline of fossil fuels has profound consequences for the EU’s energy
dependence. Import dependency (the share of imports in GAE), decreases from 61% in
2019 to 34% in S1, 29% in S2 and 26% in S3 in 2040. Due to the decline of domestic
production and a continued need for oil imports, a large decrease in import dependency
requires deeper decarbonisation. In 2050, the dependency is reduced to only 15%, more
than half associated with non-energy uses of fuels. High demand for renewables,
storage and novel technologies may lead to new dependencies for raw materials or
technology imports from non-EU countries.
Table 10 for the S3 scenario, the additional nuclear plants increase the share of nuclear
power in the energy mix from 13% of GAE to 15% in 2040 (or approximately 160
Mtoe). This increase of nuclear energy leads to a slightly slower growth of renewables
that reach 600 Mtoe in 2040 (or 10 Mtoe difference). Net installed capacity follows a
similar trend. By 2040, the installed capacity of fossil fuel plants is 154 GW (or 1.8%
less than in S3) while that of renewables is 2278 GW (or 1.3% lower). To balance the
power system (that has now less dispatchable plants suitable for dealing with peaks in
demand) more hydrogen is produced by electrolysis. By 2040, 101 Mtoe of hydrogen
are produced (or approximately 11% more than in S3). EU GHG emissions in 2040 and
2050 remain almost unchanged. Total power generation and final energy consumption
in the EU are also almost unchanged.
Future analysis will include the update of the NECPs and any legislative changes by the
Members States on deployment of newly build nuclear capacities or extension of the
operating lifetime of the existing ones.
45
The coming decades require a significant increase in electricity supply, mainly due to the
increasing electrification of end-use sectors, but also to the power needed for the
production of RFNBOs and DACC. Electricity generation increases from 2905 TWh in
2021 to about 4565 TWh in S1, 4900 TWh in S2 and 5210 TWh in S3 in 2040.
In 2040, S1 requires around 13% less electricity than S3. This is explained by substantial
differences in production of RFNBOs and in industrial removals by DACC. In 2040,
electrolysers, RFNBO synthesis and DACC combined consume approximately 600 TWh
more electricity in S3 than in S1. In S2 consumption is approximately 270 TWh more
than S1 for the same purposes. Due to the lower hydrogen production (thanks to circular
economy measures and consumption patterns) LIFE allows to save almost 390 TWh of
total electricity production in 2040. Projections for electricity, hydrogen and RFNBOs
consumption in 2050 are similar across all scenarios.
The share of fossil-fired power generation steadily decreases by 2040, from 36% in 2021
to 8% in S1 and 3% in S3. Residual fossil-fired generation consists almost solely of gas-
fired power plants (equipped with CCS or used for peak demand). Renewables increase
their contribution to total electricity generation from about 40% in 2021 to 81%-87% in
2040 (wind and solar accounting for the largest shares of renewable capacity). The
analysis results in nuclear power generation decreasing from 730 TWh in 2021 to around
495 TWh in 2040 with nuclear capacity assumptions in line with the Member State
policies as in 2019 National Energy and Climate Plans and national policies as of March
2023(58
). Net imports of electricity from outside the EU remain very small (around
current levels).
As wind and solar PV generation have relatively low full load hours, replacing fossil
fuels with renewables requires higher installed power capacity. Total installed capacity
grows more than two times faster than electricity generation between 2015 and 2040.
There are large differences in renewable capacity across scenarios. In 2040, S3 and S1
requires 6% more and 8% less capacity than S2, respectively (2300 GW in S3, 1940 GW
in S1 and 2140 GW in S2). The circular economy measures and behavioural changes in
LIFE significantly decrease the amount of generation capacity, by around 200 GW in
2040.
Balancing the high share of variable renewable electricity generation requires a flexible
power system. Flexibility needs are increasingly met by storage solutions (mainly
pumped hydro storage and batteries) reaching 275 GW in S3 in 2040 and by demand side
measures including demand management technologies such as the production of
hydrogen with electrolysers and – to a lower extent – the production of other RFNBOs.
There is a marked difference with scenarios S1 and S2 requiring significantly less storage
and electrolyser capacity than S3 in 2040.
(58
) These assumptions reflect the situation until March 2023. In June 2023, France has adopted a law
which removes the objective of reducing the share of nuclear power in the electricity mix. additional 3.3
GWe nuclear capacity was officially announced for deployment by mid-2030s. See Annex 8 for more
details. Future analysis will take the revised policies into account, as reflected in the updated National
Energy and Climate Plans which are currently being drafted.
46
Final energy consumption (FEC) shows a large reduction already this decade, reaching
765 Mtoe in 2030 (32 EJ: the Energy Efficiency Directive target), further reducing in
2040 to 622 Mtoe (26 EJ) in S1, 614 Mtoe (25.7 EJ) in S2 and 604 Mtoe in S3 (25.3 EJ).
The share of renewable energy in gross FEC increases from 42% in 2030 (in line with the
Renewable Energy Directive target) to 65% in S1, 72% in S2 and 75% in S3 in 2040.
The share of fossil fuels in total FEC decreases from above 60% in 2015 to 30% in S1,
25% in S2 and 23% in S3 in 2040, and further down to only 5% in 2050. Electricity
becomes the dominant energy vector in final energy sectors. The share of electricity in
FEC increases from 23% in 2015 to above 45% in 2040 (approximately 280-290 Mtoe
across scenarios or 11.7 – 12.1 EJ) and up to 57% (320 Mtoe – 13.4 EJ) in 2050. This
increase is mainly driven by the uptake of electric vehicles, the penetration of heat pumps
and electrification of low and medium temperature industrial processes. Fossil fuels start
to be partially replaced by hydrogen and other RFNBOs in industry and transport
(representing more than 10% and 20% of sectoral demand in S2 and S3 in 2040), while
the consumption of RFNBOs in the building sector remains limited throughout the
period. Across all sectors, RFNBOs account for approximately 5-10% of total FEC in
2040 and 16% in 2050.
Under existing energy efficiency policies, all end-use sectors are expected to reduce
energy consumption significantly in the current decade. Energy consumption continues to
decrease in the decade 2031-2040 albeit at a slower pace (except for the transport sector
that sees considerable improvements after 2030 thanks to accelerated electrification).
Compared to 2021, energy consumption decreases by 42% in 2040, in the transport
sector (59
), 45% in the residential sector, approximately 30% in the services and industrial
sectors and by 25% in agriculture. Only small additional reductions in final energy
consumption occur by 2050 in all sectors.
6.2.2 Raw materials needs
The manufacturing and deployment of net-zero technologies will increase the needs for
Critical Raw Materials (CRMs).
With scenario S3, the deployment of five net-zero technologies (wind turbines, solar PV,
batteries, electrolysers, and heat pumps) would imply a need for up to 500 000 tonnes of
copper each year in the decade 2031-2040, including 125 000 tonnes for wind alone. This
compares with a global copper demand of 26 million tonnes in 2022 according to the
IEA, including 370 000 tonnes for electric vehicles and 1.2 million tonnes for wind and
solar (60
). The global supply for copper is expected to exceed 30 million tonnes in 2030
(61
).
(59
) Including international aviation but excluding international maritime transport.
(60
) IEA (2023), Critical Minerals Data Explorer, IEA, Paris https://www.iea.org/data-and-statistics/data-
tools/critical-minerals-data-explorer. Accessed on 05 December 2023.
(61
) IEA (2023), Net Zero Roadmap: A Global Pathway to Keep the 1.5 °C Goal in Reach, IEA, Paris
https://www.iea.org/reports/net-zero-roadmap-a-global-pathway-to-keep-the-15-0c-goal-in-reach
47
Batteries for electric vehicles and stationary batteries would create needs of up to 80 000
tonnes of lithium and 60 000 tonnes of cobalt per year in 2040. As a comparison, global
lithium demand in 2022 was 130 000 tonnes, including 69 000 tonnes for electric
vehicles, and cobalt demand was around 200 000 tonnes (60
). By 2030, global supply for
lithium and cobalt are expected to be as high as 721 000 and 380 000 tonnes, respectively
(61
).
In S1 and S3, raw material needs would be lower and higher than in S2, respectively, as
in 2040 net installed renewable power capacity is lower by 8% in S1 and higher by 6% in
S3 compared to S2.
6.3 Environmental and health impacts
6.3.1 Benefits of climate change mitigation
It is estimated that climate damages could cost EU GDP by up to 1% annually already in
the next few years, with damages strongly increasing afterwards, reaching up to 2.3% of
EU GDP by mid-century, and possibly getting much higher in only a few decades in case
of uncontrolled climate change with estimates for the EU in this analysis reaching 7% by
the end of the century. Such estimates are conservative since they do not include the
wider impacts on society and natural systems (see Annex 7).
To compare the avoided cost of climate change across options, Table 11 below provides
a comparison of the monetisation of the externalities associated to GHG emissions. It
considers the difference across target options in cumulative emissions over 2030-2050
and a “cost of carbon” capturing these externalities.
Table 11: Difference across options in cumulative GHG emissions and cost of climate
change
Comparison to target option 2
2031-2040 2041-2050 2030-2050
Option
1
Option
3
Option
1
Option
3
Option
1
Option
3
Cumulative GHGs* (GtCO2-eq) 1.7 -1.3 1.4 -1.1 3.1 -2.4
Climate change cost**
[Bn EUR 2023 per year]
(Lower valuation) 26 -20 31 -24 29 -22
(Higher valuation) 49 -38 58 -44 53 -41
Note: *Considering 2040 reductions of 85% for T2 and 90% for T3. **
Cost calculations based on the “Handbook
on the external costs of transport (Version 2019 – 1.1)” following the avoidance cost approach. The cost of
carbon is interpolated from the Handbook: EUR 155 per tonne of CO2 in 2030-2040 and EUR 224 per tonne in
2041-2050 (central value of the handbook, used for the “Lower” valuation) and EUR 291 per tonne in 2031-
2040 and EUR 416 per tonne in 2041-2050 (high value of the handbook, used for the “Higher” valuation), in
EUR 2023.
Note that the methodology used for the monetisation of the external costs of climate
change is subject to discussions and that there is a high level of uncertainty associated
with such estimates and their use. Some studies conclude that the costs used are
48
(significantly) underestimated. In some other organisations (62
), a cost of carbon of above
€800/ tCO2 is suggested by 2050.
In addition, given the difficulty in doing so, analyses, including this one, do not represent
the impacts of crossing climate tipping points, which are increasingly likely with every
incremental increase in global warming. Looking forward, the cost of unmitigated
climate change will greatly exceed the cost of reducing GHG emissions, both in
magnitude and extent.
6.3.2 Health impacts
The transformations required to reduce GHG emissions in the EU have positive impacts
on air quality because they lead to lower energy consumption and a shift to non-emitting
renewable energy sources and to less polluting combustion fuels. According to
projections produced using the GAINS model (63
), the S1, S2 and S3 scenarios have very
similar impacts, with primary air pollutant emissions in the EU decreasing by 16%-77%
(depending on the pollutant) between 2015 and 2040 (see Table 12). This results mostly
from the projected strong decline in fossil fuel use in the energy system and lower
consumption of solid biomass in residential buildings, combined with clean air policies.
Consequently, the impacts on public health also decline. In general, the most harmful air
pollutants for human health are PM2.5, tropospheric ozone and NO2(64
). Between 2015
and 2040, the number of premature deaths per year caused by PM2.5 and ozone exposure
in the EU dropped by 58% (65
) and the costs associated to premature mortality caused by
PM2.5 and ozone exposure decreased by 55% or 61%, depending on the valuation
method employed.
LIFE yields additional co-benefits in terms of lower air pollutant emissions and a greater
reduction in premature mortality, mainly as a result of lower air pollutant emissions from
agricultural activities, in particular lower NH3 emissions, which has been found to result
in economic benefits from improved health (66
). Additional indirect air quality benefits
also stem from reduced methane emissions as a precursor of ozone emissions. In addition
to improved air quality, a shift in diet as in LIFE would deliver significant health
(62
) EIB, France, Germany, UK for example
(63
) The methodology used is similar to the one used in the Third Clean Air Outlook (COM(2022) 673).
(64
) According to the Third Clean Air Outlook. Note that tropospheric ozone is not emitted directly into the
air. It is created by chemical reactions between oxides of nitrogen (NOx) and volatile organic compounds
(VOC), in the presence of sunlight. The analysis of clean air impacts will be presented in more details in
the COM 4th Clean Air Outlook report (forthcoming, 2024).
(65
) The analysis considers the direct effects of PM2.5 (full exposure range) and ozone on human health,
together with the indirect effects of NOx as precursors of particulate matter and ozone. However, the direct
effects of NO2 are not considered to avoid the risk of double counting, since there is conflicting scientific
evidence on the extent to which the health impacts of PM2.5 and NO2 overlap.
(66
) Shift to flexitarian diets could reduce ammonia emissions by 33% in the EU. Through avoided
premature mortality, economic losses in the agricultural sector from dietary shifts could be mitigated by
39% in the EU in such a scenario. Himics et al. ‘Co-benefits of a flexitarian diet for air quality and human
health in Europe’, 2022
49
benefits, reducing for example the risk of cardiovascular diseases (67
), cancer (68
),
diabetes, and obesity (69
).
Table 12: Primary air pollutant emissions, impacts on premature mortality and costs
associated to premature mortality
2015 2040 Change 2015-2040
S1 S2 S3 LIFE S1 S2 S3 LIFE
Primary air pollutant emissions (kt)
SO2 2316 525 529 529 529 -1791
(-77.3%)
-1787
(-77.1%)
-1787
(-77.1%)
-1787
(-77.1%)
NOx 7392 2140 2140 2114 1913 -5252
(-71.1%)
-5252
(-71.1%)
-5277
(-71.4%)
-5478
(-74.1%)
PM2.5 1380 521 524 521 517 -859
(-62.2%)
-857
(-62.1%)
-859
(-62.2%)
-863
(-62.5%)
VOC 6362 4503 4501 4497 4259 -1860
(-29.2%)
-1861
(-29.3%)
-1865
(-29.3%)
-2103
(-33.1%)
NH3 3690 3086 3090 3091 2346 -604
(-16.4%)
-600
(-16.3%)
-599
(-16.2%)
-1345
(-36.4%)
Premature mortality caused by PM2.5 and ozone exposure
Expressed in 1000
death cases per year
466 197 198 196 188
-268
(-57.6%)
-268
(-57.6%)
-269
(-57.8%)
-277
(-59.5%)
Expressed in 1000 life
years lost per year
5977 2667 2668 2650 2544
-3309
(-55.4%)
-3309
(-55.4%)
-3326
(-55.7%)
-3432
(-57.4%)
Costs associated to premature mortality caused by PM2.5 and ozone exposure (EUR 2023 billion/year)
Higher valuation
method (VSL*)
1724 677 677 673 646
-1047
(-60.7%)
-1046
(-60.7%)
-1051
(-61.0%)
-1077
(-62.5%)
Lower valuation
method (VOLY*)
686 306 306 304 292
-380
(-55.4%)
-380
(-55.4%)
-382
(-55.7%)
-394
(-57.4%)
Note: * The valuation follows the same methodology used in the Third Clean Air Outlook. The “higher valuation”
is done using the value of a statistical life (VSL) methodology (where the VSL is assumed to be EUR 4.36
million, in EUR 2023), and the “lower valuation” is done using the value of a life year (VOLY) methodology
(where the VOLY is assumed to be EUR 114 722, in EUR 2023). Note that, in the Third Clean Air Outlook, these
values are expressed in EUR 2015.
Source: GAINS.
In addition to direct effects, climate action should mitigate the increasing negative effects
that climate change has on air quality and human health, due notably to heatwaves and
wildfires (70
) and the climate-induced spread of vector-borne diseases.
(67
) Koch et al. (2023) Vegetarian or vegan diets and blood lipids: a meta-analysis of randomized trials.
European Heart Journal
(68
) Chan, Doris SM, Rosa Lau, Dagfinn Aune, Rui Vieira, Darren C. Greenwood, Ellen Kampman, and
Teresa Norat. "Red and processed meat and colorectal cancer incidence: meta-analysis of prospective
studies." PloS one 6, no. 6 (2011): e20456.
(69
) Tukker et al. (2011) Environmental impacts of changes to healthier diets in Europe. Ecological
Economics
(70
) World Meteorological Organization, WMO Air Quality and Climate Bulletin, No 3, September 2023.
50
6.3.3 Environmental impacts
Air pollution causes acidification and eutrophication, damaging ecosystems and crops.
As shown in Table 13, in the S1, S2 and S3 scenarios, the decrease in SO2, NOx and NH3
emissions reduces the total area affected by severe acidification in the EU by around 80%
between 2015 and 2040. Moreover, the total area affected by severe eutrophication
decreases by around 23.5% over the same period, mainly as a result of the decrease in
nitrogen-related emissions. LIFE brings complementary co-benefits in terms of reduced
acidification and eutrophication because of the lower NOx and NH3 emissions from
agricultural activities.
Table 13: EU ecosystem area where acidification or eutrophication exceed critical loads
2015
2040 Change 2015-2040
S1 S2 S3 LIFE S1 S2 S3 LIFE
Acidification (1000 km2) 157 31 31 31 19
-126
(-80.4%)
-126
(-80.4%)
-126
(-80.4%)
-137
(-87.7%)
Eutrophication (1000 km2) 1164 891 892 890 742
-273
(-23.5%)
-272
(-23.4%)
-274
(-23.5%)
-422
(-36.3%)
Source: GAINS.
S2 and S3 show a higher demand for bioenergy compared to today. Due to the higher
reliance of S3 on industrial carbon removals (including DACCS) and e-fuels than S1 or
S2, S3 may involve greater need for bioenergy if BECCS and liquid biofuels were to
substitute a limited deployment of these technologies.
The future demand for biomass in 2040 compared to today is driven by an increased
demand for advanced/ second generation biofuels, and is satisfied through a higher
supply of lignocellulosic crops, which to a large extent substitute crops for first
generation biofuels (71
). In 2040 total cropland remains unchanged in S1 compared to
today and increases by 1.2 Mha in S2 and S3. In S2 and S3, forest land increases by
about 4.9 Mha compared to 3.3 Mha in S1 and (rewetted) wet- and peatlands increase by
about 1.4 Mha from a conversion of grassland in S2 and S3 (compared to 0 Mha in S1).
The impacts on biodiversity resulting from land use change are very limited across
scenarios and remain between -1% (S1) and +4% (S2) of average suitable habitat
increase in 2040 compared to 2020. The practices put in place to increase LULUCF net
removals can actually positively impact biodiversity: reforestation, polyculture
afforestation under close-to-nature practices and rewetting of peatlands play out more
favourably for habitats and ecosystems than monocultures. Different biomass demand
does not significantly alter biodiversity across scenarios, however, for lignocellulosic
crops to be fully environmental beneficial, impacts on land-use and water-use should be
minimised, by showing higher yields and lower water use than feed crops and through
applying limitation in their use.
(71
) In 2040 total cropland remains unchanged in S1 and increases by 1.2 Mha in S2 and S3, because
around 80% of the required area for lignocellulosic crops comes from crops for first generation biofuels or
other crops.
51
Building on a shift to healthier diets and more sustainable practices, LIFE leads to
complementary changes in the agricultural land area, where allowing part of the land to
be freed up from livestock, fodder activities and intensively grazed land and converted
into extensive grassland, high diversity landscape features with – in comparison to S2
and S3 – more natural vegetation (+6.8 Mha), forest land (+4 Mha) and rewetted organic
soils (+0.3 Mha). This change in land use is accompanied by a reduction in nutrient
surplus and use of pesticides, and an increase of organic farming in line with the Farm to
Fork Strategy. The land use change has a positive effect on LULUCF net removals,
which can be expected to create additional income opportunities for farmers through
carbon farming, as well as significant co-benefits for biodiversity: the likelihood to find
agricultural areas with a high value for biodiversity and ecosystems improves by 14%
within the EU (72
) compared to S2 and S3.
Biodiversity is also affected by climate change. High-latitude and freshwater ecosystems,
the prevailing domains in southern European and Boreal areas, are particularly
vulnerable to climate change (see Annex 7). Climate change mitigation reduces the
likelihood of larger climate change impacts on biodiversity and natural systems and, in so
doing, helps to increase resilience and adaption to climate change. More biodiverse
ecosystems (e.g., biodiverse forests), are more resilient, multifunctional, deliver more
ecosystem services and may function better to remove carbon (73
) (74
).
6.4 The socio-economic implications of mitigation (75)
6.4.1 Macro-economic impacts
The impact assessments for the 2030 Climate Target Plan and the long-term strategy for
2050 concluded that the respective objectives were projected to have limited impacts on
broad macro-economic aggregates, including GDP and total employment. These
conclusions were reached while assessing impacts relative to a baseline with significantly
lower climate ambition. The benchmark used for the comparison of the macro-economic
modelling in this impact assessment is the S2 scenario.
At aggregate level, the three models used in this impact assessment consistently show
that a higher level of mitigation in 2040 only has a slightly negative, transitory impact on
GDP, while a lower level of mitigation yields a minor positive effect. In 2040, GDP for
S3 is at worst 0.8% lower than in S2 under the E-QUEST model (see Table 14 and
(72
) Using the ‘Biodiversity Friendly Practices’ (BFP), a biodiversity indicator capturing the likelihood to
find High Nature Value farmland in a region. The total index is an area weighted average of the partial
indices for arable crops, permanent crops, grassland and set aside / fallow land. Partial indices for different
land use categories are therefore weighted according to their proportion of total utilised agricultural area.
(73
) Mori, Akira S., Laura E. Dee, Andrew Gonzalez, Haruka Ohashi, Jane Cowles, Alexandra J. Wright,
Michel Loreau et al. "Biodiversity–productivity relationships are key to nature-based climate solutions."
Nature Climate Change 11, no. 6 (2021): 543-550.
(74
) Liang, Jingjing, Thomas W. Crowther, Nicolas Picard, Susan Wiser, Mo Zhou, Giorgio Alberti, Ernst-
Detlef Schulze et al. "Positive biodiversity-productivity relationship predominant in global forests."
Science 354, no. 6309 (2016): aaf8957.
(75
) All figures quoted in this section are expressed in constant EUR 2023.
52
Annex 8) while output is at best 0.6% higher in S1 than in S2 (JRC-GEM-E3 model). By
2050, GDP levels almost converge for the three scenarios.
However, the limited impacts on broad aggregates do not reflect the transformations that
the economy will undergo, and the required reallocation of capital and employment in the
coming decades across sectors and actors. The macro-economic models indicate that a
higher GHG ambition in 2040 shifts the composition of GDP from consumption towards
investment (consistent with the investment needs identified in section 6.4.2).
Nevertheless, the impacts on private consumption remain small across models and levels
of ambition. In addition, the composition of consumption should evolve over time, with a
gradual decrease in the share of energy consumption and an increase in the share of other
goods in total consumption. This compositional shift would be positive from a welfare
perspective, as energy-related services would not be negatively affected by lower energy
consumption (e.g., a better insulated house provides the same – or likely better – level of
comfort than a poorly insulated one, with a lower energy consumption).
In terms of sectoral output, a higher level of climate ambition in 2040 is associated with a
faster decline in the output of fossil fuel industries, though all scenarios reach broadly
similarly low levels of output by 2050 (see Table 14 and Annex 8). The impact on the
output of energy intensive industries is also somewhat larger with more ambition, even
though the effect under S3 is limited with a decline of 0.2% relative to S2 in 2040 and
2050, both under a scenario where the rest of the world implements policies in line with
the current NDCs (fragmented action setting) and under a scenario where the rest of the
world acts in line with the 1.5°C objective (global action setting).
Table 14: Sectoral output and GDP in 2040, deviation vs. S2 (% change)
S1 fragmented S3 fragmented S1 global S3 global
GDP (*) 0.5% -0.2% 0.6% -0.2%
Fossil fuel industries 10.2% -5.6% 15.0% -5.2%
Energy intensive industries 1.4% -0.2% -0.3% -0.2%
Transport equipment 0.7% -0.5% 0.6% -0.4%
Other equipment goods 0.5% 0.2% -1.3% 0.3%
Consumer goods industries 0.7% -0.6% -0.8% -0.8%
Transport 2.0% -1.0% 1.0% -1.1%
Construction 0.0% 0.5% 0.0% 0.6%
Market services 0.5% -0.2% 1.1% -0.2%
Non-market services 0.2% -0.2% 0.4% -0.2%
Agriculture 2.0% -1.0% 1.0% -1.1%
Forestry -10.9% 0.5% -13.1% -1.4%
(*) The GDP impacts reported in this table are only those from the JRC-GEM-E3 model.
Source: JRC-GEM-E3.
While the output of energy intensive industries is somewhat larger under S1 than under
S2 in 2040 under a fragmented action setting, it is actually lower in a global action
setting. This is driven by the earlier adoption of decarbonised technologies in EU
industry relative to the rest of the world under S2, which results in an increase in its
competitiveness in a setting where the rest of the world also needs to invest in low-
carbon processes. It must be noted also that the output of energy intensive industries is
projected to continue growing across all scenarios in future decades. The growth rate
53
between 2015 and 2040 is projected to range between 25.5% and 27.6% (fragmented
action setting).
A higher level of ambition in 2040 (S3) would entail somewhat lower private
consumption, which would affect notably road and air transport, equipment goods and
consumer goods industries. However, under a global action setting, these sectors could
actually be positively impacted by 2050 as global demand for equipment goods and
technological know-how linked to decarbonisation increases and as the EU gains
competitiveness and export market shares, thereby also driving up transport activity.
Overall, the difference in the evolution in the EU’s global export market shares across
scenarios is marginal, which points to limited differences in competitiveness impacts
across target options (Table 15). While the EU is expected to represent a gradually
declining share of global exports in the coming decades, this is driven mainly by the
smaller relative size of its population and economy and not by the level of climate
ambition. As indicated above, a more relevant factor for the impacts on competitiveness
is the level of ambition in mitigation policies in the rest of the world, with a higher level
of ambition susceptible to increase market shares for EU companies.
Table 15: EU share in global exports (% of world trade)
2040 2050
S1 S2 S3 S1 S2 S3
Fragmented action
All exports 16.4% 16.2% 16.1% 15.9% 15.9% 15.9%
Energy intensive industries 17.4% 17.1% 17.1% 16.9% 16.8% 16.8%
Transport equipment 25.3% 25.1% 25.0% 24.1% 24.1% 24.1%
Other equipment goods 17.5% 17.3% 17.1% 16.7% 16.7% 16.7%
Consumer goods industries 12.6% 12.5% 12.3% 12.0% 12.0% 12.0%
Market services 22.7% 22.8% 22.7% 21.5% 21.5% 21.5%
Agriculture 7.2% 7.0% 7.0% 6.2% 6.3% 6.3%
Forestry 4.4% 4.3% 4.3% 3.1% 3.1% 3.1%
Global action
All exports 16.9% 16.7% 16.6% 16.9% 16.9% 16.8%
Energy intensive industries 17.9% 17.6% 17.6% 17.6% 17.5% 17.5%
Transport equipment 25.3% 25.2% 25.0% 24.4% 24.4% 24.3%
Other equipment goods 18.1% 17.9% 17.8% 18.7% 18.7% 18.7%
Consumer goods industries 13.3% 13.2% 13.0% 13.6% 13.6% 13.6%
Market services 21.7% 21.7% 21.7% 19.1% 19.1% 19.1%
Agriculture 7.8% 7.6% 7.5% 6.4% 6.5% 6.9%
Forestry 4.4% 4.3% 4.3% 3.1% 3.1% 3.2%
Source: JRC-GEM-E3.
The transition to climate neutrality and the level of ambition for 2040 will also impact the
EU’s main trading partners. While the level of total EU imports is similar across
scenarios, the composition of imports and their carbon intensity will change with the
transition. Imports of fossil fuels will decline sharply in the coming decades, with an
even sharper and faster decline under S3. For market services and agro-forestry goods,
the share of EU imports is expected to grow during the transition. A broad-based
54
assessment suggests that the share of EU imports coming from Africa and Asia
(excluding China and India) will increase.
The extent to which public finances could be affected by the transition itself and by the
scenarios in this impact assessment will depend on a multiplicity of factors, many
determined at Member State level. On the revenue side, environmental taxes play a key
role in decoupling economic growth and environmental impacts. In 2021, environmental
taxes represented about 2.2% of GDP or 5.5% of the total revenues of EU Member States
from taxes and social contributions, the bulk linked to energy taxes for fossil fuels. The
base of carbon taxes will erode as the EU progresses towards climate neutrality.
Revenues from carbon pricing or other taxes aiming at reducing emissions should
increase over the transition before declining as the EU economy moves towards climate
neutrality. In that context, phasing out fossil fuel subsidies will be all the more important.
These trends will have implications for the design of tax and revenue systems.
On the expenditure side, the impact will be affected, among others, by the extent to
which Member States directly fund or support investment in climate change mitigation
and adaptation. In turn, the risks to government finances arising from fossil fuel price
shocks, as recently experienced following Russia’s war of aggression in Ukraine, would
be much lower under a higher target for 2040. Simulation with the JRC-GEM-E3 model
of a stylised shock resulting in doubling of fossil fuel prices (coal, oil and gas), without
knock-on effects on electricity prices, shows that the negative impact on GDP, private
consumption and employment is halved if it takes place in an economy with a largely
decarbonised energy system projected for 2040, compared to the same shock taking place
in 2025 (GDP impact of -0.4% vs. -0.8% and private consumption impact of -1.3% vs. -
2.6%).
The risks from climate-related hazards for public finance are becoming increasingly
obvious, though these will be determined by the success of global mitigation efforts and
the extent to which private insurance can provide adequate coverage (76
). Insurance cover
for climate-related natural catastrophes is low - at about 25% at EU level, with large
disparities among Member States (77
).
Finally, it is critical to assess the potential impacts of the climate transition alongside its
co-benefits (section 6.3) and the costs of inaction. Co-benefits in terms of human health,
strategic independence, quality of life and environmental sustainability cannot all be
adequately measured in financial terms or as economic impacts; however they are large
and affect welfare in many ways. In addition, the damaging impacts of global warming
are becoming increasingly stark and immediate, both for our economies and people.
Short-term costs are soaring due to the occurrence and intensity of extreme weather-
related events. While estimates of long-term economic losses are shrouded with
(76
) The Commission’s Fiscal Sustainability Report 2021 highlights that extreme weather and climate-
related events already pose risks to fiscal (debt) sustainability in several countries, while further stressing
that the assessment is based on an incomplete view of risks and is therefore likely to underestimate the
negative fiscal impacts.
(77
) Based on the dashboard on insurance protection gap for natural catastrophes from the European
Insurance and Occupational Pensions Authority.
55
uncertainty and will depend to some extent on our ability to adapt to a changing climate,
they all point to impacts that are several times the estimated impacts of mitigation
policies.
6.4.2 Investment needs
The EU energy system needs to be decarbonised to a large extent by 2040 in all
scenarios. This requires the modernisation of many facets of our economy. All scenarios
imply an intensification of efforts to replace fossil fuels with renewable and carbon-free
sources of energy, achieving higher energy efficiency across the economy, and increasing
innovation. Existing capital assets (e.g., fossil-based power plants, heating and cooling
systems or industrial processes) will be progressively replaced with renewable
technologies, carbon-free or electricity-based assets, whose capital intensity may be
larger than fossil-based assets. New industrial capacities such as critical raw material
processing or clean steel, will be built, to supply the decarbonisation needs. The
transition of the energy system will require sustained investment including in research,
industry, and supply chain capacities. This will trigger innovation.
All scenarios require similar significant investment needs for the energy system over the
period 2031-2050, although with different time profiles over the two decades, and
different sectoral composition. This highlights the necessity to ensure enabling
conditions that make such a level of investment feasible and that avoid investment
decisions that are not compatible with the transition.
The three scenarios imply annual energy system investment needs (excluding transport)
above 3% of GDP for the period 2031-2050 (Table 16). This amounts to an additional
1.5 percentage points of GDP compared to average energy system investment in 2011-
2020, a period during which overall investment levels in the EU were historically low
(see Annex 8). It is also comparable to the level of investment that will be needed in the
current decade to achieve the objectives of the Fit-for-55 package. The resulting
evolution of investment as a proportion of GDP is not exceptional in historical terms,
though the increase would need to be sustained over a prolonged period of time: the ratio
between gross fixed capital formation (GFCF) and GDP in the EU has fluctuated
between 20-23% since the mid-90s, dropping to a 20% low between 2010 and 2020
before bouncing back in more recent years towards the average of 22% seen in 2000-
2010. In the 1970s and 1980s, the average ratio was at 25.8% and 23.1%, respectively.
The electricity sector (generation and grid) dominates investment needs on the supply
side given the increasing electrification in the economy. On the demand side, the
residential sector accounts for the largest share of investment needs at about two-thirds of
the total (excluding transport).
56
Table 16: Average annual energy system investment needs (billion EUR 2023).
S1 S2 S3 ΔLIFE
2031-
2040
2041-
2050
2031-
2050
2031-
2040
2041-
2050
2031-
2050
2031-
2040
2041-
2050
2031-
2050
2031-
2040
2041-
2050
2031-
2050
Supply 236 377 306 289 328 308 341 281 311 -59 -14 -36
Power grid 79 88 84 88 81 85 96 75 85 -15 -2 -9
Power plants 97 187 142 128 157 142 151 133 142 -28 -6 -17
Other 59 102 81 72 90 81 94 73 83 -16 -6 -11
Demand excl.
transport
332 377 354 355 357 356 372 338 355 -23 1 -11
Industry 38 31 35 46 24 35 48 22 35 -7 -3 -5
Residential 225 250 237 237 242 239 248 230 239 -12 4 -4
Services 49 78 63 53 73 63 57 67 62 -4 1 -2
Agriculture 19 19 19 19 19 19 20 18 19 0 0 0
Transport 866 875 870 861 885 873 856 882 869 -80 -85 -82
Total 1433 1629 1531 1505 1570 1537 1570 1501 1535 -162 -97 -129
Total excl.
transport
567 754 661 644 685 664 713 619 666 -82 -12 -47
Memo:
Real GDP
(period average) 19444 22369 20906 19444 22369 20906 19444 22369 20906 19444 22369 20906
Note: “LIFE” compares the cost of the LIFE scenario to the S3 scenario, which both meet the same overall net GHG
reductions by 2040.
Source: PRIMES.
More ambition in 2040 (S3) requires higher annual investment needs in 2031-2040 and a
faster deployment of decarbonisation technologies on the supply and demand side, but
also comparatively lower investment levels in 2041-2050. The opposite is true for
scenario 1, relative to scenario 2, with a significant delay in the deployment of
investment that would entail a great deal of catching up with annual investment
(excluding transport) of EUR 755 billion in 2041-2050, i.e. 6% higher than what is
required under scenario 3 in 2031-2040. The difference across scenarios takes place
notably in energy supply (+18% and -18% compared to S2, respectively). A higher level
of ambition in 2040 also requires industry to shift faster towards the manufacturing of
net-zero technologies and the use of carbon capture, and to expand the associated supply
chains that enable the decarbonisation of other sectors. Compared to S2, investments in
2031-2040 to decarbonise industry are 4% higher in S3, and 16% lower in S1. In
services, the differences are +8% and -7%, respectively, and in the residential sector +5%
and -5%, respectively. In agriculture, the difference between the scenarios is very small,
at +0.4% and -1.2% relative to S2.
LIFE shows that demand-side action, including shifts to a more sharing economy, more
circular use of materials or more sustainable mobility can reduce the need for investment
across the entire period. The reduced energy demand results in lower investment
requirements across the board. In aggregate, average annual investment needs (excluding
transport) in 2031-2050 are almost EUR 50 billion or 7.1% lower with LIFE than under
S3. They are about EUR 36 billion per annum (12%) lower on the supply side and about
EUR 5 billion (15%) lower in industry.
57
Investment in transport (78
) is projected at about EUR 870 billion per annum (4.2% of
GDP) in 2031-2050 and varies little across scenarios. About 80% of the average annual
investment in 2031-2050 is projected in road transport, mainly to purchase private cars
(about EUR 510 billion per annum and 60% of the total) (79
). Investment needs for
recharging and refuelling infrastructure account for a small proportion of the total, at
about EUR 15 billion per annum. Changes towards more sustainable mobility patterns
(LIFE) reduce the average annual transport-related investments in 2031-2050 by around
EUR 80 billion (9%).
These investment needs will be met by both private actors and the public sector. Private
businesses are likely to be the main source of investment on the supply side and in
industry. Public support via State aid has been instrumental in the past for the
deployment of renewable energy generation. It will likely remain critical in the future
deployment of innovative decarbonisation technologies in the energy system (e.g.
renewable hydrogen) and industry (e.g. innovative production processes and carbon
capture, storage, and use). Investment by SMEs largely depends on the sector where they
operate (see Annex 4). Households will face large investment needs for the renovation of
the building stock and the acquisition of zero tailpipe emission vehicles. How up-front
investment costs for renovation and heating/cooling will be borne will depend on
ownership structure (homeowners, tenant vs. landlord) and on the extent of public
support.
The early push on investment under S3 enables the achievement of a higher mitigation
target by 2040, with associated benefits in terms of a lower overall carbon budget,
reduced fossil fuel imports and lower negative impacts of GHG emissions. In turn, the
delay in investment effort under S1 comes at the cost of lower mitigation, higher fossil
fuel imports and higher negative impacts from emissions.
The early push under S3 is most significant on the supply side, where the economic
agents responsible for the investment consist mainly in private businesses with good
access to finance, backed by collateral in terms of assets and predictable long-term
revenue streams (Table 17). Industry would also need to anticipate investment under S3
to some extent, and it is likely to have solid access to finance. In the residential sector,
where access to finance is likely more challenging for low- and middle-income
households the need for an early push under S3 is less significant. Overall, average
annual investment (including transport) under S3 is 4% higher than under S2 in 2031-
2040. This amounts to 0.3% of GDP, most of which on the supply side.
(78
) These figures represent the full acquisition cost of new vehicles, not only the incremental cost related
to the decarbonisation of transport. In addition, it should be noted that investment in transport here reflect
the expenditures on vehicles, rolling stock, aircraft and vessels plus recharging and refuelling
infrastructure. They do not cover investments in infrastructure to support multimodal mobility and
sustainable urban transport. They factor in a higher number of vehicles sold as well as any potential
increase in the average size/class of vehicles.
(79
)The figure factors in a higher number of vehicles sold as well as any potential increase in the average
size/class of vehicles.
58
Table 17: investment profiles across options and financial feasibility (annual averages,
2031-2040)
Billion EUR 2023 % change vs. S2 % GDP Deviation vs. S2 (% GDP)
2011-
2020
S2 S1 S3 2011-
2020
S2 S1 S3
Total 863 1505 -4.8% +4.3% 5.8% 7.7% -0.37% +0.33%
Total excl. transport 248 644 -11.9% +10.8% 1.7% 3.3% -0.39% +0.36%
Supply 80 289 -18.4% +18.0% 0.5% 1.5% -0.27% +0.27%
Industry 7 46 -15.7% +4.4% 0.0% 0.2% -0.04% +0.01%
Residential 116 237 -5.1% +4.7% 0.8% 1.2% -0.06% +0.06%
Services 29 53 -7.1% +8.3% 0.2% 0.3% -0.02% 0.02%
Agriculture 17 19 -1.2% +0.4% 0.1% 0.1% 0.00% 0.00%
Transport 616 861 0.5% -0.5% 4.2% 4.4% +0.02% -0.02%
Source: PRIMES.
A sensitivity analysis on investment costs has been done for electricity production from
solar and wind energy, new fuels, and heat pumps, i.e. technologies at the core of the
Commission proposal on a Net Zero Industry Act (NZIA) and that will be critical as
enablers of the EU’s decarbonisation objectives. Over the past decades, the cost of low
carbon technologies has decreased sharply as a result of technological progress and
learning-by-doing. However, as demand for renewable technologies and electrification -
and for the raw materials needed for their production - are set to increase globally, these
sectors could potentially be subject to price shocks or sustained price pressures. This
would depend on the capacity of global markets to respond to that demand, on the ability
of circular economy policies to create a resource base for “secondary” materials
production in the EU, and on the capacity of the EU to create a domestic value chain for
primary materials. A 20% increase in investment costs for the four NZIA-covered
technologies would increase annual energy system investment needs (excluding
transport) in 2031-2040 by 5.5%, 6.1% and 6.3%, respectively under S1, S2 and S3.
However, such a cost increase would only affect newly installed capacity during the
period of the price shock, and not the entire stock of assets. In this regard, a price shock
on renewable technologies (or raw materials needed for their production) is
fundamentally different from a price shock on fossil fuels.
Net-zero technologies are at the centre of strong geostrategic interests and at the core of
the global technological race, as exemplified by the United States’ Inflation Reduction
Act and China’s dominance in manufacturing of some cleantech. In this context, the Net-
Zero Industry Act is part of the actions announced in the Green Deal Industrial Plan of
February 2023, aiming at simplifying the regulatory framework and improving the
investment environment for the Union’s manufacturing capacity of technologies that are
key to meet the Union’s climate neutrality goals and energy targets. The investments
needed to build EU-based manufacturing capacity for five key net-zero technologies
(wind, solar PV, electrolysers, batteries and heat pumps) are estimated at approximately
billion EUR 23 for the decade 2031-2040. Two thirds of total investments are for battery
manufacturing, one fifth to one quarter are for manufacturing of wind technologies, and
electrolysers, solar PV and heat pumps each represent between 2 and 6% of the total.
This level of investment needs takes into account that investments in manufacturing
capacity already take place by 2030.
59
6.4.3 Energy system costs and other mitigation costs
Energy system costs (80
) are one of the important factors driving the competitiveness of
EU businesses. This Impact Assessment is based on model results, reflecting adopted
legislation under the FF55 package (see Section 1.4.1), existing National Energy and
Climate Plans (81
) and understanding of the possible evolution of technologies and costs.
6.4.3.1 Energy system costs for the whole economy
The total energy system–costs - including capital costs and energy purchase costs for
both the supply and demand sectors –82
)(83
) - that result from the modelling are projected
to be only slightly higher for the more ambitious scenarios in 2031-2040. System costs
are 1.5% higher under S3 than under S2, while they are only 2.1% lower under S1 than
under S2. The moderate increase in system costs that parallels increases in mitigation
targets in 2040 are driven by higher investment needs in 2031-2040, which translate into
higher annual capital costs. A higher cost of energy purchases under S3 than under S2
also contributes to the increase in overall energy system costs.
When contrasted with the situation in 2011-2020, however, the shift in the composition
of total energy system costs from energy purchases to capital costs is very clear under all
three scenarios. Total energy system costs (including carbon revenues) in 2031-2040
range from 12.4% of GDP under S1 to 12.9% under S3. This is around the 2021-2030
average and represents a moderate increase from an average of 11.9% of GDP in 2011-
2020. While energy purchases represented 9.2% of GDP in 2011-2020, they are projected
to amount to 7.8% of GDP in 2031-2040 under S2. In contrast, capital costs are projected
to increase from 2.7% of GDP in 2011-2020 to 4.9% in 2031-2040 (Table 18). The
benefits of higher investment levels in terms of lower energy purchase are therefore very
clear.
(80
) While energy system modelling captures the energy system costs well, the costs associated with the
transition are broader. Rapid structural change will lead to the devaluation of equipment and other assets in
several industrial sectors, notably in fossil fuels extraction and processing.
(81
) “Current” at the time of publication, i.e. the NECPs submitted in 2020. Future climate and energy
assessments will take into account the final NECPs updates (2024), including for nuclear capacity.
(82
) The total energy system costs considered here includes capital costs (for energy supply installations
such as power plants and energy infrastructure, as well as investment in buildings for energy efficiency
related renovation, purchase of end-use equipment and appliances as well as energy related equipment for
transport) and energy purchase costs. For transport, the “capital cost” covers only additional capital costs
for improving energy efficiency or for using alternative fuels, including alternative fuels infrastructure.
(83
) Capital cost is computed as the annualisation of overnight investment considering a weighted average
cost of capital of 10%, which reflects both financing and opportunity cost.
60
Table 18: Energy system costs profiles across options (2031-2040, annual average)
Billion EUR 2023 % change vs. S2 % GDP Deviation vs. S2 (%
GDP)
2011-
2020
S2 S1 S3 2011-
2020
S2 S1 S3
Total energy system costs 1766 2472 -2.1% +1.5% 11.9% 12.7% -0.27% +0.19%
Industry* 270 410 -3.4% +2.3% 1.8% 2.1% -0.07% +0.05%
Tertiary** 312 397 -0.5% +0.5% 2.1% 2.0% -0.01% +0.01%
Residential 620 850 -1.4% +1.0% 4.2% 4.4% -0.06% +0.04%
Low-income households 221 316 -1.5% +1.0% 1.5% 1.6% -0.02% +0.02%
Transport 564 815 -3.1% +2.0% 3.8% 4.2% -0.13% +0.08%
Road transport 467 485 -1.5% +1.9% 3.2% 2.5% -0.04% +0.05%
Capital costs 407 956 -1.8% +1.7% 2.7% 4.9% -0.09% +0.08%
Industry* 17 85 -3.2% +1.6% 0.1% 0.4% -0.01% +0.01%
Tertiary** 51 137 -2.1% +2.4% 0.3% 0.7% -0.02% +0.02%
Residential 251 490 -1.9% +1.6% 1.7% 2.5% -0.05% +0.04%
Low-income households 78 176 -2.2% +1.7% 0.5% 0.9% -0.02% +0.02%
Transport 87 243 -1.1% +1.6% 0.6% 1.3% -0.01% +0.02%
Road transport 56 152 +0.9% -1.3% 0.4% 0.8% +0.01% -0.01%
Energy purchases 1359 1516 -2.3% +1.3% 9.2% 7.8% -0.18% +0.10%
Industry 253 325 -3.4% +2.5% 1.7% 1.7% -0.06% +0.04%
Tertiary** 261 259 +0.3% -0.5% 1.8% 1.3% 0.00% -0.01%
Residential 369 360 -0.7% +0.3% 2.5% 1.8% -0.01% +0.01%
Low-income households 143 140 -0.6% +0.2% 1.0% 0.7% -0.00% +0.00%
Transport 476 572 -3.9% +2.1% 3.2% 2.9% -0.11% +0.06%
Road transport 412 334 -2.5% +3.4% 2.8% 1.7% -0.04% +0.06%
Note: *includes cost to abate industrial process CO2 emissions. ** includes energy related costs in services and in
agriculture.
Source: PRIMES.
Total energy system costs as a share of GDP are projected to gradually decreases under
all three scenarios after 2040 as energy purchases continue to decline in relative terms,
while capital costs remain broadly constant at around 4.8% of GDP. Total energy system
costs are projected at around 11.3% of GDP in 2041-2050 under all three scenarios,
lower than the level in 2011-2020. The LIFE setting shows that circular economy actions
and more sustainable lifestyles can limit the costs associated with investments and fuel
use by up to 0.2 percentage points in 2031-2040, and 0.5 percentage points in 2041-2050.
An important driver is the cost of net fossil fuels imports, which represented about 2.2%
of GDP in 2010-2021 and 4.1% during the energy crisis in 202284
. The EU’s climate and
energy policies by 2030 and the pathways to climate neutrality considerably reduce the
exposure of the energy system to fossil fuel price shocks. As the energy system
decarbonises, fossil fuel imports decrease over time (85
) to 1.4% of GDP over 2031-2040
and down to 0.6% in 2041-2050, contributing directly to limiting the energy system cost
(84
) Based on Eurostat’s trade data for CN code 27, with the exclusion of codes 2712, 2714, 2715 and 2716.
(85
) Despite assuming growing international fossil fuel prices over time – see Annex 6.
61
(Table 19). On the other hand, it increases the EU demand for raw materials and,
possibly, the EU dependence on imports from other countries for low-carbon
technologies.
Table 19: Average annual economy-wide energy system costs (billion EUR)
2011-
2020
2021-
2030 2031-2040 2041-2050
S1 S2 S3 S1 S2 S3
Total energy system costs
Billion EUR 1766 2130 2419 2472 2508 2508 2527 2530
% GDP 11.9% 12.5% 12.4% 12.7% 12.9% 11.2% 11.3% 11.3%
Fossil fuel imports
Billion EUR 336 427 293 277 265 150 142 133
% GDP 2.3% 2.5% 1.51% 1.42% 1.36% 0.67% 0.63% 0.59%
Source: PRIMES.
The EU’s future energy system will be characterised by a growing use of electricity,
largely based on renewables. Electricity production costs are expected to be comparable
across all scenarios in 2040. The cost structure will evolve towards a capital-based
system, albeit at a different pace depending on the scenario: the share of fuels (fossil
fuels, biomass, nuclear fuel) in total costs decreases to 22-13% depending on the level of
decarbonisation and of associated remaining fossil fuels in 2040.
Table 20: Average electricity production cost
2040 2050
EUR23/MWh S1 S2 S3 Δ LIFE (S3)
Average production cost, of which 97 96 94 -0.7% 87
Fuels (incl. taxes and ETS payments) 22% 16% 13% -0.6% 13%
Capital cost 47% 51% 54% +0.5% 53%
O&M cost 32% 33% 32% +0.1% 34%
Source: PRIMES
6.4.3.2 Energy costs and prices for businesses
Energy system costs for the demand sectors (sectors others than those of energy or
electricity production) are similar across scenarios for industry and tertiary sectors. As a
share of gross value added and in comparison, with the level of the current decade, these
costs are projected to decline over time for tertiary sectors, on account of lower energy
purchases in relative terms.
As far as industry is concerned, the implementation of low-carbon processes, particularly
carbon capture and storage, leads to higher capital-related costs for the scenarios with
higher ambition. Capital-related costs under S3 are 1.6% higher than under S2 in 2031-
2040 while energy purchases increase by 2.5%, in line with the level of decarbonisation
and the role of e-fuels to substitute remaining fossil fuels. In turn, the lower ambition
under S1 than S2 enables a reduction in capital costs and energy purchases of only about
62
3%. Overall, the limited increase in energy purchases across scenarios leads to a
moderate increase in energy system costs as a share of gross value added in 2031-2040
compared to earlier periods, before a stabilisation thereafter.
In the tertiary sector, the increase in total energy system costs resulting from higher
climate ambition is more limited (+0.5% in S3 compared to S2 and -0.5% in S1
compared to S2, for 2031-2040). Higher levels of investment in energy-efficient
equipment and to renovate buildings result in lower energy purchases under S3 than
under both S2 and S1. Capital-related costs in 2031-2040 are 2.4% higher under S3 than
S2, but this is partly compensated by a reduction of 0.5% in energy purchases. Given that
the largest part of companies in the tertiary sector are SMEs (62% of the gross value
added of the sector, nearly 70% of employment by the sector) and that 65% of SMEs are
in services, the effects on this sector are well representative of the impact on SMEs.
Table 21: Average annual energy system costs for businesses (billion EUR)
2031-2040 2041-2050
S1 S2 S3 Δ LIFE S1 S2 S3 Δ LIFE
Industry & Tertiary 791 807 819 -20 881 885 886 -52
Capital-related cost* 224 234 241 -7 277 281 285 -14
Energy purchases 567 574 578 -14 604 603 601 -38
Industry 397 410 420 -16 462 467 470 -41
Capital-related cost 83 85 87 -3 114 116 117 -9
Energy purchases 314 325 333 -13 348 350 352 -31
Tertiary** 394 397 399 -4 419 418 417 -11
Capital-related cost* 134 137 141 -3 150 151 153 -3
Energy purchases 260 259 258 -2 269 267 264 -8
Note: * includes investment in energy efficient renovation of services buildings. ** includes energy-related cost in “services”
and in agriculture. “LIFE” compares the cost of the LIFE scenario to the S3 scenario, which both meet the same overall
net GHG reductions by 2040.
Source: PRIMES.
Table 22 shows the average electricity prices for industry and services in 2040 and 2050.
They remain fairly stable in the long run with very similar patterns across scenarios,
reflecting electricity production system costs shifting to lower operating costs and higher
capital-related costs. Low carbon capacity progressively substitutes CO2-emitting assets
driving the system to a more capital-based structure which is less exposed to fossil fuel
prices.
63
Table 22: Average final price of electricity for businesses
EUR23/MWh 2040 2050
Industry 130-131 131-133
Services 249 255
Note: The electricity prices shown here reflect the evolution of the average electricity production costs to supply
these sectors (i.e., considering their load profile) as well as the taxes applied to the sectors.
Source: PRIMES.
Table 23 shows the share of energy related costs in total production costs for the different
scenarios for all industries and differentiated between energy intensive and non-energy
intensive industries (EIIs and non-EII) (86
). For the industrial sector as a whole, the
difference across scenarios in 2031-2040 is limited, with higher climate ambition
translating into only mildly higher energy related costs.
Table 23: Share of energy-related costs in total production costs in industry
2031-2040 2041-2050
S1 S2 S3 ΔLIFE S3 ΔLIFE
All
Energy related cost 3.8% 3.9% 4.0% -0.15pp 4.0% -0.34pp
fuel expenses 3.0% 3.1% 3.2% -0.12pp 3.0% -0.26pp
capital and other costs 0.8% 0.8% 0.8% -0.03pp 0.9% -0.08pp
EIIs
Energy related cost 10.2% 10.7% 11.0% -0.55pp 11.5% -1.31pp
fuel expenses 7.9% 8.3% 8.5% -0.44pp 8.6% -1.01pp
capital and other costs 2.3% 2.4% 2.5% -0.11pp 2.9% -0.30pp
non-
EIIs
Energy related cost 1.63% 1.62% 1.63% -0.02pp 1.48% 0.02pp
fuel expenses 1.36% 1.35% 1.36% -0.02pp 1.13% -0.02pp
capital and other costs 0.27% 0.27% 0.27% 0.00pp 0.35% -0.01pp
Note: “LIFE” compares the cost of the LIFE scenario to the S3 scenario, which both meet the same overall net GHG
reductions by 2040.
Source: PRIMES.
There is a more marked difference across scenarios for EIIs. For these industries, which
account for about 25% of total manufacturing value-added (87
), the share of energy-
related costs in total production costs is 0.3 percentage points higher (corresponding to a
3% increase in energy system costs) in 2031-2040 in S3 than in S2. A lower level of
ambition under S1 generates leads to a moderately lower energy system cost by
0.5 percentage points of total production costs compared to S2 (corresponding to a 4.4%
decrease). The bulk of the difference comes from fuel expenses, while capital costs
remain fairly similar across scenarios. Novel low-carbon technologies replace
conventional processes, allowing a reduction in the purchase of fossil fuels, while, at the
(86
) “EIIs” covers iron & steel, non-ferrous metals, chemicals, non-metallic minerals, paper & pulp.
(87
) Estimate based on a wide definition of the EII ecosystem, economy-wide gross value added and gross
valued added in the manufacturing sector (NACE 2 code C)
64
same time, in scenarios with higher emission reductions by 2040, larger quantities of e-
fuels are used. The EU put in place the Carbon Border Adjustment Mechanism
(CBAM)(88
) to avoid carbon leakage by ensuring that the carbon price of imports in key
EIIs is equivalent to that paid by producers in the EU.
In non-EIIs, which represent the majority of total manufacturing value-added and include
many SMEs (see the SME test Annex), the share of energy-related costs in total
production costs is much smaller and scenario S3 shows virtually no difference compared
with S2 in 2031-2040, even though there is a 1% increase in energy system costs in
absolute terms.
The LIFE setting shows how circular economy, material and energy efficiency actions
contribute to limiting the share of energy related costs in EIIs. Among others, decrease of
scrap export and increased recycling allows for a larger secondary production share, and
significant savings in the more expensive e-fuels necessary for the decarbonisation of
primary processes.
6.4.3.3 Costs related to mitigation of GHG emissions in the LULUCF sector and non-
CO2 GHG emissions
Table 24 provides an overview of the average annual costs in the LULUCF sector and for
non-CO2 emissions in the different scenarios. The costs are related to the implementation
of abatement technologies or nature-based removal solutions. The technical available
potential for nature-based removals and mitigation measures differs between the two
decades, leading to varying annual costs across decades, as the entire potential up to the
respective maximum carbon value is implemented.
Table 24: Costs related to mitigation of GHG emissions in the LULUCF sector and non-
CO2 GHG emissions by decades
Average annual costs
[EUR 2023 billion/year]
2031-2040 2041-2050 2031-2050
S1 S2 S3 S1 S2 S3 S1 S2 S3
Mitigation of LULUCF GHG
emissions
1.1 2.5 2.5 1.6 2.8 2.8 1.3 2.7 2.7
Mitigation of non-CO2 GHG
emissions
0.0 0.7 3.4 3.9 4.1 5.0 2.0 2.4 4.2
- of which in the agriculture
sector
0.0 0.4 3.2 3.8 3.9 4.8 1.9 2.2 4.0
Source: GLOBIOM, GAINS.
S1 does not assume specific LULUCF and non-CO2 policies in 2040, showing smaller
mitigation costs for the 2031-2040 period. Both sectors have to contribute to meeting
climate neutrality in 2050 also in that scenario, which entails some mitigation action and
associated costs in the last decade 2041-2050.
(88
) CBAM covers cement, iron and steel, aluminium, fertilisers, as well as electricity and hydrogen.
65
For LULUCF, additional nature-based removals such as improved forest management,
afforestation or rewetting are applied in S2 and S3 by 2040. The associated average
annual cost in these scenarios amount to EUR 2.5 billion in 2031-2040 and EUR 2.8
billion in 2041-2050.
The average annual costs associated to mitigation of non-CO2 emissions over the 2031-
2040 period are around EUR 0.7 billion per year in S2 and around EUR 3.4 billion per
year in S3. Over the 2041-2050 period, the average annual costs are higher than in the
previous decade: EUR 3.9 billion in S1, EUR 4.1 billion in S2, and EUR 5 billion in S3.
Most of the annual mitigation costs take place in the agriculture sector, which represents
the bulk of the unabated non-CO2 GHG emissions post-2030. The sectoral mitigation
costs of the sector are reflected in the macro-economic analysis presented in section
6.4.1.
6.4.4 Social impacts and just transition
6.4.4.1 Fuel expenses, energy and transport poverty
Energy-related expenses represent a significant share of total expenditure for a large
proportion of EU households, in particular middle- and low-income households. The
recent increase in energy prices has had strong negative social impacts and increased the
rates of energy (and transport) poverty. Assessing the implications of this initiative on
energy system costs for households is therefore of critical importance.
The following assessment is based on modelling results, reflecting the current legislation,
and understanding of the possible evolution of technologies and costs. This assessment
will feed into the development of the future policy framework and support measures in
the coming years to meet the 2040 target, which will determine the actual costs and how
they impact individuals, regions, and society.
The cost structure is characterised by an increase of capital-related costs due to the
purchase of more efficient appliances and the investment for enhancing the insulation of
dwellings. This allows avoiding an increase in energy purchases despite the assumed
increase in international fossil fuels prices over time, the impact of carbon pricing and the
diffusion of new non-fossil fuels.
The relative importance of energy-related costs for households in private consumption is
projected to decline in 2031-2040 compared to 2021-2030, due to the decreasing
importance of fuel purchases in all scenarios. Early action in S3, driven by larger direct
efficiency investments (see Section 6.4.2), also translates into a slightly higher share of
energy-related costs in S3. It then represents 8.2% of private consumption as opposed to
8.0% in S1 and 8.1% in S2 (see Table 25). Energy purchases and electricity price are
projected to be very similar across scenarios.
66
Table 25: Average annual energy system costs as % of private consumption and average
final price of electricity for households in the residential sector
Average Annual Energy System Cost
EU27 - Average across all
income categories
2031-2040 2041-2050
S1 S2 S3 ΔLIFE S1 S2 S3 ΔLIFE
Total (% of private consumption) 8.0% 8.1% 8.2% -0.12pp 7.1% 7.1% 7.1% -0.14pp
Capital related costs* 4.5% 4.6% 4.7% -0.08pp 4.1% 4.1% 4.1% -0.01pp
Energy purchases 3.4% 3.5% 3.5% -0.04pp 3.0% 3.0% 3.0% -0.13pp
EU27 - Low Income
Categories
S1 S2 S3 ΔLIFE S1 S2 S3 ΔLIFE
Total (% of private consumption) 14.0% 14.3% 14.4% -0.20pp 12.0% 12.0% 12.1% -0.25pp
Capital related costs 7.8% 7.9% 8.1% -0.13pp 6.5% 6.5% 6.6% -0.01pp
Energy purchases 6.3% 6.3% 6.3% -0.07pp 5.5% 5.5% 5.4% -0.25pp
Electricity Price (EUR/MWh)**
Residential 288 288 288 -0 289 290 290 -0
Note: * includes purchase of appliances and cost of renovation. “LIFE” compares the cost of the LIFE scenario
to the S3 scenario, which both meet the same overall net GHG reductions by 2040. ** Average final price of
electricity. The electricity price shown here reflects the evolution of the average electricity production cost to
supply the sector (i.e., considering its load profile) as well as the taxes applied to the sector.
Source: PRIMES.
Modelling projections also show that capital related cost (including the purchase of
appliances and cost of renovation) as a share of private consumption are higher for low-
income households than for the average household (8.1% in low-income households
compared to 4.7% on average over 2031-2040 in scenario S3, which is a relative increase
with respect to S2 of 0.13 percentage points in low-income households and
0.07 percentage points on average). Low-income categories often live in relatively less
well insulated homes, in most need of renovation. For low-income households, the
capital-related costs as a share of private consumption are 0.2 percentage point higher in
S3 than in S2 for 2031-2040. Specific social measures are needed to ensure a just and fair
transition (see Annex 9).
Table 26: Average annual energy system costs of road transport (% of total private
consumption), and average final price of electricity in private transport
Average Annual Energy System Cost
EU27 - Average across all income
categories
2031-2040 2041-2050
S1 S2 S3 ΔLIFE S1 S2 S3 ΔLIFE
Total 3.7% 3.8% 3.8% -0.19pp 2.3% 2.3% 2.3% -0.23pp
Capital related costs* 1.3% 1.2% 1.2% -0.04pp 1.1% 1.1% 1.1% -0.10pp
Energy purchases 2.4% 2.5% 2.6% -0.15pp 1.2% 1.2% 1.2% -0.13pp
Electricity Price (EUR/MWh)**
Private transport 223 223
Note: “LIFE” compares the cost of the LIFE scenario to the S3 scenario, which both meet the same overall net
GHG reductions by 2040. * This covers only the additional capital costs for improving energy efficiency or for
67
using alternative fuels. ** Average final price of electricity. The electricity price shown here reflects the evolution
of the average electricity production cost to supply the sector (i.e., considering its load profile) as well as the
taxes applied to the sector.
Source: PRIMES.
Similarly, a higher degree of mitigation ambition is also linked to slightly higher total
energy system costs in road transport89
, which represent 3.7%, 3.8% and 3.8% of private
consumption respectively in S1, S2 and S3 (see Table 26) and correspond to a relative
increase of 0.07 percentage points in S3 compared to S2 and a 0.10 percentage point
decrease in S1. A limited decrease of capital costs from S1 to S3 is observed, and a
moderate increase of energy purchase linked to a larger consumption of e-fuels in S3.
The LIFE analysis shows that a more sustainable mobility can reduce energy purchases,
by an order of magnitude of about 0.2 percentage points of private consumption in 2031-
2041 and in 2041-2050.
The more ambitious the scenario, the quicker the dependence to fossil fuels is reduced,
allowing households in Europe to be better protected from future fossil fuel price shocks.
6.4.4.2 Distribution
Section 6.4.4.1 assesses the impact of changes in energy and transport related expenses
on households. Beyond this, impacts on relative prices throughout the economy are
susceptible to affect households in differentiated manners. The JRC-GEM-E3 model and
micro-data from the household budget survey were used to assess the potential impacts.90
(A macro-economic model is better suited to capture the full effects and interactions
across sectors that affect relative prices). Changes in relative prices are projected to differ
relatively little across scenarios, though the relative price of housing is likely to be higher
under S2 and S3 than under S1, as higher levels of renovation increase costs for
homeowners and renters alike (see Annex 8 for details). Similarly, energy purchases for
transport by households are projected to increase with a higher level of mitigation in
2040.
Linking these estimated changes in relative prices to micro-data from the household
budget survey, the JRC estimated distributional impacts per expenditure and income
decile. This shows that lower income households will be more affected than higher
income households, as measured in terms of compensating variation, i.e. the monetary
transfer that would be necessary to maintain the same level of utility as under the past set
of relative prices. Assuming that none of the additional revenues from ETS are
redistributed to households to temper impacts, the welfare impact of S2 would amount to
less than -0.5% (% of total expenditure) for the lowest expenditure deciles, and about -
89
The details of the total transport expenditures of households (including total capital costs) are provided in
Annex 8.
90
The analysis benefited from inputs from two joint projects between Directorate-General Employment,
Social Affairs and Inclusion (DG EMPL) and the Joint Research Centre (JRC) of the European
Commission: “Assessing and monitoring employment and distributional impacts of the Green Deal (GD-
AMEDI)” and “Assessing distributional impacts of geopolitical developments and their direct and indirect
socio-economic implications, and socio-economic stress tests for future energy price scenarios
(AMEDI+)”. See https://ec.europa.eu/social/main.jsp?langId=en&catId=1588.
68
0.3% for the highest expenditure decile. The effects would be larger under S3 at about -
1.2% and -0.8%, respectively. Redistributing some of the additional carbon revenues at
national or EU level would sharply reduce this negative impact on the lower expenditure
deciles.
6.4.4.3 Employment
The aggregate employment impacts of S2 and S3 differ only slightly from S1, which
already factors in the transformation of the EU economy to climate neutrality by 2050,
with a lower 2040 target. The labour market and social implications of the transition
itself, however, will be concentrated in some specific sectors. It will entail opportunities
but also challenges, particularly in terms of skills availability and reallocation of the
labour force across sectors and occupations. This analysis focuses on the implications of
the transition for the most affected sectors more than on the comparison of impacts
across scenarios. In parallel to decarbonisation, other factors will also impact the labour
market: ageing of the population, decline in the working age population and other trends
fully independent from climate policy, including technological changes and the uptake of
artificial intelligence.
Modelling under JRC-GEM-E3 projects that recent trends in sectoral employment
(increase in the share of services in employment and decrease in the share of industry and
manufacturing), are set to continue across the different scenarios, which display very
similar patterns by 2040 (Table 27). The flipside of the increase in the share of service
sector jobs is a gradual decrease in the share of employment in energy intensive
industries, consumer goods industries and transport equipment. The share of employment
in other equipment goods, however, is projected to remain stable as the transition should
increase EU and global demand for the type of equipment needed for decarbonisation.
While output in energy intensive industries, consumer goods industries and transport
equipment are projected to grow significantly between 2015 and 2040, they will be
outpaced by overall GDP growth. However, in the context of a declining aggregate level
of employment, driven by a shrinking labour force, these sectors’ share of employment
(and absolute employment) are projected to decline over the coming decades.
Employment in fossil fuel industries is expected to be at negligible levels in 2040 and
2050. In contrast, market and non-market services together represent more than 60% of
total employment. Given the downward trend in employment in sectors where men are
more represented alongside an upward trend in services, the transition is expected to have
a limited or positive impact on women’s employment. Annex 8 further assesses the
implications of the transition for the labour market and skills requirements by
considering the potential opportunities arising from investment needs. Employment
opportunities should be particularly significant in areas related to the renovation of the
building stock, the transition to decarbonised sources of heating and cooling (heat
pumps) and the electrification of the economy, including the large-scale installation of
renewable sources of electricity.
69
Table 27: Sectoral employment, share in total employment (%)
2020 2030
2040 2050
S1 S2 S3 S3
Fossil fuel industries 0.13% 0.11% 0.07% 0.06% 0.05% 0.05%
Energy intensive industries 6.7% 6.5% 6.2% 6.1% 6.2% 5.9%
Transport equipment 2.1% 2.0% 1.9% 1.9% 1.9% 1.8%
Other equipment goods 6.3% 6.1% 6.1% 6.1% 6.1% 6.1%
Consumer goods industries 4.4% 4.2% 4.1% 4.1% 4.0% 3.9%
Transport 3.6% 3.9% 3.7% 3.7% 3.7% 3.7%
Construction 7.8% 7.6% 7.6% 7.7% 7.7% 7.7%
Market services 34.0% 34.6% 35.0% 34.9% 34.9% 35.3%
Non-market services 26.6% 27.1% 27.3% 27.3% 27.3% 27.5%
Agriculture 3.5% 3.3% 3.1% 3.1% 3.1% 2.8%
Forestry 0.4% 0.3% 0.4% 0.5% 0.5% 0.4%
Other 4.4% 4.3% 4.5% 4.6% 4.6% 5.0%
Note: In this table, “transport” does not include storage.
Source: JRC-GEM-E3 model.
Further, major opportunities for employment creation should arise from the development
of manufacturing capacity for green technologies, mainly solar photovoltaic and solar
thermal, wind power generation, battery and storage facilities, heat pumps, electrolysers
and fuel cells, sustainable biogas and biomethane, carbon capture and storage and grid
technologies. Boosting the EU manufacturing capacity in these sectors is at the core of
the Net Zero Industry Act proposal, and it will necessitate corresponding efforts to ensure
that the skills needs are developed among the EU’s labour force. The transition will
require accompanying policies at the regional and sectoral levels to ensure that reskilling
and retraining opportunities are available for workers who need them.
6.4.4.4 Regional impacts
The transition to a low-carbon economy will have heterogenous impacts on regions within
the EU. The decarbonisation of production capacities, the transformation of the energy
system, the need to develop an industrial carbon management system and the evolution
of the land sector will all affect regions differently.
Regions with a relatively high share of employment in sectors most impacted by the
transition are more exposed to the transition (see details in Annex 8). This includes the
regions with a high share of employment in sectors that are being phased out in several
countries (mining of coal, lignite and oil shale; extraction of crude petroleum, natural gas
and peat; refining of petroleum products), in energy intensive sectors, as these will have
to produce the same goods differently (manufacturing of chemicals and chemical
products, manufacturing of other non-metallic mineral products, manufacturing of basic
metals), and in sectors that will have to produce different goods (manufacturing of motor
70
vehicles, trailers and semi-trailers) (91
). In 2020, only two EU regions (NUTS-2 level)
had employment shares of more than 1% of direct employment in coal and lignite
mining, crude petroleum, and natural gas extraction, with potential wider local impacts
due to indirect employment The employment and social consequences of the decline in
extraction activities needs to be mitigated, in line with the European Green Deal’s
objective of leaving no region behind (see Annex 9). When considering energy intensive
industries or industries that will have to produce different goods (e.g. automobile sector),
more regions will be affected. In these regions and territories, the employees from these
sectors will have specific reskilling needs. In regions where the automobile sector
represents a high share of the economic activity, the move to the manufacturing of
electricity vehicles requires companies in the supply chain to adjust their business
models. The transition will be faster in S3 than in S2 and faster in S2 than in S1. Regions
that are particularly impacted by the transition need to be accompanied and supported
(see examples of EU and national measures and programmes in Annex 9).
All scenarios require a decrease of fossil fuels and a strong growth of renewable energy
for electricity production. This will entail different opportunities and challenges for
regions: reconversion of fossil fuel producing regions, opportunities to develop local
resources and create jobs where the renewable energy potential is the largest, and
infrastructure development challenges to connect electricity producing centres with
consuming centres. These opportunities and challenges will be more acute in S3, which
has the largest increase of electricity production needs, 6% higher than in S2, while S1 is
7% lower than S2. The development of an industrial carbon management system will
require the development of a full supply chain and of the necessary infrastructure to link
CO2 emitting energy supply and industrial sites to carbon storage or usage sites (notably
to produce e-fuels). The territories with strong presence of energy intensive industries
(e.g., cement production, chemicals industries, etc) will have to anticipate and develop
the corresponding capacities. The scenarios show a very different picture in 2040: while
projections for S1 are around 80 MtCO2 of capture, S2 exceeds 200 MtCO2 and S3 gets
close to 350 MtCO2, where virtually all regions hosting CO2 emitting industrial process
sites would be concerned.
The need to maintain and enhance LULUCF net removals and to curb GHG emissions
from the agriculture sector will mostly affect rural regions. Territories where agriculture
plays a major role and where associated emissions are currently the highest will have to
achieve a larger deployment of technologies and practices to reduce GHG emissions in
S2 or S3 than in S1. A shift in society towards a healthier and more sustainable food
system, as in LIFE, means a higher uptake of more extensive farming practices with
opportunities to generate revenues from nature-based removals activities.
Innovation capacity, the level of instruction and the quality of infrastructure contribute to
the preparedness of regions for the transition. Annex 9 provides examples of EU and
national measures and programmes that can support regions for the transition. The EU’s
cohesion policy plays an important role.
(91
) See also OECD (2023), Regional Industrial Transitions to Climate Neutrality, OECD Regional
Development Studies, OECD Publishing, Paris.
71
7 HOW DO THE TARGET OPTIONS COMPARE?
The different target options are compared based on the results of the analysis of the
different representative scenarios shown in section 6. The target Option 2 serves as the
“baseline” target level (see section 5.1).
7.1 Effectiveness
7.1.1 Specific objectives
The effectiveness of the different target options is assessed against the different specific
objectives defined in section 4.
The capacity to secure the delivery of climate neutrality by 2050 (specific objective SO1)
is measured in terms of overall and sectoral progress of required GHG reductions
between 2030 and 2050 achieved by 2040 for the different target options. Option 1
covers only half the necessary overall reductions throughout the period, with sectoral
progress ranging from 9% to 68% only. Compared to the baseline Option 2, Option 1
delays to the last decade significant sectoral reductions, including in the hard-to-abate
sectors, and the development of carbon removals (see sections 6.1.1 and 6.1.2), putting at
risk the achievement of climate neutrality by 2050. Conversely, Option 3 anticipates the
importance to implement reductions in all sectors and to deploy carbon removals, with
77% of the overall needed reductions over 2030-2050 achieved by 2040, ranging from
58% to 93% across sectors, thus securing a higher capacity to deliver climate neutrality
by 2050 than Option 2.
In terms of climate performance and importance to minimise the GHG budget (SO2) to
contribute to the global Paris Agreement temperature goals, Option 3 leads to a lower
GHG budget over 2030-2050 of at most 16 GtCO2-eq (11% lower than option 2), against
18 GtCO2-eq for option 2, and 21 GtCO2-eq for option 1 (17% higher than option 2).
Table 28: Effectiveness: Delivering climate neutrality and GHG budget
Specific objective Assessment criteria Option 1 Option 2 Option 3
SO1
Delivering
climate
neutrality
GHGs reductions
achieved in 2040 as a %
of needed over 2031-
2050
Total net GHGs
50%
(-15 pp vs
Option 2)
65%
77% (+ 12
pp vs Option
2)
Sectors* (min /
max)
9% / 68% 55% / 88% 58% / 93%
SO2
Minimising
GHG budget
Cumulative GHG emissions over 2030-2050
(GtCO2-eq)
21 (+17% vs
Option 2)
18
16 (-11% vs
Option 2)
Note: *Sectors described in section 6.1.1. **Assuming net zero being reached in 2050 and linear interpolation of net GHGs
between 2030 and 2040 and between 2040 and 2050.
In terms of just transition (SO3), the difference in energy costs for households is limited
compared to Option 2. Option 1 is lower by 1.4% in the residential sector (1.5% for low-
income households) and by 1.5% in road transport. Energy costs for households under
Option 3 are 1% higher in the residential sector (also for low-income households) and
1.9% higher in road transport.
72
The effect of competitiveness (SO4) is measured by the overall energy system cost, the
economic output (total GDP and Energy intensive industries) and by the shares on global
trade. Overall, the difference between options is limited on all these criteria, and even
more so between option 3 and the baseline target option 2.
The overall energy system cost over 2031-2040 is 1.5% higher in option 3 than in option
2, while it is 2.1% lower in option 1 (Table 29).
For industry, total energy system costs in 2031-2040 are 2.3% higher in option 3 than in
option 2, and 3.4% lower in option 1 (see Annex 8). For the tertiary sector, they are 0.5%
higher in option 3 and 0.5% lower in option 1. For the time period 2041-2050, these
differences are smaller and even reverse: for industry, total energy system costs are then
0.6% higher in option 3 than in option 2, and 1.1% lower in option 1. For the tertiary
sector, they are 0.3% lower in option 3 and 0.2 higher in option 1. For energy intensive
industries, the share of energy-related costs in total production costs vary between 10.2%
in option 1 and 11% in option 3 for the time period 2031-2040.
This translates into very limited difference in terms of overall macro-economic impact,
with option 3 showing a very minor negative deviation in GDP of -0.2% compared with
option 2, and option 1 showing a slight positive deviation of 0.5% compared to option 2.
By 2050, there is no difference in GDP levels across scenarios as the impacts are
transitory.
The options also differ little in terms of economic output of key EU sectors. For example,
for energy intensive industries, it is projected to be 0.2% lower under option 3 than
option 2, and 1.4% higher under option 1. As also highlighted by certain stakeholders,
what matters more for these industries and other export-oriented sectors than the EU
target per se, is the extent to which the industrial sector decarbonises in the rest of the
world, both in terms of processes and power supply. In the context of higher mitigation
ambition in the rest of the world, output under option 1 is 2.3% lower than under option
2. In option 3, it is almost at the same level as in option 2. This is due to first-mover
advantages that benefit EU industries.
Finally, the EU share in global exports varies little across options, with long-term trends
dominated by other factors such as regional trade dynamics and trade agreements, or the
declining relative share of the EU’s population and GDP globally. Higher ambition under
Option 3 generates a marginal 0.1 percentage point decrease in the EU’s share in global
exports compared to Option 2, with Option 1 yielding only a 0.2 percentage point
increase.
Section 7.1.2 discusses the financial feasibility for the different actors.
73
Table 29: Just transition and Competitiveness
Specific objective Assessment criteria Option 1 vs 2 Option 3 vs 2
SO3 Just transition
Cost for
households
(2031-2040)
Residential
Average -1.4% +1.0%
Low income -1.5% +1.0%
Road transport Average -1.5% +1.9%
SO4 Competitiveness
Total system cost (annual average 2031-2040) -2.1% +1.5%
Economic
output* (2040)
GDP +0.5% -0.2%
EIIs +1.4% -0.2%
EU shares in global exports (% of world trade, 2040) +0.2 pp -0.1 pp
Note: *Considering fragmented climate action in the rest of the world.
In terms of deployment of technologies (SO5), option 3 already deploys more than half
(54%) of the investment needs to get to climate neutrality by 2050 by 2040, against 48%
in Option 2. With only 43% of the investment needs by 2040, Option 1 delays the
technological effort towards the last decade (Table 30).
Option 3 leads to the deployment by 2040 of almost two thirds of the renewable
electricity capacity compatible with climate neutrality by 2050 (against 56% for option
2), more than half the needed renewable hydrogen production capacity (41% for option
2) and almost three-fourths of the needed carbon capture capacity (against about half for
option 2). Conversely, Option 1 delays the deployment of these key technologies to the
last decade 2041-2050 (less than half of the renewable capacity installation needs, only
about a third of the needed hydrogen production capacity and less than 20% of the carbon
capture capacity by 2050 are installed by 2040), thus putting the achievement of climate
neutrality by 2050 at risk.
Section 7.1.2 discusses the technological feasibility for the different actors.
In terms of security of energy supply (SO6), in 2040 Option 3 has a lower dependence on
fossil fuel imports than Option 2 (26% versus 29%). Option 1 still has a dependence on
fossil fuels of 34%. This translates into lower fossil fuel import costs for the EU of about
EUR 12 billion (annual average over 2031-2040) in Option 3 compared to Option 2,
while Option 1 shows about EUR 16 billion higher costs.
Option 3 shows higher deployment of new technologies, which will lead to a higher
consumption of rare and raw materials. However, the nature of these materials allows to
a stock to be built up, making the system more resilient than with the combustion of
fossil fuel. Moreover, it creates a resource base that can be recycled and reused, which is
not possible for fossil fuels. The coherence section (7.3) discusses the interplay with the
security of raw materials supply.
74
Table 30: Effectiveness: Deployment of technologies and security of energy supply
Specific objective Assessment criteria Option 1 Option 2 Option 3
SO5
Deployment of
technologies
Investment
Progress achieved in 2040 (%
2031-2050) 43% 48% 54%
RES deployment
Progress achieved in 2040 (%
2031-2050) 47% 56% 64%
H2 production
Progress achieved in 2040 (%
2050)
32% 41% 54%
Carbon capture
Progress achieved in 2040 (%
2050) 19% 49% 76%
Specific objective Assessment criteria Option 1 vs 2 Option 2 Option 3 vs 2
SO6
Security of
energy supply
Energy dependence (2040) (Fossil fuels imports / GAE) +5pp 29% -3pp
Fossil fuel imports costs (2040) (bn EUR 2023) +6% 277 -4%
Regarding environmental effectiveness (SO7), Option 3 is very similar to Option 2 on all
accounts, while Option 1 shows a slightly lower use of bioenergy by 2040 compared to
Option 2. The differences in terms of biodiversity impact are expected to remain very
limited across all target options (see sections 6.3.3) - the coherence section (7.3)
discusses the risks of trade-offs associated to bioenergy use. Finally, the three target
options also yield strong and very similar benefits in terms of improved air quality for
ecosystems and health (see sections 6.3.3 and 6.3.2).
Table 31: Environmental effectiveness
Specific objective Assessment criteria Option 1 vs 2 Option 2 Option 3 vs 2
SO7
Environmental
effectiveness
Gross available energy
from biomass (EJ)
-1.0 8.8 +0
Biodiversity Differences smaller than 0.2% on biodiversity indicators
Air quality
Very limited differences across target options, which all show
benefits for ecosystems and health compared to current
7.1.2 Financial and technological feasibility
Financial feasibility
The up-front investment needs and the associated capital costs are the two key indicators
of financial feasibility. Most of the early push in investment in 2031-2040 under S3
compared to S2 or S1 that lower the risk of missing 2050 climate objective takes place on
the energy supply side, where investors are mainly large private and/or public utilities
with good access to finance due to secure and relatively predictable revenue streams. The
increase compared to historical investments and the difference across options is much
less significant in industry, and takes place in sectors where large companies dominate
and where access to long-term finance is likely to be good as well, especially considering
a context where industrial policy might be strengthened to maintain a globally
competitive industrial base in EU. For buildings the level of investment differs little
across options, though the push for gains in energy efficiency will require an increase in
the investment to GDP ratio of about 0.4 percentage points in 2031-2040 compared to the
level in 2011-2020. A wide range of actors, from individual homeowners to real-estate
investors or public authorities (social housing), will be responsible for these investments,
with different abilities to access low-cost finance.
75
Table 32 shows that the annual energy system investment needs (excluding transport) are
projected to increase under S2 to 3.3% of GDP in 2031-2040, compared to 1.7% in 2011-
2020 (Table 32). Average energy system investment in 2011-2020 was historically low,
however, and the increase in the investment to GDP ratio is well within the variability
experienced over the past decades. A higher level of climate ambition under S3 in 2040
leads to non-negligible, though macro-economically limited, increases in investment
needs (excl. transport) during the first decade, i.e., an increase of 0.4 percentage points
compared to S2, while S1 leads to a similar decrease of 0.4 percentage points compared
to S2. Over the whole period 2031-2050, the three scenarios require a similar level of
investment (excluding transport) of 3.2% of GDP.
Table 32: Average annual investment needs in 2031-2040 (% of GDP and deviation vs. S2)
% GDP Deviation vs. S2 (% GDP)
2011-2020 S2 S1 S3
Investment needs
Total 5.8% 7.7% -0.37% 0.33%
Total excluding transport 1.7% 3.3% -0.39% 0.36%
Supply 0.5% 1.5% -0.27% 0.27%
Industry 0.0% 0.2% -0.04% 0.01%
Residential 0.8% 1.2% -0.06% 0.06%
Services 0.2% 0.3% -0.02% 0.02%
Agriculture 0.1% 0.1% 0.00% 0.00%
Transport 4.2% 4.4% 0.02% -0.02%
Source: PRIMES.
The supply side accounts for the largest differences between the scenarios (+/-
0.27 percentage point of GDP lower or higher than S2 for S1 and S3, respectively).
While SMEs and households will play a role in the deployment of renewables, the vast
majority of investment on the supply side will be carried out by large private and/or
public utilities. The latter have good access to finance on favourable terms, including
because their financial flows are relatively secure and predictable, which makes them
good candidates to access long-term finance from players like insurance companies or
pension funds. The development of green finance instruments will nevertheless be
important to ensure that funding is indeed available. In industry, large businesses will
bear a significant share of the increase in investment needs. They are likely to have good
access to long-term finance and other supports to enhance their competitiveness, and the
difference in investment needs across options is quite limited, at +0.05 percentage points
of GDP between S1 and S3.
After energy supply, the residential sector is the sector where investment needs increase
the most across options (+/- 0.06 percentage point of GDP lower or higher for S1 and S3,
respectively). While the range between S1 and S3 is relatively limited at 0.12 percentage
points of GDP, it comes on top of a 0.4 percentage point increase between the average
for 2011-2020 and the average under scenario 2 for 2031-2040. The feasibility of the
increase in renovation investments will hinge upon a range of factors that go well beyond
financial issues, some of which are independent from the level of climate ambition, for
example, the level of awareness or information on renovation options among households,
76
knowledge about and confidence in contractors. In terms of financial feasibility, the
situation will also differ widely according to household type and income level, and
whether renovations are driven by individual homeowners or larger companies or public
authorities owning real estate assets. In any case, a strong enabling framework will be
needed to ensure access to finance at affordable costs for homeowners, or direct support
from public budgets.
Table 33: Average annual investment needs (excluding transport) and capital costs (billion
EUR 2023 and deviation from S2)
S2 S1 vs. S2 (bn EUR) S3 vs. S2 (bn EUR)
2031-
2040
2041-
2050
2031-
2050
2031-
2040
2041-
2050
2031-
2050
2031-
2040
2041-
2050
2031-
2050
Up-front
investment
Supply 289 328 308 -53 +49 -2 +52 -46 +3
Demand 355 357 356 -23 +20 -2 +18 -19 -1
Industry 46 24 35 -7 +7 0 +2 -2 0
Residential 237 242 239 -12 +8 -2 +11 -12 0
Services 53 73 63 -4 +5 +1 +4 -6 -1
Agriculture 19 19 19 0 0 0 0 0 0
Total 644 685 664 -76 +69 -4 +69 -66 +2
Annual capital
costs *
Industry 85 116 101 -3 -2 -2 +1 +1 +1
Residential 137 151 144 -3 -1 -2 +3 +2 +2
Tertiary 490 507 499 -9 -5 -7 +8 +4 +6
S2 S1 vs. S2 (%) S3 vs. S2 (%)
2031-
2040
2041-
2050
2031-
2050
2031-
2040
2041-
2050
2031-
2050
2031-
2040
2041-
2050
2031-
2050
Up-front
investment
Supply 289 328 308 -18% +15% -1% +18% -14% +1%
Demand 355 357 356 -7% +6% 0% +5% -5% 0%
Industry 46 24 35 -16% +28% 0% +4% -7% +1%
Residential 237 242 239 -5% +3% -1% +5% -5% 0%
Services 53 73 63 -7% +6% +1% +8% -8% -1%
Agriculture 19 19 19 -1% +2% +1% 0% -1% 0%
Total 644 685 664 -12% +10% -1% +11% -10% 0%
Annual capital
costs *
Industry 85 116 101 -3% -2% -2% +2% +1% +1%
Residential 137 151 144 -2% -1% -1% +2% +1% +2%
Tertiary 490 507 499 -2% -1% -1% +2% +1% +1%
* includes financing and opportunity costs.
Source: PRIMES.
77
This impact assessment considers a target at EU level only and therefore does not assess
specific aspects at the level of Member States. National budgets will nevertheless need to
contribute to the investment needs either via direct public sector investment, or via
support for private investment, subject to the State aid rules where applicable, e.g., to
support renovation in the residential sector as described above or to support industrial
decarbonisation. The extent to which the public sector will support the transition will
vary widely across Member States, depending on national policy choices. The extent to
which Member States have fiscal space to fund the transition also varies significantly,
depending on their current level of indebtedness and the level of indebtedness that they
will have by the start of the next decade. Such factors will impact, among others, their
room for manoeuvre under the EU fiscal rules that will prevail at the time and their
financing costs on the financial markets. None of this can be predicted at this stage, and
this goes well beyond the scope of this impact assessment.
Finally, the difference in investment needs across options in the tertiary sectors and
transport sectors are negligible and do not raise issues in terms of the comparison in the
financial feasibility across scenarios.
Technological feasibility
All the target options remain within the technology feasibility indicators thresholds used
by the ESABCC: primary energy biomass of 20 EJ/year in 2050, a maximum amount of
carbon capture of 500 Mt CO2/year, hydrogen production capacity of 150 GW in 2030
and a 20% decline of final energy demand between 2020 and 2030. They also remain
lower than the technological deployment challenges identified by the ESABCC for wind
and solar installed capacities in 2030, (respectively 900 and 623 GW) (92
), which
considered the implication of conservative potential estimates.
Reducing energy and industry CO2
Any of the options considered will require increasing the rate of deployment of mature
technologies such as wind and solar power. Already by 2030, the deployment of wind
and solar will increase considerably compared to both the historical average and the
highest historical level of deployment reached in 2022 (see Section 1.2.2 of Annex 8).
Option 1 leads to a lower level of effort between 2031 and 2040 compared to the 2021–
2030 decade but, to reach carbon neutrality by 2050, it requires after 2040 by far the
highest growth of wind and solar across all options and periods, with an average annual
installation rate over the decade 2041-2050 more than twice the level achieved in 2022.
This trend (a reduction in ambition followed by a very steep acceleration) appears
counterintuitive and might put the climate neutrality target at risk. Option 3 anticipates
decarbonisation of the power sector in the years 2031-2040 with lower effort required up
to 2050. The trajectory of Option 3 is safer as it leaves more flexibility in the last years to
cope with delays and unexpected developments. Option 2 lies in between Option 1 and
Option 3. The growth of wind and solar power is also described in position papers
collected during the public consultation, where the deployment rate for these two
(92
) ESABCC report Table 5 and Table 6.
78
technologies is projected to increase several times in the 2020-2040 period. Each of the
options considered will increase the need for critical raw materials. In the 2031–2040-
decade, Option 3 will require more raw materials than the other options considered.
However, the increase in global supply for raw materials such as Cobalt, Copper and
Lithium is expected to be considerably larger than the amount needed for the energy
transition in the EU (93
).
A clear distinctive feature of the target options is the importance of novel technologies to
reduce CO2 emissions in energy, transport and industry such as CCS, BECCS, DACC,
production of hydrogen by electrolysis and e-fuels and low-carbon processes for energy-
intensive industries. The maturity of technologies is an important driver of the projected
portfolio of net-zero technologies. In recent years, innovation resulted in significant
improvements of the technology readiness. For the main bulk of net-zero technologies
needed to reach the 2040 targets, the Technology Readiness Level (TRL) is already at
least 8 (out of 9) which means that they are in an advanced deployment stage (94
). DACC
(TRL of 7) and BECCS (TRL of 5.5) are less mature today, and need to be further
developed over the coming years, as highlighted by stakeholders during the public
consultation. Subsequently. these two technologies will come into play only between
2030 and 2040.
Target Option 3 goes in hand with a stronger deployment of these technologies over
2031-2040 compared to Target Option 2, while Option 1 largely delays these
developments to the last decade 2041-2050. For example, carbon capture is projected to
amount in 2040 to close to 350 MtCO2 (including 155 MtCO2 for DACC and BECCS)
in Option 3, against only 86 MtCO2 (16 MtCO2 for DACC and BECCS) in Option 1,
while a total of about 450 MtCO2 is projected to be needed to reach climate neutrality in
2050. More details on the deployment of carbon capture technologies and their
implication can be found on the Industrial Carbon Management Communication.
The use of these novel technologies will affect total electricity production needs and
entail the development of hydrogen and carbon removal infrastructure. The implications
across the energy system thus go beyond what is captured by cost estimates alone,
including on availability of these technologies for large-scale industrial projects, public
acceptance of CCS or large amounts of renewables, availability of raw materials or
geological storage sites. Finally, a slower deployment of novel technologies would
increase the recourse to other (mature) technologies, including for instance biomass (see
section 7.3). These different aspects are more relevant for Option 3 by 2040, which will
require an adequate policy framework to secure the needed technological uptake while
limiting trade-offs and addressing public acceptance. Conversely, delaying these
deployments to the last decade, Option 1 also delays the design and implementation of
the action and measures and thus risks missing the climate neutrality objective.
(93
) See for instance the expectations on future supply in: IEA (2023), Net Zero Roadmap: A Global
Pathway to Keep the 1.5 °C Goal in Reach, IEA, Paris https://www.iea.org/reports/net-zero-roadmap-a-
global-pathway-to-keep-the-15-0c-goal-in-reach
(94
) The TRL evaluation is based on the EU’s Clean Energy Technology Observatory (CETO).
79
Non-CO2 and LULUCF
All technologies to mitigate non-CO2 GHG emissions considered in the analysis already
exist and they are available for implementation, although in some cases there is ongoing
research to improve them. There is, however, some uncertainty regarding the mitigation
effectiveness and costs of some technologies that have not yet been applied on a large
scale (for instance, feed additives and precision farming). Nature-based solutions that can
increase the LULUCF net removals (e.g. forest management, rewetting, afforestation,
agroforestry, soil carbon management) are all at a fully developed technological stage
Future evolution of the LULUCF net removals bears still some uncertainty due to natural
impacts such as droughts, high variation between regions and vegetation, and variation
on the implementation level (e.g. forest management or agroforestry).
7.2 Efficiency
The assessment of the efficiency of the target options through a comparison of their
overall mitigation costs and a monetisation of their environmental benefits, shown in
Table 34. This table is computed based on the cost analysis in section 6.4.
Table 34. Comparison of the monetised costs and benefits across the different target options
Average annual cost (bn
EUR2023/year)
Comparison to Target 2
2031-2040 2041-2050 2031-2050
Target 1 Target 3 Target 1 Target 3 Target 1 Target 3
MITIGATION COSTS (see Table 19 and Table 23 in section 6.4.3)
Energy system cost -53 +36 -19 +3 -36 +20
(% of energy system cost) -2.1% +1.5% -0.8% +0.1% -1.5% +0.8%
Non-CO2 and LULUCF costs -2 +3 -1 +1 -2 +2
Total GHG mitigation cost -55 +39 -20 +4 -38 +21
ENVIRONMENTAL BENEFITS (see Table 11 and Table 12 in section 6.3)
Climate change (1) Lower 0 +1 0 +1 0 +1
Higher 0 +2 0 +2 0 +2
Air pollution (2) Lower -26 +21 -31 +25 -29 +23
Higher -49 +40 -58 +46 -53 +43
Climate change + Air pollution
Lower 0 +1 0 +1 0 +1
Higher 0 +2 0 +2 0 +2
NET BENEFITS (Environmental benefits - Mitigation costs)
« Lower » valuation of externalities +29 -18 -11 +21 +9 +3
« Higher » valuation of externalities +6 +1 -38 +42 -15 +22
Note: (1) Calculations based on the Handbook on the external costs of transport (Version 2019 – 1.1) following the
avoidance cost approach. The cost of carbon is interpolated from values of the Handbook. The “lower valuation” uses the
“central” value of the handbook EUR 155 per tonne of CO2 in 2031-2040 and EUR 224 per tonne in 2041-2050. The
“higher” valuation uses the “high” value of the handbook of EUR 291 per tonne in 2031-2040 and EUR 416 per tonne in
2041-2050 in EUR 2023. (2) The valuation methodology is similar to that used in the Third Clean Air Outlook: the “lower”
number uses the Value of a Life Year (VOLY) approach, while the “higher” value uses the Value of Statistical Life (VSL)
approach.
Target Options 1 and 3 show a limited deviation of mitigation cost compared to target 2
by 2040, with annual mitigation cost being respectively EUR 56 billion lower and 36
billion higher. The difference in mitigation cost is largely dominated by the energy
system cost, which is -2.1% lower for Option 1 than for Option 2, and +1.5% higher for
80
Option 3. Over the entire period 2031-2050, the difference is even smaller (-1.4% and
+0.8%, respectively).
The difference of monetised environmental costs across options are of the same order of
magnitude as the difference in mitigation costs. In the 2031–2040 decade, Option 1
shows net benefits compared to Option 2, driven by lower mitigation costs. However, in
the second decade 2041-2050 target Option 3 clearly outperforms Option 2 and Option 1,
leading to net benefits over the entire period 2031-2050 compared to the “baseline”
option 2 with the two valuations of climate change externalities. It must be noted that the
methodology used for the monetisation of the external costs of climate change is subject
to discussions and that there is a high level of uncertainty associated with such estimates
and their use. Some studies conclude that the costs used are (significantly)
underestimated.
7.3 Coherence
The assessment of the target options looks at the coherence and risks of trade-offs in
terms of environmental impact, strategic autonomy notably with respect to raw materials
and manufacturing needs.
Environmental risks
The analysis shows that all the target options in 2040 remain close or below the
environmental risk levels identified in the ESABCC report (95
), namely carbon capture
(425 Mt CO2 annually), the LULUCF net removals (400 Mt CO2 annually) and “gross
available energy” from biomass (9 EJ annually). However, Option 3 relies on a higher
level of industrial carbon removals and of e-fuels in 2040 than the other options: a
limited deployment of these technologies may be compensated by a higher recourse to
biomass-based solutions (BECCS, liquid biofuels). Depending on the size of these
additional volumes, this in turn may negatively affect the LULUCF net removals or
biodiversity, making this option more at risk of environmental trade-offs. This risk is also
highlighted in some position papers published by stakeholders, which support an
ambitious climate target together with other environmental priority goals. The adoption
of more sustainable lifestyles as in the LIFE analysis limits the environmental risks of
higher demand for bioenergy feedstocks observed in Option 3, due to a lower need for
industrial carbon removals and e-fuels, while simultaneously delivering strong land-use
related environmental co-benefits.
Strategic autonomy
95
) ESABCC (2023). Scientific advice for the determination of an EU-wide 2040 climate target and a
greenhouse gas budget for 2030–2050. DOI: 10.2800/609405, Table 6. Carbon capture use and storage
(CCUS) includes fossil fuels, bioenergy, industry or direct air carbon capture (DACC). The level of the
LULUCF net removals is currently declining and may further decline due to climate change. Therefore the
risk level was set at 400 Mt CO2 annually, meaning that scenarios should not rely on even higher carbon
removal levels. Future analyses may assume other supply levels of biomass to stay within the sustainability
boundaries, in view of the on-going scientific debate.
81
Specific Objective 6 (in Effectiveness) shows that target Option 3 has the highest security
of energy supply with the lowest dependence on external supply of fossil fuels, notably
oil and natural gas.
However, the resilience of future energy systems will also be measured notably by a
secure access to the technologies that will power those systems. Demand for raw
materials (including critical raw materials) and the domestic manufacturing needs (Cfr.
NZIA) to build these capacities will be proportional to the deployment of technologies
such as renewables and storage, which is lower in Option 1 than in Option 2 in 2040
(renewables capacity is 8% lower) and higher in Option 3 (renewables capacity is 6%
higher). The three target options all display a similar pattern of growing needs of raw
materials in the coming decades in line with global trends (96
), which highlights, in line
with the opinion of several stakeholders, the importance of securing supply chains and
anticipating the creation of a resource base within the EU economy in view of developing
secondary supply.
A more sustainable economy
The analysis done with the LIFE case highlights the important contribution resource
efficiency can make to meeting to climate objectives, while reducing the effort required
in key sectors. It shows that strong synergies are possible between a more efficient use of
resources in the economy and GHG mitigation objectives. The greater the reductions in
2040, the more valuable these synergies will be. This view is also shared by stakeholders,
which are in favour of better implementation of resource efficiency strategies in climate
action.
LIFE also shows that an increased uptake of demand-side options and more sustainable
lifestyles would reduce the need to deploy the most novel abatement technologies such as
carbon capture and hydrogen technologies and lower the amount of green electricity
required. More generally, LIFE improves energy efficiency and significantly reduces the
need for electricity consumption, installed renewable capacity, and storage, while
providing opportunities in the land sector. It makes the pathways less dependent on novel
technologies, while still reaching the highest target levels and the corresponding net
GHG budget.
7.4 Subsidiarity
Climate change is a trans-boundary problem. For trans-boundary problems, individual
action is unlikely to lead to optimal outcomes. Instead, coordinated EU action can
effectively supplement and reinforce national and local action. Coordination at the
European level enhances the effectiveness of climate action. This is particularly true in
view of meeting the EU climate neutrality objective by 2050 and is valid for all 2040
climate target options assessed in this impact assessment.
(96
) IEA (2023). “Net Zero Roadmap. A Global Pathway to Keep the 1.5°C Goal in Reach”
82
7.5 Proportionality
The different target options differ substantially in terms of level of progress to the
climate neutrality and in terms of cumulative GHG emissions (the “GHG budget”), with
Option 3 outperforming the other two target Options. This option secures best the
deployment of the needed technologies to meet climate neutrality by 2050. Its additional
mitigation cost to bring the EU towards climate neutrality remains limited compared to
the baseline Option 2 (+1.5% over 2031-2040, +0.8% over the entire period 2031-2050).
The cost-benefit analysis shows a positive outcome for Option 3 compared to Option 2,
including with a conservative valuation of the cost of climate change, while Option 1
shows a more uncertain outcome dependent on the valuation.
Target Option 3 is thus assessed to be the most proportional to the objective of this
initiative, namely bringing the EU economy to climate neutrality by 2050 and for the EU
to contribute to the global climate action in view of meeting the Paris Agreement
temperature goals of limiting the temperature increase to well below 2°C above pre-
industrial levels and pursuing efforts to limit the temperature increase to 1.5°C above
pre-industrial levels.
The post-2030 climate, energy and wider policy framework will need to ensure that the
social and industrial policies and support required is in place to deliver the clean
technologies needed by 2040, including for carbon management.
83
7.6 Summary
Table 35 presents a summary of the comparison of the different options to the “baseline”
Option 2. The assessment is done in the absence of the future policy framework post-
2030, which will need to be designed to ensure a just transition and coherence with other
policies.
Table 35: Summary of the comparison of options
Opt.1
vs
Opt. 2
Opt. 3
vs
Opt. 2
Source Scoring methodology
Effectiveness
SO1 Delivering climate
neutrality - - - +++ Table 27, section 7.1.1.
Quantitative comparison:
"=" means a deviation up to 1%,
“+” or "-" a deviation up to 3%,
“++” or "--" a deviation up to 10%,
“+++” or "---" a deviation higher than 10%
SO2 Minimising GHG budget - - - +++ Table 27, section 7.1.1.
SO3 Just transition + - Table 28, section 7.1.1.
SO4 Competitiveness*, cost + -
Table 28, section 7.1.1.
GDP, trade = =
SO5 Deployment of
technologies - - ++ Table 29, section 7.1.1.
SO6 Security of energy supply - - ++ Table 29, section 7.1.1.
SO7 Environmental
effectiveness = = Table 30, section 7.1.1.
Financial feasibility (annual
capital cost) + - Table 32, section 7.1.1.
Technological feasibility,
2031-2040 + -
Based on section 7.1.2 Qualitative comparison*
2041-2050 - +
Efficiency
Lower valuation of
externalities + =
Table 33 in section 7.2.
Quantitative comparison:
“=” means a deviation of annual net benefit up to 5 bn EUR
“+” or "-" net benefit up to 10 bn EUR
“++” or "--" net benefit up to 20 bn EUR
“+++” or "---" net benefit above 20 bn EUR
Higher valuation of
externalities - - +++
Coherence
Environmental risks (land use) + -
Based on section 7.3
Qualitative comparison*
Strategic autonomy (excl.
security of energy supply) + - Qualitative comparison*
Subsidiarity = = Based on section 7.4
Proportionality - + Based on section 7.5 Qualitative comparison*
Note: *Qualitative comparison: “+” means that the Option performs better than Option 2, “-“ means that the
Option performs worse than Option 2, “=” means that the Option performs as Option 2.
84
8 PREFERRED OPTION AND ITS IMPACTS
Target Option 3 with a range of 90-95% is the preferred option. This range is consistent
with that recommended by the ESABCC and ensures the lowest GHG budget of all
options. It provides the best balance between climate ambition and contribution to a fair
share of the global carbon budget to meet the Paris Agreement temperature goals on the
one hand, and feasibility on the other. 72% of the individuals and 66% of the
organisations who responded to the public consultation consider that an ambitious
climate target by 2040 will ensure that the EU does its part in protecting the planet and
fulfilling its duty towards future generations. Several position papers analysed during the
public consultation also call for an ambitious climate target, with some stakeholders
explicitly targeting ranges at 90% or above.
Target Option 3 is the most effective in terms of bringing the EU to climate neutrality by
2050. With the lowest GHG budget, it also provides the strongest leadership from the EU
and the most credible push to the EU’s partners worldwide on the need and opportunities
for accelerating climate action. Stakeholders largely agree on the positive influence that
an ambitious EU climate target can trigger at global level. By encouraging early action,
Target Option 3 is expected to have the most impact on reducing global emissions, and
on increasing the prospect of keeping 1.5 degrees warming within reach, so as to limit the
worst climate impacts and disruptions to all economies, including the risk of reaching
irreversible climate tipping points.
Target Option 3 is also the most effective in ensuring the EU’s security of energy
supply and strategic autonomy, with an energy import dependency ratio 3 percentage
points lower than the “baseline” Option 2 and a reduction in fossil fuel imports of 4%. It
is also the option that best protects the EU against the negative socio-economic impacts
of potential fossil fuel price shocks in future.
In terms of financial feasibility, all target options require a similar increase in average
annual energy system investment over the period 2031-2050 and imply a moderate
increase in energy system costs as a share of GDP compared to the average for 2011-
2020. Target Option 3 entails a moderate early push in investment in 2031-2040
compared to the “baseline” Option 2, mostly on the energy supply side, where investors
have good access to finance due to secure and relatively predictable revenue streams. The
anticipation of investment under Target Option 3 is very limited in industry and in the
residential sector.
Ensuring a just transition requires an even greater focus for Target Option 3 than for
less ambitious target options, as the transition is somewhat accelerated. However, the
increase in costs for households compared to the “baseline” Option 2 is small, and
this assessment does not account for any policy measures and redistributive
instruments that can be expected to address this impact; for example, the assessment
of impacts does not include the use of carbon revenues to support households.
In terms of the competitiveness, Target Option 3 will lead to a greater impact for fossil
fuel sectors, and a small negative impact on the output of energy intensive sectors
compared to the “baseline” Option 2. However, the higher ambition of Option 3 can
further showcase the EU’s climate leadership. Target Option 3 will also lead to earlier
85
investments in novel technologies, an important opportunity to develop the expertise and
skills in the EU to supply the equipment and infrastructure that will be needed worldwide
over decades to come for carbon dioxide removals to ensure global carbon neutrality. By
supporting a higher development of low-carbon technologies, Option 3 would thus
increase the positioning of the EU in the global race to clean technologies and solutions.
Finally, in addition, the increased energy independence mentioned below is a strong
advantage for the competitiveness of the EU industry, in reducing its exposure the
international markets volatility.
Target Option 3 is also the most efficient to meet climate neutrality by 2050, showing
the highest net benefits in terms of avoided climate change and air pollution
compared to the mitigation cost. It shows slightly higher mitigation cost overall (+1.5%
over 2031-2040 compared to the “baseline” Option 2, but only +0.8% over 2041-2050),
which differs across sectors: while the cost increase in industry and transport are close to
2%, they are limited in services and the residential sector to 1% and 0.5%, respectively.
Most SMEs are in sectors for which the impacts are very limited.
A greater push will also be required under Target Option 3 to ensure the availability of
novel technologies such as carbon capture, including for DACC and BECCS, or e-fuels,
which will need the setting up a dedicated policy. The implications above and other
impacts or trade-offs identified, for example for avoiding new dependencies on imports
of critical raw materials or pressure on biodiversity from the use of biomass associated
with a more ambitious climate target option, can and must continue to be addressed and
mitigated through dedicated policy measures, as part of the design of the future climate
and energy policy framework, and wider enabling framework (e.g. financing, land-use
and biodiversity, supply of critical raw materials, competitiveness).
Finally, the Impact Assessment further shows the potential for demand-side actions, such
as behavioural changes in food, circularity and mobility (as in LIFE) to complement the
energy and industrial transition (as shown in the scenarios) and to reduce the costs to
society of reaching the 2040 target, lowering energy system costs, the need for
investment in (novel) technologies, and environmental risks (e.g. of higher demand for
bioenergy). However, lifestyle choices depend to a large extent on personal choice and
positive incentives.
9 HOW WILL ACTUAL IMPACTS BE MONITORED AND EVALUATED?
The key EU legislation for planning, monitoring and reporting of progress towards the
EU’s climate targets and its international commitments under the Paris Agreement is the
Regulation on the Governance of the Energy Union and Climate Action (‘Governance
Regulation’) (97
).
The Governance Regulation requires EU Member States to communicate and implement
integrated National Energy and Climate Plans (NECPs) and to regularly report on
(97
) In accordance with Article 45 of the Governance Regulation, the Commission should review the
Regulation with six months of each global stocktake. The evaluation of the Governance Regulation is
planned in Q1 2024.
86
their progress in implementing them. It lays out the detailed reporting obligations on
GHG emissions, policies and measures, projections, adaptation actions and support
provided to developing countries. Every two years, Member States need to take stock of
the progress achieved towards the objectives, targets and contributions set out in their
NECPs, which are updated to reflect the countries’ contributions to the EU climate and
energy objectives (98
)(99
).
With the adoption of the European Climate Law in July 2021, the Commission should
also provide an assessment of the progress made by all Member States towards the EU
2050 climate-neutrality objective (100
). The first Climate Law assessment was undertaken
in October 2023, together with the assessment of progress provided for under the
Governance Regulation. The Climate Law assessment is to be carried out every five
years, aligned with the global stocktake under the Paris Agreement. The Climate Law
provides that the Commission base its assessment on an indicative, linear trajectory,
which sets out the pathway for the reduction of net emissions at Union level, linking the
Union 2030 climate target, the Union 2040 climate target, when adopted, and the 2050
EU climate-neutrality objective. The assessment of progress includes data derived from
the European Earth Observation Programme Copernicus.
Under the annual State of the Energy Union Report (101
), the Commission adopts the
EU Climate Action Progress Report where it reports each year on EU-wide climate
progress and delivers on obligations set out in the Governance Regulation, including to
assess progress with the EU’s climate targets. The Climate Action Progress Report is an
opportunity to inform a wide audience about recent developments in EU climate action.
(98
) Based on guidance to MS issued by the European Commission issues, like the one for the updated
NECPs 2021-2030 in view of contributing to “fit-for-55” objectives.
(99
) Final NECPs, in view of meeting the “fit-for 55” objectives, are due in June 2024.
(100
) The European Climate Law also requires the Commission to assess the collective progress made by all
Member States on adaptation, the consistency of Union and national measures with climate neutrality and
with progress on adaptation.
(101
) Under Article 29 of the Governance Regulation, where the Commission has to assess progress at
Union and Member State level towards meeting the objectives of the Energy Union.
87
Annex 1: Procedural information
1. LEAD DG, DECIDE PLANNING/COMWORKPROGRAMME REFERENCES
The lead DG is DG CLIMA, Unit A2: Foresight, Economic Analysis & Modelling. The
co-lead DG is DG ENER.
DECIDE reference number is: PLAN/2023/220.
It shows in the Commission Work Programme 2024 as item 2 in Annex I.
2. ORGANISATION AND TIMING
The impact assessment started in 2023, with the call for evidence published on 31 March
2023.
The impact assessment on the EU 2040 climate target was coordinated by an Inter-
Service Group (ISG).
The Inter-Service Steering Group met 3 times: on 20 January 2023, 30 June 2023 and 18
September 2023. It was consulted throughout the different steps of the impact assessment
process, notably on all the stakeholder consultation material and on the draft Impact
Assessment.
The Commission Services participating in the ISG were: Secretariat-General, SJ, DG
AGRI, DG BUDG, DG CNECT, DG COMM, DG COMP, DG DEFIS, DG ECFIN, DG
EMPL, DG ENV, ESTAT, DG GROW, DG INTPA, JRC, DG MOVE, DG NEAR, DG
RECOVER, DG REFORM, DG REGIO, DG SANTE, DG RTD, DG TAXUD, DG
TRADE. The EEAS was also consulted.
3. CONSULTATION OF THE RSB
An upstream meeting between the lead DGs and the RSB took place on 24 April 2023.
The draft report was submitted to the RSB on 16 October 2023 and was discussed by the
RSB on 15 November 2023.
On 17 November 2023, the RSB issued a negative opinion. A revised Impact Assessment
has been submitted on 6th
December 2023, fully addressing the recommendations
provided by the Board in its first opinion.
On 22 December 2023, the RSB issued a second, positive opinion with reservations.
Table 36 and Table 37 show the RSB findings and the changes made to respond to the
first and the second opinion respectively, which have been shared with the Inter-Service
group.
88
Table 36: How the RSB findings of the 1st
opinion have been addressed
Findings How findings were addressed
(1) The problem, its drivers and its
potential consequences are not
clearly identified. The report does
not adequately define the specific
objectives and criteria based on
which the performance of
alternative 2040 target options
would be assessed in line with the
requirements of the EU Climate
Law.
Following the recommendation by the RSB, the problem
definition (section 2) has been simplified and aligned with
the legal obligation stemming from the European Climate
Law. The specific objectives (section 4) have been better
defined, based on the elements under its article 4(5) for the
Commission to take into consideration when proposing the
2040 target.
The intervention logic has been streamlined.
A set of criteria is used to compare the performance of the
target options in terms of effectiveness according to these
different specific objectives (section 7).
(2) The description of the dynamic
baseline is underdeveloped and not
sufficiently clear. The report fails
to establish an appropriate
benchmark for comparison. The
rationale behind, the content of and
the interaction between the options
and the scenarios lack clarity. The
report does not bring out clearly
enough all available target and
pathway choices and the trade-offs
between them.
A more detailed section was added on what would happen
to the net GHGs emissions by 2040 with a continuation of
the current policy framework (section 5.1). On that basis
the report establishes a clear “baseline” target level
(section 5.1) against which the other target options are
compared in terms of effectiveness, efficiency, coherence
and trade-offs (in section 7). The relationship with the
linear trajectory set out in Article 8 of the European
Climate Law is described in the text.
The choice of the target options is informed by the analysis
by the ESABCC and other scientific publications on the
EU 2040 target and their description reflects the responses
of stakeholders to the public consultation (section 5.2). The
methodology to calculate the cumulative GHG emissions
over 2030-2050 (the “GHG budget”) for each target option
is described (section 5.2). Finally, the description of the
target options and the relation to their representative
scenarios have been simplified (sections 5.2 and 5.3),
which allows a clearer comparison of the target options
and the trade-offs between them (section 7).
The scenarios are described in terms of very broad sectoral
mitigation mix (section 5.3, which is completed by Annex
6). The detailed analysis (section 6, Annex 8) provides the
details on the reductions of GHG per sector and the
associated technology deployment, investment needs and
costs for the scenarios associated to the target option.
The LIFE scenario has been clarified as a “sensitivity” case
to societal assumptions, whose conclusions can apply to
the different target options. The assumptions for each
sector under LIFE are drawn from and benchmarked to
external studies, and are referenced in a new table in
Annex 6 (section 3) and in the sector-specific sections of
89
Annex 8
(3) The level of uncertainty of the
modelling, including in terms of
the remaining CO2 budget, and the
robustness of the results is not
clearly identified and analysed.
To complement the more detailed description of the
analytical framework that can be found in Annex 6, Annex
1 section 4 on “evidence, sources and quality” provides a
description of the different economic models used for this
impact assessment and the underlying key assumptions.
The impact assessment is backed by a detailed analysis
(Annex 8) that makes use of a multi-model approach that
provides a cross-model comparison for a number of
indicators to cross-validate the results of the analysis. A
summary comparison across models for selected key
indicators on energy and CO2 as well as on macro-
economic modelling has also been added to Annex 1
section 4. The convergence of results shows that the
conclusions are robust and not biased by the internal logic
and parameters of each model.
Finally, the different sensitivity analyses undertaken are
now presented in a clearer manner. This includes the
sensitivity analysis to test how different costs for key
energy technologies affect total investment costs, the LIFE
variant to show the impact of a more sustainable materials
and production, mobility, and food system, as well as an
additional variant to analyse the effect on the energy mix
of the recent review of the nuclear legislation in some
Member States.
(4) The costs and benefits of each
option are not clearly presented.
The report is neither clear on the
total costs and benefits due to
frontloading investments in the
2031- 2040 period nor on the
related financial and technological
feasibility.
The presentation of costs and benefits of each option and
how they compare has been clarified and extended in
section 6. A new section (6.3.1) on the cost of the climate
change externality has been added, which allows to
compare the benefits of a lower 2030-2050 GHG budget
(option 3) compared to a higher GHG budget (option 1)
and compared to the “baseline”. This complements the
monetisation of the environmental benefits related to air
quality improvement on health (section 6.3.2).
These costs and benefits inform the comparison of target
options in the new sections related to effectiveness along
the different specific objectives, financial feasibility
(including considering the financing cost associated to the
investment needs) and overall efficiency (section 7). The
assessment of competitiveness is also clearer, with some
more detail on SME impacts.
Further details are added in the main report on the views
expressed by stakeholders in the public consultation.
On technological feasibility, a new section has also been
introduced (in section 7) that compares with the ESABCC
analysis and assesses the Technology Readiness Levels
90
(TRL) of technologies needed to reach the 2040 targets. As
a result, the IA now presents the technological feasibility
of the options. A new variant has also been added to
illustrate the changes to the energy mix of the recent
nuclear plans in some Member States (section 6.2).
(5) Options are not adequately
compared as regards effectiveness,
efficiency, coherence and
proportionality. The choice of the
preferred option is not sufficiently
justified.
Criteria for the assessment of options (based on the
European Climate Law article 4 (5)) have been defined to
allow a clearer description of comparative impacts of the
target options in terms of efficiency, coherence and
proportionality. In addition, new sections have been
introduced that look in detail at how the options compare
according to each of these dimensions.
The effectiveness assessment is done for each specific
objective through specific quantitative indicators and is
complemented by an analysis of the financial feasibility
and the technological feasibility (see point above).
Efficiency is assessed through the comparison of
mitigation costs with benefits in terms of saved
externalities, notably related to GHG emissions.
Coherence is assessed in terms of environmental trade-offs
and strategic autonomy.
Proportionality compares the net benefits of each 2040
target option to achieve climate neutrality by 2050 and puts
this in perspective with the limited mitigation cost
difference and the possible trade-offs.
This comprehensive comparison of the different target
options motivates the choice of the preferred target option.
Table 37: How the RSB findings of the 2nd opinion have been addressed
Findings How findings were addressed
(1) The report is not clear on how
sustainable lifestyle changes are
reflected in the dynamic baseline
scenario. The policy choices
regarding the inclusion of
sustainable lifestyle changes (via
the LIFE variant) are not brought
out clearly and their interaction
with the three scenarios is neither
comprehensively assessed nor
compared.
The 2040 target IA compares different 2040 target levels
under a set of common key assumptions related to socio-
economics and technology costs and performance. It does
not aim at assessing policy choices that could influence
such assumptions.
However, as complementary dimension, the IA provides a
sensitivity analysis on different socio-economic
developments, including lifestyle choices, via the “LIFE”
variant. Following the feedback by the RSB, the report
makes clearer the role of this variant.
The variant is built to meet the target option 3, and thus by
design reaches in 2040 the same overall net GHGs
91
reductions levels as the core scenario S3. The assumptions
used are described in detail in Annex 6 (section 3.1.5) and
further in the sectoral sections of Annex 8 (in section 1).
This variant leads to a different sectoral composition of the
abatement of net GHGs, as well as different costs in
relation with mitigation of CO2 emissions from fossil fuel
combustion and industrial processes.
The conclusions of this sensitivity analysis are not
exclusive to target option 3 and can be applied to all target
options.
(2) The scoring of options is not
convincingly demonstrated, the key
trade-offs between options not
clearly presented and the choice of
the preferred option not sufficiently
justified.
The methodology behind the scoring of options has been
clarified, demonstrating its link with the full analysis in
terms of effectiveness, efficiency, coherence, subsidiarity,
and proportionality. For each of these aspects, the data
sources (in case of quantitative comparison), the relevant
sections for the analysis (in case of qualitative comparison)
and the detailed scoring methodology, have been included
in the summary table (Table 35).
The comparison of the options has been further detailed in
Section 7, including elements that guide the reader in the
understanding of the key trade-off between the options. In
particular, the key trade-off between fast technological
deployment (and associated challenges) to secure climate
neutrality and delayed action that would put at risk the net-
zero target have been explained in section 7.1.
Additional arguments in support of the preferred option in
line with the extended analysis of section 7 and relevant
views of stakeholders collected during the public
consultation have been introduced in section 8.
(3) The report is not sufficiently
clear about the risks related to
financial and technological
feasibility.
More detailed elements have been included in the
financial and technological feasibility section (section
7.1.2).
The financial feasibility analysis makes clearer the
comparison across options in terms of investment needs
and derived annualized capital cost, for energy supply,
industry and households.
The technological feasibility section adds an analysis on
capacity deployment needs and more elements on raw
materials needs to the Technology Readiness Level
assessment.
92
4. EVIDENCE, SOURCES AND QUALITY
The impact assessment relies on a wide range of state-of-the art and proven modelling
tools that ensure the quality of the analysis. The models have been used by the European
Commission (102
), Member States and a variety of stakeholders in the past decades to
assess the impact of climate and energy policies. The models are continuously improved
with cutting edge features and periodically peer-reviewed (103
) by the scientific
community. The models have also been used as basis for numerous publications in
scientific peer-reviewed journals and conferences (104
). They are managed by teams of
highly experienced staff who have been working alongside the European Commission for
many years in policy analysis, and therefore understand the scientific, technical and
policy requirements to carry out modelling exercises. Their methodological
underpinnings are explained in detailed descriptions available publicly for peer review,
for instance in the Modelling Inventory and Knowledge Management System of the
European Commission (MIDAS)(105
).
The underlying exogenous assumptions and the modelling scenarios are shared across
models. Exogenous assumptions on population and GDP projections are based on the
work of Eurostat (population projections) (106
) and DG ECFIN (Ageing Report) (107
). The
methodology underpinning these projections are subject to regular review among
Member States. Assumptions on technological costs and abatement costs are based on
recent scientific literature review carried out by external consultants in collaboration with
(102
) For instance, the main modelling suite of Impact Assessment was used for the Commission’s
proposals for the Long-Term Strategy (COM (2018) 773), the 2030 Climate Target Plan (SWD (2020) 176
final), and the Fit for 55 package (COM (2021) 550 final).
(103
) See POTEnCIA peer-review in SORIA RAMIREZ A., POTEnCIA technical peer-review – Related
documents, European Commission, Seville, 2017, JRC108360, and METIS peer-review in Ahlgren, E.O.,
et al. (2020). The METIS model review, EUR 30388 EN, Publications Office of the European Union,
Luxembourg, ISBN 978-92-76-22744-1, doi:10.2760/28916, JRC118638.
(104
) Description and selected publication for the models used in the impact assessment:
PRIMES https://e3modelling.com/publications/,
POTEnCIA https://joint-research-centre.ec.europa.eu/potencia/potencia-publications_en,
EU-TIMES https://www.i2am-paris.eu/detailed_model_doc/eu_times,
POLES https://www.enerdata.net/solutions/poles-model.html
METIS: https://web.jrc.ec.europa.eu/policy-model-inventory/explore/models/model-metis/references/
AMADEUS https://www.engie.com/decarbonation-scenario-engie
GLOBIOM https://iiasa.github.io/GLOBIOM/index.html
CAPRI https://www.capri-model.org/doku.php?id=capri:capri_pub
JRC-FSCM https://data.europa.eu/doi/10.2760/244051
GAINS http://gains.iiasa.ac.at/models/gains_peer_reviewed.html
JRC-GEM-E3 https://joint-research-centre.ec.europa.eu/gem-e3/gem-e3-publications_en
E3ME https://www.e3me.com/how/papers/
NEMESIS https://web.jrc.ec.europa.eu/policy-model-inventory/explore/models/model-nemesis/references/
QUEST (E-QUEST) https://economy-finance.ec.europa.eu/economic-research-and-databases/economic-
research/macroeconomic-models/quest-macroeconomic-model_en
(105
) MIDAS: https://web.jrc.ec.europa.eu/policy-model-inventory/
(106
) EUROPOP2019 (proj_19n) and short-term update of the projected population (2022-2032)
(proj_stp22), which was the latest available projection at the time the key assumptions were adopted as a
framework for all models used in the impact assessment.
(107
) DG ECFIN. Autumn 2022 Economic Forecast: The EU economy at a turning point.
93
the JRC and were validated by a dedicated stakeholders consultation prior to the
modelling exercise. In particular, a stakeholder workshop on technology assumptions on
land-sector-related and non-CO2 GHG emissions took place with national authorities,
researchers and businesses in October 2022 and energy- and mobility-related techno-
economic assumptions were discussed with several stakeholders in February 2022, and
subsequently updated in February 2023.
The models are interconnected in multiple ways, as represented in Figure 5. For the
energy system and the macro-economic analysis of this impact assessment, multiple
independent models have been used in parallel to evaluate and assure the robustness of
the results. The PRIMES model is the main energy system modelling tool for this impact
assessment. The robustness of the results was assessed by comparing results from other
energy system models, mainly the JRC’s POTEnCIA and POLES, METIS-AMADEUS
and TIMES. The GLOBIOM/G4M model suite (called “GLOBIOM” in this impact
assessment) was used to cover all LULUCF-related GHG emissions in this impact
assessment, and the results were tested with the JRC forest sector carbon model (FSCM).
The CAPRI model was used to assess impacts from agricultural, trade and environmental
policies on agriculture as well as biodiversity aspects linked to agriculture. The GAINS
model was used as the main modelling tool to estimate air pollutant emissions and their
impacts on human health and the environment, as well as non-CO2 GHG emissions.
Three macro-economic models with distinct methodological underpinnings were used to
assess the socio-economic impact of the target options and assess the robustness of the
key findings. The JRC’s GEM-E3 was used as the core model and is a recursive dynamic
computable general equilibrium model, and DG ECFIN’s E-QUEST and the Cambridge
Econometrics’ E3ME macro-econometric models complemented the analysis.
Figure 5: Modelling tools used for the impact assessment
The results of the independent modelling analyses are cross-checked across models,
indicating a level of uncertainty for the different figures, and validating the robustness of
Economics
Energy
Land use &
agriculture
Non-CO2 GHG
Air pollution
GEM-E3
+E-QUEST, E3ME
Population & GDP
PRIMES
+ POTENCIA, TIMES,
POLES, METIS-
AMADEUS
POLES-JRC
GLOBIOM
+ FSCM
CAPRI GAINS
Framework conditions Economic structure
Global system EU energy system
EU
agriculture Global, EU
PRIMES-TREMOVE
EU transport system
Global &
EU forestry+LU
Industry
& Circular Economy FORECAST
Diversification of drivers and
mitigation technologies
94
the conclusion. While high-level results across models are well aligned (see Annex 8),
uncertainty increases for more disaggregated results. Detailed modelling results are
highly dependent on the design of the energy and climate policy framework (which is not
the subject of this Impact Assessment) and the improvement and deployment of different
technologies. The dependence of projections on the choice of model can be estimated
comparing values obtained from models using the same assumptions and closely
calibrated to the same statistical data: this is the case for the PRIMES and POTEnCIA
energy models and for the JRC-GEM-E3, E3ME and E-QUEST macro-economic
models.
Table 38 shows a summary of the cross-model uncertainty levels for the key high-level
indicators of this Impact Assessment. Projections for the main emissions and energy
indicators are closely aligned in PRIMES and POTEnCIA models (with deviations of
few percentage points in 2040).
Table 38: Uncertainty level for key high-level energy and CO2 indicators.
Indicators
Uncertainty level
S1 S2 S3
2030-2050
EU CO2 budget 2030-2050 (energy & industry CO2) 9% 1% 2%
2040
Net Energy & industry CO2 8% 4% 8%
GAE 0% 3% 4%
FEC 4% 3% 3%
Share of RES in GFEC 6% 2% 1%
Note: Uncertainty level is defined as the dispersion between the max and min value obtained across models
(max/min-1).
Table 39 shows a summary of the impacts on GDP, private consumption and investment
for S1 and S3 (in percentage change vs. S2) for the JRC-GEM-E3, E3ME and E-QUEST
models. All three models concur that the macro-economic differences across the three
representative scenarios are very limited to less than 1%.
Table 39: Impacts on key macro-economic variables across models (% change vs. S2, 2040)
S1 (fragmented action) S3 (fragmented action)
JRC-GEM-E3 E3ME E-QUEST JRC-GEM-E3 E3ME E-QUEST
GDP 0.5% 0.0% 0.4% -0.2% 0.0% -0.8%
Private consumption 0.7% 0.3% 0.3% -0.5% -0.2% -0.5%
Source: JRC-GEM-E3, E3ME, E-QUEST.
Annex 6 provides a more detailed description of the modelling tools and the way they
interact in the impact assessment. It also provides a detailed description of the modelling
scenarios underpinning the target options, including assumptions, drivers, and rationale.
95
Furthermore, Annex 7 provides the analysis of the cost of climate inaction based on a
review of the literature and dedicated macro-economic modelling carried out for this
impact assessment with the NEMESIS macro-econometric model. The NEMESIS model
has been designed by an EU consortium to assess socio-economic impacts of research
and innovation policies and used in several peer-reviewed publications (108
).
Annex 8 provides the detailed analysis of the sectoral transformations towards different
2040 target levels and to climate neutrality by 2050, and a cross-model comparison for a
number of additional indicators. A comprehensive literature review, including the advice
by the European Scientific Advisory Board on Climate Change (109
), complements
throughout the documents the use of economic modelling.
(108
) NEMESIS, Selected publications: https://web.jrc.ec.europa.eu/policy-model-
inventory/explore/models/model-nemesis/references/
(109
) ESABCC (2023). Scientific advice for the determination of an EU-wide 2040 climate target and a
greenhouse gas budget for 2030–2050. DOI: 10.2800/609405.
96
Annex 2: Stakeholder consultation (Synopsis report)
Synopsis report on the stakeholder activities for setting an EU climate target for
2040
1. INTRODUCTION
In the framework of proposing an intermediate climate target for 2040 within the
European Climate Law, the European Commission conducted consultation activities
aimed at gathering views of different identified stakeholders: citizens, public authorities,
businesses, etc. The current synopsis report is a summary of the results of the
consultation activities. These will inform the impact assessment prepared by the EC.
The consultation activities included the following elements:
• Public consultation (questionnaire and position papers): A public consultation
was conducted over a 12-week period from the 31/03/2023 until the 23/06 2023. It
included a questionnaire and the option to submit position papers. The questionnaire
comprised of a general section (17 questions) and an expert section (18 questions).
The general section was targeted at a wider group of stakeholders while the expert
section was more technical and involved questions about specific policy domains
relevant for the target setting. The consultation incorporated mainly closed questions
(32) but also few open questions.
• Call for evidence: In addition to the public consultation, stakeholders had the
opportunity to share general remarks and feedback on the policy initiative through a
call for evidence. They had the opportunity to upload position papers which were
analysed together with the position papers received in the public consultation.
• Targeted stakeholder event: A hybrid stakeholder event was hosted by the EC in
Brussels. Participants were informed about the policy initiative for setting the EU
climate target for 2040 and invited to share their views.
The current synopsis report is prepared by a contractor (110
).
2. ANALYSIS OF PUBLIC CONSULTATION QUESTIONNAIRE
2.1. Overview of responses
In total, 903 responses to the public consultation were received. Among these, 23
(2.5%) responses were classified as part of a single campaign from private individuals in
Slovakia (see Section 2.2). In addition, one response was identified as a duplicate, so
that a total of 879 responses were included in the analysis. Out of these, 480 (54.6%)
(EU citizen: 468, non-EU citizen: 12) were provided by private individuals, and 399
(45.4%) by organisations.
(110
) Technopolis Group in association with COWI A/S and Eunomia.
97
Figure 6: Responses by stakeholder group
Note: n = 879 (Number of responses to the public consultation questionnaire) (111)
Figure 7: Geographical distribution of responses by EU Member States
Note: n = 811 (Number of responses from EU27 Member States. The responses from Slovakia which are
classified as a campaign are not included here. An additional 68 responses were received from non-EU
countries.)
Most organisational responses came from companies and business associations: Small
and medium-sized enterprises (SMEs) and business associations representing SMEs
(108, 12.3%) or large companies (>250 employees) and associations representing them
(136, 15.5%). An additional 98 (11.1%) responses came from civil society
organisations. (112
) Furthermore, 23 (2.6%) responses were received from
(111
) The responses from Slovakia which are classified as a campaign are not included here. See Section on
campaign identification for an overview of the campaign.
(112
) Clusters the responses from NGOs (68), environmental groups (20), trade unions (9), and one
consumer organisation (1).
23; 2,6%
108; 12,3%
136; 15,5%
98; 11,1%
468; 53,2%
23; 2,6%
23; 2,6%
46,8%
Stakeholder groups for survey analysis
Academic/research institutions
Business associations / companies
(SMEs)
Business associations/companies
(Large)
Civil society organizations
EU citizens
Others
Public authorities
© GeoNames, Microsoft, OpenStreetMap, TomTom
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35
4
6
10
3
35
39
4
5
7
54
1
1
47 14
10
16
44
54
36
129
235
2
1 118 235
Number of responses
98
academic/research institutions and an equal number of 23 (2.6%) responses from public
authorities. Also, 23 (2.6%) responses were classified as “Other”. (113
)
The frequency of responses varied greatly between EU Member States (see Figure 7).
The largest number of responses came from Germany (235, 26.7%), followed by
Belgium (129, 14.7%) (also representing EU-level stakeholders).
2.2. Methodological approach and campaign identification
The data from closed questions was processed and cleaned to facilitate descriptive
analysis and representation. Results are consistently presented as absolute numbers and
percentage values. The latter indicate the proportion of responses within each respective
stakeholder group. For Likert-scale questions, the share of (dis)agreement is
supplemented by an average for all responses.
The methodology used for analysing open-text questions involved several steps. After
eliminating invalid responses and identifying coordinated ones, a semi-automated
thematic analysis was conducted, and themes were identified without preconceived
notions.
Views from the public consultation are not statistically representative.
The strategy chosen to identify coordinated responses relied on clustering of closed
question responses and a semi-automated analysis of similarities in open-text answers.
The analysis of open-text answers led to the discovery of a distinct group of 23 (2.5%)
responses from EU citizens from Slovakia, which were classified as a campaign, and
analysed separately. The responses in the campaign showed the same narrative of urging
political leaders to use sustainable transportation (Q11, open-text). Regarding climate
ambition for 2040, most responses indicated that the EU should make its ambition
dependent on other countries’ climate ambition (19, 83%). Overall, the answers in the
campaign could be characterised as expressing climate-sceptical beliefs and attitudes.
2.3. Results from the general section of the questionnaire
Overall opinion on the EU’s climate ambition for 2040
Overall, the responses to the level of ambition strongly endorse setting an ambitious
EU climate target for 2040. A majority (598, 73%) of respondents (Individuals: 369,
80.4%; Organisations: 229, 63.6%) indicated that they want the EU to accelerate the
transition to climate neutrality. Civil society organisations (84, 91.2%) and
academic/research institutions (17, 85.0%) showed the highest levels of support, but also
about half of SMEs (51, 52.6%) and large business associations or companies (60,
47,6%) favoured an acceleration of the transition. Regarding a specific net emission
reduction target for 2040, more than half of the respondents supported a target of more
(113
) Includes the responses from non-EU citizens (12).
99
than -80% by 2040 (504, 61.5%). Again, more individuals (322, 70.2%) required a target
of more than -80% than organisations (182, 50.5%). Stakeholder groups showed
variation in ambition levels. A large majority of civil society organisations supported a
net emission reduction target of more than -80%” (73, 79,3%), followed by
academic/research institutions (14, 70,0%). Among business associations and companies,
the responses dispersed more: 42,3% (41) of SMEs and linked associations advocated for
more than -80 %, while among the group of large business and business associations
36.5% (46) advocated for more than -80%. Amon public authorities 31.3% (5) advocated
for more than -80% reduction.
100
Figure 8: Responses on the pace of the climate transition (Q1) and the level of ambition
(Q2)
Note: n = 819 (Responses to the general section of the public consultation questionnaire)
In relation to the role of carbon removals in the EU’s 2040 climate target, both
individuals (272, 59.3%) and organisations (171, 47.5%;) favoured separate targets for
38; 10,6%
15; 4,2%
12; 3,3%
66; 18,3%
229; 63,6%
4; 0,9%
34; 7,4%
38; 8,3%
14; 3,1%
369; 80,4%
0 % 10 % 20 % 30 % 40 % 50 % 60 % 70 % 80 % 90 %100 %
I don't know. / No response.
The EU’s ambition should depend
on other countries’ climate ambition.
The transition should be
slower than the current pace.
The transition to climate neutrality
should continue at the current pace.
The EU should accelerate
the transition to climate neutrality.
Percentage of responses in group
Q1: Considering the objective of achieving climate neutrality
by 2050 and the current energy crisis, how should the EU
pursue the climate transition up to 2040?
Individuals Organisations
Faster pace
of transition
Slower pace
of transition
101
GHG emission reductions, nature-based carbon removals and industrial removals with
permanent storage. Especially, civil society organisations (64, 69.6%) and
academic/research institutions (14, 70.0%) believed that three separate targets are the
best solution while public authorities (7, 43,8%) SMEs (34, 35,1%) and large business
associations/companies (46, 36,5%) were less inclined to this option (see Figure 9).
Figure 9: Responses on the set up for the EU 2040 climate target
Respondents viewed most opportunities and challenges associated with ambitious EU
climate targets as very relevant, mainly collective well-being (555, 67.8%) and taking
responsibility for the planet and future generations (571, 69.7%). The most important
challenges were ensuring a socially just transition for everybody (Avg.: 4.34, 52% rating
5), ensuring public support for climate ambition supported by EU policy (Avg.: 4.29,
56% rating 5) and improving energy efficiency (Avg.: 4.27, 56% rating 5). For SMEs
associations/ companies, large business associations/ companies and for public
authorities the most promising potentials were all related to economic factors, such as
green jobs (58.8%, 57.1% and 75,0%), economic signals (57.7%, 73.0% and 75.0%) and
energy security (55.7%, 58.7% and 81.3%).
The question of whether issues of gender should be of concern for climate policy created
a stark divide, with most respondents being either strongly in favour (181, 22.1%) or
strongly against it (162, 19.8%).
Contribution of individual sectors to the EU’s climate ambition
1; 5.0%
5; 25.0%
14; 70.0%
0.0%
26; 26.8% 28; 28.9% 34; 35.1% 9.3%
42; 33.3%
17; 13.5%
46; 36.5%
16.7%
9; 9.8%
10; 10.9%
64; 69.6%
9.8%
3; 18.8% 3; 18.8%
7; 43.8%
18.8%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Carbon removals should be considered together
with actual GHG emissions. Hence, it is enough to
have only a single ‘net’ emissions target for 2040 to
set the GHG trajectory towards climate neutrality by
2050 in a cost-effective way.
It is better to set a separate target for reducing
GHG emissions and another target for carbon
removals.
It is better to have one target for reducing GHG
emissions, a target for nature-based carbon
removals and a target for industrial removals with
permanent storage.
I don't know. / No response.
Percentage
of
responses
in
group
Q3: The EU’s 2030 climate target is expressed in ‘net’ emissions, which is the sum of GHG emissions and carbon removals. In your opinion, how should
carbon removals be considered so that the EU achieves its 2040 climate target?
Academic/research institutions Business associations / companies (SMEs) Business associations/companies (Large) Civil society organizations Public authorities
102
Overall, a large majority of the respondents claimed that all sectors can and should
do more to reduce emissions. The three most favoured sectors to increase their efforts
were “Aviation & maritime transport” (Avg.: 4.42, 57% rating 5), “Road transport
(passenger and freight transport)” (Avg.: 4.39, 59% rating 5) and “Industrial processes &
waste” (Avg.: 4.25, 48% rating 5). “Production of electricity and district heating” was the
sector that was expected to reach climate neutrality first, (442, 54%) and “Aviation &
maritime transport” to be the last (393, 48%).
Personal contribution to protect the climate
Overall, respondents depicted a great awareness for climate change impacts and a
willingness to make behavioural changes. (89% rating 4 and 5, Avg.: 4.66). They also
declared to be ready to change their behaviour to reduce their carbon footprint (82%
ratings 4 and 5, Avg.: 4.36).
The impacts of the climate crisis
Overall, respondents indicated that they are aware and concerned about the negative
impacts of the climate crisis. At the same time, they point out that relevant actors must do
more to prepare cities and countries for these impacts. “Loss of biodiversity and natural
habitats” was of greatest concern for the respondents (Individuals: 355, 77.3%;
Organisations 151, 41.9%; Total: 506, 61.6%). Additionally, in the open question on
possible impacts of the climate crisis the themes climate refugees and migration; social
and political conflicts; and health impact were mentioned most frequently.
On the societal level, natural disasters (338; 73.6%), negative impacts on food production
(315; 68.6%) and migration or refugee movements (307; 66.9%) were most frequently
selected by individuals as the most relevant climate-change related impacts.
Dealing with climate change-induced natural hazards, individuals indicated the highest
level of fear for local vulnerability regarding heatwaves (322; 70.2%), droughts (310;
67.5%) and lack of water (306; 66.7%). Organisations feared the same hazards.
2.4. Results from the expert section of the questionnaire
General policy framework
Overall, respondents indicate that there is strong support for an extension of the scope of
EU emissions trading to all fossil fuel uses and to cover non-CO2 GHG emissions. For
the other climate policy instruments, the results are less conclusive. Respondents most
strongly agreed that all fossil fuel uses (Avg.: 4.27, 48% rating 5) as well as non-CO2
GHG emissions (Avg.: 4.09, 46% rating 5) should be covered by EU emissions trading.
Regarding the future role of the Carbon Boundary Adjustment Mechanism (CBAM) and
its scope, the strongest support is for the option that sectors with the highest absolute
103
emissions should be prioritised for inclusion (Avg.: 3.90, 28% rating 5): transportation
(appeared in 29 out of 151 responses), chemicals and polymers (24); and agriculture (20).
There are no significant majority opinions regarding the future development of the ESR.
Especially large companies or business associations representing large companies
favoured the idea that national targets should only cover emissions not covered by an
ETS (37% rating 5), whereas they strongly disagreed with the idea that national targets
should cover all GHG emissions from all sectors (7% rating 5).
Mitigation of GHG emissions from the land sector and policy options
In general, stakeholders demand more ambitious regulations to mitigate the GHG
emissions in the land sector. They also indicate that if a carbon price were to be set for
agricultural emissions, it should preferably be set for industry actors and then passed-on
along the value chain - food companies and producers of fertilisers. Most respondents
agreed that there is a need for regulatory approaches such as ambitious sectorial
standards to drive the transition of the agricultural sector (Avg.: 4.23, 37% rating 5) and
that focusing on aspects such as better information is not enough (Avg.: 1.75, 5% rating
5).
The role of carbon removals
Stakeholders’ view on the general role of carbon removals was divided, with EU citizens
and civil society organisations (52, 61.9%), in contrast to other stakeholder groups,
arguing for a limited role of removals. EU citizens also argue for a stronger reliance on
nature-based removals, while SMEs display a preference for a stronger reliance on
industrial removals. Academic/ research institutions (10, 52.6%), public authorities (11,
61.1%) and SMEs (60, 62.5%) as well as large business associations/ companies (94,
72.9%) have a higher share of responses in favour of an important role of carbon
removals. In contrast, civil society organisations (52, 61.9%) together with EU citizens
(110, 50.2%), mostly prefer to limit the role of carbon removals.
Technologies
Overall, stakeholders identified technology costs as the most important barrier for
the deployment of CCS. At the same time renewable energy sources are seen as the
most relevant energy technology for the transition supplemented by energy efficiency,
storage technologies, demand management, and innovation. T
Furthermore, the respondents rated that the most relevant technologies are wind, solar
and hydropower. Energy efficiency and storage technologies are also considered as
highly relevant. The open question confirmed the prominence of renewable energy with
the addition of hydrogen (19 out of 156 responses) and nuclear power (15).
Engagement and social impacts
104
In general, stakeholders perceived the local and regional implementation of the European
Green Deal as insufficient. They emphasised the importance of a just transition and
agreed that the transition will affect and alter multiple sectors, including the energy,
transport and agriculture sectors.
With regards to sectoral impacts of the transition, respondents specifically agreed that
action to reskill and upskill the workforce due to structural shifts is required (Avg.: 4.45,
46% ranking 5) and that the green transition represents an opportunity for SMEs (Avg.:
4.14, 34% ranking 5).
Adapting to climate change
Overall, stakeholders agree that current EU regulations and policy are sufficient to
guarantee the security of the mitigation efforts. Only 5.3% (31) of the respondents did
agree that current EU regulations and policy are sufficient to guarantee the security of the
mitigation efforts in face of climate impacts. The most favoured response was that the
EU should draft new legislation to improve the climate resilience of mitigation efforts
(167, 28.8%).
3. ANALYSIS OF POSITION PAPERS
3.1. Overview of position papers
A total of 237 position papers were received from the public consultation, and 146
through the call for evidence (63 were submitted to both). Out of these, two papers from
national governments and one from the United Nations were submitted outside the
formal consultation context. In addition, a couple of additional papers were identified
through desk-research. Based on a preliminary review and a selection (removal of
duplicates, relevance, type of stakeholder, previous contribution to IIA), 120 papers were
thoroughly analysed.
105
Figure 10: Position papers by stakeholder group
Note: n = 120 (Number of position papers for in-depth analysis)
3.2. Methodological approach
The objective of the analysis was to identify the main views expressed in the position
papers. A preliminary screening of all papers was conducted to identify the main
characteristics and core idea of the papers. After selection, an in-depth review of all
papers was conducted to identify the statements relevant for the analysis and the topics to
which they belong. They were then associated with a unique identifier and basic
information on the respondents which was subsequently used as variables for the
analysis: stakeholder groups, country, sector etc. The main trends observed through this
thematic analysis then explained and described.
3.3. Focus on position papers received from public authorities
Position papers received through the public consultation include contributions from the
national governments of Denmark, Estonia, Poland, and Sweden. On a regional and local
level, additional contributions from the Bavarian State Parliament, the Bavarian Ministry
for the Environment and Consumer Protection, the Government of Flanders, the Cities of
Amsterdam and Gothenburg were also received as part of the public consultation. On an
international level, the United Nations also provided a contribution. Further relevant
position papers from public authorities were identified based on desk research and
provided by the EC. (114
)
The contributions by public authorities include recommendations and positions regarding
the level of ambition and process for setting the EU climate target for 2040 and input on
(114
) These included position papers by the Dutch Ministry of Infrastructure and Water Management, the
Irish Environmental Protection Agency, the German Environment Agency, the European Central Bank, and
the Autonomous province Bolzano.
12; 10,0%
42; 35,0%
13; 10,8%
1; 0,8%
8; 6,7%
16; 13,3%
9; 7,5%
17; 14,2%
2; 1,7%
Academic/research institution
Business association
Company/business
Consumer organisation
Environmental organisation
Non-governmental organisation (NGO)
Other
Public authority
Trade union
106
how this relates to national and regional progress of the transition and (sectoral/national)
decarbonisation scenarios.
Most public authorities welcome the process of setting an EU-wide climate target for
2040. The Danish Ministry of Climate, Energy and Utilities, the Bavarian State
Parliament, the United Nations, and the Autonomous province Bolzano call for an
acceleration of the transition. The Danish Ministry of Climate, Energy and Utilities
additionally advocates for setting an additional interim target for 2035, which would be
aligned with the five-year timeframe for Nationally Determined Contributions (NDCs).
Contrarily, the Polish Ministry of Climate and Environment and the Government of
Flanders express the view that the target setting for 2040 should be postponed as it is still
too uncertain to predict the impact of an EU-wide climate target for 2040 and that the
implementation of measures to achieve the 2030 climate targets should remain the
primary objective.
4. ANALYSIS OF THE CALL FOR EVIDENCE
In addition to the public consultation, respondents were able to share feedback through a
call for evidence. In total, 579 feedbacks were received. After the removal of 13
duplicate answers566 unique feedbacks remained. Most comments originated from
Slovakia (126, 22.3%), Germany (100, 17.7%), Belgium (60, 10.6%), and Finland (50,
8.8%). Furthermore, a total of 146 position papers were collected, which were analysed
together with the position papers obtained in the public consultation (see Section 3).
356 comments (62.9%) were received from EU citizens. Most opinions supported
stringent GHG emission reduction targets by 2040, acknowledging that climate change is
a serious threat to the EU. More radical opinions insisted on reaching climate neutrality
by 2040. The second group of opinions came from climate change sceptics, insisting that
climate change is not anthropogenic, and that climate action is a waste of resources. Most
of opinions showed similarities with the campaign of Slovakian private individuals
identified in the responses to the public consultation questionnaire.
98 submissions (17.3%) were made by business associations (55, 9.7%) and companies
(43, 7.6%). Overall, companies and business associations were in favour of setting
ambitious yet realistic 2040 GHG emission reduction targets based on the best available
science.
55 submissions (9.7%) were made by CSOs, including NGOs (43, 7.6%), environmental
organizations (9, 1.6%), trade unions (2, 0.4%), and one consumer organization (0.2%).
The key messages from this stakeholder group underscored the importance to meet the
requirements set by the Paris Agreement, generally, advocating for a more ambitious “net
zero” transition.
14 submissions (2.5%) were made by academic and research institutions. The key
messages from these responses related to the prevalent demand that the EU should
integrate the latest scientific evidence when formulating the emission targets for the
2030-2040 period. Another important aspect was the EU's historical responsibility when
it comes to carbon emissions.
107
Seven submissions (1.2%) were made by public authorities. The key messages from
these responses related to the need for investments concerning the green transition for
aspects such as green technologies and re-skilling. In this context, the submissions of
public authorities highlighted the EU’s crucial role as a supporting force that can
facilitate the transition of other countries and thereby contribute to its global
responsibility.
A further 36 responses (6.4%) came from non-EU citizens (4, 0.7%) or from
stakeholders who classified themselves as “Other” (32, 5.7%). The topics of these
responses largely mirrored the topics of the other stakeholder groups. Especially those
stakeholder types that related strongly to their respective type.
4.1. Results from the analysis of position papers
The 2040 target and associated opportunities, challenges and enabling factors
Regarding the level of ambition for the net emission reduction target for 2040, 41 papers
(34 % of the total) provided an opinion. Most papers (32) advocate for an acceleration of
the transition and five prefer its current speed.
Many contributions favour a realistic transition pathway for industry, by undertaking a
critical review of the practical feasibility of an ambitious 2040 target including impacts
on competitiveness; the impact on energy prices; and the cost-effectiveness of a more
ambitious target.
57 papers (48%) expressed an opinion about the opportunities related to higher climate
ambition. More than a third of the papers consider that a higher climate ambition would
benefit EU’s economic competitiveness; the creation of new jobs; EU global leadership;
innovation fostering or well-being. At the same time, most papers mention that the EU is
facing multiple, technological, financial, social, regulatory and political challenges.
Only few papers discussed the impact of climate policies on SMEs, not expecting
negative impacts provided that the administrative burden does not increase, and that
support, and resources are provided to cope with the needed transition (fair transition).
The contribution of Individual sectors to the EU's climate ambition
Around 70 position papers (58% of all answers) provided opinions on the prioritisation
of sectors and the following sectors were identified as priority for GHG emission
reduction: transport (24), agriculture and forestry (14). Buildings (11) and industry (10).
The role of policy instruments
• EU Emission Trading System (EU ETS)
63 papers (53%) commented on the role of the ETS post-2030. An overwhelming
majority considered the EU ETS as an instrument playing a key role in the mitigation of
EU emissions. However, an evolution of the tool in relation to the 2040 target is needed.
The most widely discussed topic was the sectoral coverage, with a suggestion to extend
to all, or to a restricted number of additional sectors. The interaction with other policies
and instruments (ESR, LULUCF, CBAM) was addressed, with concerns expressed about
108
the risk of double-coverage, relation between ETS- and CBAM-prices and scope
coverage.
Most stakeholders supported an integration of carbon removal in the ETS.
The third most discussed topic concerned the international integration and potential
linkages to other countries/regions.
• Carbon Border Adjustment Mechanism (CBAM)
39 papers (33%) provided elements on the role of CBAM. Most papers indicated that
CBAM plays an essential role to avoid carbon leakage and to support carbon market
internationalisation. However, more than a third considered that its efficiency is yet to be
demonstrated.
22 papers discuss CBAM extension, with contradicting views. While two thirds of the
papers considered that CBAM should be extended (to sector at most risk of carbon
leakage, to cover the export part of the EU production, to integrate downstream sectors or
cover all sectors covered by free allowances under the ETS), one third considered that a
CBAM extension should be carefully considered.
• Effort Sharing Regulation (ESR)
23 papers (19%) expressed an opinion on the role of ESR. A bit less than half the papers
expressed the need to adjust the ESR, notably given the broadening scope of the ETS.
Mitigation of GHG emissions from the land sector and policy options
44 of the analysed papers (37%l) commented on options to tackle agricultural emissions
including sustainable farming/carbon farming (9) followed by dietary changes (7) and
agriculture carbon removal role (7). Other options mentioned frequently were some form
of market incentives and the non-inclusion of the agricultural sector in LULUCF.
The role of carbon removals
73 papers (61%) commented on the role of carbon removals to reach 2040 climate
neutrality goals. Most papers acknowledged carbon removals as an important means, yet
reservations and concerns were shared in 15 position papers, emphasising they should not
be a substitute and offset for GHG emission reduction and should only be considered as a
second-best option.
Carbon capture and storage/use
34 papers (28%) commented specifically on the role of different carbon capture and
storage technologies. About half the papers, from business associations, public
authorities and academia, encouraged the uptake of carbon capture and storage
technologies, without assigning priority to one specific technology type.
Energy technologies
72 papers (60%) discussed the most relevant technologies for supporting the energy
transition as well as opportunities and barriers of their uptake. 33 position papers (28%)
109
argued for enhancing the utilization of renewable energies and increasing their share in
energy consumption. Moreover, 15 papers (13%) supported applying energy efficiency
principles and taking into consideration the beneficial interaction between renewables,
increased energy efficiency and GHG targets.
Engagement and social impacts
57 position papers (48%) discuss the social impact of future climate change policies. 28
(23%) make a comment on the need for a socially or economically just transition, where
vulnerable groups, communities and Member States are protected from climate risks and
poverty.
5. ANALYSIS OF THE STAKEHOLDER EVENT
On 9 June 2023, an all-day stakeholder event was held to gather further feedback and
insights on the view of the EU’s 2040 climate targets. It was attended in person by 34
stakeholder representatives, including ten from the energy sector, six from industry, six
from think tanks, and six from NGOs, as well as representatives from transport,
agriculture, SMEs, trade unions, and cities. In addition, a further 48 participants followed
the meeting online.
The contents of the event are summarised in the following:
Climate impacts and cost of inaction: Stakeholders were convinced that natural hazards
and biotic risks will impact the forestry, agriculture, and other land-use sectors, as well as
renewables and waste management/recycling. They emphasised that cities and industries
will be affected by employment and work-related risks. In this context, the
communication of mitigation and adaptation measures should be linked with other
environmental benefits to give a positive narrative, as well as to stress the costs of
inaction.
Fair transition, employment, and social aspects: Stakeholders highlighted the skills
gap regarding the required technologies and demographic factors as aspects that should
be considered. It was stressed that financial support will be needed for green
infrastructure (especially for smaller cities), as well as targeted support for lower/middle
income groups for the switch of technologies (e.g., upfront costs of heat pumps and
electric vehicles).
Energy – including storage, grids, and renewables: Stakeholders believed that aspects
such as energy efficiency and contributions to energy security are key in the energy
transition. There was disagreement on the role of hydrogen and e-fuels.
Carbon removals/storage: Participants demanded a clear differentiation between
emission reductions and carbon removals, suggesting separate targets. The focus should
be on emission reductions, with carbon removals reserved only for residual hard-to-abate
emissions. In addition, two targets are also needed within the context of carbon removals:
one for nature-based removals, and one for technological removal/storage.
110
Economic effects, competitiveness, industry, and SMEs: Most stakeholders approved
the positive effects of having long-term targets and a more stable and predictable legal
and regulatory framework is required for investments. More support for industry, such as
Carbon Contracts for Differences (CCfD) will be needed for the transition. Additional
claims included that the EU industry needs capital investment and reliable/available
renewables as well as breakthrough technologies for key industries and lead markets for
green technologies.
Agriculture, food security and land sectors (LULUCF, forests, biodiversity, and
biomass): Agriculture stakeholders called for intensified food production within GHG
boundaries. Forestry stakeholders emphasised the important role of wood-based raw
materials and products, whereas civil society organizations called for agriculture to avoid
energy crops and questioned the role of wood-based products.
International aspects, and non-EU climate action: Stakeholders emphasised that the
EU should align with the UNFCCC 5-year policy cycles, such as setting a 2035 target.
Additional claims included: assessing the EU’s carbon footprint and the global
contribution of EU-based companies in terms of behaviour and policies outside of
Europe, as well as embedding carbon in trade flows.
Behavioural change and lifestyles: Stakeholders proposed to frame the green transition
as “our well-being and lifestyles will be damaged if we fail to limit global warming to
1.5ºC”. The focus should be on sufficiency principles, active mobility, new production
models, and consumption-related emissions, as well as the green infrastructure and
support for upfront costs that are needed to enable individual climate-friendly choices.
6. OTHER CONTRIBUTIONS
In 2023, the European Scientific Advisory Board on Climate Change (ESABCC)
published an advice on the 2040 climate target and GHG budget (115
). The ESABCC’s
advice is reflected throughout the Impact Assessment and comparisons with the
ESABCC’s analysis are made where appropriate.
The outcomes of Horizon 2020 and Horizon Europe projects related to climate science
and mitigation pathways provided important contribution and evidence base for this
Impact Assessment.
(115
) ESABCC (2023). Scientific advice for the determination of an EU-wide 2040 climate target and a
greenhouse gas budget for 2030–2050. DOI: 10.2800/609405.
111
Annex 3: Who is affected and how?
1. Practical implications of the initiative
The scope of the current initiative focuses on the ambition level of a 2040 GHG target
only. The accompanying post-2030 policy implementation framework will be designed
and proposed in a later stage. As such, in absence of this post-2030 policy
implementation framework, it is not possible yet to calculate the administrative costs,
regulatory fees and charges, and enforcements costs for businesses and citizens. All these
elements of the ‘one in, one out’ approach will depend on the changes in the
implementation of the post-2030 policy implementation framework, in comparison with
the current 2030 policy framework.
The implementation of the current 2030 policy framework is supported by the 30%
minimum climate mainstreaming in the MFF, and the 37% minimum climate
requirement of the Recovery and Resilience Facility (RRF).
The preferred option for this initiative corresponds to a target range of 90-95% emission
reduction compared to 1990.
2. Summary of costs and benefits
I. Overview of Benefits (total for all provisions) – Preferred Option
Description Amount Comments
Direct benefits
Avoided costs of
climate change (section
6.3.1).
In option 3, in comparison with option
2, the average annual benefit from
climate change mitigation is between
EUR 20 and 38 billion for the time
period 2031-2040, by EUR 24 and 44
billion for 2041-2050 and by EUR 22
and 42 billion over the entire period
2031-2050.
Avoiding costs of climate change is
a general benefit for the whole
society, including population,
businesses, the public budget, and
for nature and ecosystems.
Such costs are generally thought to
be underestimated, given the
difficulty in predicting the impacts
of climate change.
This is specifically a benefit for all
companies in sectors that are
dependent on meteorological
conditions and natural ecosystems
(agriculture, fishery, etc).
This is a benefit for companies as it
reduces the risk of natural disasters
112
and associated consequences on
economic activities This is
particularly true for SMEs which
tend to have low insurance coverage
for risks associated with extreme
weather events.
This is beneficial for public budgets
as it reduces the risk that public
money is needed to compensate
losses associated with extreme
weather events (for example losses
in agriculture due to droughts).
Finally, all citizens, whether
workers in exposed sectors,
inhabitants of potentially exposed
accommodations, owners of
exposed properties, or taxpayers
benefit in consequences of the
points mentioned above.
Higher energy
independence and
reduction of the risks
associated with fossil
fuel price shocks (see
section 6.4.3.1)
In comparison with option 2, option 3
implies average annual savings of €22
billion for 2031-2040 due to reduced
fossil fuel import. In 2041-2050, the
annual savings amount to EUR 9 billion.
This is a benefit for the whole
economy, large companies as well
as SMEs, and, in fine, for the public
budget as well. The higher energy
independence reduces the risk of
fossil fuel price shocks for
companies, SMEs and all citizens.
For all, it provides larger certainty
to have access to energy at an
affordable price.
Indirect benefits
Reduction of air
pollution and reduction
of the associated
premature mortality
and morbidity (see
Section 6.3.2)
Annually, the average benefit from air
pollution reduction is between EUR 1 to
2 billion in option 3 compared to option
2 (in 2031-2040, as well as in 2041-
2050).
This is a benefit for the whole EU
population and for the public budget
as a consequence of reduced health
expenses. The health of all citizens
benefits from reduced air pollution.
This reduces health expenses,
whether they are borne by public
authorities or by private insurance
companies. In turn, this benefits
taxpayers and allows the public
budget to be used for other needs.
113
II. Overview of costs – Preferred option
Citizens/Consumers Businesses Administrations
One-
off
Recurrent One-
off
Recurrent One-
off
Recurren
t
Action (a)
Direct adjustment
costs
The figures for energy
system costs provided
below are annual
averages. More details
can be found in section 6.
4.3. of this document and
in Section 2.3 of Annex 8.
For the residential sector,
the total energy system
costs in 2031-2040 are
EUR 9 billion (1%)
higher in option 3 than in
option 2. For 2041-2050,
they are EUR 2 billion
(0.2%) higher in option 3
than in option 2. The
capital costs116
are EUR 8
billion (1.6%) more in
option 3 than in option 2
for 2031-2040 and EUR 4
billion (0.7%) more for
2041-2050. Energy
purchases are EUR 1
billion higher in option 3
than in option 2 for 2031-
2040 but EUR 2 billion
lower for 2041-2050.
The figures for energy system
costs provided below are
annual averages. More details
can be found in section 6.
4.3. of this document and in
Section 2.3 of Annex 8.
For industry the capital costs
are EUR 2 billion (2%)
higher in 2031-2040 in option
3 compared to option 2 and
EUR 1 billion (less than 1%)
higher in 2041-2050. Energy
purchases are EUR 8 billion
(2%) more in option 3
compared to option 2 for
2031-2040. They are EUR 2
billion (0.5%) more for 2041-
2050.
For the tertiary sector, capital
costs are EUR 4 billion (3%)
more in option 3 than in
option 2 for the time period
2031-2040. They are EUR 2
billion (1%) higher for the
time period 2041-2050.
Energy purchases are EUR 1
billion (0.4%) smaller in
option 3 than in option 2 for
2031-2040. They are EUR 1
billion (0.4%) smaller for
2041-2050.
Will depend on the
future post-2030
policy framework.
It will also depend
on the share of the
costs for
households and
companies that can
be borne by public
funding. This
partly depends on
the national
legislations (for
example national
or regional
funding for
improving energy
efficiency in the
residential sector).
Energy systems costs for transport are borne partly by households, partly by businesses and
public administrations. The corresponding capital costs are EUR 4 billion (1.6%) higher in
116
Capital costs includes financing and opportunity cost for private actors through the application of a
WACC at 10% in the annualization of overnight investment costs.
114
2031-2040 for option 3 compared to option 2, and EUR 6 billion (2%) higher in 2041-2050.
Energy purchases for transport are EUR 12 billion (2%) higher in 2031-2040 but EUR 7
billion (1.4 %) lower in 2041-2050.
Direct
administrative
costs
Will depend on the future post-2030 policy framework
Direct regulatory
fees and charges
Will depend on the future post-2030 policy framework
Direct
enforcement
costs
Will depend on the future post-2030 policy framework
Indirect costs
Costs related to the ‘one in, one out’ approach
Total
Direct and
indirect
adjustment costs
The figures for energy
system costs provided
below are annual
averages. More details
can be found in section 6.
4.3. of this document and
in Section 2.3 of Annex 8.
For the residential sector,
the total energy system
costs in 2031-2040 are
EUR 9 billion (1%)
higher in option 3 than in
option 2. For 2041-2050,
they are EUR 2 billion
(0.2%) higher in option 3
than in option 2. The
capital costs117
are EUR 8
billion (1.6%) more in
option 3 than in option 2
for 2031-2040 and EUR 4
billion (0.7%) more for
2041-2050. Energy
purchases are EUR 1
billion higher in option 3
than in option 2 for 2031-
2040 but EUR 2 billion
The figures for energy system
costs provided below are
annual averages. More details
can be found in section 6.
4.3. of this document and in
Section 2.3 of Annex 8.
For industry the capital costs
are EUR 2 billion (2%)
higher in 2031-2040 in option
3 compared to option 2 and
EUR 1 billion (less than 1%)
higher in 2041-2050. Energy
purchases are EUR 8 billion
(2%) more in option 3
compared to option 2 for
2031-2040. They are EUR 2
billion (0.5%) more for 2041-
2050.
For the tertiary sector, capital
costs are EUR 4 billion (3%)
more in option 3 than in
option 2 for the time period
2031-2040. They are EUR 2
117
Capital costs includes financing and opportunity cost for private actors through the application of a
WACC at 10% in the annualization of overnight investment costs.
115
lower for 2041-2050. billion (1%) higher for the
time period 2041-2050.
Energy purchases are EUR 1
billion (0.4%) smaller in
option 3 than in option 2 for
2031-2040. They are EUR 1
billion (0.4%) smaller for
2041-2050.
Energy systems costs for transport are borne partly by households, partly
by businesses and public administrations. The corresponding capital
costs are EUR 4 billion (1.6%) higher in 2031-2040 for option 3
compared to option 2, and EUR 6 billion (2%) higher in 2041-2050.
Energy purchases for transport are EUR 12 billion (2%) higher in 2031-
2040 but EUR 7 billion (1.4 %) lower in 2041-2050.
Administrative
costs (for
offsetting)
Will depend on the future post-2030 policy framework
[1]
Capital costs includes financing and opportunity cost for private actors through the application of a
WACC at 10% in the annualization of overnight investment costs.
3. Relevant sustainable development goals
The initiative aims to assess the climate target for 2040, so goes beyond the time horizon
of the UN sustainable development goals (SDG) for 2030. Nevertheless, it relates to a
number of these goals and, by setting a clear direction beyond 2030, and will also
contribute positively to these objectives by 2030 by providing long-term certainty for
policy and investment decisions. The analysis also shows that there can be strong
positive effects from some SDGs that play a role in reaching the 2040 climate target.
III. Overview of relevant Sustainable Development Goals
Relevant
SDG
Expected progress towards the Goal Comments
SDG 3 –
Good health
and well
being
Strong synergies in terms of air quality in all
target options in EU and in countries that
follow the EU lead and take more ambitious
climate action.
116
SDG 7
Affordable
and clean
energy
Clean and decarbonised energy is a key
component of all target options. It shields
consumer from shocks on the fossil fuel
markets.
SDG 8
Decent jobs
and
economic
growth
The different 2040 target options display
very limited difference in terms of overall
macro-economic impact. They will
contribute to mitigating the impacts of
climate change, including for workers and
on the economy. New markets and jobs to
substitute fossil fuel-dependent economic
activities and new opportunities in clean,
technology manufacturing and deployment,
land-use sector, service sector.
Skilling needs for new products
and services in a low carbon
economy. The new target and
future framework are an
opportunity to address labour
market inequalities.
SDG 9
Industry,
innovation
and
infrastructure
Reaching climate neutrality by 2050
represents an industrial and infrastructure
challenge that will spur innovation. The
most ambitious option (Option 3) builds on
a larger deployment of low carbon solutions
already by 2040, while the least ambitious
one (Option 1) rather delays it during the
last decade.
SDG 13
Climate
action
All target options are compatible with
meeting climate neutrality by 2050.
However, the least ambitious
target options rely heavily on
deployment on novel
technologies during last decade
2041-2050, which puts the
climate neutrality target at risk.
SDG 15 Life
on land /
SDG 14 Life
below water
Mitigate the adverse impacts of climate
change on land, oceans and biodiversity.
Limited direct impact of climate
action. The most ambitious
climate target is at risk of trade-
offs on land use due to potential
bioenergy needs.
SDG 17
Partnerships
for the goals
The preferred target option of 90-95% is
much more likely to contribute positively to
international climate action effort.
117
ANNEX 4: SME TEST
Note: the “analytical framework” Annex appears as Annex 6, just ahead of the detailed
analysis shown in Annex 7 (Cost of inaction) and Annex 8 (Detailed quantitative analysis
of GHG pathways to climate neutrality).
Step 1/4: Identification of affected businesses
All segments of the EU economy are and will be affected by climate change, although
some sectors are more exposed than others, notably agriculture, tourism, fisheries and
forestry. SMEs have a more limited financial capacity and lower resources to adapt to
climate change (118
).
To contribute to limiting climate change globally through the implementation of the
objective of climate neutrality by 2050, this initiative aims at assessing a 2040 EU-wide
climate target covering the whole economy. It is thus relevant for all businesses and
sectors since it will set the pace of the transition to 2050. The climate target is expressed
as a reduction of net GHG emissions compared to 1990. It will directly affect GHG
emitting sectors and those involved in the removal of CO2 from the atmosphere through
natural or industrial means, but also, indirectly, other sectors consuming energy or
providing goods and services to deliver a competitive and climate neutral EU economy
by 2050.
This initiative does not specifically target or have specific provisions for SMEs. The
objective of the current assessment is to compare various GHG ambition levels for 2040
to define the path between the established 2030 and 2050 objectives. This initiative and
assessment come without the design of a new 2040 policy framework, which is expected
in a later stage. The impact on SMEs depends on the sectors in which they operate.
According to the 2022 Flash Eurobarometer “SMEs, green markets and resource
efficiency” (119
), about one in three (32%) SMEs in the EU offer green products or
services, with a further 11% planning to do so in the next two years. For the largest share
(43%) of SMEs selling green products and services, these products and services make up
not more than 10% of their most recent annual turnover. About one in five (21%) reply
that green products and services represent between 11% and 50% of their annual turnover
and a slightly higher proportion (23%) answer that the sale of such products and services
makes up more than 50% of their turnover. Just under 40% of SMEs surveyed have at
least one full-time employee working in a green job some or all of the time: 33% say
there are between one and five ‘green’ employees in their SME and 5% report that their
number is higher than five.
According to this survey, most SMEs are taking measures to be more resource efficient.
At the same time, the actual investment by SMEs in resource efficiency remains low.
35% of SMEs surveyed invested 1% or more of their turnover in this area in the two
years before the survey. Saving energy is the second most common resource efficiency
(118
) Enabling business mitigation and adaptation to climate change Green policies and the role of
Employer and Business Membership Organization. International Labour Organization. December 2022
(119
) Flash Eurobarometer 498 – SMEs, green markets and resource efficiency, March 2022.
118
action undertaken by SMEs. More than three-quarters (77%) of SMEs plan to implement
additional measures to improve resource efficiency in their company. The most common
resource efficiency action planned for the two years following the survey is saving
energy (53%). A vast majority of SMEs (72%) do not (yet) have a concrete strategy in
place to reduce their carbon footprint and become climate neutral; about a quarter of
these SMEs reply they are planning to define one. One in five SMEs already have a
concrete strategy in place to reduce their carbon footprint and 4% say they are already
climate neutral. The most common actions undertaken to become carbon neutral (among
SMEs with a carbon reduction strategy) include adopting or purchasing new
technological solutions (49%).
To identify affected businesses,
119
Table 40 presents the share of each sector in the total number of SMEs and the share of
employment by SMEs in each. About 66% of all SMEs are active in services. In this
sector, many businesses will not be affected in any significant manner by the transition,
while others may gain from business opportunities stemming from the need for
innovative low carbon solutions. Agriculture represents almost a fourth of small and
medium businesses and is a sector exposed to climate change. Given its hard-to-abate
GHG emissions and its potential role to enhance LULUCF carbon removals, this sector is
also very relevant for the transition. SMEs are also very present in construction, a sector
that plays a major role to decarbonise the EU’s building stock. Finally, SMEs are less
present in other key sectors for the transition and where the assessment shows differences
across target options in terms of deployment of new technologies and investment needs:
electricity and clean fuels production, energy intensive industries and carbon capture and
storage technologies.
Table 40: Indicators of SME activity by sector (2019)
Source: Eurostat Structural Business Statistics; Farm Indicator by Legal Status of the Holding; and Detailed Breakdown of
Main GDP Aggregates (120
).
(120
) The data is calculated from the Structural Business Statistics (SBS), except for agriculture, which
is not included in the dataset. For SBS sectors, the table is based on an aggregation of sectors by size class
for special aggregates of activities (NACE 2). Fossil fuel sectors (B05, B06, C19); other mining and
extraction activities (B07, B08, B09); energy intensive industries (C17, C20, C21, C23, C24);
manufacturing of transport equipment (C29, C30); manufacturing of electrical equipment and other
machinery (C27, C28); other manufacturing (all other C codes); electricity, gas, steam and air conditioning
supply (D35); construction and architecture services (F41, F42, F43, M71); transport and storage (H49 to
H53); services (all codes not listed in other sectors); water, treatment and waste (E36 to E39). The data for
agriculture is not directly comparable and therefore provided separately. All farms under the holding of
natural persons are considered SMEs, while all others are considered as not being SMEs. The gross valued
added of SMEs in agriculture (and its share in total agricultural GVA) is estimated based on the percentage
of hectares exploited by holdings under the ownership of natural persons, using total gross value added in
Share in GVA
Share in
employment
Number of
companies
GVA Employment
Fossil fuels 7.0% 6.6% 0.0% 0.1% 0.0%
Other mining and extraction 53.1% 59.2% 0.1% 0.3% 0.2%
Energy intensive industries 29.1% 34.4% 0.6% 2.9% 2.0%
Manuf. transport equipment (incl. parts and accessories) 7.9% 14.1% 0.1% 0.6% 0.6%
Manuf. electrical equipment and other machinery 32.0% 35.4% 0.5% 3.1% 2.0%
Other manufacturing 44.4% 65.0% 7.5% 14.3% 15.9%
Electricity, gas, steam and air conditioning supply 22.3% 29.0% 0.7% 1.4% 0.5%
Construction and architecture services 77.8% 89.1% 19.0% 16.4% 17.5%
Transport and storage 49.0% 43.6% 5.4% 5.2% 4.9%
Services 62.7% 69.5% 65.7% 54.3% 55.5%
Water, treatment and waste 46.7% 45.3% 0.3% 1.3% 0.9%
Total 52.9% 64.4% 100.0% 100.0% 100.0%
Memo:
Million
Billion
EUR
Million
people
All sectors above 52.9% 64.4% 23.1 3332 76.3
Agriculture 66.7% 95.6% 8.7 128 8.3
SME shares in the
economy (% of total)
Sectoral split of SMEs (% of economy-
wide SMEs)
120
Step 2/4: Consultation of SME Stakeholders
The consultation of SME stakeholders includes the public consultation for this initiative,
with the possibility to reply to a public questionnaire and to submit position papers, and a
stakeholder event. The 2022 Flash Eurobarometer “SMEs, green markets and resource
efficiency” also provides more general insights from SMEs.
The public consultation for the initiative was held from 31 March to 23 June 2023. The
information about the public consultation was disseminated via 28 social media posts on
the channels of the Commission (Twitter, Facebook, LinkedIn, Instagram). It was
communicated to several Directorate Generals (DGs) of the Commission, Permanent
Representations and stakeholders, some of which shared the information further to their
own networks. The consultation was promoted in two intranet articles and multiple
newsletters of the Directorate General for Climate Action (“Climate Pact” and “DG
CLIMA monthly”) and other DGs.
The questionnaire includes 13 general questions (e.g. on the level of ambition for the EU)
and 18 more specific questions (e.g. on the role of carbon removal), including question
33 which covers the sectoral implications for SMEs. SMEs and representative
organisations represent 12% of the responses to the public questionnaire. The diversity of
SMEs (micro, small and medium-size enterprises) is represented, for example via the
contribution of organisations such as SMEunited or Bundesverband Erneuerbare Energie
e.V. (BEE). Respondent SMEs support for the different 2040 target levels assessed is
split between reductions of 75%-80% (29%), 80%-90% (22%) and above 90% (20%).
They consider that the green transition represents an opportunity for them (with a mark
of 4.2/5), and agree with the following statements (sorted by decreasing support):
- The likely structural shift and changing skill requirements in the economy towards a
green and circular economy will require EU action to reskill and upskill the workforce
(4.4/5).
- The EU transition to a net-zero economy impacts differently the competitiveness of
SMEs from those of large companies (4.1/5).
- The impact on competitiveness of micro-companies is likely to differ from the impact
on small and medium-sized ones (4.0/5).
- After 2030, there will be a greater need to support SMEs to cope with the adaptation
and costs associated with the green transition (3.9/5).
Only few position papers discuss the impact of climate policies on SMEs. These do not
expect negative impacts provided that the administrative burden does not increase for
SMEs, and that support and resources are provided to cope with the needed transition.
agriculture (NACE code A01) as reporting in the national accounts. Similarly, SME employment in
agriculture (and its share in total agricultural employment) is estimated based on the percentage of farms
under the ownership of natural persons. SBS-based data is for 2019 to avoid the distortions due to the
COVID pandemic. Figures for agriculture are for 2020 due to data availability.
121
Indications of possible support and resources are given in the paragraph 4/4 –
Minimising negative impacts on SMEs (see below).
A stakeholder consultation event was held on 9 June 2023. 66 organisations were invited,
including SMEs representatives (e.g. the European association of craft, small and
medium-sized enterprises - SMEunited, or European Entrepreneurs - Confédération
Européenne des Associations de Petites et Moyennes Entreprises - CEA-PME) or
associations representing sector specific businesses including SMEs, for example the
Committee of Professional Agricultural Organisations (COPA-COPEGA) or the
Confederation of European Forest Owners (CEPF).
More generally, the 2022 Flash Eurobarometer evaluated the level of resource efficiency
actions and the state of the green market among Europe’s SMEs. Among SMEs taking
resource efficiency actions, 31% say that their production costs have increased, 26% that
there has been no change in their production costs and 31% that there has been a decrease
of their production costs over the two years before the survey as a result of the resource
efficiency actions. Among SMEs that take resource efficiency actions, 64% rely on their
own financial resources and 54% on their own technical expertise in their efforts to be
more resource efficient. About a quarter of SMEs (24%) rely on external support. More
than a third (36%) of SMEs relying on external support in their efforts to be more
resource efficient say they receive public funding, such as grants, guarantees or loans.
Over a quarter (28%) receive private funding from a bank, investment company or
venture capital fund. More than one third of SMEs (36%) think that grants or subsidies
would help their company the most to be more resource efficient.
The SMEs inputs from the public consultation and stakeholder event have been taken
into consideration in this impact assessment, its in-depth analysis (see, for example, the
competitiveness aspects in Section 8) and enabling framework annexes.
Step 3/4: Assessment of the impact on SMEs
The initiative does not set out measures that require specific compliance efforts from
SMEs. Relevant impacts of this initiative on SMEs include the benefit from mitigating
climate change (avoided cost of climate inaction and extreme climate-related events),
investment needs and potential changes in energy prices, and change in specific markets.
The understanding of the impacts on SMEs is important in view of better defining the
enabling framework that will allow supporting and accompanying the transition for these
actors.
First, contributing to mitigating climate change implies a benefit for SMEs. Small
companies have started to experience the impact of climate change on their operation, as
reported by the European Investment Bank in its 2022 overview on SMEs. Collier and
Ragin (121
) indicate that the higher frequency of extreme events due to climate change
will imply higher costs for small businesses. In the worst cases of climate related extreme
(121
) Collier B. and M. Rajin, “As climate risk grows, so will costs for small businesses”. Harvard
Business Review, August 2022.
122
events, exposed SMEs could lose up to 100% of their productive capacities. 38% of
SMEs declare not to be covered for the risk of physical loss or damage from a natural
disaster and 56% declare not to be covered for the risk of stopping business activities due
to disaster related damage (122
). In such circumstance, contributing to mitigating climate
change is beneficial for all. According to the International Labour Organization, SMEs
are less equipped than large companies to plan and invest in adaptation measures (123
). A
more ambitious 2040 target is more likely to lead to limiting climate change than a lower
one.
Another benefit of the transition to a climate neutral EU economy is a reduction of the
exposure of SMEs to fossil fuel price shocks, which can propagate through the entire
energy system and all energy vectors. Due to the war in Ukraine, energy and their
volatility have increased (180% increase in the gas price in the first two weeks of the
war, reaching an all-time high of 320 €/MWh on 26 August 2022, while the average price
was around 16, 47 and 123 €/MWh in 2015-2020, 2021 and 2022 respectively) (124
) (125
).
Improving energy efficiency and independence from fossil fuel reduces the risk of such
costs for SMEs. Simulations done with the JRC GEM-E3 model show that the economic
impact of fossil fuel price shocks is smaller if the ambition for 2040 is larger.
In terms of cost of energy, the different target options display fairly similar impacts for
most sectors relevant for SMEs (see Sections 2.2 and 2.3 in Annex 8). SMEs are
expected to face very similar energy prices (including electricity prices) across target
options. However, the most ambitious target entails a stronger reliance on new fuels,
which are currently little deployed (for instance hydrogen to heat at high temperature)
and which can concern large but also some smaller industrial actors (for instance the
ceramic industry, where most manufacturers are SMEs).
Investments for electrification and energy efficiency improvement are required across all
options, with a slightly higher level for the highest level of ambition than for the lower
level. As presented in Table 40, around 66% of SMEs are active in services. For the
majority of these SMEs, the impact of the transition is likely to be limited and the
difference between options is small. For services sectors, average annual investment
needs for all companies, including large businesses, range between EUR 49 billion
(lower level of ambition) and EUR 57 billion (higher level of ambition) in 2031-2040.
This is equivalent to a range of €800 to 940 per employee, keeping in mind that about
30 percent of employees in services work in large enterprises. On average over 2031-
2050, investment requirements are very similar.
The impact of the three possible options on SMEs is rather dependant on the sectors. To
some degree, the impact of the transition on SMEs depends on the ambition of the 2040
(122
) Flash Eurobarometer, SME insurance trends, European Insurance and Occupational Pensions
Authority, 2022.
(123
) Enabling business mitigation and adaptation to climate change Green policies and the role of
Employer and Business Membership Organization. International Labour Organization. December 2022
(124
) Adolfsen J. F., F. Kuik, E. M. Lis and T.Schuler, The impact of the war in Ukraine on euro area
energy markets”. ECB Economic Bulletin, Issue 4/2022.
(125
) Dutch Title Transfer Facility prices, Internal analysis based on S&P Global Platts.
123
target, in particular in the sectors that will need to contribute more or in which specific
technologies will need to be applied more extensively. But the final impact will largely
depend on the future design of policies and measures to be determined in the years to
come in view of meeting the 2040 target.
Most SMEs are in sectors where the energy system costs for option 3 are limited in
comparison with option 2 (see Table 41 below).
Table 41: Energy system costs for 2031-2040 and sectoral distribution of SMEs
Sectoral split of SMEs
(number of
companies)
Sectoral split of SMEs
(GVA)
Aggregate sector in
the macro-economic
analysis
Energy system costs
for 2031-2040 (%
change compared to
option 2)
Services 65.7% 54.3% Tertiary +0.5%
Construction and architecture
services
-19.0% 16.4%
Water, treatment and waste 0.3% 1.3%
Manuf. transport equipment (incl.
parts and accessories)
0.1% 0.6% Non-EIIs +0.8%
Manuf. electrical equipment and
other machinery
0.5% 3.1%
Other manufacturing 7.5% 14.3%
Electricity, gas, steam and air
conditioning supply
0.7% 1.4%
Transport and storage 5.4% 5.2% Transport +2%
Energy intensive industries 0.6% 2.9% EIIS +2.8%
Fossil fuels 0.0% 0.1%
Other mining and extraction 0.1% 0.3%
Note: the sectoral disaggregation used by the Structural Business Statistics does not exactly match the sectoral
disaggregation used in PRIMES. The correspondence is indicative.
For the tertiary sector (services represent more than 65% of SMEs), the average
investment needs over 2031-2050 are the same across options. It is their distribution over
the two subperiods (2031-2040 and 2041-2050) which varies across options. The capital
costs for the transition are higher in the most ambitious options (nearly +5% in option 3
compared to option 1 for 2031-2040 vs +2% in option 2 compared to option 1) but this is
partly compensated by larger savings in energy purchases (nearly -1% in option 3
compared to option 1 vs -0,5% in option 2 compared to option 1).
For the construction sector (19% of SMEs in construction and architecture services), the
transition is an opportunity as it requires the renovation of the building stock to improve
energy efficiency. The need for renovation is high across options, but it is front-loaded
with the most ambitious target (10% larger investment needs for 2031-2040 in option 3
compared to option 1, but equally smaller needs for 2041-2050). To avoid shortages, the
transition will require to anticipate the needs with regards to skills and supply in general.
For the transport sector (5% of SMEs are in the transport and storage sector), the
investment needs are comparable across options (see Section 6 of the main report). The
most ambitious option implies a larger use of e-fuels and biofuels. The use of new energy
carriers requires new types of engines and new activities (e.g. for their
installation/maintenance). At the same time, new infrastructures need to be developed
124
(for example, charging stations for electric vehicles). The reduced use of conventional
vehicles with internal combustion engines (126
) implies a reduction in corresponding
activities, but, at the same time, new jobs are created for the supply, installation and
maintenance of the new equipment and infrastructure, as well as for the development of
new mobility services (e.g. shared cars).
In the manufacturing sectors that are not energy intensive (7.5% of SMEs in the
manufacturing other than transport or electrical equipment), SMEs are most likely to
decarbonise their production processes mainly via electrification and improvements in
energy efficiency. For the sectors that are not energy-intensive, the options differ little in
terms of investment needs in 2031-2050 at an average of around EUR 10 billion per
annum, but options 3 and 2 imply a quicker transition than option 1. The risks associated
with energy costs are limited even if they are higher with the most ambitious target (see
Annex 8). The latter indeed relies more on relatively more expensive fuels. The transition
brings opportunities in the markets for low-carbon technologies – for instance, in ocean
energy (127
) or sustainable advanced biofuels (128
).
In the sectors that are most exposed to the transition (fossil fuel, other mining and
extraction, energy intensive industries, electricity, gas and steam), SMEs only represent a
very small share of the activity (less than 1.5% of SMEs). In these sectors, SMEs will
have to adjust their activities. To give an example, the ceramic industry will have to rely
on new fuels to heat at high temperature. Specific support programmes and measures
exist to ensure a just and fair transition (see Annex 9).
Finally, the agriculture sector (23% of SMEs) is strongly exposed to climate change. The
reduction of emissions implies opportunities and challenges. The intermediate and most
ambitious options lead to strong GHG reductions in agriculture and a generalised uptake
of new technologies. Agriculture is mildly affected by a higher level of ambition, with
output 1% lower under S3 than under S2, which is itself 2% lower than under S1. In
contrast, output in the forestry sector in 2040 is significantly higher under the higher
ambition scenarios than under S1 as a result of the increased demand for biomass. By
2050, the differences are much less significant as biomass uses tend to converge across
scenarios. The need to develop carbon removals is a source of opportunities and new
revenues in the bioeconomy. The move to a more sustainable food system would
contribute positively to the transition towards climate neutrality.
To conclude, the impact of the three possible options on SMEs is rather dependant on the
sectors. In the sectors that are most exposed to the transition, SMEs have to anticipate
(126
) Less than 0.07% of SMEs in the EU are in the manufacturing of motor vehicles, trailers and semi-
trailers; less than 0.06% are in the manufacturing of other transport equipment (Eurostat Structural
Business Statistics). Around 3.4% are in the wholesale and retail trade and repair of motor vehicles and
motorcycles. Other sectors involved in the supply chain of the automobile sector may be not impacted by
the transition (e.g. textile manufacturing), negatively impacted (e.g. the manufacturing of compounds used
in fossil fuel engines) or positively impacted (e.g. the manufacturing of batteries).
(127
) Ocean Energy – Technology Development Report. Low-carbon Energy Observatory, Joint Research
Center, European Commission. EUR 30509 EN. 2020
(128
) Sustainable Advanced Biofuels– Technology Development Report. Low-carbon Energy Observatory,
Joint Research Centre, European Commission. EUR 30502 EN. 2020
125
and adjust. This can be a challenge but also yield opportunities in terms of new markets
for smaller businesses which tend to be more agile in developing innovative solutions.
Across all target options, opportunities arise for green solutions and technical support
including digitalisation, circular economy, and sustainable products. While the
decarbonisation requires investments, it benefits SMEs by mitigating the risks associated
with climate change and reducing the exposure of SMEs to fossil fuel price shocks.
Step 4/4: Minimising negative impacts on SMEs
The decarbonisation contributes to minimising climate change and hence to minimising
the negative impact of climate change on SMEs.
Regarding the transition to a climate neutral economy, as the emission objectives for
2030 and 2050 have already been set, the options for intermediary ambition levels in
2040 are relatively close to one another. The analysis shows that there is limited
difference between the target options assessed in terms of overall macro-economic
impacts and costs for the sectors with more SMEs. While the decarbonisation of the EU
economy will entail changes in business activities, it is also a source of opportunities
given the role they play in innovation.
As the impact of the transition is strongly dependent on the sector in which SMEs
operate, minimising the impact of the transition is achieved not only via programmes for
SMEs but also by sector-specific measures. The EU has already put in place a number of
measures and programmes dedicated to SMEs as well as those that are specifically
targeted to sectors and regions exposed to the climate transition. As an example, the
European programme for small and medium-sized enterprises (COSME) contributed to
the climate mainstreaming objectives from 2014 to 2020. It included, among others, the
Equity Facility for Growth (EFG) and the Enterprise Europe Network (EEN) which
provides advice and support to SMEs. Based on the experience with COSME, other
comparable programmes could be developed in the future. The European Investment
Bank develops financing instruments that are particularly targeted to SMEs. The recent
SME Relief Package (129) is expected to support SMEs in the transition to a low-carbon
economy. Rules to ensure small businesses are paid in due time help them invest and
innovate in sustainability and hire more employees. The Recovery and Resilience
Facility makes unprecedented levels of funding available for greening, digitalisation, and
upskilling in SMEs. It includes €44 billion of measures to support SMEs directly in 22
national plans. SMEs can benefit from broader measures worth €109 billion, such as
loans or equity support open to all companies. InvestEU will help SMEs access loans and
equity. It aims to mobilise over €370 billion in investment. This builds on the success of
the European Fund for Strategic Investments where over 1.4 million SMEs benefitted
from investment projects. It will also include guarantees for Solvency Support to tackle
solvency risks. This will attract additional private investments to help SMEs scale-up and
grow.
(129
) COM(2023) 535 final
126
The actual impacts on SMEs will largely depend on the future design of policies and
measures to be determined in the years to come in view of meeting the 2040 target once
it has been agreed. These future policies, including enabling measures, need to take
account of SME’s ability to engage in climate action, from their ability to adapt to the
impacts of climate change and invest in resilience, to their access to skills and finance for
the investments needed to reduce their own emissions or to bring new technologies and
solutions to market.
127
ANNEX 5: COMPETITIVENESS CHECK
This annex describes the competitiveness check of the preferred option (Option 3) of a
target range of 90-95% reduction compared to 1990.
In terms of cost and price competitiveness, capital related costs for industry are 2%
higher in Option 3 than in Option 2 for the time period 2031-2040. The difference
between these two options falls to less than 1% for the time period 2041-2050. For the
tertiary sector, capital related costs are 2.9% higher in 2031-2040 and 1.3% higher in
2041-2050. Energy expenditures for industry are 2.5% higher in Option 3 than in Option
2 in 2031-2040 and around 0.5% higher in 2041-2050. For the tertiary sector, energy
expenditures are 0.3 lower in option 3 than in Option 2 in 2031-2040 and around 1%
lower in 2041-2050.For energy intensive industries, this actually implies that the share of
capital related costs in total production costs in 2031-2040 is only 0.1 percentage point
higher in Option 3 than in Option 2 while the share of fuel expenses in total production
costs is only 0.2 percentage point higher. In aggregate, total energy system costs are1.5%
higher in Option 3 than in the “baseline” Option 2, partly due to higher financing costs.
This difference corresponds to 0.19% of GDP. However this has a very limited impact on
the EU share in global exports (see following paragraph). The price of electricity is very
close in all the options considered. LIFE could reduce the total investment needs by 8%.
Regarding international competitiveness, earlier investment allows companies to
position themselves earlier in the competition in low-carbon technologies. 52% of the
organisations who responded to the public questionnaire agree that an ambitious target
for 2040 will improve the competitiveness of the European economy and give EU
industry a first-mover advantage on global markets. The EU share in global exports is
comparable across options, with a difference of less than 0.1 percentage point between
Option 3 and Option 2. The level of ambition in mitigation policies in the rest of the
world actually has a higher impact on it: a higher level of global climate mitigation effort
is susceptible to increase market shares for EU companies. In a setting where the rest of
the world acts in line with the 1.5°C objective (global action setting), the EU share in
global exports is 16.6% for Option 3, compared to 16.1% in the case of a more
fragmented climate action (see Section 6.4.1). At the sector level, the differences
between options are also very small. What matters more is international action. For
example, for energy intensive industries, the EU share in global exports in 2040 is 17.1%
for both Options 2 and 3 in a fragmented action setting, but 17.6% in a global action
setting). For markets services, the EU share in global exports in 2040 is 22.7% in Option
3 compared to 22.8% in Option 2 in a fragmented action setting. It is 21.7% for both
Options 2 and 3 in a global action setting. Option 3 for the EU is more likely to trigger
more ambitious climate action in the rest of the world than the other target options. With
more ambition domestically, the EU is in a stronger position to convince countries in the
rest of the world to increase ambition of their own Nationally Determined Contributions
within the UNFCCC. By showing that the transition is feasible at an acceptable cost, it
can be an example to inspire from for climate policy development. By developing
technologies to decarbonise the economy, it can also facilitate decarbonisation in other
countries. Finally, it is also the option which reduces most the exposure to fossil fuel
price shocks like the one induced by the war in Ukraine.
128
All options will have a positive impact on the capacity to innovate by triggering the
development of new markets for products and services compatible with the 2050 climate
neutrality objective. Option 3 accelerates this pull further already in 2031-2040 compared
to the other options.
With regards to SME competitiveness, the preferred option shows no significantly
higher energy-related cost for most sectors relevant for SMEs than the other options (see
Annex 4). The impact depends on the sectors (see Annex 8). While the decarbonisation
requires investments, it benefits SMEs by mitigating the risks associated with climate
change and by providing an economic framework which is more resilient to potential
energy price shocks.
Table 42: Overview of impact on competitiveness
Dimensions of
Competitiveness
Impact of the initiative
(++ / + / 0 / - / -- / n.a.)
References to sub-
sections of the main
report or annexes
Cost and price
competitiveness
[0] Investment needs for 2031-2050 are very close across
options. The preferred option implies more investment in
2031-2040 and less in 2041-2050 in comparison with Option
2. The difference in total energy system costs between options
3 and 2 corresponds to less than 0.2% of GDP.
Sections 6.4.2 and 6.4.3
Annex 8 Sections 2.2 and
2.3
International
competitiveness
[0] The EU share in global exports is comparable across
options, with a difference of around 0.1 percentage point
between options 3 and 2.
However, the preferred option is more likely to induce more
ambitious mitigation action in the rest of the world, which, in
turn, would have a positive impact on the EU share of global
exports.
The preferred option allows an earlier positioning of EU
companies in the growing global market for innovative, low
carbon technologies, clean products and services. The
preferred option reduces exposure to fossil fuel import costs
the quickest.
Section 6.4.1
Capacity to innovate
[++] The preferred option will spur innovation in a number of
sectors by 2040 to deliver the reductions of net GHGs,
including in energy, industry or the land sector.
Sections 6.1 and 6.2
Annex 8 Section 1
SME competitiveness
[0] The investment needs will depend on the sector. The
preferred option shows no significantly higher energy-related
cost than option 2 for most sectors relevant for SMEs.
Annex 4
Annex 8 Section 2.3
129
TABLE OF FIGURES
Figure 1: GHG emissions and GDP development in the EU since 1990 __________________________________________ 11
Figure 2: Intervention logic_____________________________________________________________________________ 21
Figure 3: Theoretical 2030-2040 GHG emissions with the current policy framework _______________________________ 23
Figure 4. Profile of the net GHG emissions over 1990-2050 ___________________________________________________ 28
Figure 5: Modelling tools used for the impact assessment____________________________________________________ 93
Figure 6: Responses by stakeholder group ________________________________________________________________ 97
Figure 7: Geographical distribution of responses by EU Member States _________________________________________ 97
Figure 8: Responses on the pace of the climate transition (Q1) and the level of ambition (Q2)______________________ 100
Figure 9: Responses on the set up for the EU 2040 climate target_____________________________________________ 101
Figure 10: Position papers by stakeholder group __________________________________________________________ 105
TABLE OF TABLES
Table 1: Mapping of the Specific Objectives to Article 4(5) of the Climate Law____________________________________ 21
Table 2: Pieces of legislation considered in the default post-2030 framework ____________________________________ 25
Table 3: GHG budget and annual reduction of GHG emissions of each target option_______________________________ 28
Table 4: Overview of the scenario building blocks by 2040 ___________________________________________________ 32
Table 5: Sectoral net GHG emissions _____________________________________________________________________ 35
Table 6: Industrial carbon capture and use ________________________________________________________________ 38
Table 7: Industrial removals and net LULUCF removals ______________________________________________________ 38
Table 8: Emissions from the agriculture sector and LULUCF net removals _______________________________________ 39
Table 9: Comparison of GHG in the LIFE case with the core scenarios___________________________________________ 40
Table 10: Summary of key energy indicators_______________________________________________________________ 42
Table 11: Difference across options in cumulative GHG emissions and cost of climate change _______________________ 47
Table 12: Primary air pollutant emissions, impacts on premature mortality and costs associated to premature
mortality _____________________________________________________________________________ 49
Table 13: EU ecosystem area where acidification or eutrophication exceed critical loads ___________________________ 50
Table 14: Sectoral output and GDP in 2040, deviation vs. S2 (% change) ________________________________________ 52
Table 15: EU share in global exports (% of world trade) ______________________________________________________ 53
Table 16: Average annual energy system investment needs (billion EUR 2023).___________________________________ 56
Table 17: investment profiles across options and financial feasibility (annual averages, 2031-2040) __________________ 58
Table 18: Energy system costs profiles across options (2031-2040, annual average) _______________________________ 60
Table 19: Average annual economy-wide energy system costs (billion EUR)______________________________________ 61
Table 20: Average electricity production cost ______________________________________________________________ 61
Table 21: Average annual energy system costs for businesses (billion EUR) ______________________________________ 62
Table 22: Average final price of electricity for businesses ____________________________________________________ 63
Table 23: Share of energy-related costs in total production costs in industry _____________________________________ 63
130
Table 24: Costs related to mitigation of GHG emissions in the LULUCF sector and non-CO2 GHG emissions by
decades ______________________________________________________________________________ 64
Table 25: Average annual energy system costs as % of private consumption and average final price of electricity
for households in the residential sector ____________________________________________________ 66
Table 26: Average annual energy system costs of road transport (% of total private consumption), and average
final price of electricity in private transport _________________________________________________ 66
Table 27: Sectoral employment, share in total employment (%) _______________________________________________ 69
Table 28: Effectiveness: Delivering climate neutrality and GHG budget _________________________________________ 71
Table 29: Just transition and Competitiveness _____________________________________________________________ 73
Table 30: Effectiveness: Deployment of technologies and security of energy supply _______________________________ 74
Table 31: Environmental effectiveness ___________________________________________________________________ 74
Table 32: Average annual investment needs in 2031-2040 (% of GDP and deviation vs. S2) _________________________ 75
Table 33: Average annual investment needs (excluding transport) and capital costs (billion EUR 2023 and
deviation from S2) _____________________________________________________________________ 76
Table 34. Comparison of the monetised costs and benefits across the different target options ______________________ 79
Table 35: Summary of the comparison of options __________________________________________________________ 83
Table 36: How the RSB findings of the 1st opinion have been addressed ________________________________________ 88
Table 37: How the RSB findings of the 2nd opinion have been addressed _______________________________________ 90
Table 38: Uncertainty level for key high-level energy and CO2 indicators. _______________________________________ 94
Table 39: Impacts on key macro-economic variables across models (% change vs. S2, 2040) ________________________ 94
Table 40: Indicators of SME activity by sector (2019) _______________________________________________________ 119
Table 41: Energy system costs for 2031-2040 and sectoral distribution of SMEs _________________________________ 123
Table 42: Overview of impact on competitiveness _________________________________________________________ 128


EN EN
EUROPEAN
COMMISSION
Strasbourg, 6.2.2024
SWD(2024) 63 final
PART 3/5
COMMISSION STAFF WORKING DOCUMENT
IMPACT ASSESSMENT REPORT
Part 3
Accompanying the document
COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN
PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL
COMMITTEE AND THE COMMITTEE OF THE REGIONS
Securing our future
Europe's 2040 climate target and path to climate neutrality by 2050 building a
sustainable, just and prosperous society
{COM(2024) 63 final} - {SEC(2024) 64 final} - {SWD(2024) 64 final}
Offentligt
KOM (2024) 0063 - SWD-dokument
Europaudvalget 2024
1
Table of contents
ANNEX 8: DETAILED QUANTITATIVE ANALYSIS OF GHG PATHWAYS ........................................................3
1 KEY TRANSFORMATIONS TO CLIMATE NEUTRALITY BY 2050 ..........................................................3
1.1. GHG EMISSIONS ..............................................................................................................................3
1.1.1. GHG budgets and net GHG emissions.....................................................................................3
1.1.2. GHG emissions and role of removals ......................................................................................5
1.1.3. Energy and Industry CO2 emissions ......................................................................................15
1.1.4. Non-CO2 GHG emissions.......................................................................................................23
1.2. ENERGY SECTOR TRANSFORMATION....................................................................................................26
1.2.1. Energy supply........................................................................................................................26
1.2.2. Power generation sector.......................................................................................................30
1.2.3. Gaseous fuels ........................................................................................................................39
1.2.4. Final Energy Consumption ....................................................................................................42
1.2.5. Energy related CO2 emissions ...............................................................................................46
1.2.6. Raw materials’ needs............................................................................................................48
1.3. BUILDINGS ....................................................................................................................................48
1.3.1. Buildings activity...................................................................................................................49
1.3.2. Energy efficiency in buildings................................................................................................49
1.3.3. Fuel mix in buildings..............................................................................................................53
1.3.4. Appliances.............................................................................................................................57
1.3.5. CO2 emissions from buildings................................................................................................58
1.4. INDUSTRY......................................................................................................................................59
1.4.1. Introduction ..........................................................................................................................59
1.4.2. Activity ..................................................................................................................................60
1.4.3. Final Energy Consumption ....................................................................................................61
1.4.4. Final Non-Energy Consumption.............................................................................................63
1.4.5. CO2 emissions from industry.................................................................................................64
1.4.6. Complementary analysis.......................................................................................................68
1.5. TRANSPORT...................................................................................................................................75
1.5.1. Introduction ..........................................................................................................................75
1.5.2. Activity ..................................................................................................................................76
1.5.3. Energy consumption and fuel mix.........................................................................................79
1.5.4. Technology developments per transport mode ....................................................................83
1.5.5. CO2 emissions from transport ..............................................................................................97
1.6. NON-CO2 GHG EMISSIONS IN NON-LAND-RELATED SECTORS .................................................................99
1.6.1. Evolution of emissions without additional mitigation ..........................................................99
1.6.2. Additional mitigation potential...........................................................................................101
1.6.3. Emissions projections..........................................................................................................104
1.7. AGRICULTURE...................................................................................................................................106
1.7.1. Introduction ........................................................................................................................106
1.7.2. Activity ................................................................................................................................108
1.7.3. Evolution of emissions without additional mitigation measures ........................................110
1.7.4. Mitigation potential for non-CO2 GHG emissions...............................................................111
1.7.5. GHG emissions projections..................................................................................................114
1.8. LULUCF.....................................................................................................................................118
1.8.1. Introduction ........................................................................................................................118
1.8.2. Activity ................................................................................................................................119
1.8.3. Options to increase the net LULUCF net removal ...............................................................126
1.8.4. The LULUCF net removal.....................................................................................................129
1.8.5. Analysis of climate change impacts and CO2 fertilisation ..................................................132
1.8.6. Impacts from simulated extreme events on the LULUCF net removal ................................135
1.9. ENVIRONMENTAL AND HEALTH IMPACTS............................................................................................138
1.9.1. Air quality............................................................................................................................138
1.9.2. Biodiversity and ecosystems ...............................................................................................142
1.9.3. Food security, animal welfare and health...........................................................................146
2
1.9.4. Raw materials .....................................................................................................................149
2. SOCIO-ECONOMIC IMPACTS .......................................................................................................150
2.1. MACRO-ECONOMIC IMPACTS ().......................................................................................................151
2.1.1. GDP and employment .........................................................................................................151
2.1.2. The impact of frictions in the economic transition..............................................................153
2.2. THE INVESTMENT AGENDA ()...........................................................................................................157
2.2.1. Aggregate investment needs ..............................................................................................157
2.2.2. Supply-side investment needs.............................................................................................162
2.2.3. Demand-side investment needs, industry,services and agriculture....................................164
2.2.4. Demand-side investment needs, households......................................................................170
2.2.5. Demand-side investment needs, transport.........................................................................174
2.2.6. Sensitivity of investment needs to technology costs assumptions......................................177
2.2.7. Investment needs for net-zero technology manufacturing capacity ..................................178
2.2.8. Technical feasibility.............................................................................................................179
2.2.9. Other related investment needs..........................................................................................180
2.2.10. The role of the public sector and carbon pricing revenues.............................................182
2.3. COMPETITIVENESS ........................................................................................................................184
2.3.1. Total energy system costs...................................................................................................184
2.3.2. Energy system costs and prices for industry .......................................................................186
2.3.3. Energy system costs and prices for services........................................................................189
2.3.4. Energy system costs and prices for transport .....................................................................190
2.3.5. Costs related to mitigation of GHG emissions in the LULUCF sector and non-CO2 GHG
emissions...........................................................................................................................................190
2.3.6. Sectoral output and international trade .............................................................................192
2.4. SOCIAL IMPACTS AND JUST TRANSITION .............................................................................................199
2.4.1. Fuel expenses, energy and transport poverty, distributional impacts ................................199
2.4.2. Electricity prices ..................................................................................................................204
2.4.3. Sectoral employment, skills and occupation groups...........................................................204
2.4.4. Changes in relative prices and distributional impacts ........................................................214
2.4.5. The equity dimension..........................................................................................................217
2.5. REGIONAL IMPACTS.......................................................................................................................217
2.5.1. Regional exposure to climate change .................................................................................217
2.5.2. Regional exposure to the transition....................................................................................217
2.6. ENERGY SECURITY .........................................................................................................................230
2.6.1. Strategic independence and fuel imports – energy security ()............................................230
2.6.2. Vulnerability to external shocks..........................................................................................232
TABLE OF FIGURES ...............................................................................................................................235
TABLE OF TABLES .................................................................................................................................238
3
Annex 8: Detailed quantitative analysis of GHG pathways
1 KEY TRANSFORMATIONS TO CLIMATE NEUTRALITY BY 2050
The impact assessment explores different GHG emission pathways in the 2030-2050
period, building on the Fit-for-55 and REPowerEU policy package for 2030 and beyond,
and achieving climate neutrality by 2050. The first section below describes the evolution
of GHG emissions in the various pathways explored, looking at their reduction and the
contribution of carbon removals. The following sections provide details on the associated
transformation in various sectors: the energy system, with dedicated analysis on the
energy supply, buildings, industry, transport, as well as non-CO2 emissions, agriculture
and LULUCF emissions.
The model-based analysis is a technical exercise based on a number of assumptions that
are shared across scenarios. Its results do not prejudge the future design of the post-2030
policy framework.
1.1. GHG emissions
1.1.1. GHG budgets and net GHG emissions
1.1.1.1.GHG budgets
The target options provide different remaining GHG budgets for the period 2030-2050:
21 GtCO2-eq for the linear option, 18 GtCO2-eq for option 2 (at least 85% up to 90%)
and 16 GtCO2-eq for option 3 (at least 90% up to 95%) (see section 5.2 in the main
document).
The ESABCC analyses a (intra-EU) range of 11-16 GtCO2-eq for the EU to contribute to
limiting global warming to 1.5°C with no or limited overshoot (1
). The ESABCC report
highlights that scaling-up of energy technologies beyond challenging levels is required to
achieve the more ambitious end of this range: not overcoming such technological
deployment challenge moves the range to 13-16 GtCO2-eq. ESABCC also recommends
a range of 11-14 GtCO2-eq (9
).
1.1.1.1.Net GHG emissions
The scenarios achieve net GHG reductions in line with the budgets associated to each
target option.
Table 1 shows the 2040 and 2050 net GHG emissions in S1, S2, S3, and LIFE (see
Annex 6 for their description), as well as the corresponding reductions compared to 1990.
The values are provided for Union-wide GHG emissions and removals regulated in
Union law, in accordance with the climate neutrality target scope (2
). With the fit-for-55
(1
) The ESABCC provides ranges for intra-EU emissions which do not take into account international
emissions under Union Law as in the European Climate Law and analysed in this impact assessment.
(2
) Regulation (EU) 2021/1119, Article 2
4
package (3
), this covers all domestic net emissions (in the sense of the UNFCCC
inventories), international intra-EU aviation, international intra-EU maritime, and 50% of
international extra-EU maritime from the Monitoring Reporting and Verification (MRV)
scope (4
). The table also provides a range to illustrate the uncertainties on the future
evolution of LULUCF net removals, considering a lower level and an upper level
depending on the effect of policies or other factors (See 1.8 of this Annex for more
details).
Table 1: Net GHG emissions and reductions compared to 1990
2040 2050
S1 S2 S3 LIFE S3 LIFE
Total Net GHG -
MtCO2-eq
1051 [1051
to 893]
578 [681 to
520]
356 [458 to
298]
353 [469 to
302]
-38 [90 to
-100]
-70 [85
to -117]
Reduction vs
1990 - %
-78% [-78% to
-81%]
-88% [-86% to
-89%]
-92% [-90% to
-94%]
-93% [-90%
to -94%]
-101% [-98% to
-102%]
-101% [-98% to
-102%]
Note: Main values reported correspond to the LULUCF net removals considered in the scenarios, with net GHG
emissions with lower and upper level of LULUCF net removals are in brackets. S1 and S2 values for 2050 are
similar to S3.
Source: PRIMES, GLOBIOM, GAINS.
While all scenarios achieve climate neutrality in 2050, in 2040, the net GHG emissions
are clearly different across scenarios.
S1 leads to total net GHG emissions reaching about 1050 MtCO2-eq (ranging down to
890 MtCO2-eq depending on the behaviour of the LULUCF net removals), representing
a reduction of 78% compared to 1990. This scenario focuses on strengthening the
existing trends with limited contribution of more advanced mitigation options supported
by novel technologies (5
) by 2040 and fits a linear trajectory of net GHG emissions
between 2030 and climate neutrality in 2050.
The S2 scenario deploys the full potential of existing decarbonisation solution, such as
electrification and renewable and relies upon novel technologies such as carbon capture
and a higher uptake of e-fuels using fossil free carbon (see sections 1.1.3 and 1.2 in this
Annex), as well as further abatement in the agriculture sector (see 1.1.4 and 1.7). It
reaches about 580 MtCO2-eq in 2040, or 88% reduction compared to 1990 (ranging
between 86% and 89%).
The S3 scenario foresees early implementation of novel technologies to attain net GHG
emissions levels of around 360 MtCO2-eq in 2040, and a reduction level of -92%, with a
range between -90% and -94%.
LIFE implements additional circular economy and sufficiency actions in industry,
transport and agriculture, achieving similar reduction as per S3, but with a different
sectoral distribution of emission (see 1.1.2 in this Annex). This setting illustrates the
(3
)COM/2021/550 final
(4
) Regulation (EU) 2015/757 (amended by Regulation (EU) 2023/957)
(5
) Not yet commercially available at large scale, such as carbon capture and renewable hydrogen
5
important role of demand-side policies and measures to reduce GHG emissions, and to
enhance the environmental performance of mitigation actions by limiting the
consumption of natural resources, including raw materials and land or further improving
some direct environmental benefits of climate action (see sections 1.4, 1.7.5 and 1.9.1).
The levels of emission reductions achieved in the different scenarios are in line with
ranges found in the literature, spanning from 84% to 89% (6
), from 87% to 91% (7
),
around 89% (8
) and from 88 to 95% by the ESABCC (9
).
The distribution of emissions between CO2, non-CO2 gases and GHGs coming from
LULUCF sector is reported in Table 2. A more detailed analysis of the sectoral reduction
for S1, S2, S3 and LIFE is described in the following sections.
Table 2: CO2, non-CO2 and emissions from LULUCF sector.
2040 2050
S1 S2 S3 LIFE S3 LIFE
Total Net GHG - MtCO2-eq 1051 578 356 353 -38 -70
CO2 (excl. LULUCF) * – MtCO2 815 521 331 432 5 83
Non-CO2 (excl. LULUCF) ** – MtCO2-eq 454 373 342 281 291 236
LULUCF*** – MtCO2-eq -218 -316 -317 -360 -333 -389
Note: *includes CO2 from fossil fuel combustion (category 1 in inventories), industrial processes and product
use (category 2) and agriculture under category 3. **Includes non-CO2 emissions under categories 1, 2, 3 and 5
of the inventories. ***Only main values are reported.
1.1.2. GHG emissions and role of removals
According to the IPCC, reductions in gross GHG emissions, nature-based and industrial
carbon removals are all needed to reach net zero (10
). While gross GHG emissions need
to decrease significantly, the deployment of carbon removals is unavoidable to
counterbalance hard-to-abate residual emissions and replace residual fossil fuels.
However, relying primarily on carbon removals without intervening in gross GHG
emissions may be unrealistic since the potential for removals is limited by land
constraints, feasibility, cost-efficiency, public acceptance and technological
consideration (11
).
(6
) ECEMF (2023), ECEMF Policy Brief: Insights on EU2040 targets based on a model intercomparison
exercise of EU Climate Neutrality Pathways. DOI 10.5281/zenodo.8337667.
https://zenodo.org/record/8337668 Full model range, including international bunkers.
(7
) Rodrigues et al., (2023). 2040 greenhouse gas reduction targets and energy transitions in line with the
EU Green Deal, Nature Communication, Under Review. Intra-EU scope.
(8
) Graf, A., et al. (2023). Breaking free from fossil gas. A new path to a climate-neutral Europe. Agora
Energiewende.
(9
) ESABCC (2023). Scientific advice for the determination of an EU-wide 2040 climate target and a
greenhouse gas budget for 2030–2050. DOI: 10.2800/609405. Table 9, Table 12. The range spans
from 88-92% and up to 95% if technological challenges can be overcome.
(10
) IPCC (2022): Climate Change 2022: Mitigation of Climate Change. Contribution of Working Group
III to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change.
(11
) CLG Europe (2023). Raising European Climate Ambition for 2040 A CLG Europe position paper.
6
The increasing role of carbon removals is also highlighted in the public consultation
questionnaire, where majority of respondents (around 65%, including all categories) calls
for 2040 carbon removal targets separate from net emission, and experts from the
academic, economic and public sectors are in favour of an important role of the carbon
removals. 61% of the papers analysed also comment on carbon removals, with most of
them indicating removals instrumental to reach climate neutrality, if complementary to
GHG emission reduction at source. There is no clear preferred pathway indicating the
contribution of nature-based vs industrial removals. In position papers, the emphasis of
forests as carbon sink is underlined, while carbon capture for industrial removals plays an
important role for energy-intensive industries to reduce hard-to-abate emissions within
the sector. The public consultation indicates a general slight inclination for relying on
nature-based removals (around 30% of respondents) or a balanced approach between
nature-based and industrial removals (around 27% of respondents). This preference is
confirmed also when looking individually at the different stakeholder groups, except for
large businesses and SMEs, who expressed by majority a preference for either a balance
between nature-based and industrial removals or a stronger reliance on industrial
removals.
1.1.2.1.Gross GHG Emissions
The “gross GHG” emissions are defined as the actual GHG emissions excluding the
contribution of industrial removals and net LULUCF removals that are part of the
computation of “net GHG” emissions meeting EU’s climate objectives for 2030 and
2050.
Figure 1 shows the evolution of EU gross GHG emissions over 1990-2050. In 2021, EU
gross emissions achieved around 3570 MtCO2-eq, with a reduction of around 28%
compared to 1990 (12
). The trajectory until 2030 is consistent with the Fit-for-55 policy
package, where emissions reach around 2300 MtCO2-eq. Post-2030, these emissions
keep decreasing in all scenarios, albeit at difference pace by 2040 and beyond. They
reach about 400 MtCO2-eq in 2050, when they are compensated by industrial and
LULUCF net carbon removals to converge to climate neutrality.
(12
) EEA Greenhouse Gases Data Viewer. DAS-270-en Published on 18 Apr 2023
7
Figure 1: Domestic Gross GHG emissions
Note: Gross GHG emissions represented here include only domestic emissions and excludes industrial carbon
removals and the LULUCF net removals.
Source: PRIMES, GAINS.
Table 3 summarises the gross GHG emission by sector. In S1 gross GHG emissions
decrease following a linear profile over 2031-2050, reaching around 1270 MtCO2-eq in
2040, which correspond to a decrease of around 75% compared to 1990 levels. Most
sectors undergo significant emissions reductions already over 2031-2040, with emissions
ranging from around -70% in the domestic transport sectors to about -10% in agriculture.
The S2 scenario achieves further reductions of gross GHG emissions by 2040, reaching
around 940 MtCO2-eq or 80% reduction compared to 1990. Significant additional
reductions with respect to S1 take place notably in power and heat, industry and
agriculture. The S3 scenario achieves a reduction of around 85% in 2040, driven by extra
reductions to S2 in all sectors, including the industry sector, where they are triggered by
higher recourse to carbon capture and storage of fossil fuels (see section 1.1.3.2), the
power system, buildings and transport. LIFE, which aims at the same overall reduction as
S3, redistributes gross emissions across the different sectors. While energy and industry
sectors reduce to a level intermediate between S2 and S3, mostly due to a lower use of e-
fuels and DACC, agriculture emissions reduce more than in S3.
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
1990 2000 2010 2020 2030 2040 2050
MtCO2-eq Historical
S1
S2
S3
LIFE
8
Table 3: Gross GHG emissions
MtCO2-eq 2005 2015 2030 2040 2050
S1 S2 S3 LIFE S1 S2 S3 LIFE
Total Gross GHG Emissions 4641 3914 2301 1273 943 748 740 416 413 411 360
Power and district heating 1300 1012 339 123 42 23 34 21 22 19 15
Other Energy sectors* 277 237 133 71 59 53 57 39 39 38 36
Industry (Energy) 469 360 232 126 94 75 86 6 6 9 11
Domestic Transport 822 772 583 190 143 120 134 10 8 7 9
Residential and Services** 648 514 221 119 92 75 92 20 19 19 29
Industry (Non-Energy) 343 233 157 139 88 14 13 7 7 7 7
Other Non-Energy sectors*** 101 130 56 33 26 25 25 23 22 22 22
International
transport (target
scope)
Intra-EU
aviation
35 38 43 31 29 28 14 14 12 11 10
Intra-EU
navigation
31 27 25 7 6 4 0 0 0 0 0
50% extra-EU
maritime MRV
50 42 44 14 11 9 0 0 0 0 0
Agriculture**** 390 385 361 351 302 271 209 249 249 249 194
Waste 155 118 87 68 55 55 55 32 32 32 .32
CO2 calibration 15 43 24 3 -1 -1 -1 0 0 0 0
Non-CO2 calibration 5 2 -3 -3 -3 -3 -3 -3 -3 -3 -3
Memo Items
International aviation
(Intra-EU and Extra-EU)
96 103 117 83 80 78 73 38 34 31 27
International maritime
(Intra-EU and Extra EU)
152 129 134 41 33 25 33 0 0 0 0
Note: Calibration of total to inventory 2023. *Includes emissions from energy branch and other non-CO2
emissions from the energy sector; **Includes fossil fuel combustion in the agriculture/fishery/forestry sector;
***Includes CO2 fugitive emissions and non-CO2 emissions from direct use or specific products (e.g., aerosols,
foams, etc). **** Excludes fossil fuel combustion in the sector, but includes “category 3” CO2 emissions,
assumed constant at 10 MtCO2.
Source: PRIMES, GAINS.
Sectors that reduce little in 2031-2040 accelerate their decarbonisation in the 2041-2050
decade, while sectors that have already reached low emissions levels by 2040, maintain
or slow down the reduction rate by 2050, leading to a balanced contribution to climate
neutrality for all sectors across 2030-2050. Overall, gross GHG emissions in 2050 reduce
to -92% vs 1990 across all scenarios.
1.1.2.2.Nature-based carbon removals
Table 4 shows the LULUCF net removals in the different scenarios. The central level for
2040 is close to -320 MtCO2-eq in all scenarios by 2040, slightly above the target for
2030 (-310 MtCO2-eq). The differences between S1, S2 and S3 are driven by the
different bioenergy needs in the energy systems underpinning the scenarios (see section
1.8 in this Annex). LIFE is characterised by a different food system that frees up land for
carbon farming activities such as afforestation.
The table also provides a range (from lower level to upper level) to illustrate the
uncertainties on the future evolution of LULUCF net removals, depending on the effect
of policies or other factors (see section 1.8 in this Annex).
9
Table 4: LULUCF net removals by scenarios in 2040 and 2050
MtCO2-eq 2040 2050
S1 S2 S3 LIFE S1 S2 S3 LIFE
Lower level -218 -213 -215 -243 -213 -202 -206 -234
Central level -319 -316 -317 -360 -341 -332 -333 -389
Upper level -376 -374 -376 -410 -403 -394 -396 -436
Note: The ‘Central level’ is derived from applying in the modelling the same policy intensity as the one
necessary to meet the 2030 target, except for S1 in 2040. The ‘Lower level’ is derived from assuming no
additional cost as the lower boundary of the LULUCF net removals level. The ‘Upper level’ is derived from the
maximum mitigation potential as the upper boundary of the LULUCF net removals level. The numbers in bold
are used to compute the overall net GHGs for the different scenarios.
Source: GLOBIOM
The expected contribution of LULUCF to the 2040 climate target stays within the
boundaries of the ESABCC, which discusses an upper bound of 400 MtCO2-eq in
2040 (13
) and describes three iconic scenarios that display a larger range from
323 MtCO2-eq to 601 MtCO2-eq in 2040 and from 312 MtCO2-eq to 669 MtCO2-eq in
2050 (14
).
Section 1.8 in this Annex provides more details on the LULUCF sector and the related
GHG emissions and removals.
1.1.2.3.Industrial carbon removals
Industrial carbon removals, together with nature-based removals, are projected to play an
increasing role in the EU economy in the next decades (15
), in the view of balancing EU
GHG emissions by 2050, and achieving negative emissions thereafter (16
).
Industrial removals can contribute to compensate residual GHG emissions from hard-to-
abate sectors. They can also progressively replace fossil carbon feedstock in processes
like the production of plastics or e-fuels (17
), (18
) and become the main source of (fossil-
free) carbon in sectors where carbon will still be needed in the long-term.
Figure 2 shows the industrial removals projected by PRIMES and differentiated by their
source. The total amount of carbon removed until 2040, whether captured from the
atmosphere, from biomass combustion or from biogas upgrading, varies across scenarios.
Removals are projected to remain marginal in the S1 scenario by 2040, to reach
(13
)ESABCC (2023). Scientific advice for the determination of an EU-wide 2040 climate target and a
greenhouse gas budget for 2030–2050. DOI: 10.2800/609405. Section 7.7.1. This risk level was based
on research by Pilli et al. (2022) who provide as a probable range of -100 to -400 MtCO2-eq for the
LULUCF sink in 2050 taking future climate change impacts based on RCP 2.6 into account. Scenarios
exceeding the upper bound of -400 MtCO2-eq may rely on implausibly high LULUCF sink levels.
(14
) Ibid. Table 15
(15
) COM(2021) 800 final
(16
) European Climate Law (Regulation (EU) 2021/1119), Article 2.
(17
) The Global CO2 Initiative (2016). Global Roadmap for Implementing CO2 Utilization.
(18
) CEFIC (2021). Shining a light on the EU27 chemical sector’s journey toward climate neutrality.
10
50 MtCO2 in S2 and up to 75 MtCO2 in S3. Removals deploy progressively from S1 to
S3 and allow for higher reductions of net GHG emissions (see also Figure 7). LIFE
models lower carbon removals: demand-side actions and enhanced LULUCF net
removals can reduce the need for industrial removals, and, in this projection, eliminate
the recourse to DACC in 2040.
Figure 2: Carbon removals by source and use
Source: PRIMES.
The amount of carbon removed by industrial means in 2050 is similar across scenarios
and reaches around 120 MtCO2/y, suggesting the need for significant carbon removals to
achieve climate neutrality. While most of the storage takes place in underground sites,
limited storage in permanent materials also appears in the last decade. The slightly higher
values for S1 are required to compensate for delayed climate action in 2031-2040.
While the modelling shows a similar share of BECCS and DACCS by 2040 in S3 and
beyond by 2050, their actual relative deployment will depend on a number of factors,
e.g.: high costs and technological uncertainty (DACCS (19
) (20
)), cost and competition on
biomass resource and possible negative impact on LULUCF (BECCS (21
)(22
)(23
), see
(19
) Motlaghzadeh, K., Schweizer, V., Craik, N., & Moreno-Cruz, J. (2023). Key uncertainties behind
global projections of direct air capture deployment. Applied Energy, 348, 121485.
https://doi.org/10.1016/j.apenergy.2023.121485.
(20
) Lehtveer, Mariliis & Emanuelsson, Anna. (2021). BECCS and DACCS as Negative Emission
Providers in an Intermittent Electricity System: Why Levelized Cost of Carbon May Be a Misleading
Measure for Policy Decisions. Frontiers in Climate. 647276. 10.3389/fclim.2021.647276.
(21
) Slade, R., Bauen, A., and Gross, R. (2014). Global bioenergy resources. Nat. Clim. Change 4:99. doi:
10.1038/nclimate2097
(22
) Creutzig, F., et al. (2015). Bioenergy and climate change mitigation: an assessment. GCB Bioenergy 7,
916–944. doi: 10.1111/gcbb.12205
(23
) Directive (EU) 2018/2001 (amendment to be published)
-140
-120
-100
-80
-60
-40
-20
0
S1
S2
S3
LIFE
S1
S2
S3
LIFE
2030 2040 2050
MtCO2/y
Biogenic in
Materials
DACCS in Materials
DACCS
Underground
Power Gen. (BECCS)
11
section 1.8 in this Annex), creation of the transport and storage infrastructure, public
acceptance and equitable and sustainable technology scale up (24
).
Both technologies add requirements on the ambitious and challenging industrial sectors’
decarbonisation plans, and these needs to be coupled effectively with feasibility analysis
and supporting measures as appropriate. While the scenarios filtered by the ESABCC
attribute a minor role to carbon captured from the atmosphere (25
), the IEA indicates that
more efforts are needed to fully develop DACCS (26
). The demand side, with the amount
of e-fuels required by other sectors and the need to compensate residual emissions, will
also influence the deployment of each technology.
Given the lack of predictability for the uptake of one removal technology over another by
2040, a comparison between different deployment pathways is performed.
Figure 3 compares the industrial carbon removals obtained in 2040 with the PRIMES
model, with deployment pathways projected by the POTEnCIA model. In PRIMES
(Figure 3, left) BECCS tends to come first, and considerations of sustainable biomass
availability limits its expansion. The remaining needs for removals are fulfilled by
DACCS, which appears as complementary to BECCS. The POTEnCIA model (Figure 3,
right), where the cap on the amount of sustainable biomass supply for bioenergy is
relaxed (see also Annex 6), illustrates a stronger deployment of BECCS, reaching up to
around 80 MtCO2 in 2040 in S3, complemented by storage of biogenic carbon from
biogas upgrade and very limited development of DACCS. Higher recourse to BECCS
leads to an increase of bioenergy demand, with a possible negative impact on the
LULUCF net removals (see 1.8.2).
Both pathways modelled provide an amount of total industrial removals in 2040 lower
than the estimated maximum in the scenarios considered by the ESABCC, corresponding
to 214 MtCO2 (27
), and consistent with ranges of 10-220 MtCO2 that can be found in the
literature (28
), (29
), (30
), (31
).
(24
) Liebling K., et al. (2023). International Governance of Technological Carbon Removal: Surfacing
Questions, Exploring Solutions.
(25
) ESABCC (2023). Scientific advice for the determination of an EU-wide 2040 climate target and a
greenhouse gas budget for 2030–2050. DOI: 10.2800/609405. Table 16.
(26
) IEA (2023), Tracking Direct Air Capture. Accessed on 14-08-23
(27
) ESABCC (2023). Scientific advice for the determination of an EU-wide 2040 climate target and a
greenhouse gas budget for 2030–2050. DOI: 10.2800/609405. Table 16 summing DACCS and
BECCS.
(28
) Rodrigues et al., (2023). 2040 greenhouse gas reduction targets and energy transitions in line with the
EU Green Deal, Nature Communication, Under Review.
(29
) Kalcher, L. et al., (2023). The post-2030 climate target debate starts now, Strategic Perspectives and
Climact. https://strategicperspectives.eu/the-post-2030-climate-target-debate-starts-now/
(30
) Graf, A., et al. (2023). Breaking free from fossil gas. A new path to a climate-neutral Europe. Agora
Energiewende.
(31
) Climate Analytics (2022). 1.5°C National Pathways Explorer. Climate Analytics.
12
Figure 3: Industrial carbon removals in PRIMES and POTEnCIA in 2040
Source: PRIMES, POTEnCIA.
1.1.2.4.Balancing emissions and removals
In Figure 4, gross GHG emissions (excluding all removals) only reduce between 75%
and 85% in 2040 and around 92% in 2050 (vs 1990 (32
)). In comparison, net GHG
emissions (including all removals) reduce more and achieve net-zero in 2050. This
suggests that removals complete other mitigation options and are needed to achieve
climate neutrality. In 2040, the PRIMES modelling analysis shows that total (industrial
and LULUCF net) removals range from around 220 MtCO2-eq in S1 to around
390 MtCO2-eq in S3 (with upper level of LULUCF net removals). Around
360 MtCO2-eq are needed to achieve net reductions of 90% and beyond in 2040
(considering the lowest level of gross emissions projected in S3), with this value
increasing in the range of 430-460 MtCO2-eq in 2050 to attain net-zero.
(32
) In line with the remaining gross emissions without counting compensation from removals analysed by
the ESABCC and corresponding to around 390 MtCO2.
-100
-80
-60
-40
-20
0
S1
S2
S3
POTEnCIA (2040)
Biogenic
DACCS
Power Gen.
(BECCS)
-100
-80
-60
-40
-20
0
S1
S2
S3
PRIMES (2040)
MtCO2/y
13
Figure 4: Net and Gross GHG Emissions and % reductions vs 1990
Note: “Net GHG” includes domestic emissions, international intra-EU aviation and maritime transport and 50%
of extra-EU maritime transport (as per MRV). “Excl. LULUCF” subtracts the LULUCF net removals from net GHG.
“Excl. all removals” subtracts industrial removals and LULUCF net removals from net GHG, resulting in gross
GHG emissions.
Source: PRIMES, GAINS.
Table 5 summarises the model projections on different type of removals and show that
nature-based and industrial removals play different roles. While LULUCF net removals
contribute significantly in 2030 and along until 2050, the role of industrial removals
becomes more relevant from 2040 in pathways with the lowest carbon budget (S3) and
by 2050 in all cases. LIFE always shows a relative higher contribution of LULUCF net
removals compared to industrial removals, and a slightly more moderate recourse to
overall removals in 2050. This means that all pathways need a strong LULUCF net
removals, which needs to be complemented by industrial solutions.
Table 5: LULUCF net removals and industrial carbon removals
2030 2040 2050
S1 S2 S3 LIFE S1 S2 S3 LIFE
Total Removals
(MtCO2-eq)
-314 -222
[-222
to -380]
-365
[-262
to -423]
-391
[-290
to -450]
-387
[-270
to-437]
-462
[-334
to -525]
-447
[-318
to -510]
-447
[-319
to -509]
-428
[-274
to -476]
Net LULUCF sink
(MtCO2-eq)
-310 -218
[-218
to -376]
-316
[-213
to -374]
-317
[-215
to -376]
-360
[-243
to -410]
-341
[-213
to -403]
-332
[-202 to
--394]
-333
[-206
to -396]
-389
[-234 to -
-436]
Industrial Removals
(MtCO2) -4 -4 -49 -75 -27 -121 -115 -114 -40
BECCS -4 -4 -34 -33 -27 -58 -59 -56 -37
DACCS 0 0 -15 -42 0 -63 -56 -57 -3
Source: PRIMES, GLOBIOM.
The 36 scenarios selected by the ESABCC (33
) offer an overview of the possible balances
between removals and emission reductions: for 2040, the level of gross emission lies
(33
) The range refers to the 36 filtered scenarios, including also scenarios not complying with
environmental risk that led to an emission reduction for 2040 between 83% and 96%.
-110%
-100%
-90%
-80%
-70%
-60%
-50%
-500
0
500
1000
1500
2000
2500
S1
S2
S3
LIFE
S1
S2
S3
LIFE
2030 2040 2050
MtCO2-eq
Net GHG (incl. all
removals)
GHG (incl. industrial
and excl. LULUCF
net removals)
Gross GHG (excl. all
removals)
14
between 1596 and 697 MtCO2-eq (34
) and the contribution of removals is split into land-
based removals (range between -100 and -400 MtCO2-eq, with majority between -300
and -400 MtCO2-eq) and industrial removals (BECCS and DACCS ranging between -46
and -214 MtCO2, with majority around -200 MtCO2) (35
).
In the modelling analysis, the amount of projected gross GHG emissions in 2040 and the
contribution of nature-based removals lies within the range of the 36 ESABCC scenarios
studied by the ESABCC. Instead, while the industrial removals in the main scenarios lie
in the lower end of the range of the 36 scenarios analysed, achieving reductions up to
90% and beyond in 2040 cannot rely only on LULUCF net removals and needs to be
complemented by development of industrial removals.
(34
) ESABCC (2023). Scientific advice for the determination of an EU-wide 2040 climate target and a
greenhouse gas budget for 2030–2050. DOI: 10.2800/609405. Figure 37
(35
) Ibid., Figure 35, Figure 36 and Table 16
15
1.1.2.5.GHG pathways
Figure 5 summarises the analysis of the previous sections and shows the net economy-
wide GHG emission pathways. While all scenarios follow the same pathway until 2030,
they diverge after that year, leading to distinct trajectories for the 2030-2050 decade
before converging to net-zero by 2050.
Figure 5: Economy-wide GHG emission pathways
Source: PRIMES, GAINS, GLOBIOM.
1.1.3. Energy and Industry CO2 emissions
1.1.3.1.Net CO2 emissions
Figure 6 shows the trajectories for the energy and industry net CO2 emissions (36
) in the
different scenarios.
(36
) The emissions scope includes the net domestic energy-related CO2, the net domestic non-energy
related CO2, the intra-EU transport and 50% of the international extra-EU maritime as per MRV.
-1000
0
1000
2000
3000
4000
5000
2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
MtCO2-eq
S1
Ind. Removals LULUCF
Non-CO2 in non Land-related sectors Agriculture
Int. Transport Domestic Transport
Buildings Industry
En. Supply Net GHG emissions
-500
500
1500
2500
3500
4500
MtCO2-eq
S2
-500
500
1500
2500
3500
4500
MtCO2-eq
S3
-500
500
1500
2500
3500
4500
2005
2010
2015
2020
2025
2030
2035
2040
2045
2050
LIFE
-500
500
1500
2500
3500
4500
MtCO2-eq
S1
16
Figure 6: Energy and Industry net CO2 emissions
Note: Power and District Heating (DH) include BECCS. Other energy includes energy branch and DACCS. Residual
and services includes fossil fuel combustion in the agriculture/fishery/forestry sector. Non-Energy includes
industrial processes and fugitive emissions.
Source: PRIMES.
In line with current policies, CO2 emissions from the energy sector are projected to more
than halve already in 2030 with respect to 2015. Achieving net-zero in 2050 projects net
CO2 emissions in 2040 to be in the range of 330-800 MtCO2 across scenarios, meaning a
reduction between 80% and 92% compared to 1990. S3 reduces emissions by an
additional 500 MtCO2 with respect to S1: this amount corresponds to around 20% of
2030 total net GHG emissions, indicating the important contribution of the energy and
industry sectors to decarbonise the EU economy already by 2040. In 2050, the sum of
emissions coming from all sectors analysed achieves slightly negative levels in all
scenarios, with industrial carbon removals compensating for the residual hard-to-abate
emissions. LIFE shows a level of energy and industry CO2 emissions intermediate
between S2 and S3 in 2040, and slightly higher emissions of around 70 MtCO2 in 2050.
These additional emissions are compensated by lower emissions in agriculture (see 1.7)
and enhanced land-based removals (see 1.8), highlighting a redistribution of emission
reductions across sectors: total net GHG emissions levels comparable to S3 are achieved
in LIFE mostly with a reduced need for industrial carbon capture.
The domestic CO2 emissions (Table 6) decrease significantly already in the decade
2031-2040 and reach slight negative levels in the main scenarios in 2050. Energy related
emissions (37
) in 2040 are between 40% and 20% the level of 2030, with the power
generation, district heating and transport sectors reducing the most, driven by the
decarbonisation of the power system, the energy efficiency measures and the
implementation of renewables in final energy sectors. Residual energy emissions are then
reduced gradually in the decade 2041-2050 and reach cumulative negative values of
around -40 MtCO2 in 2050, as result of the contribution of industrial removals. Non-
energy related CO2 emissions decrease only by around 35% in 2030 vs 2015, and
(37
) Essentially, the emissions from fuel combustion.
-100
0
100
200
300
400
500
600
700
800
900
S1
S2
S3
LIFE
S1
S2
S3
LIFE
2040 2050
Non-Energy
Transport
Res. & Services
Industry
(Energy)
Other Energy
Power & DH
-100
400
900
1400
1900
2400
2900
3400
2015 2030
MtCO2
17
additional reductions between 20% and 80% (compared to 2030) are achieved in 2031-
2040, driven by the decrease of industrial processes emissions: the large variation across
scenarios is justified by the late (in S1) and early (in S3) entry into market of low-carbon
innovative manufacturing technologies, including carbon capture, utilisation and storage.
In 2050, emissions from industrial processes reduce to negligible values and the non-
energy emissions stagnate. International emissions within the scope decrease by around
half in the period 2031-2040 and range around 10-15 MtCO2 in 2050. Further details on
sectoral CO2 emissions, including transport, are discussed in sections 1.2-1.5.
Table 6: Energy and Industry net CO2 emissions
2005 2015 2030 2040 2050
- - - S1 S2 S3 LIFE S3 LIFE
Total Energy and Industry CO2 emissions 3837 3197 1759 805 511 321 422 -5 73
Net Domestic CO2 Emissions: Energy Related 3381 2787 1448 594 357 247 351 -40 41
Power and district heating* 1300 1012 334 119 8 -10 7 -38 -22
Other Energy sectors** 152 136 84 43 23 -11 35 -37 15
Industry (Energy) 469 360 232 126 94 75 86 9 11
Transport 812 764 577 187 141 117 132 6 8
Residential and Services*** 648 514 221 119 92 75 92 19 29
Net Domestic CO2 Emissions: Non-Energy Related 325 260 176 156 109 34 33 23 22
Industry (Non-Energy) 288 226 150 133 86 12 11 4 2
Other non-energy***** 37 35 26 23 23 22 22 20 19
International intra-EU and 50% extra-EU 116 107 112 52 46 41 39 11 10
international intra-EU aviation 35 38 43 31 29 28 26 11 10
international intra-EU navigation 31 27 25 7 6 4 4 0 0
50% extra-EU MRV maritime MRV
50 42 44 14 11 9 8 0 0
Residual CO2 for calibration
15 43 24 3 -1 -1 -1 0 0
Note: *Includes BECCS. **Includes emissions from energy branch and DACCS; ***Includes fossil fuel combustion
in the agriculture/fishery/forestry sector; ****Includes fugitive emissions. S1 and S2 values in 2050 are similar to
S3 and described in more details in sectoral sections 1.2, 1.3, 1.4 and 1.5 of this Annex.
Source: PRIMES.
1.1.3.2.Role of carbon capture
To investigate the role of carbon capture and understand better the uncertainties
associated to the deployment of this technology, a cross-model analysis comparing
PRIMES projections with the ones provided by POTEnCIA, AMADEUS-METIS,
POLES and EU-TIMES (see Annex 6) is performed (Figure 7). Results show how the
level of climate ambition achievable in 2040 in the energy and industry sectors strongly
depends on the amount of carbon captured and, as discussed in section 1.1.2.3, of carbon
removals. The level of domestic energy and industry CO2 emissions before capture (i.e.,
gross emissions) spans from 580 to 850 MtCO2, with most of the models projecting in
the 650-750 MtCO2 range. Limited differences exist across modelling runs (reductions
between -78% and -85% compared to 1990) and even in scenarios with the highest
uptake of novel technologies (excluding carbon capture) the energy and industry CO2
can reduce at most by around 85%, meaning that the 2040 potential for the
implementation of mitigation solutions other than carbon capture modelled in the
scenarios is mostly attained. The picture of emissions after capture (i.e., net emissions) is
different. Limited carbon capture allows for a marginal further decrease in emissions (see
S1 and POTEnCIA-S1 (POT-S1) on the left of Figure 7), while a more substantial
18
deployment of the technology achieves emission levels of around 470-520 MtCO2 in S2,
POTEnCIA-S2 (POT-S2), AMADEUS-METIS (AM-METIS), POLES and EU-TIMES,
and down to around 250-350 MtCO2 in S3 and POTEnCIA-S3 (POT-S3). Carbon
capture allows to reach additional reductions of between 2-3% (corresponding to around
80-130 MtCO2 captured in S1) and 4-6% (corresponding to around 150-240 MtCO2
captured in S3) of 1990 levels and represents a key mitigation solution to reach deeper
net GHG emission reductions. The models show that above 150 MtCO2 (including
removals) need to be captured in 2040 to achieve a total reduction of energy and industry
CO2 emissions of at least 88% and above 250 MtCO2 to reach above 90%.
Figure 7: Energy and Industry CO2 emissions in 2040
Note: Emissions (left) and relative reductions vs 1990 (right).
Sources: AMADEUS-METIS, EU-TIMES, POLES, POTEnCIA, PRIMES.
Figure 8 shows the evolution of the carbon captured yearly (left), and corresponding
additional carbon captured at the end of each decade until 2050 (right) projected by
PRIMES. A yearly capture level of around 50 MtCO2 is projected in 2030 across all
scenarios, in line with the Net Zero Industry Act (38
), which then increases in 2040 to
around 90 MtCO2 in S1, above 200 MtCO2 in S2 and to 350 MtCO2 in S3 and
converges in 2050 to around 450 MtCO2 in S1, S2 and S3. LIFE projects a level of
carbon capture intermediate between S2 and S3 in 2040, and more moderate in 2050.,
showing that sustainable lifestyle and circular economy actions leads to a more extensive
use of nature-based removals and lower the need for carbon capture in industry (see 1.4
and 1.8).
(38
) COM(2023) 161
-100%
-95%
-90%
-85%
-80%
-75%
0
100
200
300
400
500
600
700
800
900
S1
POT-
S1
POT
-
S2
AM-METIS
S2
TIMES
POLES
S3
POT
-
S3
MtCO2
Before capture (gross) After capture (net) Captured
19
Figure 8: Total (left) and additional (right) carbon captured yearly in selected years
Source: PRIMES.
The projections for carbon capture are in line with ranges found in the literature: in 2040,
the ENGAGE project depicts a yearly amount of carbon captured around 300
MtCO2 (39
), the ECEMF (40
) provides a range of 215-376 MtCO2, Rodrigues at al. (41
)
describe a range of 120-330 MtCO2 and Ecologic indicates a range between 46 and 160
MtCO2 (with a stronger reliance on land-based removals) (42
). For 2050, ESABCC (43
)
and other literature (44
) show the maximum threshold for feasibility of this technology at
around 500 MtCO2.
As a result of different amount of carbon captured in 2031-2040 and 2041-2050 in the
main scenarios, the additional minimum capacity (45
) per decade necessary to capture
carbon varies significantly: in S1, delayed climate action results in additional
installations capable of capturing up to 35 million tonnes of CO2 extra in 2040, but this
number multiplies by around 7.5 times by 2050. S2 shows a minimum additional
capacity able to capture around 180-190 MtCO2/y extra at the end of each decade. S3
suggests a large deployment of extra 300 MtCO2/y captured by 2040, and only additional
75 MtCO2/y by 2050. LIFE shows an intermediate level of additional capacity needed in
(39
) ENGAGE Scenario Explorer, Engage: Feasibility of Climate Pathways Project,
https://www.engage-climate.org/ Accessed 15-09-23
(40
) ECEMF (2023), ECEMF Policy Brief: Insights on EU2040 targets based on a model intercomparison
exercise of EU Climate Neutrality Pathways. DOI 10.5281/zenodo.8337667.
https://zenodo.org/record/8337668 Full model range, including international bunkers.
(41
) Rodrigues et al., (2023). 2040 greenhouse gas reduction targets and energy transitions in line with the
EU Green Deal, Nature Communication, Under Review.
(42
)Ecologic and Oeko-Institut, Designing the EU 2040 climate target, 2023.
(43
) ESABCC (2023). Scientific advice for the determination of an EU-wide 2040 climate target and a
greenhouse gas budget for 2030–2050. DOI: 10.2800/609405.Table 5.
(44
) ENGAGE Scenario Explorer, Engage: Feasibility of Climate Pathways Project, Accessed 15-09-23
(45
) These values only represent indicative capacities and will have to take account of normal operational
downtimes and be supported by a total geological storage capacity of several giga-tonnes of CO2.
0
50
100
150
200
250
300
350
2040
vs
2030
2050
vs
2040
MtCO2/y
S1
S2
S3
LIFE
0
50
100
150
200
250
300
350
400
450
500
2020 2030 2040 2050
MtCO2/y
20
2040 between S2 and S3 and a minimal increase in the 2041-2050 related to the overall
lower need of industrial capture in these settings.
Achievement of the required level of carbon capture capacity by 2040 is not trivial,
especially in the S3 scenario. Several barriers to a large deployment of the technology
exist today: the transition from R&I stage to the full-scale, replicable, commercial
deployment for certain steps of the technology, the need to establish a new (cross-border)
carbon value chain, including storage sites (46
) (47
), and a lack of market coordination for
fast deployment of the technology. A large development of carbon capture means
foreseeing the build up of commercially ready carbon capture infrastructure on existing
or new-build industrial capacity, often in sectors characterized by long investment cycles.
Hence, sound regulatory predisposition and long-term financial planning taking into
account the impact on industrial competitivess become necessary to provide certainty to
industrial investors. Downstream of the carbon capture value chain, storage operators
face high upfront costs to identify, develop and appraise storage sites before they can
apply for a regulatory permit that is necessary to operate, while their future customers are
willing to invest in carbon capture only if access to operating storage site is secured.
Subsequently, market players have little templates for commercial contracting or risk
sharing and depend on each other’s plans and project progress to de-risk their own
investment decisions. Regulatory uncertainty and inexperience also represent a challenge,
for instance in terms of supplementing the CCS directive (48
) and clarifying future link
between industrial removals and ETS or cross-border transport of captured CO2. To
overcome these challenges, several Member States have CO2 value chain strategies in
place or are developing them (NL, DK, FR, DE) (49
) and consolidated effort is needed to
stimulate and guide a market development that can deliver the scale needed, as described
in the Communication on Industrial Carbon Management (50
).
When looking at the different sources of carbon captured in 2040, and only considering
this specific pathway modelled by PRIMES, a veritable “merit order” emerges (Figure
9). S1 shows that carbon is first captured in industrial processes and power generation
(emitting from fossil fuels) in order to reduce emissions in those sectors, with very little
coming from BECCS, the upgrade of biogas to biomethane (biogenic carbon) and
DACC. A larger uptake of the technology in S2 leads first to the increase of the level of
fossil carbon coming from industrial processes and power generation, and then taps into
industrial removals, mostly BECCS. Being the potential for BECCS limited by
sustainability constraints on biomass availability, and possible negative impact on the
LULUCF net removals, an increase in demand for the production of e-fuels opens the
doors to deployment of DACC in 2040: this happens already in S2 and becomes even
(46
) Lane, J., Greig, C., & Garnett, A. (2021). Uncertain storage prospects create a conundrum for carbon
capture and storage ambitions. Nature Climate Change, 11(11), 925-936.
https://doi.org/10.1038/s41558-021-01175-7
(47
) Koelbl, B. S., et al. (2014). Uncertainty in the deployment of Carbon Capture and Storage (CCS): A
sensitivity analysis to techno-economic parameter uncertainty. International Journal of Greenhouse
Gas Control, 27, 81-102.
(48
) Directive 2009/31/EC
(49
) This list is to be published by JRC mid-october 2023.
(50
) Industrial Carbon management Communication (upcoming).
21
more evident when moving from S2 to S3, where the additional carbon is captured
almost exclusively through DACC. In 2050, the share of the different technologies is
similar across S1-S2-S3. Proportionally, LIFE also shows a similar distribution, with less
DACC than S3 in 2040 and an overall capture level in 2050 lower than the other
scenarios.
Figure 9: Carbon captured by source
Note: Biogenic carbon indicates the carbon resulting from the upgrade of biogas to biomethane.
Source: PRIMES
The order in which carbon capture technologies are deployed to satisfy increasing
demand reflects the results of the public consultation questionnaire for the 2040 target,
where respondents would prioritise deployment of carbon capture from industrials
process (highest priority given by 36% of respondents), followed by combustion of
biomass (23%) and fossil fuel (20%). The strong preference for carbon capture from
industrial process is also confirmed when looking at different stakeholders’ group,
indicating a general agreement on the development of this technology. The picture is less
technology-specific when analysing positions papers collected during the consultation:
about half of them, published by business associations, public authorities and academia,
encourages the uptake of carbon capture and storage technologies, without assigning
priority to one specific technology type.
The modelling shows that capture of carbon in 2040 is mainly driven by the demand for
e-fuels required in other sectors and by the need to reduce net emissions within the sector
through underground storage (Figure 10). In the 2041-2050 decade, where e-fuels are to
be produced using fossil-free carbon and all residual emissions needs to be compensated,
the action of these drivers continue, increasing the amount of carbon captured for these
two applications. The increasing demand for industrial feedstock also creates a new
market for storage in materials, where CO2 is chemically bound in products, balancing
industrial CO2 needs, making local CO2 networks an attractive option.
0
50
100
150
200
250
300
350
400
450
500
S1
S2
S3
LIFE
S1
S2
S3
LIFE
2030 2040 2050
MtCO2
Biogenic
DACC
Power Gen. (BECCS)
Power Gen. (FF)
Ind. Processes
22
Figure 10: Carbon Captured by end application
Source: PRIMES.
In the 2030-2050 period, the model shows that carbon capture does not only reduce
emissions in hard-to-abate sectors, but above all generates carbon feedstock for e-fuels or
fossil-free products as well as industrial removals (in terms of BECCS and DACCS). A
real carbon management industry is to be created, connecting different carbon
technologies and sources to final end-user applications through industrial feedstocks,
balancing carbon flows in the EU economy. Figure 11 shows the carbon flows between
sources and uses in 2040 in the different scenarios. These carbon flows can be also
affected by the projected levels of emission reduction. For instance, while e-fuels can be
produced by carbon captured from fossil fuels in power generation and industrial
processes in scenarios with higher 2040 emissions (S1 and S2), the higher ambition of S3
makes necessary the permanent storage of these fossil fuel emissions. In S3, the
production of e-fuels in 2040 relies mostly on fossil-free sources of carbon derived from
biomass (either captured from bioenergy combusting application or of biogenic origin
from the upgrade of biogas to biomethane) and, given the limited sustainable biomass
resources, from DACC. Beyond 2040, when fossil fuels are excluded (51
) from possible
source of carbon for production of RFNBOs across all scenarios, and e-fuels demand
increases even further, they are produced mostly using carbon derived from DACC and
in part from biomass. All remaining fossil carbon is then permanently stored (either
underground or in products).
(51
) Commission Delegated Regulation (EU) 2023/1184
0
50
100
150
200
250
300
350
400
450
500
S1
S2
S3
LIFE
S1
S2
S3
LIFE
2030 2040 2050
MtCO2
Storage in Materials
E-fuels
Underground
Storage
23
Figure 11: Flow of captured carbon in 2040
Note: “Ind. P.” stands for Industrial processes and include fossil carbon from industrial processes as well as
carbon of biogenic origin coming from the upgrade of biogas to biomethane. “FF” stands for “fossil fuels”.
“PG” stands for “power generation”. “Bio” refers to CO2 produced by the combustion of biomass in power
generation and produced during the upgrade of biogas into biomethane. “DACC” stands for “Direct Air Capture
of CO2”, for underground storage (DACCS) or use in efuels.
Source: PRIMES.
1.1.4. Non-CO2 GHG emissions
Non-CO2 GHG emissions declined considerably over the past decades in the EU.
Currently, however, significant amounts of non-CO2 greenhouse gases are still being
emitted every year, representing around 20% of total GHG emissions. In 2015, the EU’s
total non-CO2 GHG emissions added up to more than 700 MtCO2-eq. As shown in
Figure 13, most of these were CH4 emissions (61%), whereas the rest were N2O and F-
gas emissions (25% and 14%, respectively). Agriculture was the largest emitting sector,
representing roughly 53% of the EU’s total non-CO2 GHG emissions (mostly CH4 and
N2O emissions associated to enteric fermentation, manure management and fertiliser
application), followed by waste treatment (17%, mostly CH4 emissions stemming from
uncaptured emissions caused by anaerobic digestion of solid waste and wastewater
streams), energy and transport (16%, mostly methane leakage and emissions related to
S2- 222 MtCO2
S3- 344 MtCO2 LIFE- 278 MtCO2
S1- 86 MtCO2
24
fuel combustion), and heating/cooling installations (11%, mostly F-gas emissions), as
shown in Figure 12.
In the S1 scenario, which considers mitigation due to current policies (but no more), non-
CO2 GHG emissions drop to around 457 MtCO2-eq in 2040 (i.e., 35% less than in
2015). Note that the degree of reduction by 2040 varies considerably across sectors (see
Figure 12). Agriculture is the sector showing the smallest decrease in relative terms (9%
reduction between 2015 and 2040). Non-CO2 GHG emissions from the waste
management sector decline by 42% over the same period (driven by the implementation
of existing legislation on landfilling and additional legislative proposals, such as the
proposal on a revised Urban Wastewater Treatment Directive, see Section 1.6.1 and
Annex 6), while the energy and transport sector shows a deep reduction (-71%) driven by
the phase down of fossil fuel use in the energy system. The heating and cooling sector
shows the largest decrease in relative terms (97% relative to 2015), driven mostly by the
assumed implementation of the F-gas regulation proposal (see Annex 6). Looking at the
disaggregation per gas, total N2O emissions across all sectors decrease by 14% between
2015 and 2040, CH4 emissions decline by 32% over the same period, and F-gas
emissions decrease by more than 90%, as shown in Figure 13.
The S2 and S3 scenarios show a more ambitious reduction of net GHG emissions by
2040 than the S1 scenario, and this requires stronger non-CO2 emission reductions than
those delivered by current policies. In the S2 scenario, total non-CO2 GHG emissions go
down to 376 MtCO2-eq in 2040 (i.e., 81 MtCO2-eq less than in the S1 scenario), that is
to say, they decrease by 47% compared to 2015. In the S3 scenario, total non-CO2 GHG
emissions drop to 345 MtCO2-eq in 2040 (i.e., 112 MtCO2-eq less than in the S1
scenario), which translates into a 51% reduction compared to 2015 (i.e., more than three-
quarters of the emissions reduction trajectory between 2030 and 2050). As shown in
Figure 12, the main difference compared to the S1 scenario are additional reductions in
emissions in the agriculture sector (22% reduction between 2015 and 2040 in S2, 13
percentage points more than in S1, and 30% reduction between 2015 and 2040 in S3, 21
pp more than in S1). Most of this additional reduction corresponds to N2O emissions
from agricultural soils and CH4 emissions from enteric fermentation and manure
management (see Figure 13 and Section 1.7.5). In the S3 scenario, all sectors (including
agriculture) are close to reaching their maximum mitigation potential both in 2040 and in
2050.
In LIFE, total non-CO2 GHG emissions go down to 284 MtCO2-eq in 2040 (which
means a 60% reduction relative to 2015, and 61 MtCO2-eq less than in S3) and 238
MtCO2-eq in 2050 (i.e., 55 MtCO2-eq less than in S3). As shown in Figure 12, the only
significant difference compared to the S3 scenario is an additional decrease in emissions
in the agriculture sector (47% reduction between 2015 and 2040, 17 percentage points
more than in the S3 scenario), which is mainly due to the smaller amount of livestock and
lower use of mineral fertilisers assumed in LIFE. All sectors (including agriculture) are
close to reaching their maximum mitigation potential both in 2040 and in 2050.
A more detailed analysis of the non-CO2 GHG emission trajectories in all scenarios can
be found in Sections 1.6 and 1.7.
Table 7 shows the emission residuals related to the calibration of the GAINS and
PRIMES models to the UNFCCC inventory, which have not been considered in the
discussion above. These residuals are small and not assigned to any particular sector. The
25
table also shows the CO2 emissions produced by the agriculture sector (including only
“category 3” emissions).
Figure 12: Evolution of non-CO2 greenhouse gas emissions by sector
Note: *In the S1 and S2 scenarios, emissions in 2050 are equal to those in the S3 scenario. **The waste
treatment sector includes solid waste and wastewater treatment. ***Emission residuals related to the
calibration of the GAINS and PRIMES models to the UNFCCC inventory (which are small and not assigned to
any sector) are not included in this figure.
Source: GAINS.
Figure 13: Evolution of non-CO2 greenhouse gas emissions by gas
Note: *In the S1 and S2 scenarios, emissions in 2050 are equal to those in the S3 scenario. **Emission residuals
related to the calibration of the GAINS and PRIMES models to the UNFCCC inventory (which are small) are not
included in this figure.
Source: GAINS.
0
100
200
300
400
500
600
700
S1 S2 S3 LIFE S3* LIFE
2015 2030 2040 2050
MtCO2-eq
Industry and other
Heating and cooling
Energy and transport
Waste treatment**
Agriculture
0
100
200
300
400
500
600
700
S1 S2 S3 LIFE S3* LIFE
2015 2030 2040 2050
MtCO2-eq
F-gases
N2O
CH4
26
Table 7: Total non-CO2 GHG emissions in all sectors and CO2 emissions from agriculture
Greenhouse gas emissions (MtCO2-eq)
2015 2030
2040 2050
S1 S2 S3 LIFE S3* LIFE
Non-CO2 emissions 705 531 457 376 345 284 294 238
Non-CO2 calibration 2 -3 -3 -3 -3 -3 -3 -3
CO2 emissions from
agriculture (category 3)
10 10 10 10 10 10 10 10
Source: GAINS.
1.2. Energy sector transformation
1.2.1. Energy supply
Gross Available Energy (52) (53) (GAE) reduces to between 1 018-1 022 Mtoe across the
S1-S2-S3 scenarios in 2040, corresponding to approximately a 30% reduction compared
to 2019 (see Figure 14). Thanks to the circular economy measures and consumption
patterns, LIFE further reduces GAE. After 2040, GAE stabilises around 1020–1040
Mtoe, except for LIFE where, in 2050, it is further reduced by more than 50 Mtoe
compared to other scenarios.
(52
) The model-based analysis is a technical exercise based on a number of assumptions that are shared
across scenarios. Its results do not prejudge the future design of the post-2030 policy framework.
(53
) Gross Available Energy refers to the overall supply of energy for all activities of a country. It includes
energy needs for energy transformation, for the energy sector itself, transmission and distribution
losses, final energy consumption and the use of fuels for non-energy purposes. It also includes fuel
purchased within the country that is used elsewhere (e.g., international aviation and shipping). These
figures exclude ambient heat (from heat pumps).
27
Figure 14: Gross Available Energy by energy vector, 2015-2050
Note: Biomass and waste include non-renewable waste. Natural gas includes also manufactured gas.
Source: PRIMES.
Profound changes in the energy mix underpin the overall reduction of GAE over time.
Fossil fuels are gradually reduced, from approximately 1060 Mtoe in 2019 to between
275 and 375 Mtoe in the S1-S2-S3 scenarios (a 65 to 74% reduction compared to 2019).
In 2050, approximately 155 Mtoe of residual fossil fuels remain with little differences
between the S1, S2 and S3 scenarios (-85% compared to 2019), largely consumed for
non-energy uses and from long distance transport. In 2040, fossil fuels account for 27 to
37% of GAE in the S1-S2-S3 scenarios, down from more than 70% in 2019. Fossil fuels
reach a share of total GAE of approximately 15% in 2050 across all scenarios.
Renewables undergo a pronounced growth in their share of total GAE as they gradually
replace fossil fuels as the backbone of the EU energy system. The share of renewables in
total GAE grows from just 17% in 2019 to 50-60% in the S1-S2-S3 scenarios (around
520-610 Mtoe) in 2040. Then, in 2050 the share of renewables reaches more than 70% in
2050 (around 690-735 under the S1-S2-S3 scenarios). LIFE decreases the overall use of
renewables in GAE by more than 40 Mtoe in 2040 and more than 50 Mtoe in 2050.
Based on nuclear capacity assumptions in line with the Member State policies as
described in the 2019 National Energy and Climate Plans (54
), cf. sub-section 2.5.2.2,
nuclear power is projected to experience a reduction in output over this decade from
around 200 Mtoe in 2019 to 130 Mtoe in 2030 after which it broadly stabilizes,
accounting for 13-14% of total GAE from 2040 onwards without major differences
across scenarios.
(54
) These assumptions reflect the situation until March 2023. In June 2023, France has adopted a law
which removes the objective of reducing the share of nuclear power in the electricity mix. Additional
3.3 GWe nuclear capacity was officially announced for deployment by mid-2030s. See the box in 6.2.1
of the main Impact Assessment and the assumptions in Annex 6. Future EU policies and analysis will
take the revised policies into account, as reflected in the updated National Energy and Climate Plans
which are currently being drafted.
0
200
400
600
800
1000
1200
1400
1600
S1 S2 S3 LIFE S1 S2 S3 LIFE
2015 2019 2040 2050
Mtoe
Hydrogen
Wind
PV
Others
Electricity imports
Hydro
Geothermal
Biomass
Nuclear
Coal
Gas
Oil
28
Overall, total GAE is quite stable across the S1, S2 and S3 scenarios, varying by less
than 1% in 2040 and less than 2% in 2050, but measures in the LIFE scenario further
decrease GAE. However, the trajectories (in terms of GAE) of the various energy vectors
are characterised by considerable variations across scenarios: the S3 scenario shows a
faster uptake of renewables at the expense of fossil fuels, while S1 scenario shows a
slower uptake.
The gradual substitution of fossil fuels (largely imported from outside the EU) with
renewables deployed domestically implies a steep reduction of net imports of energy
commodities (Figure 15).
Total net imports of energy commodities are projected to reduce by 62%-71% in the S1-
S2-S3 and LIFE scenarios (for a total of 270-350 Mtoe) compared to 2019. In 2050, net
imports further decrease to 150 and 160 Mtoe in the S1-S2-S3 scenarios, 83% lower than
in 2019. Net imports of coal virtually end by 2040 in all scenarios and those of natural
gas and oil products drastically reduce with a very similar pace as the one of overall net
imports. All scenarios meet the goal of the REPowerEU plan to phase out import of
Russian gas (55
). The amounts of imports of hydrogen and e-fuels remain relatively small
in 2040, due to still relatively high costs.
Figure 15: Net imports by energy vector, 2015-2050
Note: Biomass and waste include non-renewable waste. Natural gas includes also manufactured gas. When the
scenario name is not indicated for future years, the reasons is that trends are almost identical across scenarios.
Source: PRIMES.
As shown in Figure 15, the main difference in the fuel-specific pattern across scenarios is
associated to natural gas: total net import in 2040 under the S3 achieves three-quarters of
the level of the S2 scenario (around 70 Mtoe and 90 Mtoe respectively). Oil and natural
gas are the last fossil fuels to be phased out and significant imports still occur in 2050.
However, by mid-century almost half of oil consumed in the EU is used to make
products in the non-energy sector. In 2050, more than half of the liquid fuels used for
energy purposes in end-use sectors are RFNBOs.
(55
) COM/2022/230 final
0
50
100
150
200
250
300
350
400
S1 S2 S3 LIFE S1 S2 S3 LIFE
2040 2050
Mtoe
Synthetic fuels
Coal
Others
Natural gas
Hydrogen
Electricity
Oil
Biomass
29
The decline in imports has profound consequences for the EU’s security of energy
supplies. Import dependency (defined as the ratio of net imports to GAE excluding
ambient heat) decreases from 61% in 2019 to 50% in 2030 and to 34% – 26% in 2040
(depending on the scenario). By 2050, only approximately 15% of the fuels used in
Europe will be imported. The energy transition will greatly reduce the EU’s dependency
on energy imports. However – due to the decline of indigenous production and the fact
that oil is the last fossil fuel to be abandoned – a large decrease in imports will occur only
with deep decarbonisation (see Figure 16). As shown in Figure 15, import reduction is
similar across scenarios depending mainly on the decarbonisation target.
Figure 16: Import dependence
Source: PRIMES.
As introduced in Annex 6, complementary modelling tools have been used in addition to
PRIMES to model the decarbonisation scenarios. Figure 17 compares the projections for
total Gross Available Energy obtained from the POTEnCIA, AMADEUS-METIS, EU-
TIMES and POLES models for the S2 scenario. Values and patterns are comparable
across all models, with EU-TIMES showing the highest GAE throughout the time
horizon and a trajectory that reduces up to 2040 and then increases again afterwards. The
highest GAE in EU-TIMES is explained mainly by the lowest reduction in FEC (see
Figure 17) linked to an extensive use of RFNBOs in comparison with electricity (see
Figure 33 later in the text), and a high reliance on industrial carbon removals to
compensate for emissions in hard-to-abate sectors, which has associated significant
consumption of electricity and heat.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
S1 S2 S3 LIFE S1 S2 S3 LIFE
2015 2019 2030 2040 2050
30
Figure 17: Total Gross Available Energy from different energy models, 2019-2050
Sources: AMADEUS-METIS, EU-TIMES, POLES, POTEnCIA, PRIMES.
1.2.2. Power generation sector
The coming decades require an increase in electricity supply due to the increasing
electrification of the economy and the production of RFNBOs. Fossil fuel-fired
electricity generation decreases substantially and is replaced by variable renewable
electricity generation. To match variable supply and demand, more smart solutions are
needed. The variability of wind and solar can be addressed through real time pricing
signals and flexibility solutions on the demand side. Sector coupling technologies like
storage, interconnection and carbon free dispatchable power generation are expected to
play an increasingly important role (56
).
In the context of reducing fossil fuels use in favour of direct electrification of end-use
sectors, for instance via the deployment of heat pumps, electric vehicles and electrified
low and mid-temperature industrial processes, demand for electricity increases by 31-
34% between 2021 and 2040 in S1-S2-S3 (Figure 18).
(56
) Koolen, D. et al., Flexibility requirements and the role of storage in future European power systems,
EUR 31239 EN, Publications Office of the European Union, Luxembourg, 2023, ISBN 978-92-76-
57363-0, doi:10.2760/384443, JRC130519.
31
Figure 18: Final electricity consumption by end-use sector
Note: Total electricity consumption consists of final electricity consumption from end-use sectors (hereby
shown), own consumption of the energy sector, RFNBOs production and transmission/distribution losses.
Source: PRIMES.
As shown in Figure 18, electrification of the economy drives final electricity demand in
the transport, services & agriculture, industry and residential sectors. Total final demand
increases from 2 485 TWh in 2021 to 2 810 TWh in 2030 and to 3 255-3 340 TWh in S1-
S2-S3 in 2040. Measures following LIFE are projected to reduce electricity demand by
110 TWh.
In the residential sector, overall electricity demand will increase by 23-25% between
2021 and 2040 due to an increased uptake of heat pumps replacing oil and gas-based
heating systems (see Section 1.3.3). Due to the high efficiency of heat pumps, the overall
increase of electricity demand is lower than the energy savings resulting from phasing
out gas and oil boilers. There are only minor differences between the scenarios, with S1
reaching 920 TWh and S3 reaching 935 TWh.
Industry, agriculture and services show a similar picture. In those sectors, the share of
electricity in the final energy demand is rising sharply due to the slight increase in
electricity demand and the overall drop of final energy consumption. As a result of the
interplay of electrification and energy efficiency, electricity demand in these sectors
increases by 12% (industry) and 15% (services and agriculture) between 2021 and 2040
(S2). See sections 1.3.3 and 1.3.4 for more details.
The transport sector undergoes the strongest growth in final electricity consumption
between 2021 and 2040, attributed to the large development of electric transport (see
Section 1.5.3). Overall, final electricity demand in the transport sector will increase over
the period 2021 to 2040 by a factor of 8 with no major differences between scenarios. In
absolute terms, final electricity demand increases from 60 TWh in 2021 to 180 TWh in
2030 and 505-510 TWh in 2040, respectively. The LIFE measures would reduce final
electricity consumption in the industry by 35 TWh.
Between 2040 and 2050, total final electricity demand increases again by 13% to 3 760
TWh. Transport (+26%) and industry (+22%) increase further sharply while the
residential, services and agriculture sectors face a slowdown (both + 2%).
-
500
1.000
1.500
2.000
2.500
3.000
3.500
4.000
S1 S2 S3 LIFE S1 S2 S3 LIFE
201520212030 2040 2050
TWh
Transport
Residential
Services and agriculture
Industry
32
Figure 19: Electricity generation by energy carrier, 2015-2050
Source: PRIMES.
As a result of increased electricity demand, electricity generation increases from 2 905
TWh in 2021 to 3 360 TWh in 2030. The increase continues even more strongly until
2040 resulting in total electricity generation to reach 4 565-5 210 TWh in S1-S2-S3 in
2040 (+57 to 80% since 2021) (see Figure 19). The measures from LIFE are projected to
reduce need for electricity generation by 390 TWh. The difference in electricity
generation between scenarios is only to a small extent due to the final demand for
electricity. Rather, it is driven by differences in the electricity required for the production
of RFNBOs from 2030 onwards (which does not fall under final electricity demand). In
2040, electrolysers, RFNBO synthesis processes and DAC combined consumes
approximately 490 TWh more electricity in the S3 scenario than in S1 (a 51% increase).
The S2 scenarios consumes approximately 225 TWh more than S1 for the same purposes
(23% increase).
The share of fossil-fired generation is projected to steadily decrease from 36% in 2021 to
12% in 2030 and further down to 3% – 8% in S1-S2-S3 in 2040. The residual fossil-fired
generation in the last decade before 2050 is projected to consist almost solely of gas-fired
power plants, with and without CCS. The plants equipped with CCS will generate the
majority of the gas-fired electricity, while the ones without CCS equipment will only be
used as peakers. Renewables in the electricity system generated around 40% of total
electricity supply in 2021 and are expected to cover 81% – 87% by 2040. Nuclear power
generation decreases over the decades from 730 TWh in 2021 to around 495 TWh in
2040 (-30%). Due to the high increase in overall electricity supply, the share of nuclear
generation is projected to decrease from 25% in 2021 to 10 – 11% in 2040. The results in
nuclear generation are based on nuclear capacity assumptions in line with the Member
State policies as described in the 2019 National Energy and Climate Plans (57
), cf. sub-
section 2.5.2.2.
The three scenarios follow the same trend in the electricity mix with minor deviations.
The higher production of RFNBOs in S3 requires more renewable electricity generation
(57
) Future EU policies and analysis will take the revised policies into account, as reflected in the updated
National Energy and Climate Plans which are currently being drafted.
0
1000
2000
3000
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6000
7000
8000
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TWh
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Nuclear
Fossil fuels
33
(around 850 TWh more in 2040 compared to S1). At the same time, S1 shows a higher
use of fossil-fired generation by 2040 (around +200 TWh in comparison to S3) and result
in overall lower emission reductions.
The electricity system will increasingly face the need to integrate variable wind and solar
generation. Renewable generation will increase from 1 125 TWh in 2021 to 3 700 to
4 540 TWh in 2040 in the S1-S2-S3 (see Figure 20). As the total demand for electricity
generation increases significantly but less than renewable generation, the share of
renewables in the electricity mix increases continuously, from 39% in 2021 to 85% in
2040 and almost 90% in 2050.
Figure 20: Electricity generation from renewables, 2015-2050
Source: PRIMES.
Due to the relatively low full load hours of wind and solar PV generation, total installed
capacity is projected to grow more than two times faster than the amount of electricity
generated between 2015 and 2040. The net capacity increases from 870 GW in 2015 to
2 180-2 525 GW in S1-S2-S3 in 2040, led by an increase of renewable capacity (see
Figure 21). The implementation of LIFE measures reduces the need for installed power
capacity by around 195 GW in 2040.
During the same time, the installed fossil-fuel capacity will decrease from 385 GW in
2015 to only 155-170 GW in 2040. While today the share of gas-fired power capacity is
about half of total fossil-fired capacity, the share is projected to increase to around 90%
in 2040 due to the overall decrease of fossil-based generation. A small amount of coal-
and oil-fired capacity remains during this period.
-
1.000
2.000
3.000
4.000
5.000
6.000
S1 S2 S3 LIFE S1 S2 S3 LIFE
2015 2021 2030 2040 2050
TWh
34
Figure 21: Net installed capacity by energy carrier, 2015-2050
Source: PRIMES.
By 2030, the EU’s nuclear power capacity is projected to decline from around 110 GW
in 2015 to 95 GW in 2030 and 70 GW in 2040, under the current modelling assumptions,
cf. sub-section 2.5.2.2. The decline in capacity can be attributed to the policy decisions of
the respective EU Member States (58
).
Only a limited use of CCS for power generation is projected in the considered scenarios.
In 2030, there is only a small amount of CCS-equipped installed capacity which
increases to 10-20 GW in 2040 in S1-S2-S3 and 30 GW in 2050 in the S2 scenario.
The difference in the scenarios for total installed capacity results from the higher
electricity consumption in the S3 scenario. The difference to S1 in total installed capacity
is 345 GW, which is covered by higher renewable capacity deployment.
Net installed renewable capacity increases dramatically by a factor of 4 to 5 between
2020 and 2040 (see Figure 22).
(58
) The installed nuclear capacity is mostly exogenous based on the NECPs submitted in 2019 and
modifications based on discussions with Member States, which however reflect the status only until
March 2023. In June 2023, France has adopted a law which removes the objective of reducing the
share of nuclear power in the electricity mix. Additional 3.3 GWe capacity was officially announced
for deployment by mid-2030s. . See the box in 6.2.1 of the main Impact Assessment and the
assumptions in Annex 6. Forthcoming analysis will take the revised policies into account, as reflected
in the updated National Energy and Climate Plans which are currently being drafted. See Annex 8 for
more details.
0
500
1000
1500
2000
2500
3000
3500
S1 S2 S3 LIFE S1 S2 S3 LIFE
2015 2020 2030 2040 2050
GW
Renewables
Nuclear
Fossil fuels
35
Figure 22: Net installed renewable capacity, 2015-2050
Source: PRIMES.
The increasingly high share of variable renewable electricity generation will increase
flexibility requirements. These flexibility needs will increasingly be addressed by new
flexibility technologies and storage solutions. Regarding the latter, pumped hydro storage
and increasingly batteries will allow to store electricity when demand does not match
supply. Albeit not the main driver, electrolysers may also provide some form of storage
in the form of power-to-power. Total capacity from technologies that may provide such
storage solutions is multiplied by 10 (from 50 to 350-530 GW) between 2020 and 2040
in the S1-S2-S3 (see Figure 23). Pumped-hydro storage capacity is projected to grow
from 50 GW in 2020 to 75 GW in 2040. Deployment of battery storage is projected to
accelerate after 2030, from 100 GW to 135-200 GW in S1-S2-S3 in 2040 enabling
mostly the daily and weekly storage of electricity. Electrolyser capacity increases from
30 GW in 2030 to 185-300 GW in 2040. The measures accompanying LIFE reduce the
need for flexibility, in particular of electrolyser capacity. Comparing the 2040 scenarios,
the increased deployment of renewables in S3 results in an additional 180 GW of
installed storage technologies in comparison to S1. Between 2040 and 2050, batteries and
pumped storage are projected to remain relatively stable, while electrolysers show
additional growth (from 300 to 535 GW).
Figure 23: Net installed storage and new fuels production capacity, 2015-2050
0
500
1000
1500
2000
2500
3000
3500
S1 S2 S3 LIFE S1 S2 S3 LIFE
2015 2020 2030 2040 2050
GW
0
100
200
300
400
500
600
700
800
900
1000
S1 S2 S3 LIFE S1 S2 S3 LIFE
2015 2020 2030 2040 2050
GW
Power-to-liquid
Power-to-gas
Electrolyzers
Pumped-hydro storage
Batteries
36
Source: PRIMES.
Power-to-X technologies provide additional flexibility in the future by adjusting
production levels to match the pattern of intermittent electricity generation. Installed
power-to-gas and power-to-liquid capacities remain relatively low amounting to 5-20
GW and 20-35 GW, respectively, by 2040. Power-to-X capacity further increases from
55 GW in 2040 to 85 GW in 2050.
Electricity is stored in the form of direct electricity storage (via pumped-hydro storage or
batteries) and chemical storage (via hydrogen or clean gas). Figure 24 shows the stored
energy across scenarios. Storage needs are currently met by pumped hydro storage and
increasingly batteries. The electricity stored in pumped hydro is projected to grow from
25 TWh in 2020 to 35-50 TWh in 2040. Batteries are expected to surpass pumped hydro
storage as the main source of providing storage between 2025 and 2030, reaching 160
TWh in 2030. By 2040, electricity stored in electrolysers (10-70 TWh) plays a minor role
in providing storage to the electricity system than that stored in batteries (200-240 TWh),
as the available electrolyser capacity to produce hydrogen (see Figure 23) will be used in
sectors other than the power sector. In 2040, methane storage, i.e., clean gas, will play a
minor role covering 4-15% of stored electricity in S1-S2-S3. The measures of LIFE are
projected to result in a slight reduction in stored electricity in 2040. The four scenarios
result in different compositions of stored electricity by technology. Methane storage
displays a crucial uptake in S3 where it reaches 50 TWh or 15% of all stored electricity
in 2040. The lower use of methane storage in S1 is compensated by hydrogen, which
covers 20% of the total stored electricity, in contrast to S3, where it only accounts for
4%. Until 2050, batteries remain the dominant electricity storage covering 63% of all
stored electricity. The amount of total stored electricity remains stable between 2040 and
2050 despite the uptake of renewables in the electricity mix.
Figure 24: Stored energy by technology, 2015-2050
Source: PRIMES.
The five models used for this impact assessment show a high degree of similarity in the
trajectory of the share of renewables in gross electricity generation, which increases quite
steeply over the course of this decade to fulfil the Renewable Energy Directive and then
at slower pace over the rest of the time horizon. Figure 25 shows the share of renewables
in gross electricity generation across models. Four out of five models reach a renewable
share in gross electricity generation around 85% in 2040, while one already achieves
0
50
100
150
200
250
300
350
400
S1 S2 S3 LIFE S1 S2 S3 LIFE
2015 2020 2030 2040 2050
TWh
Pumped-hydro storage
Methane Storage
Hydrogen storage
Batteries
37
90% by then. Then, in 2050 all five models identify that the share of renewables reaches
around 90% (87-93%) to achieve the 2050 climate neutrality objective.
Figure 25: Share of renewables in gross electricity generation, 2019-2050
Note: renewables include solar PV, wind, hydro, concentration solar power, biomass, geothermal, tidal and
marine.
Sources: AMADEUS-METIS, EU-TIMES, POLES, POTEnCIA, PRIMES.
It is worth noting that while the share of renewables is very similar across the five
models, the renewable electricity generation in absolute terms shows a large variation.
While all models feature an increase in renewable electricity generation over time, that is
more pronounced in PRIMES, POTEnCIA and EU-TIMES – which feature a very
similar trajectory – than in POLES and AMADEUS-METIS.
Projections for electricity generation across models show more variability as shown in
Figure 26. This happens because energy models have more degrees of freedom in
computing indicators such as electricity generation (compared to indicators such as GAE
that is constrained by assumptions on economic activity and by emissions reduction
targets). For example, in 2040 the POTEnCIA model projects 13% more electricity
generation than PRIMES, which is largely due to a higher number of heat pumps
deployed by the former model. On the other hand, PRIMES deploys significantly more
RFNBOs than POTEnCIA in 2040 and 2050, which results in higher electricity
generation in 2050 in PRIMES. POLES and AMADEUS-METIS show the lowest level
of electricity production throughout the time horizon and particularly in 2050. This is
mainly due to the fact that these models feature the smallest deployment of DAC and the
smallest production of e-fuels. Overall, these results highlight the fact that different
technology pathways are possible to reach the 2050 carbon neutrality target, which entail
different levels of gross electricity generation.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2019 2030 2040 2050
AMADEUS - METIS
EU-TIMES
POLES
POTEnCIA
PRIMES
Historic
38
Figure 26: Gross electricity generation in different energy models, 2019-2050
Sources: AMADEUS-METIS, EU-TIMES, POLES, POTEnCIA, PRIMES.
Figure 27 compares annual deployment of wind and PV in different scenarios to the
average of recent years (2016-2050, blue line) and to the maximum value reached in
2022 (green line).
Figure 27: Average annual deployment of wind and PV
Note: Blue line: average 2016-2020; Green line: max historical deployment (occurred in 2022).
Source: PRIMES
The pace of the energy transition will increase in the 2031- 2040 decade, both compared
to recent year and (especially in s ome scenarios) to the projections for 2030. Some
patterns emerge across scenarios. The effort in the S1 scenario in the decade between
2030 and 2040 is comparable or slightly lower to that required to reach the 2030 target.
However, in the 2041 – 2050 decade, the effort in S1 is significantly higher than in the
other scenario (see Figure 28).
39
On the contrary the S3 scenario anticipates decarbonisation in the years 2031-2040 with
lower effort required up to 2050. The S2 scenario lies in between S1 and S3. These
trends are repeated for several other key indicators and is particularly noticeable when
considering the annual increase in renewable power generation required to electrify the
energy system (see Figure 28).
Figure 28: Average change in renewable power generation
Source: PRIMES
The combined needs of carbon capture, RFNBOs and electrification of final demand will
require a very rapid increase in power generation. The rate of change up to 2040 is
extreme in the S3 scenario. On the contrary, S1 requires the largest increase by far up to
2050. In this respect the S2 scenario shows a safer trajectory with an effort better
balanced between the decades 2031 – 2040 and 2041 – 2050. Notably, LIFE allows to
contain the needs for decarbonised power compared to the other scenarios.
1.2.3. Gaseous fuels
The RepowerEU Plan aims at rapidly reducing Europe’s dependence on Russian fossil
fuels by fast-forwarding the clean transition and achieve a more resilient energy system.
REPowerEU builds on the full implementation of the Fit-for-55 package, but the fast
phasing-out of fossil fuel imports from Russia affects the transition trajectory – and how
we reach the EU climate neutrality target – compared to previous assumptions. The EU’s
consumption of natural gas is expected to reduce at a faster pace than expected before the
crisis (e.g., in the Climate Target Plan 2030).
Consumption of gaseous fuels is expected to decrease by between 54% and 68% between
2020 and 2040, reducing from 319 Mtoe in 2020 to 100 to 150 Mtoe in 2040 in S1-S2-S3
(Figure 29). The impact of the LIFE measures is projected to slightly increase the overall
consumption of gas. The consumption of gaseous fuels amounts to 100 Mtoe in the S3
scenario. By 2050, gas consumption in the EU is further declines to around 80 Mtoe.
0
50
100
150
200
250
300
2001-2010 2011-2020 2021-2030 2031-2040 2041-2050
TWh/year
S1 S2 S3 LIFE
40
Figure 29: Consumption of gaseous fuels in the gas network, 2040-2050
Note: the consumption of gaseous fuels hereby represented refers to gas consumed as transformation input in thermal
power stations and district heating plants, consumption of the energy branch, and gas available for final consumption
(including final non-energy consumption). It includes natural gas, clean gas and biomethane. Biogas is not covered in
this figure and related analysis as it is not injected in the gas network.
Source: PRIMES.
In the gas network, this decrease in the consumption of natural gas is partly compensated
by an increase in the consumption of biomethane. The sector with the largest absolute
decrease in consumption of gas in the gas networks by 2040 is the residential sector, with
-55 Mtoe (-70%) to -64 Mtoe (-82%) between 2020 and 2040. European energy policies
encourage building renovation and energy efficiency improvements in the residential and
commercial sector reducing the need for heating fuel.
Figure 30: Consumption of gaseous fuels by sector, 2040-2050
Note: Gaseous fuels include natural gas, biogas and biomethane.
Source: PRIMES.
Consumption of gaseous fuels per sector differs across scenarios in 2040, with notable
differences for some sectors. At this time horizon, gas consumption in the industrial
sector is higher in S1 compared to S3 (35 Mtoe versus 20 Mtoe). In the residential sector,
-
20
40
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160
S1 S2 S3 LIFE S1 S2 S3 LIFE
2040 2050
Mtoe
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S1 S2 S3 LIFE S1 S2 S3 LIFE
2040 2050
Mtoe
Other
Services and
agriculture
Transformation
input
Residential
Non-energy
International
shipping
Industry
41
consumption is also significantly higher in S1 compared to S3 (25 Mtoe versus 15 Mtoe)
as well as in agriculture and services (15 Mtoe versus 10 Mtoe).
Renewable hydrogen is a rapidly evolving technology and sector. The modelling results
for 2030 reflect the EU RFNBO targets, and associated hydrogen production, as per the
revision of the Renewable Energy Directive under the Fit-for-55 package. However, the
modelling for the future design of the post-2030 policy framework will take into account
the updates of the National Climate and Energy Plans due in June 2024. The
consumption of hydrogen as energy vector beyond traditional applications (like the
chemical sector and refineries) appears in the EU energy system and contributes to
decarbonise the hard-to-abate sectors and to support the operation of the power sector
with high shares of variables renewable energies providing seasonal storage. In this
decade, the consumption of hydrogen remains limited (see Figure 31), both because
hydrogen-based technologies are generally characterised by relatively low maturity level
and because the models prioritise the decarbonisation of sectors characterised by lower
marginal abatement costs. Hydrogen consumption rapidly scales up, achieving in 2040
55-95 Mtoe in the S1-S2-S3 scenarios. The production of e-fuels (both gaseous and
liquid) accounts for the lion’s share of total hydrogen consumption in 2040, followed by
industry and – very closely – transport (in the S1, in 2040 the consumption of hydrogen
in transport is higher than in industry). These three sectors alone account for more than
three-fourths of total hydrogen consumption in 2040 in all scenarios. As a large
deployment of e-fuels occurs in S3, this scenario experiences the highest level of
hydrogen consumption in 2040 (i.e., about 95 Mtoe) and is characterised by a
tremendous growth in hydrogen use in the next decade. The main driver of the higher
hydrogen consumption in the S3 scenario is the production of e-fuels, which consumes
by itself around 50 Mtoe of hydrogen. In 2050, the consumption of hydrogen doubles
with respect to 2040, attaining about 170-175 Mtoe in the S1-S2-S3 scenarios. LIFE
measures would reduce the production of hydrogen by around 15 Mtoe. In 2050, the
production of e-fuels continues being the main driver of hydrogen use in the EU energy
system (70-75 Mtoe across scenarios), followed by non-energy uses (about 30 Mtoe
across scenarios), then very closely followed by transport (about 30 Mtoe across
scenarios) and finally by industry (20 Mtoe across scenarios).
42
Figure 31: Consumption of hydrogen by sector, 2040-2050
Source: PRIMES.
1.2.4. Final Energy Consumption
Final Energy Consumption (FEC) declines steadily, attaining in 2030 the 763 Mtoe
targeted by the Energy Efficiency Directive (Figure 32). Then, FEC further reduces to
606-624 Mtoe in the S1-S2-S3 and scenarios. LIFE measures are projected to reduce
FEC by additional 12 Mtoe. In 2050, FEC reaches approximately 560 Mtoe. The fuel and
sector split of total FEC also changes progressively and the sector-specific drivers and
dynamics are described in the relevant sections (Sections 1.3, 1.4 and 1.5).
Figure 32: Final Energy Consumption by fuel, 2015-2050
Source: PRIMES.
The share of fossil fuels in total FEC decreases from above 60% in 2019 to 52% in 2030,
between 23% and 30% in 2040 under the various scenarios and 6% in 2050. Coal FEC
becomes very small in 2030 and disappears shortly after 2040, driven by phase out in
buildings after 2030 (pushed by the policies of several Member States) and by significant
reductions in industry after 2030. Encouraged by the gradually more stringent CO2
0
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2040 2050
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Transport
Non-energy
e-fuels production
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Oil
43
emission standards, oil FEC in 2030 reduces by 28% (108 Mtoe) compared to 2019
levels. After 2035, the reduction in oil FEC accelerates in light of the CO2 emissions
standards mandating sales of zero-emission vehicles only: in 2040, oil FEC attains
approximately 100-110 Mtoe in the S1-S2-S3 scenarios. Natural gas FEC gradually
reduces to only small quantities by 2040 (59
). That is mainly due to improved energy
performances of the building stock and to fuel switching towards mainly electricity in the
building sector and hydrogen and electricity in the industrial sector. Natural gas FEC
differs significantly in the S1 and S3 scenarios compared to the S2 scenario (-27% in S1
compared to S3 and -46% for S3), as the three scenarios are underpinned by different
renovation rates (see section 1.3.2) and fuel switching to hydrogen and e-fuels. The share
of renewable energy in gross FEC increases from 42.5% in 2030 (in line with the
Renewable Energy Directive target) to between 65% and 75% in 2040 (with the S3
scenario requiring 10% more renewable energy than S1).
The contribution of electricity in FEC increases across all scenarios, and electricity
becomes the dominating energy vector in final energy sectors. From 23% in 2015, the
share of electricity in final demand increases to more than 30% in 2030 (240 Mtoe), to
above 45% in 2040 across scenarios (280-290 Mtoe). The measures in LIFE reduce the
need for electricity in FEC by 9 Mtoe. In 2050, it reaches 57% (320 Mtoe). Such increase
is mainly driven by the uptake of electric vehicles in the transport sector, the penetration
of heat pumps in buildings and electrification of low and medium temperature industrial
processes.
Fossil fuels are also partially replaced by hydrogen and other RFNBOs, whose uptake
only scales up at the end of this decade. Renewable hydrogen is a rapidly evolving
technology and sector. The modelling results for 2030 reflect the EU RFNBO targets,
and associated hydrogen production, as per the revision of the Renewable Energy
Directive under the Fit-for-55 package. However, the modelling for the future design of
the post-2030 policy framework will take into account the updates of the National
Climate and Energy Plans due in June 2024.
Combined, RFNBOs account for 1% of total FEC in 2030 (5 Mtoe), 5-12% in 2040
(about 30-65 Mtoe) and 20% in 2050 (105 Mtoe). Measures from LIFE in 2040 have
only a limited impact on the FEC of RFNBOs. Hydrogen is mostly consumed by heavy-
duty trucks and in energy intensive industrial processes that can be hardly electrified.
Gaseous e-fuels are consumed in almost equal proportions by the industrial sector and by
the residential sector, and in lower amounts in the services sector as well. Liquid e-fuels
are consumed entirely in the transport sector. Under the S3 scenario, the decline of FEC
of oil and natural gas accelerates and in 2040 fossil fuels only account for approximately
23% of total FEC. This acceleration is driven by the need to rapidly reduce emissions in
industry, buildings and transport sectors, which should get to almost net zero in early
2040s.
All five energy system models used in this impact assessment project a major increase in
the contribution of electricity in total FEC, with high similarity in the overall trend in
four of the five models (see Figure 33). In particular, POTEnCIA features a higher level
of electrification than the other models from 2035 onwards: in 2040, it reaches 55% share
(59
) Natural gas is still used as feedstock for the industry after 2040.
44
of electricity in FEC compared to 43-46% in the other models and in 2050 it reaches 63%
compared to 49-57%. The higher electrification rate in POTEnCIA is mainly explained
by POTEnCIA’s technology choices in the transport and residential sectors, i.e.,
POTEnCIA features a larger adoption of heat pumps in buildings and higher roll-out of
electric vehicles.
Regarding the share of RFNBOs in total FEC, the different models show a larger
variability in the results, especially after 2035. In 2030, all five models see the
contribution of RFNBOs to total FEC at below 3%. Afterwards, a larger degree of
variability emerges in the results, with EU-TIMES showing the largest uptake – at 912 in
2040 and 21% in 2050 - and AMADEUS-METIS the smallest one – 3% in 2040 and 4%
in 2050. This suggests that while electrification of end-use sectors is broadly considered
a robust pathway for the decarbonisation of the EU energy system, there is more
uncertainty on the actual role that RFNBOs are going to play.
Figure 33: Share of electricity (left) and RFNBOs (right) in FEC, 2019-2050
Sources: AMADEUS-METIS, EU-TIMES, POLES, POTEnCIA, PRIMES.
FEC of district heating and renewable heating (solar thermal, biomass and geothermal) in
PRIMES slightly reduces over the time horizon, mainly due to better energy
performances of the building stock, without particular variations across scenarios. The
reduction of renewables FEC is lower than that of total FEC. As a result, the share of
renewable heating in total FEC grows from 10% in 2015 to about 15% in 2040 and 2050.
Among the end-use sectors, the residential sector is expected to experience the largest
reduction in energy consumption in this decade with almost -30% in 2030 (175 Mtoe)
with respect to 2015, triggered by dedicated policies and measures (Figure 34). The
residential sector is projected to further reduce its energy consumption by39-41% under
the S1-S2-S3 scenarios (around 140-150 Mtoe), up to reducing by 44% in 2050 (140
Mtoe). The measures of LIFE only have a minor impact.
Transport FEC undergoes a markedly different trajectory: the reduction with respect to
2015 is limited to -13% by 2030 (about 270 Mtoe), but afterwards it experiences a steep
reduction to reach -42% in 2040 (about 180 Mtoe) across all scenarios and -53% in 2050
(about 150 Mtoe) – the largest reductions across end-use sectors. Such dynamics is
largely explained by the CO2 emission standards, which are gradually tightening until
45
2030 and then from 2035 mandate sales of zero-emission vehicles only (See Section
1.5.3 for more details). The impact of LIFE further reduces FEC in transport by 9 Mtoe n
2040. FEC in services and agriculture combined reduces at slower pace than in the
residential sector, attaining -21% in 2030 (about 120 Mtoe) with respect to 2015; -25, -
29% under the S1-S2-S3 scenarios, and -29% in 2050 (about 110 Mtoe). Finally, industry
undergoes the smallest reduction in FEC of all end-use sectors throughout the time
horizon, with -13% in 2030 with respect to 2015 (about 200 Mtoe), -27% in 2030 (about
170 Mtoe) and -39% in 2050 (about 165 Mtoe). Such dynamics are mainly due to the fact
activity grows significantly in many energy-intensive sectors. Nevertheless, circular
economy measures, as well as material, resource and energy efficiency are able to
partially offset the economic growth and still lead to a FEC reduction in the sector (see
Section 1.4.2 and 1.4.3 for more details).
Figure 34: FEC by sector, 2015-2050
Source: PRIMES.
The above-mentioned sectoral dynamics lead to a different sectoral composition of FEC,
with industry and agriculture and services becoming relatively more important over time,
while residential and transport are declining.
The different scenario assumptions in the S1-S2-S3 scenarios have a somehow limited
effect on energy consumption by sector. For each sector considered, the differences
between scenarios are limited to approximately 5%.
Figure 35 compares projections for Final Energy Consumption from different energy
system models and finds good alignment between them. In 2030, all models fulfil the
target of the Energy Efficiency Directive, but different trends can be appreciated
afterwards. EU-TIMES in particular features the slowest pace of reduction in total FEC:
its total FEC is 14% and 21% higher than PRIMES’s total FEC in 2040 and 2050
respectively. EU-TIMES’ higher FEC than other models is largely explained by the fact
that it features the lowest degree of electrification of end-use sectors and the highest
reliance on RFNBOs (see also Figure 33). Results from the PRIMES and POTEnCIA
models are very close throughout the time horizon (with a maximum difference below
4% over the 2035 – 2050 period).
0
100
200
300
400
500
600
700
800
900
1000
S1 S2 S3 LIFE S1 S2 S3 LIFE
2015 2019 2030 2040 2050
Mtoe
Agriculture
Services
Industry
Residential
Transport
46
Figure 35: Total FEC from different energy models, 2019-2050
Sources: AMADEUS-METIS, EU-TIMES, POLES, POTEnCIA, PRIMES
1.2.5. Energy related CO2 emissions
Figure 36 illustrates the energy-related CO2 emissions profile over the modelling time
horizon for the main energy sectors and for all the scenarios assessed. Achieving the
climate neutrality objective in 2050 requires energy-related CO2 emissions in 2040 to be
in the range of 200-590 MtCO2 across scenarios. This is equivalent to a reduction in
CO2 emissions with respect to 1990 in the range of 83-94%.
Historically, the power generation and district heating sectors were the largest emitter of
CO2 from combustion processes. With about 1 010 MtCO2 emitted in 2015, it accounted
for 37% of all energy-related CO2 emissions. However, the power generation and district
heating sectors reduce CO2 emissions at the fastest pace across the energy system and are
the first achieving net-zero emissions. This result is in line with the findings of the public
consultation on the EU climate targets for 2040, where respondents have most frequently
identified “power generation and and district heating" as the first sector to achieve
climate neutrality. In 2040, less than 10 MtCO2 are emitted from these sectors in the S2
scenario (99% reduction with respect to 1990) and under the S3 scenario negative
emissions are achieved (thanks to BECCS) shortly before 2040. In 2050, these sectors
become a negative emitter in all the scenarios analysed, with 30-40 MtCO2 of negative
emissions, thus partially offsetting residual emissions from the other sectors. The
relatively fast pace in CO2 emission reductions from the power generation and district
heating sectors is explained by the stringency of the emission reduction target and the
availability of a broad set of technologies to generate carbon-free electricity backed by
proven storage technologies. The reductions in energy-related emissions for the other
energy sectors is discussed in dedicated sectoral sections.
47
Figure 36: Domestic energy-related CO2 emissions by sector, 2015-2050
Note: the transport sector covers road, rail, inland navigation, domestic aviation and other transport.
Source: PRIMES.
The energy-related CO2 emission reduction trajectory is very similar in the S2 scenario
across the energy models used in this impact assessment. Overall, there is good
agreement among the five energy models in identifying that energy-related CO2
emissions in 2040 should reduce between 86% and 90% compared to 1990 (Figure 37).
The AMADEUS-METIS model attains the largest CO2 emission reductions in 2050 and
EU-TIMES is the least ambitious model. In 2050, three models (i.e., AMADEUS-
METIS, POLES and POTEnCIA) attain negative energy-related CO2 emissions, while
the other two models achieve almost net-zero emissions.
Figure 37: Comparison of domestic energy-related CO2 emissions, 2021-2050
Note: the figures for the five energy models refer to the S2 scenario.
Sources: AMADEUS-METIS, EU-TIMES, POLES, POTEnCIA, PRIMES.
-500
0
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1500
2000
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3000
S1 S2 S3 LIFE S1 S2 S3 LIFE
201520202030 2040 2050
MtCO
2
Agriculture
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Energy branch
Residential
Industry
Transport
Power Generation/District
Heating
48
1.2.6. Raw materials’ needs
The manufacturing and deployment of net-zero technologies will increase the needs for
Critical Raw Materials (CRMs). With the scenario S3, the deployment of five net-zero
technologies (wind turbines, solar PV, batteries, electrolysers and heat pumps) in the
decade 2031-2040 would imply the need of up to 500 000 tonnes of copper each year.
This compares with a global copper demand of 26 million tonnes in 2022 according to
the IEA, including 370 000 tonnes for electric vehicles and 1.2 million tonnes for wind
and solar. In 2030, global demand for copper could achieve 261 million tonnes in the Net
Zero Emissions by 2050 scenario of the IEA (60
).
Wind power on its own would create needs of up to 50 000 tonnes of manganese and
125 000 tonnes of copper per year. Batteries would create needs of up to 900 000 tonnes
of aluminium, 80 000 tonnes of lithium and 60 000 tonnes of cobalt per year. Solar PV
would also create needs of gallium (50 tonnes per year) and germanium (3 000 tonnes per
year). Raw materials’ needs would be lower in scenarios S1 and S2, as in 2040, net
installed renewable power capacity is lower by 7% in S2 and by 16% in S1 compared
with S3. As regards batteries though, deployment is relatively comparable in S1, S2 and
S3, as battery capacity in 2040 is lower by only 1% in S2, and by 2.6% in S1 compared
with S3. As a comparison, global lithium demand in 2022 was 130 000 tonnes, including
69 000 tonnes for electric vehicles according to the IEA. In 2030, global demand for
lithium could be as high as 721 000 tonnes in the Net Zero Emissions by 2050 scenario
of the IEA (61
).
1.3. Buildings
The building sector (62
) (including the residential and services sectors) accounted for
42% of final energy consumption in the EU in 2021 (63
). The projections discussed below
show that in this decade energy efficiency measures – i.e., renovating the building
envelope and adopting minimum energy performance standards – is the main lever for
buildings to contribute to the Fit for 55 targets in 2030. By reducing the useful energy
needs, energy renovation enables to diminish the size of the heating and cooling
equipment, thus reducing related capital and running costs and shielding vulnerable
consumers from the impact of increasing energy prices. Fuel switching from fossils to
renewable electricity for space heating is a key decarbonisation lever throughout the time
horizon and is also essential to contribute to security of supply. In order to achieve
climate neutrality by 2050 and to achieve significant emission reductions already in
2040, electrification in buildings needs to be intensified and – to a lower extent -
accompanied by fuel switch to low-carbon gases. Besides, the push for high standard
renovation must be kept beyond 2030 at higher rates than historically.
(60
) IEA (2023), Critical Minerals Data Explorer, IEA, Paris https://www.iea.org/data-and-statistics/data-
tools/critical-minerals-data-explorer. Accessed on 05 December 2023.
(61
) Ibid
(62
) The model-based analysis is a technical exercise based on a number of assumptions that are shared
across scenarios. Its results do not prejudge the future design of the post-2030 policy framework.
(63
) Eurostat, Complete Energy Balances European Union (27 countries) – 2021, 2023.
49
1.3.1. Buildings activity
In the residential sector, the total floor area of households is projected to grow by 21%
and 26% respectively in 2040 and 2050 with respect to 2015. Although the European
population is projected to remain quite stable in the first half of the century (less than 1%
reduction in 2050 compared to 2015), the total floor area of households grows due to two
concurring dynamics:
• The average number of inhabitants per household is projected to reduce over
time, which tends to increase the number of dwellings.
• The average size of the houses is projected to grow, as new houses have
significantly larger surfaces than the existing ones.
In the commercial and services sector, the overall floor area of the buildings is projected
to slightly reduce reaching in 2040 and beyond a floor area around 5% higher than 2015.
These socio-economic dynamics push up the energy consumption in building, which
makes the effort to mitigate energy demand and CO2 emissions of buildings harder.
Heating degree days (HDD) and cooling degree days (CDD) are climate-based indicators
commonly used to represent buildings’ space heating and cooling needs in energy system
models. HDDs and CDDs in historic years are based on EUROSTAT, and projections
depart from statistics considering the effect of climate change on these indicators based
on the findings of climate models (64
). Projections of HDDs and CDDs are the same
across the S1-S2-S3 scenarios, where - due to rising global average temperature - in the
future HDDs are assumed to reduce in all member states with respect to today. In
particular, in most member states the reduction in 2050 is in the range of -3/-11%
compared to 2022. Consistently, CDDs are assumed to increase in all Member States
compared to today. In particular, Member States characterised by colder climates, which
today do not use air conditioning or make very limited use of it, are expected to increase
CDDs the most in the future in relative terms, in some cases more than tripling compared
to today (65
). LIFE assumes a decrease/increase of the thermostat setpoint for heating and
cooling respectively to mimic behavioural change related to thermal comfort. The
thermostat setpoint is changed gradually, reaching +/-1.5 degrees in 2040 and remaining
at that level until 2050.
1.3.2. Energy efficiency in buildings
Energy efficiency in buildings consists in two main types of action. For existing
buildings, it implies renovating the building envelope - in order to reduce the demand for
space heating and cooling while ensuring high comfort levels – and deploying
renewables and energy efficient equipment for heating, cooling, cooking and appliances.
(64
) Dosio, A, Fischer, E.M. (2018): Will half a degree make a difference? Robust projection of indices of
mean and extreme climate in Europe under 1.5°C, 2°C and 3°C global warming, Geophysical
Research Letter, 45(2), 935-944, DOI:10.1002/2017GL076222
(65
) Energy consumption associated to cooling buildings is much lower than the one associated to heating
and thus a large growth in CDDs provides a limited contribution to the overall change in building
energy (see Figure and Figure ).
50
For new buildings, it implies sticking to the minimum energy performance standards, as
outlined in the Energy Performance of Buildings Directive (EPBD).
The current policy context is expected to significantly reduce energy consumption in
buildings already in the course of this decade. Climate neutrality by 2050 requires
reductions in buildings’ energy demand beyond the levels reached in 2030. Encouraged
by several policy initiatives that extend their impact after 2030, as well as by possible
long-term effects of current energy crisis and pressure on gas imports, energy savings in
buildings reach 35-38% across scenarios in 2040 and 40% in 2050. The residential sector
would contribute more than the services sector to the overall energy savings in buildings,
with 29% savings in 2030 with respect to 2015 (vs 23% savings in services), 39-41%
across scenarios in 2040 (27-32% savings in services) and 44% in 2050 (31% savings in
services).
The most important energy use in buildings is for space heating, which in 2015
accounted for more than three-quarters of final energy consumption in buildings.
Figure 38: FEC in the residential sector by energy service, 2015-2050
Note: heating refers to both space heating and water heating.
Source: PRIMES.
0
50
100
150
200
250
300
S1 S2 S3 LIFE S1 S2 S3 LIFE
201520202030 2040 2050
Mtoe
Heating and cooking
Electric appliances and
lighting
Cooling
51
Figure 39: FEC in the services sector by energy service, 2015-2050
Note: “Heating” refers to both space heating and water heating.
Source: PRIMES.
Final energy consumption related to heating in buildings is projected to reduce by one
third in 2030 compared to 2015, by 46-47% across the S1-S2-S3 scenarios and by 51% in
2050, with almost identical dynamics in the residential and services sector (66
). Final
energy consumption related to cooling buildings accounted for only 2% of the total in
2015, but its share is projected to double by 2040 mainly due to higher comfort needs.
The final energy consumption of appliances and lighting accounted for less than 20% of
total energy consumption in buildings and the dynamics of this end-use sector are
outlined in detail in Section 8.1.3.4 below.
The reduction of energy demand for space heating & cooling is largely achieved via the
improvement of the thermal integrity of the building envelopes via increased renovation
rates of existing buildings and high energy performance standards for renovated and new
buildings. Renovation rates of the building envelope increase significantly in the future
compared to historically observed rates. Higher renovation rates are encouraged by
existing policies (e.g., the EPBD, ETS2, Energy Efficiency Directive) and increasing
material circularity, and assuming that market failures - such as access to finance and
split-incentives - that currently limit renovations are addressed.
(66
) The figures on heating include energy used for space heating, water heating and cooking, although the
two latter have minor contributions.
0
20
40
60
80
100
120
140
S1 S2 S3 LIFE S1 S2 S3 LIFE
201520202030 2040 2050
Mtoe Heating and cooking
Electric appliances and
lighting
Cooling
52
Figure 40: Renovation rates in the residential and services sectors, 2020-2050
Source: PRIMES
Over the course of this decade, the residential sector doubles the building shell
renovation rate, from 0.9% in 2020 to 2.2% in 2030 and 1.4% to 1.9% in 2040. The
faster renovation rate of buildings than historically is in line with the findings of the
public consultation on the climate target for 2040: 80% of individuals and 64% of
organisations claim that the transition to climate neutrality should accelerate up to 2040.
In the S3 scenario, the renovation rate in the residential sector changes to 1.6% in 2040
and then stabilises at that level. The S3 and S1 are characterised by opposite dynamics
after 2030. The S3 scenario anticipates the renovation effort in the next decade (attaining
1.9% in 2040, the maximum across scenarios) and then limits the renovation in 2050 to a
rate of 1.4% (the minimum level across scenarios). On the other hand, the S1 scenario
after 2030 reduces substantially the renovation rate (attaining 1.4% in 2040) to then
accelerate it in the 2040-2050 decade until 1.9% in 2050 (the highest level across
scenarios) to compensate for missed climate action in the earlier decade. Similarly, in the
services sector the renovation rate increases from 0.5% in 2020 to 0.6 to 1.3% in 2040. In
the S2 scenario it gradually reduces (although at higher levels than historical) to 0.9% in
2040 and finally stabilizes at that level. The S1 and S3 scenarios show similar dynamics
as in the residential sector, with the S3 anticipating the renovation effort and the S1
delaying it to the last decade of this analysis.
The renovation rates discussed above lead to 29% of the EU residential buildings fleet
having been renovated in 2030, up to 40%-43% in the S1-S2-S3 scenarios) and finally to
55% in 2050. Regarding the services building fleet, 15% get renovated by 2030, 20% in
the S2 scenario in 2040 (between 18% and 22% in the S1-S2-S3 scenarios) up to 32% in
2050.
0,0%
0,5%
1,0%
1,5%
2,0%
2,5%
2020 2030 2040 2050
S1 S2 S3 LIFE
0,0%
0,5%
1,0%
1,5%
2,0%
2,5%
2020 2030 2040 2050
53
The improvement of the energy performance standards and the renovation of the building
fleet contribute to a gradual reduction in the average useful energy consumption for space
heating (Figure 41). For new dwellings, the average useful energy for space heating at
EU level will be pushed down from 36 kWh/m2
/year in 2015 to 32 in 2030 (-11%), to 27
in 2040 across scenarios (-25% compared to 2015) and 24 kWh/m2
/year in 2050.
Existing dwellings will reduce useful energy for space heating from almost 80
kWh/m2
/year in 2015 to 66 in 2030 (-14% compared to 2015), 54-57 in 2040 across
scenarios (-25/29% compared to 2015) and approximately 48 kWh/m2
/year in 2050 (-
36% compared to 2015).
Figure 41: Average useful energy for space heating (S3)
Source: PRIMES.
1.3.3. Fuel mix in buildings
The main trend related to the fuel mix that can be observed in buildings is the rapid
growth of electricity consumption and the decrease of fossil fuels (notably natural gas)
(see Figure 42 and Figure 43). In 2015, fossil fuels accounted for almost half of the final
energy consumption in the buildings sector (about 170 Mtoe), with natural gas giving the
largest contribution (about 110 Mtoe). By 2040, fossil fuels account for 9-15% under the
S1-S2-S3 scenarios (20-37 Mtoe). In 2040 the consumption of oil and coal in buildings is
almost entirely phased-out in all scenarios. By 2050, natural gas is phased-out from
buildings as well.
Electricity becomes the backbone of the buildings sector. It increases from one-third of
buildings energy demand in 2015 (about 120 Mtoe), to more than half in 2030 (140
Mtoe), up to 61-64% under the S1-S2-S3 scenarios (about 150 Mtoe) in 2040 and 67% in
2050. The electrification pattern is quite different between the residential and services
sectors. In the residential sector, the share of electricity is projected to grow from one-
fourth today to just above 40% in 2030, 53-56% across the S1, S2 and S3 scenarios in
2040 and up to 60% in 2050. In services, the electricity share today is already much
higher: almost 50% and would increase to around two-thirds in 2030, more than 75% in
all scenarios in 2040, until achieving almost 80% in 2050.
0
10
20
30
40
50
60
70
80
90
2020 2030 2040 2050
kWh/m
2
Existing stock
New dwellings
Total
54
Figure 42: FEC in the residential sector, 2015-2050
Note: Biomass and waste include non-renewable waste. Ambient heat is not shown.
Source: PRIMES.
Figure 43: FEC in the services sector, 2015-2050
Note: Biomass and waste include non-renewable waste. Ambient heat is not shown.
Source: PRIMES.
Electrification of the buildings sector is characterised by the deployment of efficient
electric heating and cooling technologies (notably heat pumps), energy efficient
appliances and LED lighting. Efficiency of the electricity use in the buildings sector is
well illustrated by the fact that the growing use of equipment consuming electricity is
accompanied by limited growth in absolute electricity consumption: from 123 Mtoe in
2015 to almost 140 in 2030 (+12% compared to 2015), almost 150 Mtoe in 2040 across
scenarios (+21% compared to 2015) and almost 155 Mtoe (+24%) in 2050.
Since space heating accounts for the lion’s share of energy consumption in buildings,
fuel switch in buildings’ heating services is the key avenue for buildings to contribute to
the carbon neutrality objective in 2050 and to curb emissions in 2040. Electrification of
space heating and cooling is driven by the uptake of heat pumps (triggered partly by
RepowerEU Plan), which experience a tremendous growth especially in the next two
decades (see Figure 44).
0
50
100
150
200
250
300
S1 S2 S3 LIFE S1 S2 S3 LIFE
201520212030 2040 2050
Mtoe
Syntethic fuels
Hydrogen
Geothermal and solar heat
Coal
District heating
Petroleum products
Biomass and waste
Electricity
Natural gas
0
20
40
60
80
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S1 S2 S3 LIFE S1 S2 S3 LIFE
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Mtoe
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Hydrogen
Geothermal and solar heat
Coal
Biomass and waste
District heating
Petroleum products
Natural gas
Electricity
55
Figure 44: Stock of heat pumps in the residential and services sector, 2015-2050
Source: PRIMES.
Hydrogen and gaseous e-fuels (67
) start featuring an uptake in the buildings sector from
2035 and partially substitute the use of natural gas, thus supporting the phase out of such
fossil fuel (see Section 1.2.4). However, the consumption of RFNBOs in the buildings
sector remains extremely limited, at 1-3% in the S1-S2-S3 scenarios and below 10% in
all scenarios in 2050.
Renewable energy sources (such as geothermal and solar heat) have marginal shares in
buildings energy consumption and only experiences a moderate growth during the time
horizon. Rather, the use of heat pumps with electricity provided by solar PV is expected
be a more competitive technology option underpinned by faster cost reductions. Biomass
(used in modern stoves) broadly maintains constant its share of energy consumption in
buildings throughout the projections’ time horizon. In the residential sector, where
biomass accounted for 17% of residential energy consumption in 2015, the consumption
of biomass almost halves between 2015 and 2050, at the same pace as total energy
consumption in the residential sector. (68
) In the services sector, the share of biomass
remains stable as well, although at much lower level than in the residential sector -
around 3%. District heating increases slightly its share of total energy demand in
buildings reaching approximately 11% in 2040 in all scenarios.
It is worth noting that the role of RFNBOs in the decarbonisation of the building sector is
highly uncertain. A literature review has found out that hydrogen’s role in global energy
scenarios is extremely inconsistent: only two out of ten studies reviewed feature a
contribution of hydrogen to space heating, which is less than 15% of total space heating
(67
) Renewable hydrogen is a rapidly evolving technology and sector. The modelling results for 2030
reflect the EU RFNBO targets, and associated hydrogen production, as per the revision of the
Renewable Energy Directive under the Fit-for-55 package. However, the modelling for the future
design of the post-2030 policy framework will take into account the updates of the National Climate
and Energy Plans due in June 2024.
(68
) Future analyses may assume other supply levels of biomass to stay within the sustainability
boundaries, in view of the on-going scientific debate.
0
20
40
60
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100
2015 2020 2025 2030 2035 2040 2045 2050
millions
Stock of heat pumps
Services
Residential
56
demand even in the most hydrogen ambitious scenarios in 2050. (69
). Another recent
literature review has found out that few EU energy system models see RFNBOs used in
buildings in 2030 (and with a share below 1% of total energy consumption in buildings).
In 2040, more models feature hydrogen demand in buildings, which remains below 6%
of final demand. In 2050, EU models are characterised by very different levels of
RFNBOs consumption in buildings, ranging from nothing or extremely low levels up to
16% of final demand in buildings.
Both PRIMES and POTEnCIA project a similar growing trajectory in terms of combined
share of gaseous fuels (natural gas, hydrogen and synthetic gas) and electricity in total
buildings' FEC (Figure 45). However, the two models differ in that PRIMES features a
higher and longer reliance on the gas network to fulfil buildings’ energy needs, while
POTEnCIA features a deeper and faster electrification. Such difference is partially
explained by the fact that PRIMES reduces the carbon intensity of the gas mix provided
to buildings by producing RFNBOs to be injected in the gas network earlier and in larger
amounts.
Figure 45: Contribution of electricity and gaseous fuels to buildings’ FEC, 2030-2050
Sources: POTEnCIA, PRIMES
This analysis underlines that a very similar level of decarbonisation of the building sector
– as other sectors - can be achieved via different pathways, with the largest differences
around 2040. The balance between the use of heat pumps rather than RFNBOs to heat
households has important implications on the economics of the gas network and on the
sizing of the electricity distribution network.
(69
) Quarton C.J, Tlili O., Welder L., Mansilla C., Blanco H., Heinrichs H., Leaver J., Samsatli N.J.,
Lucchese P., Robinius M., Samsatli S. (2020), The curious case of the conflicting roles of hydrogen in
global energy scenarios, Sustainable Energy Fuels, 4, 80, DOI: 10.1039/c9se00833k
57
1.3.4. Appliances
The growing number of dwellings (Section 1.3.1), higher GDP and living standards drive
up the number of appliances (Figure 46). Compared to 2015, the stock of black
appliances grows by 44%, 68% and 86% respectively in 2030, 2040 and 2050
respectively70
. Information and communication appliances experience the largest growth,
more than doubling their stock already in 2030. The stock of white appliances grows at
slightly lower pace, by 41%, 55% and 65% respectively in 2030, 2040 and 2050 with
respect to 2015 (71
). The growth of the stock of lighting equipment is more limited
compared to that of appliances.
Figure 46: Stock of black and white appliances and of lighting equipment, 2015-2050
Note: the stock of appliances and of lighting equipment does not vary across scenarios.
Source: PRIMES.
Such ever increasing number and use of appliances is moderated by energy efficiency
measures (such as eco-design and energy labelling legislation targeting the energy
efficiency of appliances) resulting in almost constant electricity demand from appliances
and lighting, at around 35 Mtoe throughout the projections’ time horizon (see Figure 47).
Since energy demand for space heating is projected to reduce significantly, the share of
energy demand for appliances out of total energy demand in buildings grows from 14%
in 2015 to 19% in 2030, 23% in 2040 and 26% in 2050 across scenarios.
(70
) Black appliances refer to vacuum cleaners, small appliances, information and entertainment
appliances.
(71
) White appliances refer to dishwasher, dryers, freezers, refrigerators and washing machines.
58
Figure 47: Electricity demand associated to appliances and lighting, 2015-2050
Source: PRIMES.
1.3.5. CO2 emissions from buildings
Direct CO2 emissions from buildings experience a rapid decrease already in this decade,
from about 450 MtCO2 in 2015 to 190 MtCO2 in 2030, i.e., -57% (Figure 48). Then, CO2
emissions further reduce to about 50-90 MtCO2 under the S1-S2-S3 scenarios in 2040
and reach almost zero emissions in 2050 for all scenarios. The residential and services
sectors face a similar pace of CO2 emission reductions throughout the projection time
horizon. This is largely explained by the fact both sectors rely on essentially the same
mitigation options, which have very similar costs, and are triggered by the same policy
measures.
Figure 48: Buildings CO2 emissions trajectory by sector, 2015-2050
Note: CO2 emissions shown in the figure are only direct emissions, i.e., related to the combustion of fuels
consumed in the building sector. Emissions related to the production of the electricity and RFNBOs consumed
in the buildings sector are accounted in the upstream sectors.
Source: PRIMES.
The CO2 emissions discussed above only account for direct CO2 emissions, i.e., those
directly related to the combustion of fuels consumed in the building sector. Instead,
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59
emissions associated to the production of electricity and RFNBOs consumed by
buildings are accounted in the upstream sectors. Given that the buildings sector is
expected to experience a significant electrification (see Figure 42 and Figure 43) and to
consume – to a lower extent – RFNBOs, the building sector is responsible for significant
amounts of indirect CO2 emissions as well. However, the power generation sector is set
to decarbonise rapidly and become completely carbon neutral by around 2040.
The reduction in CO2 emissions from buildings is achieved mainly via the faster rate of
renovation of the buildings’ envelopes, which reduces the overall energy consumption,
and by the replacement of fossil fuels space heating equipment with heat pumps. The
deployment of renewables and the blending of low-carbon gases in the gas network also
contributes to lower emissions. As discussed in detail in Sections 1.3.2 and 1.3.3, these
transformations are largely driven by climate policies extending their impact beyond
2030, such as the ETS2. Finally, CO2 emission reductions are also achieved by reducing
energy consumption from heating, cooling and cooking equipment and appliances –
driven by the eco-labelling policy.
1.4. Industry
1.4.1. Introduction
According to IEA, global industry (72
) accounts for one-third of total final energy
consumption, and the CO2 emitted (9 GtCO2) represents one-quarter of all energy and
process CO2 emissions (73
). In the EU, industrial emissions have been decreasing
steadily since 1990, overcoming also the rebound due to the restart of economic activity
after the COVID-19 pandemic (74
), and in 2020, they represented 26% of total net GHG
emissions (75
).
No silver bullet exists to decarbonise industry, and different solutions are to be
implemented to the various subsectors to achieve climate neutrality. Reduction of raw
materials demand, for instance by implementation of circular economy and demand-side
actions, can reduce emissions by 20% in 2040 (76
). Energy efficiency, together with
indirect and direct electrification can reduce emissions by 25% (77
), acting on the
industry energy needs. Replacement of fossil fuels by bio- and e-fuels can contribute to
decarbonisation where electrification is not technically possible and carbon capture can
be implemented where low carbon alternative processes have limited potential. Literature
(72
) The model-based analysis is a technical exercise based on a number of assumptions that are shared
across scenarios. Its results do not prejudge the future design of the post-2030 policy framework.
(73
) IEA, (2022). Achieving Net Zero Heavy Industry Sectors in G7 Members.
(74
) COM/2022/514 final
(75
) McKinsey, (2020). Net-Zero Europe Decarbonization pathways and socioeconomic implications.
(76
) Kalcher, L. et al., (2023). The post-2030 climate target debate starts now, Strategic Perspectives and
Climact. https://strategicperspectives.eu/the-post-2030-climate-target-debate-starts-now/
(77
) Madeddu, S., et al. (2020). The CO2 reduction potential for the European industry via direct
electrification of heat supply (power-to-heat). Environmental Research Letters, 15(12), 124004.
60
shows that combining all approaches can reduce industrial emissions by 86% in 2050
compared to 2019 (78
).
1.4.2. Activity
The activity in the three main scenarios build on a continuation of trends of sector-
specific material demand and associated production. LIFE illustrates how a more
efficient use of materials resources, through technological innovations and a higher
circularity of the EU’s economy, can impact positively sectoral CO2 emissions.
Future production of steel in EU is likely to maintain current levels (79
), and this trend is
reflected in the main scenarios, where sector decarbonisation happens mainly through the
increase of electric arc furnace share and a larger use of hydrogen in the reduction of iron
ore (80
). A more efficient use of steel and an increasing recycling rate could lead to a
decrease in primary production and an increased share of secondary steel, reducing
overall demand by up to 15-17% in the period 2040-2050 compared to the most recent
years (77
)(78
). LIFE follows this approach and projects a decrease in demand of around
15% in 2050 (25% of primary) compared to the main scenarios.
According to BNEF (79
), global production for aluminium is projected to increase by
around 40% by 2050, intensifying especially secondary aluminum. Studies also show
that a more efficient use of this material, especially in terms of scrap recycled and
lifetime extension of products, can instead maintain production level to similar values as
today (77
). In S1, S2 and S3, an increase of aluminum production of around 35% until
2050 is assumed, while LIFE models an optimisation of material use resulting in a
reduction of 20% of production when compared to the main scenarios.
The paper sector is expected to moderately increase production, as the decline in
printing-related paper production is outweighed by growth in packaging and sanitary
paper products (81
). The high recyclicling rates of today are projected to increase
further (82
), expanding the secondary share of production and unlocking the possibility to
reduced paper demand of up to 14% in 2050 (vs 2015) (78
). The modelling captures these
trends, projecting a 5% increase of production by 2050 in S1, S2 and S3 and a decrease
in LIFE of around 20% in 2050 (40% for primary), thanks to higher recycling rates and
material efficiency, and implementation of reusable packaging.
Production of cement (including clinker) in EU is assumed to increase by around 20% in
the main scenarios by 2050 (79
). However, low-carbon cement alternatives, high share of
recycled cement in concrete, and changes in lifetime and utilisation rate of buildings
could decrease demand, with estimates showing lower demand by 25% in 2040
(78
) CLEVER, (2023). Climate neutrality, Energy security and Sustainability: A pathway to bridge the gap
through Sufficiency, Efficiency and Renewables, Final Report. https://clever-energy-scenario.eu/wp-
content/uploads/2023/06/clever_final_report-exec_summary.pdf
(79
) BNEF, (2023). New Energy Outlook: Industry.
(80
) Agora Industry and Wuppertal Institute, (2023). 15 insights on the global steel transformation.
(81
) IEA, (2023). Tracking Clean Energy Process, Tracking Pulp and Paper.
(82
) Directive 94/62/EC (Amended by Directive(EU) 2018/852).
61
compared to 2019 (77
) or by 38% in 2050 compared to 2015 (78
). LIFE assumes a
demand-driven production around 25% lower in 2050.
The global demand for petrochemicals, including a larger share of chemically recycled
feedstock, is projected to double by 2050 compared to 2021, with the EU representing
around 4% of market share by mid-century (79
). In the main scenarios, an increase of
demand for organic chemical and petrochemicals in end-user products of around 23%
with respect to the average production in 2015-2020 is assumed, taking also into account
a steep increase in recycling rate. According to literature, additional demand-side actions
could lead to an optimisation of production of chemicals, with savings of up to around
28% of olefins and ammonia in 2040 (vs 2019) (77
) and up to 23% in 2050 (vs 2015)
when encompassing all chemicals (78
). Introduction of additional measures in LIFE such
as a ban of single use water bottles and strong reduction of plastic-packaging are
projected to save approximately 15% of primary input material in 2050.
Table 8 summarises the variation of industrial production assumed in the analysis.
Table 8: Assumptions on evolution of industrial domestic production for selected materials
S1, S2, S3 LIFE
2050 vs 2015 vs S1, S2, S3 in 2050
Steel 0% -15% (-25% primary)
Aluminum 35% -20%
Paper 5% -20% (-40% primary)
Cement (including clinker) 20% -25%
Petrochemicals and organic materials 25%* -15%
Note: *Value calculated with respect to the 2015-2020 average production.
1.4.3. Final Energy Consumption
As result of improved energy efficiency and changes in activity, energy consumption (83
)
in the industrial sector decreases by around 20% in the 2031-2040 decade and by 7
additional percentage point in 2041-2050 (vs 2030) in the main scenarios, showing that a
significant part of the mitigation potential allocated to efficiency improvement is attained
already by 2040. LIFE shows for 2040 a nearly identical value as the other scenarios and
for 2050 an additional reduction of few percentage points (Figure 49).
(83
) Final energy consumption (FEC) and consumption in refineries
62
Figure 49: Final Energy Consumption in industry by sector
Note: *The iron and steel sector includes blast furnaces.
Source: PRIMES.
When looking at the share of the different fuels in industry consumption (Figure 50), the
model shows an increasing electrification trend in all scenarios. Electrification share
reaches around 48% in 2040 and 62% in 2050 from around 21% in 2021 (84
), in line with
figures of around 50% in 2040 and 60% in 2050 projected by Eurelectric (85
). The model
also shows a progressively higher contribution of RFNBOs, representing around 1%,
10% and 18% of FEC in 2030, 2040 and 2050. Electrification share in Final Energy
Consumption (FEC-E) varies little across scenarios, indicating that it is based on a
number of commercial technologies and consolidated trends already available in S1 and
deployed similarly across S1, S2 and S3. Fossil fuels, in particular natural gas, are
replaced partially by biofuels and mostly by an increasing amount of RFNBOs, in
particular hydrogen, whose share in FEC-E increases from 7% to 9% and 12% when
moving from S1 to S2 and S3 (Eurelectric shows hydrogen shares of around 10-
15% (86
)). LIFE shows a use of RFNBOs in line with S2 and more moderate compared to
S3: additional emission reductions in sectors outside energy and industry slightly delays
the need for extensive deployment of e-fuels. In 2050, almost all fossil fuels disappear, as
result of complete fuel switch in furnaces and introduction of alternative heating
processes.
(84
) Eurostat, (2023). Complete Energy Balances European Union (27 countries) – 2021.
(85
) Eurelectric (2023). Decarbonisation speedways: Accelerating Europe’s journey to net zero with
realistic 2040 targets. Slide 19. https://www.eurelectric.org/publications/decarbonisation-speedways-
full-report
(86
) Ibid
0
50
100
150
200
250
300
S1
S2
S3
LIFE
S1
S2
S3
LIFE
20152030 2040 2050
Mtoe
Refineries
Other Industry Sectors
Textile
Engineering & Other Metals
Food, Beverages & Tobacco
Pulp, Paper & Print
Chemicals
Non-Ferrous Metals
Non-Metallic Minerals
Iron & Steel*
63
Figure 50: Energy Consumption in industry by fuel
Note: The energy consumption includes the final energy consumption plus the consumption in refineries.
*Natural gas including manufactured gas (coke-oven gas, blast furnace gas & gasworks gas), but not e-gas.
**Bioenergy including bio-solids, biofuels, biogas (including waste gas and biomethane) and solid waste.
Source: PRIMES.
1.4.4. Final Non-Energy Consumption
Figure 51 shows the evolution non-energy consumption in industry, representing fuels
that are used as raw materials (for instance oil transformed in plastics or bitumen used in
road construction). In 2031-2040, total consumption is maintained around 2030 levels,
while significant changes occur in 2041-2050: fossil fuels which represents around 90%
of the industrial feedstock until 2040 decrease by 15 Mtoe and are partially replaced by
hydrogen and electricity. In the same decade, hydrogen increases of around 25 Mtoe.
Negligible differences can be found between S1, S2 and S3. A small decrease in non-
energy consumption in LIFE is projected in around 5% in 2040 and 10% in 2050, as
result of decrease in activity in the petrochemical and other industrial sectors.
0
50
100
150
200
250
300
S1
S2
S3
LIFE
S1
S2
S3
LIFE
2015 2030 2040 2050
Mtoe Others
Electricity
Other RES
Bio-energy**
Marketed heat
Hydrogen
E-gas
E-liquids
Natural gas*
Liquid fossil fuels
Solid fossil fuels
64
Figure 51: Final Non-Energy Consumption in industry by fuel
Note: *including manufactured gas (coke-oven gas, blast furnace gas & gasworks gas), but not e-gas.
Source: PRIMES.
1.4.5. CO2 emissions from industry
1.4.5.1.Energy-related CO2 emissions
Significant reduction of the energy-related CO2 industrial emissions appears in the decade
2031-2040: -47% in S1, -63% in S2 and -80% in S3 (Figure 52). Emissions reduce in all
sectors, as result of electrification process and gradual uptake of RFNBOs and carbon
capture technologies. The variation across scenarios for all main sectors ranges between 12
and 32 percentage point, with the chemical sector achieving the highest reduction in 2040
(down to 82% below 2030 level). The iron and steel emissions achieve around -55% in S1,
-65% in S2 and -70% in S3 when compared to 2030 levels. These values result from an
increased electrification occurring in S1, on top of which carbon capture and RFNBOs
deploy progressively in S2 and S3. In 2050, an even higher share of electricity and
RFNBOs in industrial consumption (see Figure 49), together with larger development of
carbon capture, reduce or eliminate further residual emissions in all sectors in a similar
way across the three scenarios.
LIFE shows emissions higher than S3 and in line with S2 in 2040, since the additional
reductions in non-CO2 and the LULUCF allow for less constraints in the energy and
industrial emissions. This translates into a lower use of RFNBOs in 2040 (see also Figure
50) and a lower amount of carbon captured in 2050.
0
20
40
60
80
100
120
S1
S2
S3
LIFE
S1
S2
S3
LIFE
2015 2030 2040 2050
Mtoe
Electricity
Hydrogen
Natural gas*
Liquid fossil fuels
Solid fossil fuels
65
Figure 52 : Energy-related CO2 emissions in industry by sector
Source: PRIMES.
1.4.5.2.Process-related CO2 emissions
Figure 53 shows that process-related CO2 emissions, are projected to decreased by around
30% in 2030 compared to 2015. In 2040, emissions amount respectively to around 135, 85
and 10 MtCO2 in S1, S2 and S3, i.e., reducing approximately between 20% and 95% (vs
2030). By 2050, all scenarios show negligible residual emissions.
Figure 53: Process CO2 emissions in industry by sector
Note: Metal production includes both ferrous and non-ferrous materials. For 2050, S1 and S2 values are similar
to S3 and not represented.
Source: PRIMES
The role of carbon capture (87
) is pivotal to explain differences on total net process
emissions across scenarios in 2040 and the negligible emissions in 2050 (Figure 54). In S1
(87
) Industrial challenges explained in 1.1.3.2 are associated to the development of carbon capture, but
these challenges are assumed to be overcome in the projections.
-50
0
50
100
150
200
S1
S2
S3
LIFE
S1
S2
S3
LIFE
2040 2050
Refineries
Other Industry Sectors
Textile
Pulp, Paper & Print
Engineering & Other Metals
Food, Beverages & Tobacco
Chemicals
Non-Ferrous Metals
Iron & Steel
Non-Metallic Minerals
-50
50
150
250
350
450
550
2015 2030
MtCO2
0
50
100
150
200
250
2015 2030
MtCO2
-25
0
25
50
75
100
125
150
S1
S2
S3
LIFE
S1
S2
S3
LIFE
2040 2050
Other
production
Chemical
industry
Mineral
products
Metal
production
66
only around 40 MtCO2 are projected to be captured in 2040, in line with the limited
uptake of capture technologies. This value leaps to around 120 MtCO2 in S2, of which
around 65% goes to e-fuel production and 35% goes to underground storage (see Figure 11
section 1.1.3.2). The stored CO2 is not considered as emitted, and total net industrial
process emissions reduce by a corresponding amount. In S3, the carbon captured increases
moderately compared to S2, but it is mostly stored underground or in materials and not
dedicated to e-fuels productions, reducing further the net process emissions. By 2050, the
amount of total carbon captured increases for S1, and it is similar to 2040 values for S2,
but in both scenario it is fully stored either underground or in materials, reducing net
emission further than in 2040 and reusing CO2 within the industry. In S3, a similar amount
of carbon is captured yearly between 2040 and 2050, resulting in limited reduction in net
emissions in the 2041-2050 decade. In LIFE, carbon capture falls short to S3 in 2040 and
2050, as result of more emission reductions elsewhere (see 1.4.2 in this Annex).
Figure 54: Carbon captured in industrial processes.
Note: Metal production includes both ferrous and non-ferrous materials.
Source: PRIMES
The different reduction rates and residual emissions shown by the iron and steel, the
chemical and the mineral product sectors are explained by the different availabilities of
decarbonisation technologies in each sector (in addition to carbon capture). In the steel
sector, options exist today (88
): a large implementation of hydrogen-based alternative
steelmaking process reduces emissions between 65% and 80% (before carbon capture and
depending on the scenario) by 2040, when compared to 2015. Carbon capture completes
then the decarbonisation process. The chemical sector relies almost exclusively on carbon
capture by 2040 while implementation of low-carbon processes by replacement of fossil
fuel feedstock and use of fossil-fuel free CO2 as feedstock occurs only in 2041-2050. In
the 2041-2050 decade, capture still plays a prominent role in chemistry, leading to even
negative emissions in 2050, as result of improved flow of CO2 within the industrial sector
and storage in materials of carbon coming from non-fossil fuel feedstock (89
). Production
(88
) BNEF, (2021). Decarbonizing steel – Technologies and Costs.
(89
) CEFIC, (2021). Shining a light on the EU27 chemical sector’s journey toward climate neutrality.
0
20
40
60
80
100
120
140
160
S1
S2
S3
LIFE
S1
S2
S3
LIFE
2040 2050
MtCO2
Other
Chemical Industry
Mineral Products
Metal Production
67
of minerals, such as cement, are the hardest to decarbonise: literature shows that residual
emissions from cement in 2050 can be as high as 25% of 2017 levels (90
), and massive
deployment of carbon capture and storage is projected to be the most common options for
decarbonisation of the sector.
1.4.5.3.Total CO2 from industry
Figure 55 summarises the energy and process related CO2 emission from the industrial
sector, showing that total net CO2 reduces by 37%, 55% and 76% in S1, S2 and S3, in
2040 compared to 2030 (91
). This correspond to a decrease between 60% and 90% in
comparison with 1990 levels, well aligned with literature: a report from the
NAVIGATE project comparing the results of seven IAM states that industrial emissions
should reduce by at least 55% in 2040 vs 2020 to be compatible with the 1.5°C case (92
),
report from the CLEVER project show how industry can reduce emissions by 86% in 2050
vs 2019 (93
) and Ecologic illustrates that the industrial sector should reach emissions
between -78% and -91% in 2040 vs 1990 to comply with climate neutrality (94
).
Acceleration of the decarbonisation of the industry is also supported by the public
consultation results, where almost 48% of respondents, and a number of position papers
indicated “Industrial processes and waste” as one of the sectors that can do more to reduce
emissions.
Figure 55: CO2 Emissions from industrial sector
Source: PRIMES
(90
) McKinsey, (2020). Laying the foundation for zero-carbon cement.
(91
) Carbon capture from DACCS not included.
(92
) Kriegler, E. et al., (2023). The EU’s 2040 target Insights from the NAVIGATE project, NAVIGATE.
(93
) CLEVER, (2023). Climate neutrality, Energy security and Sustainability: A pathway to bridge the gap
through Sufficiency, Efficiency and Renewables, Final Report. https://clever-energy-scenario.eu/wp-
content/uploads/2023/06/clever_final_report-exec_summary.pdf
(94
) Ecologic and Oeko-Institut, (2023). Designing the EU 2040 climate target.
0
50
100
150
200
250
300
350
S1
S2
S3
LIFE
S1
S2
S3
LIFE
2040 2050
Non-
Energy
Energy
0
100
200
300
400
500
600
700
800
2015 2030
MtCO2
68
1.4.6. Complementary analysis
1.4.6.1.Introduction
Circular Economy (CE) actions can contribute significantly to decarbonise industrial
sectors, especially in fields where other mitigation options are under development or
available but still come at a cost premium (e.g., electrification of high temperature heat or
hydrogen). One of the key channels through which CE actions can support industrial
decarbonisation is by reducing the demand for primary production of industrial outputs
through the extension of the lifetime of products and materials as well as the substitution
of primary with less carbon-intensive, secondary materials. Literature reports 20% GHG
emission saving potential in the EU due to CE actions until 2050 (95
), that can go up to
25% in certain Member States (96
). More ambitious estimates, which also include
sufficiency actions can go beyond that level (97
), (98
). CE can also bring several additional
co-benefits e.g., reducing the environmental pressure associated with natural resource
consumption nd increasing strategic autonomy of the EU by derisking supply chain for
critical and other raw materials (see section 1.9.4).
The following complementary analysis investigates the impact of a limited group of
relevant CE actions on the decarbonisation of iron and steel, aluminum, paper and pulp,
cement, ethylene, and glass sectors. It shows results on future material production, GHG
emissions and energy demand. A broad circular economy approach and the overall impact
of CE actions across the whole economy fall outside the scope of this study (99
),(100
), and
is taken into account in S1, S2, S3 and LIFE analysis.
1.4.6.2.Methodology
The complementary analysis focuses on a subset of materials produced by energy-
intensive industries EIIs (Iron and Steel, Cement, Aluminium, Glass, Ethylene and Pulp
and Paper). It projects future material production, and by mean of the FORECAST tool,
(see Annex 6), it models GHG emissions and energy demand in two different
decarbonisation scenarios: CIRC (after circularity) and STD (after standard). While the
(95
) Ellen MacArthur Foundation, Completing the picture: How the circular economy tackles climate
change (2019). 20% GHG emission saving potential due to CE actions until 2050.
(96
) Agora Industrie, Systemiq (2023): Resilienter Klimaschutz durch eine zirkuläre Wirtschaft:
Perspektiven und Potenziale für energieintensive Grundstoffindustrien. Agora estimates circular
economy potential to be around 25% until 2050 for Germany.
(97
) Ramboll. Fraunhofer ISI, Ecologic Institute (2020). Quantification methodology for, and analysis of,
the decarbonisation benefits of sectoral circular economy actions. Final Report.
(98
) IRP (2020). Resource Efficiency and Climate Change: Material Efficiency Strategies for a Low-
Carbon Future. Hertwich, E., Lifset, R., Pauliuk, S., Heeren, N. A report of the International Resource
Panel. United Nations Environment Programme, Nairobi, Kenya.
99
) Ellen MacArthur Foundation, Completing the picture: How the circular economy tackles climate
change (2019). 20% GHG emission saving potential due to CE actions until 2050.
(100
)Agora Industrie, Systemiq (2023): Resilienter Klimaschutz durch eine zirkuläre Wirtschaft:
Perspektiven und Potenziale für energieintensive Grundstoffindustrien. Agora estimates circular
economy potential to be around 25% until 2050 for Germany.
69
STD assumes the partial implementation Circular Economy Action Plan (CEAP) (101
), the
CIRC includes additional selected CE actions that are listed in Table 9. The main common
assumptions of the CIRC and STD are in line with the main scenarios S1, S2, S3 with
some signficiant differences. For instance, in STD and CIRC, deployment of carbon
capture is limited to industrial processes in sectors where residual emissions are projected
in 2050 (the cement industry (102
) (103
)), and removal compensation outside EII sectors
(DACCS), are not considered. Moreover, the CIRC scenario only reflects selected CE
action, without considering a large circular economy framework including sufficiency or
shared economy measures. Finally, the analysis focuses on the decarbonisation of
industrial sectors and is limited to the savings that could be achieved only during
production stage. It does not take into account decarbonisation in the other sectors leading
to EU economy-wide climate neutrality, thus, allowing only for comparison in relative
terms with scenarios S1, S2 and S3. These limitations need to be taken into account when
interpreting the magnitude of the modelled impacts. More details on the methodology can
be found elsewhere (104
).
(101
)The STD scenarios implements actions from the CEAP (COM/2020/98) that have been legislated or
agreed until March 2023.
(102
)McKinsey, (2020). Laying the foundation for zero-carbon cement.
(103
) Cembureau, (2023). Cementing the European Green Deal. Reaching climate neutrality along the
cement.
(104
)Herbst, A. et al. (2023): Role of the circular economy as a contributor to industry decarbonisation
beyond 2030. Report prepared for DG CLIMA: Job number 330301101. Fraunhofer ISI & ICF.
70
Table 9: List of circular economy actions applied to the CIRC scenario
MATERIAL CE ACTION
Aluminium
Increased aluminium recycling from buildings (increase collection rate from 96 to 100% by
2045)
Increased recycling of aluminium cans (reduce losses and disposal to 0 by 2030)
Reduction of scrap exports (to 0 by 2050)
Reduction of exports of EoL cars (to 0 by 2050)
Alloy sorting of post-consumer scraps (reduce input of primary aluminium for dilution of scrap
from 20 to 5%)
Lifetime extension of cars (increasing from 15 to 20 years on average)
Lifetime extension of buildings (decreasing building demolition by up to 30%)
Lifetime extension of machinery (from 25 to 30 years on average)
Cement
Using up to 20% recycled cement in buildings
Use innovative binders as substitute for ordinary cement (market share of up to 10%)
Lifetime extension of buildings (decreasing building demolition by up to 30%)
Design for building disassembly, and make standardised building elements (reusing up to 38% of
prefab building elements)
Reducing use of structural concrete at design stage by up to 41%
Using cement with lower clinker shares (reducing average from 0.73 to 0.7)
Ethylene
Redesign multi-material packaging of different layers to ensure recyclability from the year 2030
Increasing the recycled content in plastic bottles
Reduction in single-use plastics packaging from supermarkets by 50%
Ban single use water bottles
Glass
Recycling of municipal waste to increase to 55%, 60% and 65% by weight by 2025, 2030 and
2035 respectively
Increase share of reusable glass bottles and containers
Iron
and
Steel
Reduction of scrap exports from 28Mt in 2020 to 0 in 2050
Reduction of exports of EoL cars from 72600 cars in 2020 to 0 in 2050
Alloy sorting of post-consumer scraps to increase the quality of recycled steel which enables the
European usage of formerly exported and downcycled steel scrap
Lifetime extension of cars (increasing from 15 to 20 years on average)
Lifetime extension of buildings (decreasing building demolition by up to 30%)
Lifetime extension of machinery (increasing from 22 to 27 years on average)
Reusing up to 6% structural steel from buildings
Design for building disassembly, and make standardised building elements (reusing up to 38% of
prefab building elements)
Lightweighting of steel-intensive products (depending on product, reduction of 5-10% product
weight by 2050)
Reducing use of structural steel at design stage (reducing overspecification up to 41%)
Paper
and
Pulp
Recycling of municipal waste to increase to 55%, 60% and 65% by weight by 2025, 2030 and
2035 respectively
Increase paper recycling
Increase the market share of reusable packaging to 40% by 2050
Lightweighting of paper packaging (Decreasing paper packaging weight by 20% in 2050
compared to 2020)
Note: This list only applies to the CIRC scenario. The actions listed in the Circular Economy Action Plan are
assumed to be already implemented up to the cutoff date of March 2023 both in the STD and the CIRC
scenarios.
71
1.4.6.3.Activity
Figure 56 summarises the projections of the total demand for the different materials in the
STD and the CIRC scenario and includes historical data of the material production in EU
as reference.
Figure 56: Historical EU production and future demand for specific materials
Note: 2019 is taken as the calibration year for the FORECAST model. In case 2019 historic values are not
available, first previously available year is represented (e.g., 2018 for Aluminum).
Source: FORECAST production database, FORECAST model.
For all materials, the material demand reduces, leaving a gap between the two scenarios
that increases over time in the period 2030-2050. Around 5% and 10% of total cement are
saved in CIRC in 2040 and 2050 compared to STD, which in 2050 splits into around 10%
of reduction of conventional cement and 10% replacement of conventional cement by low-
carbon cement. Building lifetime extension and demand reduction through reuse, preparing
for re-use, and modification of overspecification has the highest optimisation potential
among the actions analysed, followed by the substitution of conventional cement by wood
and low carbon cement produced using alternative cement constituents (105
), (106
). The use
(105
)Le Den, et al., (2020). Quantification methodology for, and analysis of, the decarbonisation benefits of
sectoral circular economy actions. Final report.
(106
)Rehfeldt, M. et al., (2020). Modelling circular economy action impacts in the building sector on the
EU cement industry. ECEEE Industrial Summer Study Proceedings, 133–143.
0
50
100
150
200
2019
2030
2040
2050
2019
2030
2040
2050
2019
2030
2040
2050
Cement Steel Paper & Pulp
Mton
0
5
10
15
20
25
2018
2030
2040
2050
2019
2030
2040
2050
2019
2030
2040
2050
Aluminium Glass Ethylene
Mton
Historic EU Production STD CIRC
72
of wood has been restricted only to certain construction elements and in single family
houses (107
), largely in line with sustainable use of biomass and limiting its possible
negative impact on the LULUCF net removals. Total steel and aluminium demand reduce
around 15%-20% in 2050 compared to STD: this reduction affects mostly primary
production, which reduced for the two materials by around half, while secondary
production remains stable or increases due to higher availability of scrap and higher
recyclability. Ethylene demand, which already decreases in STD due to the high recycling
rates, shows a possible additional reduction of around 20% in CIRC. The demand in the
paper and pulp sector by around 20-25% until 2050 in CIRC, driven mostly by an increase
market share of reusable packaging and light weighting of paper packaging.
1.4.6.4.Final Energy Consumption
The resulting FEC, FEC-E and FEC-RFNBOs (hydrogen + e-fuels) in STD and CIRC
scenarios are shown in Figure 57.
Figure 57: FEC, FEC-E and FEC-RFNBOs as % of 2019
Note: 2019 is taken as the calibration year for the FORECAST model.
Source: FORECAST.
A significant decrease in FEC in STD occurs until 2040 (around -10% vs 2019) and
stabilises until 2050. This decline is given mainly by efficiency gains from the
electrification of processes or the shift to hydrogen-based production, which in part
compensate for the assumed growth in industrial value added. Additional savings of 3%,
5% and 8% in 2030, 2040 and 2050 are achieved in CIRC compared to STD, leading to
an overall decrease of around 20% in 2050 compared to 2019. This trend is attributed to
additional energy and material efficiency measures, as well as the increase in recycling-
based processes, and confirm that impact of CE actions becomes more visible on the long
term. Electricity and RFNBOs consumptions in the sector under analysis increase
considerably both in STD and CIRC. In STD, FEC-E grows by around 21%, 55% and
68% in 2030, 2040 and 2050 compared to 2019, and FEC-RFNBOs rises from 0 to 1%,
6% and 15% in the same years. CIRC allows for lower consumption, leading to
(107
) Nemry, F.; Uihlein, A. (2008): Environmental Improvement Potentials of Residential Buildings
(IMPRO-Building).
0%
20%
40%
60%
80%
100%
2019
2030
2040
2050
FEC
%
of
2019
50%
75%
100%
125%
150%
175%
200%
2019
2030
2040
2050
FEC-E
0%
4%
8%
12%
16%
20%
2019
2030
2040
2050
FEC-RFNBOs
73
electricity savings of around 3-4% in 2030-2040 and up to 6% in 2050, and RFNBOs
savings of around 1% in 2040 and 3% in 2050 (with respect to STD).
The share of FEC across energy carriers also changes (Figure 58). As result of decrease
of FEC and increase of FEC-E, electricity becomes the dominant energy carrier, growing
from around 30% of FEC share in 2019, to above 50% already in 2040 and up to around
65% in 2050. To replace fossil fuels in processes where electrification is currently not
viable, the amount of RFNBOs increases in absolute terms and as share of FEC, growing
from around 1% in 2030, to above 5% in 2040 and above 10% in 2050. When comparing
the two scenarios in relative terms (108
), the shares for the two energy carriers behave
differently: in CIRC, CE actions boost electricity share by around 1% in 2040 and 2050
when compared to the shares of the same years in STD, while share of RFNBOs reduces
by 1% and 3% respectively in 2040 and 2050. This indicates that CE actions, in addition
to reducing overall FEC, especially contributes to reduce the final energy demand (and
relative FEC shares) for carriers that are more expensive or more complex to implement,
like hydrogen and e-fuels. A similar effect of reduction of hydrogen and e-fuels due to
circular economy actions could be witnessed also in the final non-energy consumption
(see 1.4.4 in this Annex).
Figure 58: Share of electricity and RFNBOs in FEC
Note: STD and CIRC shows different FEC, meaning that the comparison between FEC shares in STD and CIRC
can only apply in relative terms. A phase out of fossil fuel to less than 3% share of FEC in 2050 is projected,
and the rest of FEC is covered by other RES sources. 2019 is taken as the calibration year for the FORECAST
model.
Source: FORECAST.
1.4.6.5.GHG Emissions
Figure 59 shows the evolution of GHG emissions in the industrial sector. In STD, net
GHG emissions reduce by 29%, 69% and 90% in 2030, 2040 and 2050 compared to
(108
) Comparison in absolute terms is not possible since the total FEC in CIRC and BENCH is different.
0%
10%
20%
30%
40%
50%
60%
70%
STD
STD
CIRC
STD
CIRC
STD
CIRC
2019 2030 2040 2050
Electricity
RFNBOs
74
2019. GHG emissions in the CIRC scenario reduce by 31%, 72% and 91% for the same
years.
Energy-related emissions decrease in STD in line with the strong electrification of the
power system and the reduction of energy needs. In an already well decarbonised sector,
the CIRC assumptions can further decrease energy-related emissions by around 7% and
12% compared to STD in 2040 and 2050. The use of alternative processes also reduces
significantly process emissions in comparison with today level: process changes in the
steel and chemical industries, reduced use of hydrofluorocarbons (HFCs) and additives or
low-CO2 binders in cement and lime production can cut by around 50% process-related
emissions (excl. carbon capture) in 2050 compared 2019 in the industrial sector
considered. Implementation of the selected list of CE action leads to additional savings in
2040-2050 compared to STD of around 10%. Carbon capture also plays a role in the
decarbonisation of process emissions, and CE actions help slightly reduce the carbon
capture needs.
The differences in GHG emissions between STD and CIRC only capture a fraction of the
positive impact of CE on the decarbonisation of the economy for two main reasons. First,
part of the CE impact is already covered in the STD, which assumes implementation of
the CEAP; second, the additional CE actions apply into an already well decarbonised
energy system, limiting their potential to cut emissions. The contribution to emission
reduction of the CE actions can be disaggregated from the one of the decarbonisation of
the energy system by assuming a constant carbon intensity in the period from the year of
reference (2019) until 2050. In constant carbon intensity settings, the analysis shows that
selected list of CE actions could reduce industrial emissions in the sectors under scrutiny
by around 20% in the CIRC scenario with respect to STD (in 2050).
Net residual emissions of around 10% of 2019 values are projected in 2050 (see Figure
59). This is explained mainly by the assumptions taken on the role of carbon capture in
these scenarios, which has been applied only to the emissions of processes where other
mitigation strategies (e.g., fuel and process switch) are lacking today, i.e., in the cement
sector. Residual emission confirms that a larger deployment of carbon capture in
additional (e.g., steel, chemical) and emerging (e.g., DACC) sectors, or compensation of
emission by other sectors (e.g. LULUCF) are be needed to reach climate neutrality in
industry.
75
Figure 59: GHG emissions by type in % of 2019 values
Note: 2019 is taken as the calibration year for the FORECAST model.
Source: FORECAST.
1.5. Transport
1.5.1. Introduction
All the decarbonisation pathways for the transport sector (109
) analysed in this impact
assessment show a sustained growth in transport activity at EU level, as well as a modal
shift to rail, from now to 2040 and 2050 (see Section 1.5.2). Nevertheless, as explained in
Section 1.5.3, the total amount of energy consumed by the EU’s transport sector is
projected to decline significantly because of large-scale electrification (notably in road
transport) and implementation of technological and operational measures to improve
energy efficiency (notably in maritime and air transport). Furthermore, the fuel mix of
the transport sector is projected to undergo a deep transformation characterised by a
significant reduction in the consumption of fossil fuels, which are largely replaced by
zero- and low-emission energy carriers (i.e., electricity, advanced liquid biofuels and
biogas, e-fuels and hydrogen) by 2040 and almost fully replaced by them by 2050. In
terms of decarbonisation options deployed, road and rail transport are largely electrified
over time, whereas the maritime and air transport sectors, which are hard to electrify,
deploy measures to improve energy efficiency combined with a significant uptake of
zero- and low-emission fuels, particularly liquid biofuels, biogas and e-fuels (see Section
1.5.4). Consequently, direct CO2 emissions from the EU’s transport sector are projected
to decrease dramatically in the next decades, especially after 2030 (see Section 1.5.5).
Road and maritime transport are the modes reducing their CO2 emissions the most by
2040, and most of the transport-related emissions remaining in 2050 are projected to
come from the international aviation sector.
The decarbonisation pathways for the transport sector are in line with the results of the
public consultation. The participants to the “expert section” of the public consultation
think that the transport sector will be one of the key sectors affected by the green
transition after 2030, particularly because of the transition to electric vehicles and
(109
) The model-based analysis is a technical exercise based on a number of assumptions that are shared
across scenarios. Its results do not prejudge the future design of the post-2030 policy framework.
-20%
0%
20%
40%
60%
80%
100%
STD
STD
CIRC
STD
CIRC
STD
CIRC
2019 2030 2040 2050
Energy GHG
Processes (excl. CCUS)
Carbon Captured
Total Net
76
alternative fuels (this is mentioned by 20% of the respondents). The results of the public
consultation also show that, amongst all economic sectors, the respondents give the
highest priority to reduce emissions caused by the transport sector, particularly “aviation
and maritime transport” (with an average priority of 4.42 between 1 and 5, 5 being the
highest priority level) and “road transport” (with an average priority of 4.39 between 1
and 5). However, overall, the respondents think that “aviation and maritime transport”
will be the last economic sectors to become climate neutral, compared to “production of
electricity and district heating”, “industrial processes and waste”, “buildings”,
“agriculture, forestry and other land use” and “road transport”.
1.5.2. Activity
A sustained growth in transport activity at EU level is observed in all scenarios,
following the post-COVID recovery. Total passenger transport activity (expressed in
passenger-km, excluding international navigation and extra-EU aviation), increases to a
similar extent in the main scenarios (S1, S2 and S3). As shown in Figure 60 and Figure
61, in these scenarios, total activity increases by 26-27% (depending on the scenario) in
2040 and 32% in 2050 compared to 2015. However, there are differences between
transport modes with respect to activity growth. The modes showing the greatest increase
in activity relative to 2015 are rail (65-67% in 2040 and 83-86% in 2050), driven mainly
by the revision of the TEN-T Regulation, CEF funding, the proposal for the increase in
railway capacity use and the action plan to boost long-distance and cross-border
passenger rail, and intra-EU aviation (56-57% increase in 2040 and 74% increase in
2050), driven by the sustained economic growth and the post-COVID recovery. Road
transport activity grows by 20-21% between 2015 and 2040 (see Figure 61) and then
mostly stabilises (between 2015 and 2050, activity grows by 23%, see Figure 60).
Domestic navigation activity is projected to increase by 12-17% in 2040 and by 20-23%
in 2050, relative to 2015 (110
). There are slight differences between the three main
scenarios. The S3 scenario shows the highest increase in rail transport activity and the
lowest increase in road and air transport activity over time, whereas the S1 scenario
shows the lowest increase in rail transport activity and the highest increase in road and air
transport activity.
In LIFE, total passenger transport activity (excluding international navigation and extra-
EU aviation) still increases over time, but less than in the three main scenarios (111
). As
shown in Figure 60 and Figure 61, total passenger activity increases by 22% in 2040 and
27% in 2050 compared to 2015 (i.e., 4-5 and 5-6 percentage points less than in the other
scenarios, respectively). If one looks at the activity per mode, intra-EU aviation shows
much lower activity growth rates relative to 2015 than the other scenarios (42% in 2040,
i.e., 15-16 pp less than in S2 and S3, and 47% in 2050, i.e., 27 pp less), driven by the
assumed substitution of some business trips with video conferences, reduction in the
(110
)In this impact assessment, the term domestic navigation includes inland waterway transport and
national maritime transport. These two waterborne transport modes are grouped together because a
split between inland waterway and national maritime transport is currently not available in the official
energy statistics, so the PRIMES model takes them together.
(111
) Other analyses look at much stronger changes in mobility patterns. For instance, the CLEVER
scenario published in “Energy security and Sustainability: A pathway to bridge the gap through
Sufficiency, Efficiency and Renewables” projects a 21% reduction in passenger traffic between 2019
and 2050. However, the costs associated to these changes are not assessed.
77
distance travelled for trips for personal purposes, and modal shift towards high-speed rail
where available. Passenger road transport also shows lower activity growth rates relative
to 2015 than in the other scenarios (15% in 2040 and 18% in 2050, i.e., 4-5 pp less than
in S2 and S3 in both years). Note that it is assumed that part of this difference in road
transport activity growth is replaced by an increased use of active modes, which is not
represented in the PRIMES model. Instead, passenger rail activity increases much more
than in the other scenarios (74% in 2040, i.e., 7-9 pp more than in S2 and S3, and 97% in
2050, i.e., 10-13 pp more). Domestic navigation activity is projected to increase by 12%
in 2040 and by 22% in 2050, relative to 2015, that is to say, similarly to the main
scenarios. Consequently, in LIFE, air transport represents a lower share of the total
passenger transport activity (9% in 2040 and 2050) than in the other scenarios (10% in
2040 and 2050), whereas rail transport represents a higher share of the total passenger
transport activity (12% in 2040 and 13% 2050) than in the other scenarios (11% in 2040
and 2050). This indicates a modal shift to rail.
International extra-EU aviation activity (expressed in passenger-km) increases by 62% in
2040 and 80-81% in 2050 compared to 2015 in the three main scenarios (S1, S2 and S3),
whereas in LIFE it increases to a lesser extent (46% in 2040 and 57% in 2050 relative to
2015, i.e., 16 and 23-24 percentage points less than in S2 and S3 in 2040 and 2050,
respectively) (112
).
Figure 60: Passenger transport activity in the EU disaggregated by mode
Note: The y-axis label (“Tpkm”) stands for trillion passenger-kilometres.
Source: PRIMES.
(112
) In its “Aviation Outlook 2050 – Main Report, 2022” report EUROCONTROL looks at scenarios on
the evolution of the number of flights in Europe between 2019 (the year with the highest number of
flights) and 2050, reaching +44% in the “base” (or most-likely) scenario, ranging from +54% in the
“high” scenario to +20% in the “low” scenario.
0
1
2
3
4
5
6
7
8
S1
S2
S3
LIFE
S1
S2
S3
LIFE
2015 2030 2040 2050
Tpkm
Intra-EU aviation
Domestic navigation
Rail
Other road transport
Passenger cars
78
Figure 61: Change in passenger transport activity between 2015 and 2040 by mode
Note: *The total passenger transport activity excludes international navigation and extra-EU aviation.
Source: PRIMES.
Total freight transport activity (expressed in tonnes-km, including international
shipping), also increases to a similar extent in the S1, S2 and S3 scenarios. As shown in
Figure 63, in these scenarios, total activity increases by 35-36% in 2040 and 51% in 2050
compared to 2015. Note, however, that there are significant differences in activity growth
between transport modes. The activity of international navigation increases by 34% in
2040 and by 50-51% in 2050 compared to 2015, and the activity growth is slightly higher
in the S3 scenario than in the S1 and S2 scenarios. Rail shows the greatest increase in
freight transport activity relative to 2015 amongst all modes (77-79% in 2040 and 99-
102% in 2050), driven mainly by the revision of the TEN-T Regulation, CEF funding,
the proposal for the increase in railway capacity use, and the proposed revision of the
Combined Transport Directive. The S3 scenario shows the highest increase in rail
transport activity over the 2015-2040 and 2015-2050 periods, and the S1 scenario shows
the lowest increase over the same periods (see Figure 62 and Figure 63). Regarding road
transport, the S3 scenario shows a lower increase in activity over the 2015-2040 and
2015-2050 periods (36% and 40%, respectively) than the S1 and S2 scenarios. Instead,
the S1 scenario shows the highest growth in activity between 2015 and 2040 (41%).
Road transport activity increases to a similar degree over the 2015-2050 period in the S1
and S2 scenarios (49%), which is greater than that of the S3 scenario. All three scenarios
reflect the proposed revision of the Weights and Dimensions Directive. Domestic
navigation activity is projected to grow by 40-44% over the 2015-2040 period and by 48-
51% over the 2015-2050 period.
In LIFE, the increase in total freight transport activity (expressed in tonnes-km) is similar
to the other scenarios. However, there are small differences between modes. As shown in
Figure 63, road transport shows an increase in activity compared to 2015 that is lower
than in S2 but higher than in S3 (36% in 2040 and 45% in 2050, i.e., 4 percentage points
less than S2 in both years, 1 pp more than in S3 in 2040 and 5 pp more than in S3 in
2050). Instead, rail transport shows slightly higher activity growth rates relative to 2015
than the S2 scenario (80% in 2040 and 102% in 2050, i.e., up to 2 pp more than S2 and
S3 in both years). Furthermore, the increase in domestic navigation activity between
2015 and 2040 is also slightly higher in LIFE than in S2 and S3. This indicates a modal
shift to rail and domestic navigation.
0%
10%
20%
30%
40%
50%
60%
70%
80%
Total* Road transport Rail Intra-EU aviation
Change
2015-2040
(%)
S1
S2
S3
LIFE
79
Figure 62: EU freight transport activity by mode (excluding international navigation)
Note: The y-axis label (“Ttkm”) stands for trillion tonne-kilometres.
Source: PRIMES.
Figure 63: Change in EU freight transport activity between 2015 and 2040 by mode
Note: *The total freight transport activity includes international navigation.
Source: PRIMES.
1.5.3. Energy consumption and fuel mix
The total amount of energy consumed by the transport sector in the EU significantly
decreases between 2015 and 2050 in all scenarios (even though transport activity
increases over that period, as discussed in Section 1.5.2), thanks to major energy
consumption reductions in road transport. The main reasons are electrification (113
)
(notably in road transport) and energy efficiency improvements. As shown in Figure 64
and Figure 65, in the S1, S2 and S3 scenarios, total energy consumption (expressed in
Mtoe, including international aviation and navigation) decreases by 33-35% in 2040 and
(113
)In general, electric engines are 3-4 times more energy-efficient than internal combustion engines.
0
1
2
3
4
S1
S2
S3
LIFE
S1
S2
S3
LIFE
2015 2030 2040 2050
Ttkm
Domestic
Navigation
Rail
Heavy Goods
Vehicles
Vans
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Total* Road transport Rail Dom. Navigation Int. Navigation
Change
2015-2040
(%)
S1
S2
S3
LIFE
80
by 42-44% in 2050 compared to 2015. The greatest reduction is observed in the S3
scenario, whereas the lowest reduction is observed in the S1 scenario.
There are significant differences between transport modes. As shown in Figure 64 and
Figure 65, a large reduction in energy consumption is observed in road transport (by
52-53% in 2040 and 65-67% in 2050 relative to 2015, depending on the scenario). The
main reason is the large-scale electrification of the fleet. As a result, the percentage of the
total energy consumption in the transport sector attributable to road transport drops from
74% in 2015 to 53-54% in 2040 and around 44% in 2050. The decrease in energy
consumption is especially significant for passenger cars: roughly 105 Mtoe in 2040
compared to 2015 (i.e., 60% reduction) and 135 Mtoe in 2050 relative to 2015 (i.e.,
around 75% reduction). For trucks, the reduction is significant but more moderate,
because of lower levels of electrification (see Figure 64).
All modes other than road transport increase their energy consumption. These are
modes for which the shift to electrification is less prominent than for road transport (114
),
so their energy consumption increases mainly because of the increased transport activity.
However, in relative terms, the increase in energy consumption is significantly lower
than the increase in transport activity (see Section 1.5.2), which indicates important
energy efficiency gains over time in these transport modes.
In LIFE, the total amount of energy consumed by the transport sector decreases over time
a bit more than in the other scenarios, mainly because of a different transport activity
pattern (including a higher shift to rail transport, which is a very energy-efficient mode,
and to active modes). As shown in Figure 64 and Figure 65, total energy consumption
drops by 37% in 2040 and 46% in 2050 compared to 2015 (i.e., 1-3 percentage points
more than in S2 and S3 in 2040, and 3-4 pp more in 2050). Road transport shows a
slightly greater decrease in energy consumption relative to 2015 than the other scenarios
(55% in 2040 and 69% in 2050, i.e., 2 pp more than in S2 and S3 in 2040 and 2-3 pp
more than in S2 and S3 in 2050), while aviation shows a much lower increase (6% in
2040, i.e., 11 pp less than in S2 and S3, and 0.5% in 2050, i.e., 16-17 pp less). Instead,
energy consumption in rail transport increases more in LIFE than in the other scenarios
(by 48% in 2040, i.e., 4-5 pp more than in S2 and S3, and by 54% in 2050, i.e., 4-6 pp
more), driven by the higher increase in activity.
(114
)In the case of rail transport, the shift to electrification is less prominent than for road transport only
because currently the sector is already largely electrified.
81
Figure 64: EU energy consumption in the transport sector by mode
Note: *Aviation includes domestic aviation as well as international intra-EU and extra-EU aviation.
Source: PRIMES.
Figure 65: Change in EU energy consumption between 2015 and 2040 by mode
Note: *The total energy consumption includes international transport. **Aviation includes domestic aviation as
well as international intra-EU and extra-EU aviation.
Source: PRIMES.
The analysis of the fuel mix in the transport sector shows a significant reduction in the
consumption of fossil fuels (i.e., oil products and natural gas) between 2015 and 2050,
which are partially replaced by electricity, advanced liquid biofuels and biogas, e-fuels
and hydrogen. As shown in Figure 66, in the S1, S2 and S3 scenarios, fossil fuel
consumption in the EU drops from almost 326 Mtoe in 2015 to 12-16 Mtoe in 2050 (i.e.,
95-96% reduction). Most of the fossil fuel consumption remaining in 2050 occurs in the
aviation sector. In 2040, fossil fuel consumption is 68% to 77% lower than in 2015,
depending on the scenario (68% in S1, 74% in S2 and 77% in S3). Fossil fuel
consumption constituted 95% of the total energy consumption in 2015, but this share
drops to 33-45% in 2040 and 6-8% in 2050, depending on the scenario.
Instead, electricity consumption in the EU’s transport sector increases from less than 5
Mtoe in 2015 to 42-43 Mtoe in 2040 and 53-54 Mtoe in 2050 in the S1, S2 and S3
scenarios (see Figure 66). This represents 15-16% of the EU’s total final electricity
0
50
100
150
200
250
300
350
S1
S2
S3
LIFE
S1
S2
S3
LIFE
2015 2030 2040 2050
Mtoe
Aviation*
International navigation
Domestic navigation
Rail
Other road transport
Heavy Goods Vehicles
Vans
Passenger cars
-60%
-40%
-20%
0%
20%
40%
60%
Total* Road transport Rail Dom.
Navigation
Int. Navigation Aviation**
Change
2015-2040
(%)
S1
S2
S3
LIFE
82
consumption across all sectors in 2040 and around 17% in 2050 (with small differences
between the scenarios). The main driver is the electrification of road transport; however,
it should be noted that electricity consumption in rail transport also increases
significantly (it almost doubles between 2015 and 2050). As a result, the share of
electricity in the total energy consumption of the transport sector increases from around
1% in 2015 to 19% in 2040 and 27-28% in 2050, depending on the scenario (the highest
shares are observed in S3, and the lowest shares are observed in S1).
Hydrogen consumption in the EU’s transport sector increases from almost zero in 2015
to 14-16 Mtoe in 2040 and 35-40 Mtoe in 2050 in the S1, S2 and S3 scenarios (see
Figure 66). Based on the assumptions on hydrogen production pathways and efficiency,
producing this amount of hydrogen will require around 17-19 Mtoe of (renewable)
electricity in 2040 and 42-48 Mtoe in 2050. In 2040, almost all hydrogen used in the
transport sector (more than 90%) is consumed by road transport alone. In 2050, this
percentage drops to 75-80% (depending on the scenario), because the navigation and
aviation sectors also consume significant amounts of hydrogen. The use of hydrogen in
rail transport is more limited; it is mainly used where electrification is not possible. In the
S1, S2 and S3 scenarios, the share of hydrogen in the total energy consumption of the
transport sector increases from almost zero in 2015 to 6-7% in 2040 and 18-21% in 2050
(the highest shares are observed in S3, and the lowest shares are observed in S1).
As shown in Figure 66, the consumption of liquid biofuels and biogas increases from
around 13 Mtoe in 2015 (mostly bioliquids used in road transport) to 48-52 Mtoe in 2040
in the three main scenarios, mainly because of increased consumption in the navigation
and aviation sectors (115
), which are generally considered hard to decarbonise through
electrification. In 2050, instead, the consumption of liquid biofuels and biogas decreases
to 41-47 Mtoe, depending on the scenario. The main reason is a strong reduction in liquid
biofuel consumption in the road transport sector relative to 2040 (due to growing
electrification and use of hydrogen), even if consumption in the navigation and aviation
sectors continues to rise. In the S1, S2 and S3 scenarios, the consumption of liquid
biofuels and biogas represents 21 to 23% of the total energy consumption of the transport
sector (depending on the scenario) in 2040, and 22-23% in 2050. Bioliquids dominate,
but the importance of biogas, which is mostly used in the navigation sector, grows over
time: biogas use constitutes 7-8% of the total consumption of bioliquids and biogas in
2040 (depending on the scenario), but this share increases to 16% in 2050 (in all three
main scenarios).
In the S1, S2 and S3 scenarios, the consumption of e-fuels (including e-gas and e-
liquids (116
)) in the EU rises from zero in 2015 to 22-40 Mtoe in 2040 and 45-49 Mtoe in
2050 (depending on the scenario), which are mainly consumed by road transport,
navigation and aviation (117
). Based on the assumptions on e-fuel production pathways
and efficiency, producing this amount of e-fuels will require around 38-69 Mtoe of
(renewable) electricity in 2040 and 76-84 Mtoe in 2050. Note that there are significant
differences in e-fuel use between scenarios in 2040: 22 Mtoe in S1, 34 Mtoe in S2 and 40
(115
)Only bioliquids are used in aviation.
(116
)E-liquids include e-ammonia and e-methanol.
(117
)Only e-liquids are used in aviation.
83
Mtoe in S3 (see Figure 66). These differences are caused mainly by differences in e-fuel
consumption in the road transport sector, in which reduced consumption of fossil fuels in
the most ambitious scenarios is mostly compensated by increased consumption of e-
fuels. E-fuel consumption in road transport in 2040 is rather small in the S1 scenario
(roughly 3 Mtoe), but it is significantly higher in the S2 and S3 scenarios (12 and 17
Mtoe, respectively). As a result of the above, in the S1, S2 and S3 scenarios, the share of
e-fuels in the total energy consumption of the transport sector increases from zero in
2015 to 10-18% in 2040 and 23-25% in 2050. The consumption of liquid e-fuels is much
higher than that of gaseous e-fuels. However, the importance of e-gas, which is mostly
used in the navigation sector, increases over time: 4-6% of e-fuel consumption in 2040
corresponds to e-gas, depending on the scenario, whereas in 2050 this share is 13-14%.
In LIFE, the total amount of energy consumed by the transport sector decreases over time
a bit more than in the other scenarios, mainly because of the different transport activity
pattern, as already explained above. However, in relative terms, the fuel mix of the
transport sector is very similar to that of the S2 and S3 scenarios (see Figure 66). More
specifically, in LIFE, in 2040, fossil fuel and e-fuel shares are in between those observed
in S2 and S3, whereas electricity, hydrogen and liquid biofuel and biogas shares are
similar in S2, S3 and LIFE.
Figure 66: EU energy consumption in the transport sector by fuel/energy carrier type
Note: Energy consumption including international aviation and navigation.
Source: PRIMES.
1.5.4. Technology developments per transport mode
1.5.4.1. Passenger cars and vans
A deep transformation of the EU’s car and van fleet occurs between 2015 and 2050,
driven mainly by the new regulation strengthening the CO2 emission performance
standards applicable to these types of vehicles. In 2015, the fleet consists practically only
of conventional ICE cars and vans. Over time, however, the share of ICE vehicles rapidly
declines, and these vehicles are replaced by battery-electric vehicles and, to a lesser
0
50
100
150
200
250
300
350
S1
S2
S3
LIFE
S1
S2
S3
LIFE
2015 2030 2040 2050
Mtoe
Electricity
Hydrogen
E-Gas
Biogas
Natural Gas
E-Liquids
Liquid Biofuels
Oil Products
84
degree, fuel-cell and plug-in hybrid vehicles (118
) (119
). As a result, the EU’s car and van
fleet goes from consuming almost only fossil fuels in 2015 to consuming energy mostly
in the form of electricity and hydrogen in 2050.
As shown in Figure 67, in the S1, S2 and S3 scenarios, the share of ICE passenger cars
(including diesel, gasoline, LPG and CNG vehicles) in the EU’s car stock declines from
practically 100% in 2015, to 26% in 2040 and 2% in 2050. These vehicles are substituted
by battery-electric, fuel-cell and plug-in hybrid cars. The share of battery-electric cars
increases to 57-58% in 2040 and 79-80% in 2050 (depending on the scenario), and the
share of fuel-cell cars increases to 5% in 2040 and 14% in 2050. The share of plug-in
hybrids increases to 11% in 2040, which indicates that this technology has a role to play
in the transition away from fossil fuels. However, in 2050, the share of plug-in hybrids
decreases to 5%, as zero-emission powertrains become dominant. As a result of the
above, the passenger car fleet goes from consuming mostly only fossil fuels in 2015
(95% of the total amount of energy consumed by cars) to consuming mostly electricity
and hydrogen (91% of the total energy consumption) and almost no fossil fuels in 2050
(see Figure 68). Finally, it should be noted that the total energy consumption by cars
drops from around 180 Mtoe in 2015 to 72-73 Mtoe in 2040 and 45-46 Mtoe in 2050
(which means it decreases by roughly 60% and 75% in 2040 and 2050, respectively,
relative to 2015). This occurs even if transport activity by car (expressed in passenger-
km) increases by 20-21% and 21-22% over the 2015-2040 and 2015-2050 periods,
respectively (see Section 1.5.2). This can be explained by the significant energy
efficiency gains related to electrification.
The picture looks similar for vans, although in this case the switch to alternative
drivetrains is slightly more moderate than for cars in 2040. In the S1, S2 and S3
scenarios, the share of ICE vehicles in the EU’s van stock declines from virtually 100%
in 2015, to 38% in 2040 and 3% in 2050, as ICE vans are replaced by battery-electric,
fuel-cell and plug-in hybrid vans. The share of battery-electric vehicles increases to 39-
40% in 2040 (depending on the scenario) and 74% in 2050, and the share of fuel-cell
vans rises to 5% in 2040 and 15-16% in 2050. As a result, the van fleet goes from
consuming mostly only fossil fuels in 2015 (94% of the total amount of energy consumed
by vans) to consuming mainly electricity and hydrogen (91% of the total energy
consumption) and almost no fossil fuels in 2050, similarly to passenger cars. Also, the
total amount of energy consumed by vans in the EU drops by 47-48% in 2040 and by 60-
63% in 2050, relative to 2015, even though transport activity by vans actually increases
(118
)The electric passenger car and van market is growing rapidly. According to IEA’s ‘Global EV Outlook
2023’, in Europe, electric passenger car sales increased by more than 15% in 2022 relative to 2021 to
reach 2.7 million units (including battery-electric and plug-in hybrid cars). As a result, 21% of all new
cars sold in Europe in 2022 were electric, up from 18% in 2021, 10% in 2020 and less than 3% prior to
2019. Electric van sales increased by around 50% in 2022 relative to 2021 to reach 95 000 units
(including battery-electric and plug-in hybrid vehicles). As a result, 5% of all new vans sold in Europe
in 2022 were electric, up from 3% in 2021 and less than 2% prior to 2020. Note that, in IEA’s study,
“Europe” includes the EU countries, Iceland, Israel, Norway, Switzerland, Türkiye, and the UK.
(119
)The share of electric vehicles (including battery-electric and plug-in hybrid vehicles) in the annual
amount of cars and vans sold in Europe is expected to continue rising in the next years, reaching more
than 40% in 2026 (according to BNEF’s ‘Electric Vehicle Outlook 2023’) and around 60% in 2030
(according to IEA’s ‘Global EV Outlook 2023’, in the Stated Policies Scenario).
85
over the same periods (see Section 1.5.2). Again, this can be explained by the significant
energy efficiency gains related to electrification.
It should be noted that the carbon intensity of the fuels used by ICE cars and vans is
significantly lower in 2040 and 2050 than in 2015, owing to the increased consumption
of liquid biofuels, biogas and e-fuels relative to fossil fuels. This is particularly important
in 2040, with significant differences between the S1, S2 and S3 scenarios (see Figure 68).
The total amount of fossil fuels, liquid biofuels, biogas and e-fuels consumed by
passenger cars and vans in 2040 is similar in the three main scenarios (45-46 Mtoe).
However, disaggregating per fuel shows that, in 2040, fossil fuel consumption is higher,
and liquid biofuel and e-liquid consumption is lower in the S1 scenario than in the S2 and
S3 scenarios. Instead, the S3 scenario shows a lower consumption of fossil fuels and a
greater consumption of liquid biofuels and e-liquids than the S1 and S2 scenarios. Biogas
and e-gas consumption is similar in the three main scenarios. This implies that the carbon
intensity (expressed in tCO2/toe) of fuels used by the ICE passenger cars and vans
remaining in the fleet in 2040 is highest in the S1 scenario (21% lower intensity than in
2015) and lowest in the S3 scenario (49% lower intensity than in 2015). In 2050, the
carbon intensity is 89-93% lower than in 2015 in the main scenarios, with S3 scenario
showing the largest decrease (93%).
In LIFE, the total amount of energy consumed by cars and vans decreases over time a bit
more than in the other scenarios, mainly because of the lower transport activity
(expressed in passenger-km for cars, and in tonnes-km for vans). For passenger cars, total
energy consumption drops by 62% in 2040 and by 78% in 2050 compared to 2015 (i.e., 2
percentage points more than in the S2 and S3 scenarios in 2040, and 3 pp more in 2050).
For vans, energy consumption drops by 52% in 2040 and 63% in 2050 compared to 2015
(i.e., 4-5 pp more than in the S2 and S3 scenarios in 2040, and 1-3 pp more in 2050). In
2040, both for cars and vans, the fuel mix is similar to that of the S2 scenario (in relative
terms).
Figure 67: Distribution of the EU passenger car stock per type of drivetrain
Source: PRIMES.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
S1
S2
S3
LIFE
S1
S2
S3
LIFE
2015 2030 2040 2050
Fuel cell
Electric
Plug-in hybrid
ICE gaseous
Gasoline ICE
Diesel ICE
86
Figure 68: EU energy consumption by passenger cars by fuel/energy carrier type
Source: PRIMES.
1.5.4.2. Heavy Goods Vehicles (HGVs)
The EU’s HGV stock undergoes a deep transformation between 2015 and 2050, driven
mainly by the proposed revision of the regulation on CO2 emission standards for heavy
duty vehicles (120
). In 2015, the fleet consisted almost entirely of diesel conventional ICE
vehicles, but over time their share is projected to decline, and these vehicles are largely
replaced by battery-electric vehicles and hydrogen vehicles (the latter, mostly for long-
haul transport) (121
). Consequently, the EU’s HGV fleet goes from consuming almost
only fossil fuels in 2015 to consuming mostly electricity and hydrogen in 2050.
As shown in Figure 69, in the S1, S2 and S3 scenarios, the total share of diesel
conventional, diesel hybrid (122
), LPG and LNG vehicles in the EU’s HGV stock drops
from virtually 100% in 2015, to 62-64% in 2040 and 21-29% in 2050 (depending on the
scenario). These vehicles are replaced mostly by battery-electric and hydrogen HGVs.
The share of battery-electric vehicles in the HGV stock increases to 24-25% in 2040 and
45-48% in 2050, and the share of hydrogen HGVs increases to 12-14% in 2040 and 26-
31% in 2050. As already mentioned above, however, there is still a significant percentage
of diesel conventional, diesel hybrid and ICE gaseous vehicles left in 2050 (21-29% of
the HGV stock, depending on the scenario). The differences between scenarios,
particularly observed in 2050, are mainly due to different assumptions on HDV CO2
standards from 2040 onwards (see Annex 6). S1 is the scenario assuming the least
(120
)COM(2023) 88 final.
(121
) Electric truck sales are currently low, but this market is growing. According to IEA’s ‘Global EV
Outlook 2023’, 0.5% of all new trucks sold in Europe in 2022 were electric (including battery-electric
and plug-in hybrid vehicles). This is a small share, but an increasing trend is observed in the last years
(the share of electric truck sales was almost zero in 2017 and 0.2% in 2020). Furthermore, the share of
electric truck sales is projected to continue rising in the next years, reaching 10% in Europe and 13%
in the EU in 2030 (in the Stated Policies Scenario). Note that, in IEA’s study, “Europe” includes the
EU countries, Iceland, Israel, Norway, Switzerland, Türkiye, and the UK.
(122
)Here, diesel hybrid vehicles include plug-in hybrids. The share of plug-in hybrids in the HGV stock is
limited (below 2% of the fleet in all years up to 2050).
0
20
40
60
80
100
120
140
160
180
200
S1
S2
S3
LIFE
S1
S2
S3
LIFE
2015 2030 2040 2050
Mtoe
Electricity
Hydrogen
E-Gas
Biogas
Natural Gas
E-Liquids
Liquid Biofuels
Oil Products
87
stringent CO2 standards in the 2040-2050 period, and S3 is the scenario assuming the
most stringent ones. This is why the S1 scenario shows the largest share of diesel
conventional, diesel hybrid and ICE gaseous vehicles (29%) and the smallest share of
battery-electric and hydrogen vehicles (71% taken together) in 2050, whereas S3 is the
scenario showing the smallest share of diesel conventional, diesel hybrid and ICE
gaseous vehicles (21%) and the biggest share of battery-electric and hydrogen vehicles
that year (79% in aggregate).
As a result of the fleet transformation described above, the HGV fleet goes from
consuming mostly only fossil fuels in 2015 (94% of the total amount of energy consumed
by HGVs) to consuming mostly hydrogen and electricity (70-84% of the total energy
consumption, depending on the scenario) and almost no fossil fuels in 2050 (see Figure
70). Moreover, as in the case of passenger cars and vans, the diesel conventional, diesel
hybrid and ICE gaseous vehicles remaining in the fleet in 2040 and 2050 use fuels that
have a significantly lower carbon intensity than in 2015, owing to the increased
consumption of liquid biofuels, biogas and e-fuels relative to fossil fuels. This is
particularly important in 2040, with significant differences in carbon intensity between
the S1, S2 and S3 scenarios. More specifically, the carbon intensity of fuels used by
diesel conventional, diesel hybrid and ICE gaseous vehicles in 2040 is highest in the S1
scenario (24% lower intensity than in 2015) and lowest in the S3 scenario (52% lower
intensity than in 2015). In 2050, instead, the remaining diesel conventional, diesel hybrid
and ICE gaseous vehicles use almost no fossil fuels in all three scenarios (see Figure 70);
hence, the carbon intensity is similar in the three main scenarios (95-98% lower than in
2015).
Furthermore, it should be noted that the total amount of energy consumed by HGVs in
the EU, which is almost 50 Mtoe in 2015, decreases by 29% in S1 and S2 and 32% in S3
in 2040, and by 36% in S1, 37% in S2 and 42% in S3 in 2050, compared to 2015 (see
Figure 70). This occurs even if the HGV transport activity (expressed in tonnes-km)
increases by 35-41% and 40-49% (depending on the scenario) over the 2015-2040 and
2015-2050 periods, respectively (see Section 1.5.2). This is mostly explained by the
energy efficiency gains linked to electrification.
In LIFE, the total amount of energy consumed by HGVs decreases over time a bit more
than in the S1 and S2 scenarios, mainly because of a slightly lower level of HGV
transport activity (expressed in tonnes-km), due to a shift to other modes, such as rail.
However, the total energy consumption in LIFE is slightly higher than in S3, mainly
because of the somewhat higher level of HGV transport activity. More specifically, the
total energy consumption drops by 32% in 2040 and 40% in 2050 compared to 2015 (i.e.,
3 percentage points more than in S1 and S2 in 2040 and 3-4 pp more in 2050, and 0.1 pp
less than in S3 in 2040 and 2 pp less in 2050). In 2040, the fuel mix in LIFE has similar
characteristics to the fuel mix of both the S2 and S3 scenarios (in relative terms).
88
Figure 69: Distribution of the EU HGV stock by type of drivetrain
Note: *Diesel hybrid vehicles include plug-in hybrids. **Hydrogen vehicles include fuel-cell vehicles and hydrogen
ICE vehicles.
Source: PRIMES.
Figure 70: EU energy consumption by HGVs by fuel/energy carrier type
Source: PRIMES.
1.5.4.3. Other road transport
The EU’s fleet of buses and coaches is projected to undergo significant changes between
2015 and 2050, driven mainly by the proposed revision of the regulation on CO2
emission standards for heavy duty vehicles (123
). In 2015, the fleet consisted almost
entirely of diesel ICE vehicles. However, battery-electric and hydrogen vehicles are
expected to largely replace this type of vehicles by 2050 (124
). Buses are used mostly
(123
) COM(2023) 88 final.
(124
) Electric bus and coach sales are growing. According to IEA’s ‘Global EV Outlook 2023’, around 9%
of all new buses and coaches sold in Europe in 2022 were electric (including battery-electric and plug-
in hybrid vehicles), up from around 7% in 2021, 4% in 2020 and less than 3% prior to 2019.
Furthermore, the share of electric bus and coach sales is projected to continue rising in the next years,
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
S1
S2
S3
LIFE
S1
S2
S3
LIFE
2015 2030 2040 2050
Hydrogen**
Electric
ICE gaseous
Diesel hybrid*
Diesel
conventional
0
5
10
15
20
25
30
35
40
45
50
55
S1
S2
S3
LIFE
S1
S2
S3
LIFE
2015 2030 2040 2050
Mtoe
Electricity
Hydrogen
E-Gas
Biogas
Natural Gas
E-Liquids
Liquid Biofuels
Oil Products
89
within urban areas, where battery-electric vehicles are generally a fully viable alternative,
and this allows high shares of this type of vehicles. Instead, coaches are mainly used for
long inter-urban trips, which imposes operational limitations on the use of battery-
electric vehicles; as a result, the share of hydrogen vehicles in the fleet is higher for
coaches than for buses. In the S1, S2 and S3 scenarios, the share of battery-electric
vehicles in the bus and coach fleet increases to 36-37% in 2040 and 43-44% in 2050,
while the share of hydrogen vehicles reaches 15-16% in 2040 and 32-37% in 2050 (the
exact share depends on the scenario). It is important to note that, even though the total
share of diesel conventional, diesel hybrid (125
) and ICE gaseous buses and coaches is
projected to decline over time, their share remains significant in 2040 and 2050. More
specifically, the share of diesel conventional, diesel hybrid and ICE gaseous vehicles in
the EU’s bus and coach fleet is 47-49% in 2040 and 20-25% in 2050. Note that the exact
fleet composition shares differ per scenario. In particular, significant differences can be
observed in 2050, which is mainly due to different assumptions on CO2 emission
standards for coaches from 2040 onwards (see Annex 6). As a result of the fleet
transformation described above, the EU’s bus and coach fleet goes from consuming
almost only fossil fuels in 2015 (94% of the total energy consumption) to using mostly
alternative energy carriers in 2050 (electricity, hydrogen, liquid biofuels, biogas and e-
fuels represent 95-96% of the total energy consumption in that year).
The EU’s fleet of powered 2-wheelers becomes largely electrified between 2015 and
2050 (126
). In the S1, S2 and S3 scenarios, the share of ICE 2-wheelers in the EU’s stock
declines from virtually 100% in 2015, to 32% in 2040 and 10% in 2050, as ICE vehicles
are rapidly replaced by battery-electric vehicles. On the other hand, the share of battery-
electric vehicles increases to 68% in 2040 and 90% in 2050. As a result, the 2-wheeler
fleet goes from consuming mostly only fossil fuels in 2015 (97% of the total energy
consumption) to consuming mainly electricity (78-79% of the total energy consumption)
and almost no fossil fuels in 2050.
It should be noted that the total amount of energy consumed by buses, coaches and
powered 2-wheelers taken together decreases by 39-40% in 2040 and 49-51% in 2050
compared to 2015. This occurs even if transport activity (expressed in passengers-km) by
these transport modes taken together increases by 19-21% and 35-36% over the 2015-
2040 and 2015-2050 periods, respectively (see Section 1.5.2). This can be explained by
the significant energy efficiency gains related to electrification.
Finally, the diesel conventional, diesel hybrid and ICE gaseous buses and coaches and
the ICE 2-wheelers that remain in the fleet in 2040 and 2050 use fuels that have a
significantly lower carbon intensity than in 2015, due to the increased consumption of
reaching 40% in Europe and 55% in the EU in 2030 (in the Stated Policies Scenario). Note that, in
IEA’s study, “Europe” includes the EU countries, Iceland, Israel, Norway, Switzerland, Türkiye, and
the UK.
(125
)Diesel hybrid vehicles include plug-in hybrids.
(126
) The electric two- and three-wheeler market is growing. According to IEA’s ‘Global EV Outlook
2023’, in Europe, 8% of all new powered two-wheelers and 7% of all new powered three-wheelers
sold in 2022 were electric, up from around 5% and 4%, respectively, in 2020. The share of electric
two- and three-wheeler sales is projected to continue rising in the next years, reaching more than 90%
in 2040 (according to BNEF’s ‘Electric Vehicle Outlook 2023’).
90
liquid biofuels, biogas and e-fuels relative to fossil fuels. This is particularly important in
2040, with significant differences in carbon intensity between scenarios. More
specifically, the carbon intensity of fuels used by ICE vehicles in 2040 is highest in the
S1 scenario (22% lower intensity than in 2015) and lowest in the S3 scenario (51% lower
intensity than in 2015), while in 2050 the carbon intensity is similar in all scenarios (88-
91% lower intensity than in 2015).
In LIFE, the total amount of energy consumed by buses, coaches and 2-wheelers taken
together is similar to that of the other scenarios both in 2040 and 2050 (around 8 and 6
Mtoe, respectively). Furthermore, in 2040, the combined fuel mix for all these modes is
similar to that of the S2 scenario.
1.5.4.4. Rail
The EU’s rail transport sector is projected to undergo significant further electrification
between 2015 and 2050. In 2015, around 67% of the rolling stock used for passenger
transport was already electric, while in the case of freight transport this share was a bit
lower (55%). The remainder was internal combustion rolling stock. The proportion of
electrified lines in use in the EU is increasing gradually (56% in 2015, 57% in 2020), and
the share of electric rolling stock is projected to increase considerably by 2040 and 2050.
More specifically, in the S1, S2 and S3 scenarios, the share of electric rolling stock used
for passenger transport increases to 85-86% in 2040 and 95% in 2050, and the share of
electric rolling stock used for freight transport increases to 76-77% in 2040 and 88-89%
in 2050 (the exact shares differ slightly per scenario). At the same time, the share of
internal combustion rolling stock used for passenger transport drops to 12-13% in 2040
and 4% in 2050, and in the case of freight rail transport, it goes down to 21-22% in 2040
and 10% in 2050. The share of hydrogen rolling stock is projected to be limited; it will be
mainly used where electrification is not possible. This transformation requires substantial
investments in electric rolling stock as well as significant efforts to largely electrify the
European rail infrastructure by 2050 (127
), and it is supported by the assumed completion
of the core TEN-T network by 2030 and the comprehensive TEN-T network by 2050.
As a result of the transformation described above, in the S1, S2 and S3 scenarios, the
EU’s rail transport sector transitions from meeting 25% of its energy demand with fossil
fuels in 2015 (the remainder being electricity), to using almost only electricity and no
fossil fuels in 2050 (see Figure 71). Note that, although the share of internal combustion
rolling stock is projected to decline over time, there is still some left both in 2040 and in
2050; however, in these two years, and particularly in 2050, the internal combustion
rolling stock uses a fuel blend that has a significantly lower carbon intensity than in
2015, due to the increased consumption of liquid biofuels and e-fuels relative to fossil
fuels (see Figure 71). More specifically, in 2040, this carbon intensity is 26% lower in
S1, 46% lower in S2 and 56% lower in S3 than in 2015. In 2050, it is more than 95%
lower than in 2015 in all three scenarios. Furthermore, it should be noted that the total
amount of energy consumed by rail transport in the EU increases by around 43-44% in
2040 and 48-51% in 2050 compared to 2015 (see Figure 71), mainly due to increased rail
transport activity (see Section 1.5.2). However, these energy consumption growth rates
(127
)The investment costs corresponding to the electrification of the rail network are not included in the
modelling. Instead, the investment costs related to rolling stock are included.
91
are lower than the activity growth rates observed over the same period. The main reason
is that the rail sector is projected to be further electrified during the next decades, which
brings significant energy efficiency gains.
In LIFE, the total amount of energy consumed by the rail sector increases over time a bit
more than in the S1, S2 and S3 scenarios, mainly because of a higher level of rail
transport activity (both in passenger-km and tonnes-km) due to a higher shift from other
modes to rail. The total energy consumption increases by 48% in 2040 and 54% in 2050
compared to 2015 (i.e., 4-5 percentage points more than in the core scenarios in 2040,
and 4-7 pp more in 2050). Nevertheless, the fuel mix remains similar to that of the core
scenarios (in relative terms), particularly S2 and S3.
Figure 71: EU energy consumption in the rail sector by fuel/energy carrier type
Note: Energy consumption including passenger and freight rail transport.
Source: PRIMES.
1.5.4.5. Domestic navigation
As explained in Section 1.5.2, in this impact assessment, the term domestic navigation
includes inland waterway transport and national maritime transport (128
). The
composition of the vessel fleet used for domestic navigation in the EU is projected to
undergo significant changes between 2015 and 2050, in a similar way across all
scenarios. In 2015, the fleet consisted almost entirely of conventional vessels powered by
liquid fossil fuels (i.e., diesel, gasoline and fuel oil). However, the share of vessels using
alternative propulsion technologies is expected to grow in the next decades. More
specifically, in the S1, S2 and S3 scenarios, the share of battery-electric vessels in the
fleet increases to 14% in 2040 and 24% in 2050, while the share of fuel-cell ships, which
are deployed only after 2040, becomes 6% in 2050. Furthermore, the share of vessels
using gaseous fuels grows over time, reaching 8% of the fleet in 2040 and 11-12% in
2050. It is important to note that, even though the share of vessels equipped with
(128
)These two waterborne transport modes are grouped together because a split between inland waterway
and national maritime transport is currently not available in the official energy statistics, so the
PRIMES model takes them together.
0
1
2
3
4
5
6
7
8
9
S1
S2
S3
LIFE
S1
S2
S3
LIFE
2015 2030 2040 2050
Mtoe
Electricity
Hydrogen
E-Liquids
Liquid Biofuels
Oil Products
92
conventional propulsion systems using liquid fuels is projected to decline over time, this
ship type remains the predominant one, representing 78% of the EU fleet in 2040 and
58% in 2050.
As a result of the fleet composition changes described above, along with a significant
uptake of liquid biofuels, biogas and e-fuels after 2030, the EU’s fleet goes from
consuming almost only fossil fuels in 2015 to using mostly zero- and low-emission
energy carriers in 2050. In the S1, S2 and S3 scenarios, projections show that liquid oil
products and natural gas represent only 6-7% and 1% of the total amount of energy
consumed by domestic navigation in 2050, respectively (see Figure 72). Instead, liquid
biofuels, biogas and e-fuels (in gaseous or liquid form) are projected to represent 76-77%
of the total energy consumption in 2050, while the share of electricity and hydrogen
taken together reaches 16%. Note that the fuels used by conventional vessels have a
significantly lower carbon intensity in 2040 and 2050 than in 2015, due to the increased
consumption of liquid biofuels, biogas and e-fuels (both in gaseous and liquid form)
relative to fossil fuels (see Figure 72). This is particularly important in 2040, with
significant differences in carbon intensity between scenarios. More specifically, the
carbon intensity of fuels used by conventional vessels in 2040 is highest in the S1
scenario (31% lower intensity than in 2015) and lowest in the S3 scenario (54% lower
intensity than in 2015), while in 2050 it is 91-93% lower than in 2015 in the three main
scenarios.
Furthermore, it should be noted that, in S1, S2 and S3, the total amount of energy
consumed by domestic navigation in the EU increases by around 18-25% in 2040 and 9-
11% in 2050 compared to 2015 (see Figure 72). This occurs in parallel to the deployment
of technological and operational measures to improve energy efficiency (e.g., hull design,
slow steaming, optimisation of cargo capacity utilisation, etc.) as well as the energy
efficiency gains linked to the partial electrification of the fleet.
In LIFE, the total amount of energy consumed in the domestic navigation sector evolves
over time in the same way as in the core scenarios (reaching almost 5 Mtoe in 2040 and a
bit more than 4 Mtoe in 2050). In 2040, the fuel mix is similar to that of the S2 scenario.
93
Figure 72: EU energy consumption in domestic navigation by fuel/energy carrier type
Note: Including passenger and freight transport. The category «E-Liquids» includes e-methanol, e-ammonia,
synthetic diesel and synthetic fuel oil.
Source: PRIMES.
1.5.4.6. International navigation
The composition of the vessel fleet used for international maritime transport in the EU is
projected to change considerably between 2015 and 2050. The transformation is driven
by policy measures aimed at decarbonising this sector adopted by the EU (e.g., FuelEU
Maritime) and by the International Maritime Organisation (see Annex 6). In 2015, the
EU’s fleet consisted almost entirely of vessels with conventional engines powered by
liquid fossil fuels (i.e., diesel and fuel oil). However, the number of ships using
alternative propulsion technologies is projected to grow in the next decades. More
specifically, in the S1, S2 and S3 scenarios, the share of battery-electric vessels in the
fleet increases to 2-3% in 2040 and 6-7% in 2050, while the share of fuel-cell ships
increases to 3-7% in 2040 and 21-29% in 2050 (depending on the scenario), as shown in
Figure 73. Furthermore, the share of vessels powered by engines that can use gaseous
fuels (which are gradually decarbonised over time) grows significantly until 2040
(reaching 20-21% in 2040) and it remains relatively stable after that year (reaching 21-
23% in 2050). It is important to remark that, even though the share of vessels equipped
with conventional propulsion systems using liquid fuels is projected to decline over time,
this ship type remains the predominant one, representing 71-74% of the EU fleet in 2040
and 44-49% in 2050 (depending on the scenario). Note also that the fleet composition is
similar in the S1 and S2 scenarios, whereas in the S3 scenario it shows slightly lower
shares of ships with conventional engines along with slightly higher shares of fuel-cell
vessels (see Figure 73).
As a result of the fleet composition changes described above, combined with a significant
uptake of liquid biofuels, biogas and e-fuels (129
) after 2030, the EU’s fleet goes from
consuming almost only liquid fossil fuels in 2015 to using almost exclusively zero- and
(129
) Including e-ammonia, e-methanol and other e-fuels.
0
1
2
3
4
5
6
S1
S2
S3
LIFE
S1
S2
S3
LIFE
2015 2030 2040 2050
Mtoe
Electricity
Hydrogen
E-Gas
Biogas
Natural Gas
E-Liquids
Liquid Biofuels
Oil Products
94
low-emission energy carriers in 2050 (130
). In the S1, S2 and S3 scenarios, liquid oil
products are projected to represent almost 0% of the total amount of energy consumed by
international navigation in 2050 (see Figure 74). The use of gaseous fuels (LNG, biogas
and e-gas) is projected to increase gradually this decade and the next one, reaching 23-
24% of the total energy consumption in 2050. It should be noted that gaseous fuels are
gradually decarbonised over time: biogas and e-gas taken together represent 63-70% of
the consumption of gaseous fuels in the international navigation sector in 2040, whereas
in 2050 this share is close to 100%, as biogas and e-gas progressively replace LNG (see
Figure 74). Liquid biofuels and e-liquids are projected to represent 61-62% of the total
energy consumption in 2050, whereas electricity and hydrogen represent the remaining
14-16%. Note that the fuels used by vessels equipped with conventional liquid fuel
engines or engines that can use gaseous fuels have a significantly lower carbon intensity
in 2040 and 2050 than in 2015, due to the increased consumption of liquid biofuels,
biogas and e-fuels (both in gaseous and liquid form) relative to fossil fuels. This is
particularly important in 2040, with significant differences in carbon intensity between
scenarios. More specifically, the carbon intensity of liquid and gaseous fuels in 2040 is
highest in the S1 scenario (73% lower intensity than in 2015) and lowest in the S3
scenario (82% lower intensity than in 2015). In 2050, the carbon intensity of these fuels
is projected to be almost zero in all scenarios, due to the very low share of fossil fuels in
the fuel blend.
It should be noted that the total amount of energy consumed by international navigation
in the EU increases by around 10-21% in 2040 and 19-30% in 2050 compared to 2015 in
the S1, S2 and S3 scenarios (see Figure 74). However, these growth rates are lower than
the increase in international navigation activity projected over the same period (see
Section 1.5.2). This can be explained mainly by the deployment of technological and
operational measures to improve the energy efficiency of maritime transport (e.g., hull
design, slow steaming, optimisation of cargo capacity utilisation, increased vessel size,
etc.). The energy intensity of international navigation (expressed in toe/tkm) decreases by
9-18% between 2015 and 2040 and by 13-21% between 2015 and 2050 (the exact rate
depends on the scenario), mostly as a result of these measures. Note that there are
significant differences between scenarios, with S3 showing the lowest increase in total
energy consumption relative to 2015 (see Figure 74), although it is the scenario with the
highest level of transport activity (see Section 1.5.2). The main reason for this difference
is a larger deployment of energy efficiency measures compared to the S1 and S2
scenarios.
In LIFE, the total amount of energy consumed in the international navigation sector
evolves over time in the same way as in S2. However, in 2040, the fuel mix is similar to
that of the S3 scenario (in relative terms).
(130
) Projections made by other studies also show an increasing use of zero- and low-emission energy
carriers over the next decades. For example, IEA’s ‘Net Zero Road Map’ (2023 update) shows an
increase in the use of bioenergy, hydrogen and e-fuels in international shipping at global level, with
bioenergy representing 8% and 19% of the energy consumed in 2030 and 2050, respectively, hydrogen
representing 4% and 19% in 2030 and 2050, respectively, and e-fuels (mostly, ammonia), representing
7% and 47% in the same years. Similarly, DNV’s ‘Energy Transition Outlook 2023’ argues that the
main decarbonisation opportunity for the international maritime sector is switching to low- and zero-
carbon fuels such as ammonia, e-methanol, e-methane, and various forms of biofuel.
95
Figure 73: Composition of the EU vessel fleet used for international navigation
Source: PRIMES.
Figure 74: EU energy consumption in international navigation by fuel/energy carrier type
Note: The category «E-Liquids» includes e-methanol, e-ammonia, synthetic diesel and synthetic fuel oil.
Source: PRIMES.
1.5.4.7. Aviation
The European aviation sector is projected to undergo a significant transformation over
the next decades, driven by policy measures aimed at decarbonising this sector, such as
the EU Emissions Trading System and ReFuelEU Aviation, which mandates the supply
of Sustainable Aviation Fuels (SAF) (see Annex 6). This transformation is multi-
dimensional, mainly driven by significant improvements in energy efficiency and a large
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
S1
S2
S3
LIFE
S1
S2
S3
LIFE
2015 2030 2040 2050
Fuel cell engine
Battery-electric
engine
Gas engine
Conventional
liquid fuel engine
0
10
20
30
40
50
60
S1
S2
S3
LIFE
S1
S2
S3
LIFE
2015 2030 2040 2050
Mtoe
Electricity
Hydrogen
E-Gas
Biogas
Natural Gas
E-Liquids
Liquid Biofuels
Oil Products
96
uptake of zero- and low-emission fuels (such as liquid biofuels and e-fuels) (131
), along
with a moderate deployment of battery-electric and fuel-cell-electric aircraft.
In the S1, S2 and S3 scenarios, the total amount of energy consumed by the aviation
sector in the EU (including domestic and international intra-EU and extra-EU aviation) is
projected to increase by around 16-17% between 2015 and 2040, remaining relatively
stable after 2040 (see Figure 75). This increase is much lower than the growth in air
transport activity (expressed in passenger-km) over the same period (see Section 1.5.2).
There is a decoupling between energy consumption and market growth. The difference
between transport activity growth and energy consumption growth is mainly due to the
large-scale deployment of technological and operational measures to improve energy
efficiency (e.g., measures related to aircraft structure design and aerodynamics,
propulsion system technology, and transport capacity utilisation). The energy intensity of
air transport (expressed in toe/pkm) decreases by 27-28% between 2015 and 2040, and
by 34-35% between 2015 and 2050, mostly as a result of these measures.
Furthermore, the S1, S2 and S3 scenarios show an increasing use of zero- and low-
emission energy carriers (particularly after 2030), which partially replaces the
consumption of fossil fuels in the EU aviation sector. In this respect, the sector
transitions from consuming almost only fossil fuels (kerosene) in 2015 to using mostly
zero- and low-emission energy carriers in 2050. As shown in Figure 75, oil products are
projected to represent 62-66% of the total amount of energy consumed by the aviation
sector in 2040, and 24-30% in 2050 (the exact shares depend on the scenario). Thanks to
the mandates in ReFuelEU Aviation, the share of liquid biofuels in the total energy
consumption increases to 24% in 2040 and 35% in 2050, and the share of e-fuels grows
to 10-13% in 2040 and 33-34% in 2050. In addition, hydrogen is projected to represent
0.2-1.1% of the aviation fuel mix in 2040 and 1.6-6% in 2050. The use of electricity as
an energy carrier in the aviation sector remains limited to very specific niche markets;
consequently, it represents a very small share of the total amount of energy consumed by
the aviation sector by 2050 (see Figure 75). Note that the fuel mix in 2040 and 2050
differs between scenarios: S1 is the scenario showing the highest share of oil products
and the lowest shares of e-fuels and hydrogen, whereas S3 shows the lowest share of oil
products and the highest shares of e-fuels and hydrogen. The liquid biofuel shares in
2040 and 2050, instead, are almost the same across scenarios.
It is important to remark that the aviation fuel blend (excluding electricity and hydrogen)
is projected to have a considerably lower carbon intensity in 2040 and 2050 than in 2015,
mainly because of the increased consumption of liquid biofuels and e-fuels relative to
fossil fuels. There are significant differences between scenarios; more specifically, the
carbon intensities are highest in the S1 scenario (34% lower intensity in 2040 than in
(131
) Projections made by other studies also show an increasing use of zero- and low-emission fuels over
the next decades. For instance, IEA’s ‘Net Zero Road Map’ (2023 update) projects an increase in the
use of sustainable aviation fuels (SAF) at global level, with biofuels representing 10% and 33% of the
energy consumed in 2030 and 2050, respectively, and synthetic hydrogen-based fuels representing 1%
in 2030 and 37% in 2050. Similarly, both DNV’s ‘Energy Transition Outlook 2023’ and ITF’s
‘Decarbonising Air Transport’ (published in 2021) expect a large uptake of sustainable aviation fuels
(biofuels and e-fuels) over the next decades, which will play a key role in decarbonising air transport
(together with technological and operational measures to improve energy efficiency, which will play a
smaller role).
97
2015, and 70% lower intensity in 2050 than in 2015) and lowest in the S3 scenario (37%
lower intensity in 2040 than in 2015, and 74% lower intensity in 2050 than in 2015).
In LIFE, the total amount of energy consumed by the aviation sector increases over time
less than in the core scenarios, mainly because of lower levels of air transport activity, as
explained in Section 1.5.2. In LIFE, total energy consumption is 6% higher in 2040 and
0.5% higher in 2050 relative to 2015 (i.e., 11 percentage points less than in the main
scenarios in 2040, and 16-17 pp less in 2050), as shown in Figure 75. However, the
energy efficiency of air transport (expressed in toe/pkm) is very similar in all scenarios.
Furthermore, the fuel mix in LIFE is similar to that of the S3 scenario (in relative terms),
although showing a somewhat lower uptake of hydrogen.
Figure 75: EU energy consumption in aviation by fuel/energy carrier type
Note: Energy consumption including domestic and international (intra-EU and extra-EU) aviation.
Source: PRIMES.
1.5.5. CO2 emissions from transport
Direct CO2 emissions from the EU transport sector are projected to decrease
dramatically between 2015 and 2050, especially after 2030. It should be noted that this
occurs within a context of increased transport activity (see Section 1.5.2). Even so,
emissions drop because of a sharp decline in fossil fuel consumption, which is mainly
caused by a decrease in energy consumption in the transport sector (resulting mainly
from electrification and measures to improve energy efficiency) combined with an
increased use of zero- and low-emission energy carriers, i.e., electricity, hydrogen, liquid
biofuels, biogas and e-fuels (see Section 1.5.3). As a result of the latter, the carbon
intensity (expressed in tCO2/toe) of all the energy carriers employed in the transport
sector taken together decreases by more than 90% between 2015 and 2050 in all
scenarios.
As shown in Figure 76, in the S1, S2 and S3 scenarios, the total CO2 emissions from the
EU transport sector (including international navigation and aviation) are projected to
drop from almost 1000 MtCO2 in 2015 to 37-46 MtCO2 (depending on the scenario) in
2050, i.e., a 95-96% reduction. It should be noted that, in 2015, almost 74% of the
transport-related CO2 emissions were caused by road transport; instead, roughly 90% of
the emissions remaining in 2050 are projected to come from the aviation sector,
particularly from the international aviation sector. In 2040, the total amount of transport-
related emissions differs significantly between scenarios (see Figure 76 and Figure 77):
0
5
10
15
20
25
30
35
40
45
50
S1
S2
S3
LIFE
S1
S2
S3
LIFE
2015 2030 2040 2050
Mtoe
Electricity
Hydrogen
E-Liquids
Liquid Biofuels
Oil Products
98
310 MtCO2 in the S1 scenario (i.e., a 69% reduction relative to 2015), 252 MtCO2 in the
S2 scenario (-75% compared to 2015), and 219 MtCO2 in the S3 scenario (-78%
compared to 2015). Relative to 1990, this means CO2 emissions reductions of 62% in
S1, 69% in S2 and 73% in S3 by 2040. Emissions are lower in S2 compared to S1, and in
S3 compared to S2, mainly because of a greater consumption of e-fuels, hydrogen and
electricity taken together, which replace fossil fuels (see Figure 66).
In the S1, S2 and S3 scenarios, emissions from road and rail transport decrease by 77-
86% and 62-78% in 2040 compared to 2015, respectively, and they are almost fully
eliminated by 2050 (see Figure 76 and Figure 77). In 2040, both modes show the highest
level of emissions in the S1 scenario, and the lowest level in the S3 scenario. These
emissions reductions are driven mostly by large-scale electrification combined with a
switch to zero- and low-emission fuels (i.e., advanced liquid biofuels, biogas and e-fuels)
to power the remaining internal-combustion engine vehicles and rolling stock (see
Sections 1.5.4.1 to 1.5.4.4). As shown in Figure 76 and Figure 77, direct emissions from
the international navigation sector decrease by 68-81% in 2040 compared to 2015 and
they are almost fully eliminated by 2050. The aviation sector (including both domestic
and international air transport) is projected to reduce its CO2 emissions by 23-28% in
2040 and 65-72% in 2050 relative to 2015, thanks mainly to the uptake of SAF as a
major emissions reduction driver. In 2040, both modes show the highest level of
emissions in the S1 scenario and the lowest level in the S3 scenario. The emissions
reductions in the maritime and air transport sectors are driven mainly by the uptake of
zero- and low-emission fuels and the deployment of zero-emission airplanes and vessels,
along with further improvements in energy efficiency (see Sections 1.5.4.6 and 1.5.4.7).
If one analyses domestic and international transport emissions separately, domestic
transport emissions decrease by 76-85% in 2040 compared to 2015 and they reach very
low levels in 2050, whereas international transport emissions (including navigation and
aviation) decrease by 47-56% in 2040 and by 84-87% in 2050 compared to 2015.
However, as already mentioned above, in 2050, most emissions are caused by
international air transport, while the international navigation sector is fully decarbonised.
In LIFE, which is designed to meet the same climate target in 2040 as the S3 scenario,
transport-related CO2 emissions are in between those observed in S2 and S3 (although
closer to S3) in 2040 (226 MtCO2) (132
), and similar to those observed in the other
scenarios in 2050 (35 MtCO2). This is driven by a combination of two factors: a) lower
energy consumption compared to the S2 and S3 scenarios, which is caused by a different
transport activity pattern including a higher modal shift to rail and to active modes; b) a
fuel mix combining characteristics from S2 and S3 (see Sections 1.5.2 and 1.5.3).
In addition to the above, it should be noted that the transport sector also has significant
non-CO2-related impacts on the climate. These effects are caused by emissions of non-
CO2 greenhouse gases such as methane and nitrogen oxides, but also by emissions of
black carbon from maritime transport, and various types of particles from air transport
causing the formation of contrail cirrus. Methane and nitrous oxides emissions from the
(132
)Although S3 and LIFE are designed to meet the same climate target in 2040, transport-related CO2
emissions are higher in LIFE. Other sectors (e.g., agriculture) have lower GHG emissions in LIFE than
in S3, which compensates for the higher transport-related CO2 emissions.
99
EU transport sector are presented in Section 1.6. Other non-CO2 effects are not
quantified in this impact assessment, but they are discussed in Annex 12.
Figure 76: Direct CO2 emissions from the EU transport sector by mode
Source: PRIMES.
Figure 77: Change in EU transport direct CO2 emissions between 2015 and 2040 by mode
Source: PRIMES.
1.6. Non-CO2 GHG emissions in non-land-related sectors
1.6.1. Evolution of emissions without additional mitigation
For non-land-related sectors, the concept of “non-CO2 GHG emissions without
additional mitigation” refers to the emissions trajectory resulting from applying a carbon
value equal to zero to non-CO2 GHG emissions up to 2050. Thus, this emissions
0
100
200
300
400
500
600
700
800
900
1000
1100
S1
S2
S3
LIFE
S1
S2
S3
LIFE
2015 2030 2040 2050
Mt
CO2
International aviation
International navigation
Domestic aviation
Domestic navigation
Rail
Other road transport
Heavy Goods Vehicles
Vans
Passenger cars
-100%
-90%
-80%
-70%
-60%
-50%
-40%
-30%
-20%
-10%
0%
Total
Road
transport Rail
Domestic
navigation
International
navigation
Domestic
aviation
International
aviation
Change
2015-2040
(%)
S1
S2
S3
LIFE
100
trajectory results solely from the combination of the following two types of drivers for
emissions reductions: a) transformation of the energy system on its way to meet climate
neutrality by 2050; and b) relevant existing and proposed legislation, particularly the
Landfill Directive (133
), the Waste Framework Directive (134
), and the proposals for a
regulation to reduce methane emissions in the energy sector (135
), a revised Urban
Wastewater Treatment Directive (136
) and a revised F-gas regulation (137
). In this impact
assessment, the non-CO2 GHG emissions without additional mitigation in the non-land-
related sectors are assumed to be the same in all scenarios. There is, however, significant
mitigation potential beyond this level of emissions. This additional mitigation potential is
discussed in Section 1.6.2.
The non-CO2 GHG emissions without additional mitigation corresponding to all non-
land-related sectors taken together equal 116 MtCO2-eq in 2040, which represents a 65%
reduction relative to 2015 levels. The degree of reduction varies across sectors (see Table
10), but all of them reduce their non-CO2 GHG emissions by more than 40% in 2040
compared to 2015. In the energy and transport sector, non-CO2 GHG emissions drop by
71% in 2040 compared to 2015. Heating and cooling is the sector showing the largest
decline in emissions (97% reduction in 2040 relative to 2015, close to the maximum
mitigation potential), mainly due to the impact of the proposal for a revised F-gas
regulation. Finally, in industry and other sectors, emissions decrease by 50% over the
same period.
(133
)Directive 1999/31/EC and Amending Directive (EU) 2018/850.
(134
)Directive 2008/98/EC.
(135
)COM(2021) 805 final.
(136
)COM(2022) 541 final.
(137
)COM(2022) 150 final.
101
Table 10: Non-CO2 GHG emissions without add. mitigation in non-land-related sectors
NON-CO2 GREENHOUSE GAS EMISSIONS (MTCO2-EQ)* CHANGE IN EMISSIONS (%)
2005 2015 2030 2040 2050
2015-
30
2015-
40
2015-
50
Waste treatment**
CH4 145 109 78 59 47 -29% -46% -57%
N2O 10 9.2 9.2 9.1 9.1 0% -1% -1%
Total (all gases) 155 118 87 68 56 -27% -42% -53%
Energy and transport
CH4 110 86 38 20 14 -56% -76% -83%
N2O 24 23 18 11 8.1 -22% -52% -65%
Total (all gases) 135 109 56 31 23 -49% -71% -79%
Heating and cooling
F-gases 43 76 21 2.6 0.7 -72% -97% -99%
Total (all gases) 43 76 21 2.6 0.7 -72% -97% -99%
Industry and other
N2O 48 8.3 6.9 7.2 7.6 -16% -13% -8%
F-gases 28 18 8.9 6.1 6.8 -51% -67% -63%
Total (all gases) 76 27 16 13 14 -41% -50% -46%
Total
CH4 255 196 116 80 61 -41% -59% -69%
N2O 83 41 34 27 25 -16% -33% -39%
F-gases 71 94 30 8.7 7.6 -68% -91% -92%
Total (all gases) 409 330 180 116 93 -46% -65% -72%
Note: *Non-CO2 GHG emissions without additional mitigation, i.e., assuming a carbon value equal to zero. **The
waste treatment sector includes solid waste and wastewater treatment.
Source: GAINS.
1.6.2. Additional mitigation potential
Figure 78 and Figure 79 show the 2040 marginal abatement cost curves (MACC)
corresponding to non-land-related sectors specified per gas and per sector, respectively.
These curves indicate the marginal cost of the additional reductions in non-CO2 GHG
emissions, which come on top of the “emissions without additional mitigation” described
in Section 1.6.1. Similarly, Table 11 and Table 12 show the reductions in emissions
achievable at various marginal abatement cost levels. Note that the marginal abatement
cost curves corresponding to non-land-related sectors are assumed to be the same in all
scenarios.
Table 11 and Table 12 show that, in the non-land-related sectors, there is significant
additional mitigation potential: 41 MtCO2-eq in 2040, considering all sectors and gases.
If fully achieved, this mitigation potential would reduce the EU’s total non-land-related
non-CO2 GHG emissions to 79 MtCO2-eq by 2040 (i.e., 76% less than in 2015). It is
important to mention that 61% of this maximum mitigation potential (i.e., 25 MtCO2-eq)
could be reached at a marginal cost close to zero. Note, however, that even in cases
where marginal abatement costs are nearly zero, policy intervention is usually needed to
overcome market barriers, lack of information and split incentives. The largest share of
this near-zero-cost potential is found in the waste treatment sector. The remaining share
102
of the maximum mitigation potential (39%) comes at a marginal cost significantly higher
than zero. Nevertheless, 80% and 85% of the maximum mitigation potential (including
all sectors and gases) may be reached at a marginal cost lower than 10 and 50
EUR/tCO2-eq, respectively, leaving only a small part of the maximum mitigation
potential untapped (8 and 6 MtCO2-eq, respectively).
Figure 78: MACC across all non-land-related sectors in 2040 (per gas)
Note: MACC including all non-CO2 greenhouse gases, and MACCs per gas. Marginal abatement costs are
expressed in constant EUR 2015.
Source: GAINS.
Figure 79: MACC across all non-CO2 greenhouse gases in 2040 (per sector)
Note: MACC including all non-land-related sectors, and MACCs per sector. Marginal abatement costs are
expressed in constant EUR 2015.
Source: GAINS.
By analysing the additional mitigation potential across all non-land-related sectors
separately for each gas, one can see that in all cases most of the maximum mitigation
potential could be tapped at a low marginal cost. For instance, there exists potential to
reduce methane emissions by as much as 23 MtCO2-eq below the “emissions without
additional mitigation” in 2040 (see Table 11). Around 82% of this maximum mitigation
0
50
100
150
200
250
300
0 10 20 30 40 50
Marginal
abatement
cost
(EUR/tCO2-eq)
Reduction in non-CO2 GHG emissions (MtCO2-eq)
F-gases
N2O
CH4
All gases
0
50
100
150
200
250
300
0 10 20 30 40 50
Marginal
abatement
cost
(EUR/tCO2-eq)
Reduction in non-CO2 GHG emissions (MtCO2-eq)
Industry and
other
Heating and
cooling
Energy and
transport
Waste
treatment
All non-land-
related sectors
103
potential could be tapped at a marginal abatement cost lower than 10 EUR/tCO2-eq,
mainly in the waste treatment sector and the energy and transport sector. In the case of
nitrous oxide, there exists potential to reduce emissions by as much as 10 MtCO2-eq
below the “emissions without additional mitigation” in 2040, about half of which is to be
found in the waste treatment sector, and the other half is to be found in industry and other
sectors. Around 82% of the maximum mitigation potential for N2O emissions could be
reached at a marginal abatement cost lower than 10 EUR/tCO2-eq. Finally, for
fluorinated gases, the maximum additional mitigation potential is around 8 MtCO2-eq in
2040 (see Table 11), which is to be found mostly in heating and cooling, industry and
other sectors. About 70% of this maximum mitigation potential could be reached at a
marginal cost lower than 10 EUR/tCO2-eq and 80% may be tapped at a marginal cost
lower than 50 EUR/tCO2-eq, leaving only a very small part of the maximum mitigation
potential untapped (3 and 2 MtCO2-eq, respectively).
Table 11: Additional mitigation potentials of non-CO2 GHG emissions across all non-land-
related sectors in 2040 (by gas)
Marginal abatement cost for non-CO2 GHG emissions (EUR/tCO2-eq)**
0* 0.1 10 50 100 300 Max
Emissions mitigation in 2040
(MtCO2-eq)
CH4 0 16 19 20 20 20 23
N2O 0 6.6 8.4 8.7 8.7 8.7 10
F-gas 0 2.7 5.8 6.7 7.5 7.5 8.3
Total 0 25 33 35 36 36 41
Share of maximum mitigation
potential achieved in 2040 (%)
CH4 0% 71% 82% 86% 87% 87% 100%
N2O 0% 64% 82% 85% 85% 85% 100%
F-gas 0% 33% 70% 80% 90% 90% 100%
Total 0% 61% 80% 85% 87% 87% 100%
Note: *In this table, the non-CO2 GHG emissions at zero marginal abatement cost correspond to the emissions
without additional mitigation in 2040. **Marginal abatement costs are expressed in constant EUR 2015.
Source: GAINS.
By analysing the mitigation potential separately for each non-land-related sector, one can
see that in almost all cases most of the maximum mitigation potential could be reached at
a low marginal cost. In the waste treatment sector, there exists potential to reduce
emissions by as much as 14 MtCO2-eq below the “emissions without additional
mitigation” in 2040. Around 96% of this maximum mitigation potential could be tapped
at a marginal abatement cost lower than 10 EUR/tCO2-eq (see Table 12), mainly through
process optimisation and deployment of anaerobic digestion technology with biogas
recovery. In the energy and transport sector, the maximum additional mitigation
potential is 14 MtCO2-eq in 2040. About 73% of this mitigation potential could be
achieved at a marginal cost lower than 10 EUR/tCO2-eq, and 82% could be tapped at a
marginal cost below 50 EUR/tCO2-eq (in both cases, mostly through implementation of
best available technology in bunker fuel use and leak detection and repair programs, and
by flooding abandoned coal mines). Higher emission reductions could be achieved only
at very high marginal costs, mainly by upgrading long-distance gas pipelines to
minimum leakage rates, replacing steel gas distribution networks by PE/PVC networks,
and additional leak detection and repair. Non-CO2 GHG emissions from the heating and
104
cooling sector are mostly F-gas emissions. In this sector, the “emissions without
additional mitigation” are already very low in 2040 (less than 3 MtCO2-eq); however,
there is enough additional mitigation potential in 2040 to almost eliminate these
emissions fully (by using alternative agents). Around 57% of the maximum mitigation
potential could be tapped at a marginal cost lower than 10 EUR/tCO2-eq, and 62% could
be reached at a marginal cost below 50 EUR/tCO2-eq, leaving only a small part of the
maximum mitigation potential untapped (around 1 MtCO2-eq in both cases). Finally, in
industry and other sectors, the maximum additional mitigation potential is 11 MtCO2-
eq in 2040. About 72% of this potential could be tapped at a marginal abatement cost
lower than 10 EUR/tCO2-eq, while 79% may be reached at less than 50 EUR/tCO2-eq.
Table 12: Additional mitigation potentials of non-CO2 GHG emissions in 2040 (by non-
land-related sector)
Marginal abatement cost for non-CO2 GHG emissions (EUR/tCO2-eq)**
0* 0.1 10 50 100 300 Max
Emissions mitigation in 2040
(MtCO2-eq)
Waste treatment*** 0 12 13 13 13 13 14
Energy and transport 0 9 10 12 12 12 14
Heating and cooling 0 0.8 1.4 1.6 2.4 2.4 2.5
Industry and other 0 3.5 7.8 8.6 8.6 8.6 11
Total 0 25 33 35 36 36 41
Share of maximum mitigation
potential achieved in 2040 (%)
Waste treatment*** 0% 85% 96% 96% 96% 96% 100%
Energy and transport 0% 65% 73% 82% 83% 83% 100%
Heating and cooling 0% 33% 57% 62% 94% 94% 100%
Industry and other 0% 32% 72% 79% 79% 79% 100%
Total 0% 61% 80% 85% 87% 87% 100%
Note: *In this table, the non-CO2 GHG emissions at zero marginal abatement cost correspond to the emissions
without additional mitigation in 2040. **Marginal abatement costs are expressed in constant EUR 2015. ***The
waste treatment sector includes solid waste and wastewater treatment.
Source: GAINS.
1.6.3. Emissions projections
As described in the previous section, the non-land-related sectors show relatively low-
cost mitigation potentials, which translates into very close emission profiles across all
scenarios except S1 (see Table 13). The S1 scenario assumes a carbon value equal to zero
up to 2040. Therefore, in this scenario, the non-CO2 GHG emissions trajectory is the
emissions trajectory without additional mitigation (see Section 1.6.1) until 2040. The
level of non-CO2 GHG emissions in 2050 is the same across all scenarios (since the
carbon value assumed is also the same).
The non-CO2 GHG emissions from the waste management sector in 2040 are projected
to be 42% lower than in 2015 in S1, and 54% lower in the other scenarios. In 2050,
emissions from the waste management sector are 73% lower than in 2015 in all
scenarios. In 2040, in S2, S3 and LIFE, the additional mitigation is achieved mainly
through the implementation of: a) source separation and anaerobic digestion with biogas
recovery to treat solid waste; and b) 2-stage treatment (anaerobic with biogas recovery
105
and then aerobic) combined with process optimisation to treat wastewater. In 2050,
energy recovery technologies are used in addition to the above-mentioned ones in all
scenarios.
The non-CO2 GHG emissions from the energy and transport sector go down to 31
MtCO2-eq in S1 and 24 MtCO2-eq in the other scenarios in 2040, which means a
decrease by 71% and 78%, respectively, compared to 2015. In 2050, emissions are
projected to be 83% lower than in 2015 in all scenarios. This mitigation is largely driven
by the evolution of the energy system and the lower consumption of fossil fuels,
complemented in S2, S2 and LIFE by implementation of technologies to improve bunker
fuel use, leak detection and repair programs in gas networks, leakage control and gas
recovery in crude oil and natural gas production sites, oxidation of ventilation air
methane in coal mines, and flooding of abandoned coal mines.
Non-CO2 GHG emissions from the heating and cooling sector are projected to decrease
to around 2.5 MtCO2-eq in S1 and to almost zero in the other scenarios in 2040, largely
driven by the impact of the proposal for a revised F-gas regulation (reflected already in
the S1 scenario, which assumes no additional mitigation). Emissions from this sector are
almost fully eliminated by 2050 in all scenarios. Finally, the non-CO2 GHG emissions
from industry and other sectors are projected to be around 13 MtCO2-eq in S1 and 5
MtCO2-eq in the other scenarios in 2040 (i.e., 50% and 82% less than in 2015,
respectively). In 2050, non-CO2 GHG emissions from this sector remain at around 5
MtCO2-eq in all scenarios.
106
Table 13: Non-CO2 GHG emissions from the non-land-related sectors
Non-CO2 greenhouse gas emissions (MtCO2-eq) Change in emissions (%)
2005 2015
2040 2050 2015-40 2015-50
S1
S2, S3 &
LIFE
S1, S2, S3
& LIFE
S1
S2, S3 &
LIFE
S1, S2,
S3 & LIFE
Waste management*
CH4 145 109 59 51 28 -46% -53% -74%
N2O 10 9.2 9.1 4.2 3.8 -1% -54% -59%
Total (all gases) 155 118 68 55 32 -42% -54% -73%
Energy and transport
CH4 110 86 20 14 10 -76% -84% -88%
N2O 24 23 11 11 7.9 -52% -53% -66%
Total (all gases) 135 109 31 24 18 -71% -78% -83%
Heating and cooling
F-gases 43 76 2.6 0.2 0.1 -97% -100% -100%
Total (all gases) 43 76 2.6 0.2 0.1 -97% -100% -100%
Industry and other
N2O 48 8.3 7.2 3.7 4.0 -13% -55% -52%
F-gases 28 18 6.1 1.0 0.7 -67% -94% -96%
Total (all gases) 76 27 13 4.7 4.7 -50% -82% -82%
Total
CH4 255 196 80 64 38 -59% -67% -80%
N2O 83 41 27 19 16 -33% -54% -61%
F-gases 71 94 8.7 1.2 0.8 -91% -99% -99%
Total (all gases) 409 330 116 84 55 -65% -74% -83%
Note: *The waste management sector includes solid waste and wastewater treatment.
Source: GAINS.
1.7. Agriculture
1.7.1. Introduction
Emissions in the agricultural sector declined since 1990 by 23% with an increase in outut
efficicency (i.e., lower emissions per unit of output), but remained stable over the last 10
years (see Figure 80). This relative stability in emissions also applies to livestock
emissions, which throughout the average 2019-2021 compared to 10 years ago only
reduced emissions by around 1%. Since 1990, livestock emissions consistently make up
around 65% of all emissions in the agriculture sector. Emissions from agricultural soil
management increased in the last 10 years by about 4% (on a three-year average) and
make up around 30% of all emissions in the agriculture sector.
Although agricultural GHG emissions changed very little at EU level in the past, the
trend shows considerable variation between Member States, with some decreasing or
increasing by about 20%, which highlights the dynamic of emissions from agriculture
107
and the room for additional emission reduction in some Member States in relation to their
specific emission profiles and sectorial context (138
). It is important to note that the
reduction of uncertainty in the GHG inventories in the agricultural sector, which does not
fully capture the implementation of emission reduction practices at farm level, remains a
significant challenge.
Figure 80: Emissions from Agriculture in the EU by sector
Note: Emissions based on UNFCCC categories. ‘Livestock’ depicts category 3.1 (3.A+3.B) ‘enteric fermentation’
3.A, ‘manure management’ 3.B, ‘agricultural soils’ 3.D. ‘Other’ summarises emissions from 3.C Rice Cultivation,
3.F - Field Burning of Agricultural Residues, 3.G – Liming, 3.H - Urea Application, 3.I - Other Carbon-containing
Fertilisers, 3.J - Other agriculture emissions.
Source: UNFCCC 2023.
Opinions on whether the land sector should do more to reduce GHG emissions were
divided among stakeholders responding to the Public Consultation questionnaire. On a 5-
point scale from ‘can reduce little more’ (1) to ‘can reduce a lot more’ (5), on average all
respondents found that the land sector could do somewhat more to reduce emissions
(Average: 3.96). But civil society organisations (Average: 4.59) and academic/research
institutions (Average: 4.28) find that the land sector could contribute much more, while
SME’s, EU citizens and public authorities assessed the sector’s potential for further
reduction less positive (Average: 3.53 to 3.81). This divided assessment was also
reflected in the question on which sector would achieve climate neutrality first. While
about 22% of the respondents believed that the land sector will be the first one to achieve
climate neutrality, 30% believed that it will be the last sector, a division presumably due
to different expectations about the potential of nature-based removals and the potential to
reduce agricultural emissions.
(138
)European Environment Agency, ‘Agricultural emissions and projected emissions by EU Member
State’, https://www.eea.europa.eu/ds_resolveuid/KPQBZ3Y6T9 , 2022.
50
100
150
200
250
300
350
400
450
500
MtCO2-eq
Agricultural Soils
Other
Manure Management
Enteric Fermentation
Livestock emissions
108
1.7.2. Activity
1.7.2.1.Mitigation options in the food system
Agricultural and forest land are the two primary users of land in the EU. A conversion of
agricultural land has impacts on GHG emissions when forests or grasslands are converted
into croplands and carbon stored in vegetation and soil is released into the atmosphere.
However, current trends show a positive trend with a slow decline of cropland and a slow
increase of forest land.
Implementing sustainable land management practices in agriculture, such as agroforestry,
conservation agriculture practices, and proper land-use planning, can help minimise
impacts of land use change and deforestation and thus preserving carbon stocks.
Promoting carbon farming practices under the Common Agricultural Policy (CAP) and
other EU and national programmes with financial incentives to farmers and foresters can
enhance practices such as afforestation, reforestation, agroforestry, conservation
agriculture practices and soil protection, appropriate peatland management, and
sustainable and precision farming, which contribute to carbon removals with the potential
to offset agricultural emissions. Throughout a combination of mandatory and voluntatry
interventions, Member States planned significative support to farmers in the approved
Common Agricultural Policy Strategic Planning Regulation, for the uptake of carbon
farming practices, protection of carbon in soil and reduction of emissions.
Livestock production, particularly from ruminant animals like cows, sheep, and goats, is
a significant contributor to GHG emissions in the EU's agriculture sector. Ruminant
animals produce methane through enteric fermentation, a natural digestive process,
responsible for roughly 38% of emissions in the agriculture sector. Additionally, the
management of manure from livestock releases methane and nitrous oxide and is
responsible for about 13% of emissions throughout the last 10 years (139
). Implementing
practices such as optimised fodder, feed additives, more favourable animal genetics (140
),
and improved herd management help reduce enteric fermentation and, consequently,
methane emissions from the livestock. Anareobic digestion of manure and other biomass
does not only mitigate emissions but also provides a new source of income for farmers
(since it produces biogas, which can be recovered and used for energy production or
other purposes) and can help to prevent excessive nutrient losses.
Nitrogen fertilisers are widely used in agriculture to enhance crop production. However,
the excessive or inefficient application of nitrogen fertilisers leads to the release of N2O
into the atmosphere and losses of other nitrogen components to water and atmosphere.
Utilisation of precision agriculture techniques (141
), such as site-specific fertiliser
management with variable rate distribution techniques, can help optimise fertiliser
(139
) UNFCCC inventory data 2023
(140
)Wall, E., Simm, G., & Moran, D. (2010). Developing breeding schemes to assist mitigation of
greenhouse gas emissions. Animal, 4(3), 366-376.
(141
)for overview on precision agriculture technologies: Balafoutis, A.; Beck, B.; Fountas, S.; Vangeyte, J.;
Wal, T.V.d.; Soto, I.; Gómez-Barbero, M.; Barnes, A.; Eory, V. Precision Agriculture Technologies
Positively Contributing to GHG Emissions Mitigation, Farm Productivity and Economics.
Sustainability 2017, 9, 1339.
109
application and minimise nitrogen losses, reducing N2O emissions. Moreover, the use of
N2O stabilisers (142
), inhibitors and nitrogen in more complex formulation (such as in
organic fertilisers) can enhance fertiliser efficiency and reduce nitrogen losses, ultimately
lowering nitrous oxide emissions. With regard to nutrients and the objective to reduce
nutrient losses within the EU (143
), implementing precision nutrient management and
optimising the use of organic fertiliser improves the nutrient cycle and provides co-
benefits for environmental protection.
It's worth noting that the effectiveness and feasibility of these mitigation options depends
on local conditions, farm-scale factors, and policy support. Ongoing research and
innovation play a crucial role in further developing and implementing these technologies
to achieve sustainable agricultural practices with reduced emissions.
Importantly, action addressing primary agriculture is necessary to drive down emissions
from the food system. But for the EU to achieve climate neutrality in 2050, the food
system needs to take action along the entire value chain, which goes beyond primary
agriculture and includes secondary agriculture (144
), retail, and consumption (145
). In other
words, the adoption of certain practices and technologies can reduce GHG emissions
from agriculture, but reducing food loss and food waste, dietary shifts away from animal
protein and use of land resources for nature-based mitigation solutions is unavoidable to
get to climate neutrality (146
).
1.7.2.2.Sustainable Agriculture and bioeconomy
A living and functioning environment is vital for a functioning and resilient food system.
Agriculture needs pollinators, healthy soils and functioning ecosystems. A more
sustainable agricultural production will increase resilience and protect the food system in
the long term. But sustainable agricultural practices may reduce agricultural intensity and
agricultural output, which in turn may affect economic income in the sector. It is
therefore important to ensure adequate support and discuss new business models, such as
the provision of biogenic carbon as industrial feedstock and the remuneration of
ecosystem services as additional income opportunities for European farmers (see Annex
9 for more details).
(142
)Panchasara, H.; Samrat, N.H.; Islam, N. Greenhouse Gas Emissions Trends and Mitigation Measures
in Australian Agriculture Sector—A Review. Agriculture 2021, 11, 85.
(143
)COM(2020) 381 final.
(144
)Secondary agriculture is defined as processing and adding value to the basic agriculture commodities
(O’Shea et al. Dietary fibre and phytochemical characteristics of fruit and vegetable by-products and
their recent applications as novel ingredients in food products. Innov Food Sci Emerg Technol 2012,
16).
(145
) Mc Kinsey & Company, ‘The agricultural transition: Building a sustainable future’, 2023.
(146
) Ibid.
110
1.7.3. Evolution of emissions without additional mitigation measures
1.7.3.1.S1, S2 and S3 scenarios
In this impact assessment, the concept of “emissions without additional mitigation” in the
agriculture sector refers to the emissions trajectory resulting from applying a carbon
value equal to zero to non-CO2 GHG emissions up to 2050. Thus, this emissions
trajectory results solely from the combination of two main types of drivers for emissions
reductions: a) agriculture policy as reflected in the EU Agricultural Outlook 2022 (147
);
and b) relevant existing and proposed legislation, particularly the proposal for a revised
Industrial Emissions Directive (148
) (see Annex 11). The “emissions without additional
mitigation” do not consider any other policies that would enable the implementation of
extra practices and technologies.
In the S1, S2 and S3 scenarios, the GHG emissions without additional mitigation from
the agriculture sector are 351 MtCO2-eq in 2040 and 347 MtCO2-eq in 2050 (including
all greenhouse gases), which implies a 9% reduction by 2040 and a 10% reduction by
2050 relative to 2015 levels (see Table 14). It should be noted that, in all scenarios, there
exists significant additional mitigation potential through different practices and
technological solutions. This additional mitigation potential is discussed in Section 1.7.4.
Table 14: GHG emissions in agriculture without additional mitigation in S1, S2, S3
GREENHOUSE GAS EMISSIONS (MTCO2-EQ) CHANGE IN EMISSIONS (%)
2005 2015 2030 2040 2050 2015-30 2015-40 2015-50
Agriculture
CH4 242 237 223 214 213 -6% -10% -10%
N2O 138 138 128 127 124 -7% -8% -10%
CO2 9 10 10 10 10 3% 3% 3%
Total (all gases) 390 385 361 351 347 -6% -9% -10%
Source: GAINS.
1.7.3.2.LIFE scenario
LIFE considers a more sustainable lifestyle guided by consumer climate-friendy choices
and a more efficient use of the resources. Besides the impact of the existing policy
framework, LIFE assumes changes in the food system in terms of dietary changes, food
waste reduction and a gradual implementation by 2040 of the objectives of the Farm to
Fork Strategy (149
). This leads to changes in sectoral activity (notably in livestock of
cattle and other animals as well as in use of manure and mineral fertilisers) compared to
the main scenarios (S1, S2 and S3).
(147
)The Agricultural Outlook 2022 is assumed to reflect the Common Agricultural Policy at the time of
publication in 2022.; European Commission, DG Agriculture and Rural Development, ‘EU
agricultural outlook for markets, income and environment, 2022-2032’, Brussels, 2022.
(148
) COM(2022) 156 final. Note that this impact assessment takes into account the changes made to the
European Commission’s proposal during the co-decision process up to July 2023.
(149
) COM(2020) 381 final.
111
As a result, assuming no deployment of additional mitigation practices and technologies,
the GHG emissions from the agriculture sector are lower in LIFE than in the other
scenarios (around 80 MtCO2-eq less, both in 2040 and 2050). More specifically, the
level of emissions in LIFE is projected to be around 271 MtCO2-eq in 2040 and 269
MtCO2-eq in 2050 (i.e., 30% lower than in 2015 in both years), as shown in Table 15.
Note that both CH4 and N2O emissions are lower than in scenarios S1, S2 and S3; for
instance, in 2040, CH4 emissions are 48 MtCO2-eq (22%) lower, while N2O emissions
are 32 MtCO2-eq (25%) lower.
Table 15: GHG emissions in the agriculture without additional mitigation in LIFE
GREENHOUSE GAS EMISSIONS
(MTCO2-EQ)
CHANGE IN EMISSIONS
(%)
DIFFERENCE COMPARED TO
S1, S2 & S3 (MTCO2-EQ)
2015 2040 2050 2015-40 2015-50 2040 2050
Agriculture
CH4 237 166 167 -30% -29% -48 -46
N2O 138 95 92 -31% -33% -32 -32
CO2 10 10 10 3% 3% 0 0
Total (all gases) 385 271 269 -30% -30% -80 -78
Source: GAINS.
1.7.4. Mitigation potential for non-CO2 GHG emissions
The GAINS model provides marginal abatement cost (150
) curves (MACC) for non-CO2
GHG emissions corresponding to the agriculture sector, specified per gas and per type of
source, coming on top of the “emissions without additional mitigation” described in
Section 1.7.3. Note that the S1, S2 and S3 scenarios are assumed to share the same
MACCs, whereas LIFE has scenario-specific MACCs. Figure 81 shows the MACC
applicable to the agriculture sector in 2040 in the different scenarios.
For the S1, S2 and S3 scenarios, the maximum abatement potential is estimated to be 83
MtCO2-eq in 2040, which would bring total non-CO2 GHG emissions down to 258
MtCO2-eq (i.e., a level 31% lower than in 2015). A bit more than 25% of this mitigation
potential may be tapped at near-zero cost (151
), mainly by introducing breeding through
selection to enhance productivity, fertility and longevity, and farm-scale anaerobic
digestion with biogas recovery, which reduce CH4 emissions. Almost 40% of the
maximum mitigation potential could be reached at a marginal abatement cost lower than
20 EUR/tCO2-eq, mainly by using feeding additives that reduce CH4 emissions in
addition to the near-zero-cost mitigation options. Finally, around 85% of the maximum
mitigation potential can be achieved with a marginal cost lower than 140 EUR/tCO2-eq,
mostly by scaling up the use of various mitigation options to reduce N2O emissions
(such as nitrification inhibitors and variable rate technology) on top of the options
mentioned above.
(150
) Marginal abatement costs are defined using the opportunity cost approach.
(151
) Note that even in cases where marginal abatement costs are nearly zero, policy intervention is often
needed to overcome market barriers, lack of information and split incentives.
112
In LIFE, starting with lower emissions than in the S1, S2 and S3 scenarios, the additional
mitigation potential for non-CO2 GHG emissions stemming from the deployment of
extra mitigation practices and technologies is estimated to be still 64 MtCO2-eq in 2040.
Fully reaching this potential would reduce total non-CO2 GHG emissions from the
agriculture sector to 198 MtCO2-eq in that year, which implies a 47% reduction relative
to 2015.
Figure 81: MACC of the agriculture sector in 2040 per scenario
Note: Marginal abatement costs are expressed in constant EUR 2015.
Source: GAINS.
By analysing the additional mitigation potential separately for each gas, one can see that
most of the mitigation potential associated to CH4 emissions may be tapped at a
relatively low marginal cost; instead, in the case of N2O emissions, higher marginal costs
are observed (see Table 16 and Table 17).
For CH4, the abatement potential is mostly linked to mitigation options to reduce
livestock emissions, with a small contribution from mitigation options to reduce
emissions from rice cultivation and other activities (see Figure 82 and Figure 83). In
2040, the total maximum additional potential to reduce CH4 emissions is 38 MtCO2-eq
in the three main scenarios (30 MtCO2-eq in LIFE, which starts from lower emissions).
Around 57% of this potential would be accessible at near-zero marginal abatement cost
(mainly through breeding through selection to enhance productivity, fertility and
longevity, and farm-scale anaerobic digestion with biogas recovery), and 90% could be
achieved at a marginal cost lower than 35 EUR/tCO2-eq (by including feeding additives).
For N2O, the abatement potential is entirely linked to mitigation practices and
technologies to reduce emissions from agricultural soils, such as nitrification inhibitors
and variable rate technology. In 2040, the maximum additional potential to reduce N2O
emissions is 44 MtCO2-eq in the three main scenarios (34 MtCO2-eq in LIFE, starting
from lower emissions). Around 32% of this potential could be reached at a marginal cost
between 25 and 50 EUR/tCO2-eq, while 75% could be reached at a marginal cost below
140 EUR/tCO2-eq and 95% could be reached at a marginal cost below 190
EUR/tCO2-eq.
0
50
100
150
200
250
300
0 10 20 30 40 50 60 70 80 90
Marginal
abatement
cost
(EUR/tCO2-eq)
Reduction in non-CO2 GHG emissions (MtCO2-eq)
LIFE
S1, S2, S3
113
Figure 82: MACC of the agriculture sector in 2040 in S1, S2 and S3 (by gas and area of
application)
Note: The MACCs include all non-CO2 greenhouse gases. Marginal abatement costs are expressed in constant
EUR 2015.
Source: GAINS.
Figure 83: MACC of the agriculture sector in 2040 in LIFE (by gas and area of application)
Note: The MACCs include all non-CO2 greenhouse gases. Marginal abatement costs are expressed in constant
EUR 2015.
Source: GAINS.
0
50
100
150
200
250
300
0 10 20 30 40 50 60 70 80 90
Marginal
abatement
cost
(EUR/tCO2-eq)
Reduction in non-CO2 GHG emissions (MtCO2-eq)
CH4 (Livestock)
CH4 (Rice cultivation
and other)
N2O (Agricultural
soils)
All sources
0
50
100
150
200
250
300
0 10 20 30 40 50 60 70 80 90
Marginal
abatement
cost
(EUR/tCO2-eq)
Reduction in non-CO2 GHG emissions (MtCO2-eq)
CH4 (Livestock)
CH4 (Rice cultivation
and other)
N2O (Agricultural
soils)
All sources
114
Table 16: Mitigation potential in the agriculture sector in S1, S2 and S3
Marginal abatement cost for non-CO2 GHG emissions (EUR/tCO2-eq)**
0* 0.1 10 50 100 300 Max
Emissions mitigation in 2040
(MtCO2-eq)
CH4 (Livestock) 0 21 22 34 35 36 37
CH4 (Rice cultivation and other) 0 1 1 2 2 2 2
N2O (Agricultural soils) 0 0 0 14 25 42 44
Total 0 22 23 50 62 81 83
Share of maximum mitigation
potential achieved in 2040 (%)
CH4 (Livestock) 0% 57% 59% 92% 97% 100% 100%
CH4 (Rice cultivation and other) 0% 50% 50% 94% 94% 100% 100%
N2O (Agricultural soils) 0% 0% 0% 32% 57% 95% 100%
Total 0% 27% 27% 60% 76% 97% 100%
Note: *In this table, the non-CO2 GHG emissions at zero marginal abatement cost correspond to the emissions
without additional mitigation in 2040. **Marginal abatement costs are expressed in constant EUR 2015.
Source: GAINS.
Table 17: Mitigation potential in the agriculture sector in LIFE
Marginal abatement cost for non-CO2 GHG emissions (EUR/tCO2-eq)
0* 0.1 10 50 100 300 Max
Emissions mitigation in 2040
(MtCO2-eq)
CH4 (Livestock) 0 16 16 26 27 28 28
CH4 (Rice cultivation and other) 0 1 1 2 2 2 2
N2O (Agricultural soils) 0 0 0 11 19 32 34
Total 0 17 17 39 48 62 64
Share of maximum mitigation
potential achieved in 2040 (%)
CH4 (Livestock) 0% 56% 58% 93% 97% 100% 100%
CH4 (Rice cultivation and other) 0% 50% 50% 94% 94% 100% 100%
N2O (Agricultural soils) 0% 0% 0% 32% 56% 96% 100%
Total 0% 26% 27% 61% 75% 98% 100%
Note: *In this table, the non-CO2 GHG emissions at zero marginal abatement cost correspond to the emissions
without additional mitigation in 2040. Marginal abatement costs are expressed in constant EUR 2015.
Source: GAINS.
1.7.5. GHG emissions projections
This section presents the agriculture GHG emissions trajectory in each scenario.
Currently, almost all GHG emissions from agriculture that are not related to energy
consumption (i.e., all category 3 of the UNFCCC inventory) are CH4 and N2O emissions
(see Table 18 and Figure 84). CO2 emissions included in category 3 are very small and
are assumed to remain constant at historical level (10 MtCO2). CO2 emissions from
agriculture related to energy consumption (i.e., those included in category 1 of the
UNFCCC inventory) are not analysed in this section, but in Section 1.1.3.
115
The S1 scenario assumes that no additional mitigation measures are deployed by 2040. In
the S2 scenario, reductions take place, mostly through the deployment by 2040 of
technologies reducing CH4 emissions (such as feeding additives, farm-scale anaerobic
digestion with biogas recovery, and breeding through selection to enhance productivity,
fertility and longevity), while technologies to reduce N2O emissions from agriculture are
only partially deployed in 2040. S3 and LIFE assume the full deployment of all
additional mitigation measures (including nitrification inhibitors, variable rate technology
and restoring drained organic soils) by 2040, thus contributing to the overall net GHG
reductions. In modelling terms, the extra mitigation to the baseline is realised through the
application of a “carbon value” to GHG emissions applied to the sector (see Annex 6 and
previous section on mitigation potential in the sector).
Figure 84: GHG emissions from agriculture by gas
Note: *In the S1 and S2 scenarios, emissions in 2050 are equal to those in the S3 scenario. **CO2 emissions
include only emissions in category 3 (“Agriculture").
Source: GAINS.
The amount of GHG emissions (152
) generated by the agriculture sector in 2040 is
projected to be 351 MtCO2-eq in S1 (9% lower than in 2015), 302 MtCO2-eq in S2
(22% lower than in 2015), and 271 MtCO2-eq in S3 (30% lower than in 2015) (see Table
18). LIFE, which combines a different evolution of the food system and the application
of technologies, shows a much lower level of emissions (209 MtCO2-eq, i.e., 46% lower
than in 2015). In 2050, GHG emissions are projected to reach 249 MtCO2-eq (a 35%
reduction relative to 2015) in the three main scenarios, and 194 MtCO2-eq in LIFE (a
50% decrease compared to 2015).
(152
) Including CO2, CH4 and N2O emissions in category 3 of the UNFCCC inventory.
0
50
100
150
200
250
300
350
400
S1 S2 S3 LIFE S3* LIFE
2015 2030 2040 2050
MtCO2-eq
CO2
N2O
CH4
116
Table 18: GHG emissions from the agriculture sector (by gas and type of source)
Greenhouse gas emissions (MtCO2-eq)
2015 2030
2040 2050
S1 S2 S3 LIFE S3* LIFE
Disaggregated per gas
CH4 237 223 214 179 176 137 162 127
N2O 138 128 127 113 85 63 77 57
CO2** 10 10 10 10 10 10 10 10
Total (all gases) 385 361 351 302 271 209 249 194
Disaggregated per type of source
Livestock 244 230 221 188 185 143 171 134
Agricultural soils 127 118 116 102 74 55 66 49
Other 13 14 14 12 12 12 12 12
Total (all sources) 385 361 351 302 271 209 249 194
Note: *In the S1 and S2 scenarios, emissions in 2050 are equal to those in the S3 scenario. **CO2 emissions
include only emissions in category 3 (“Agriculture").
Source: GAINS.
The analysis of emissions per type of source shows that, in 2040, GHG emissions caused
by livestock (which are mostly CH4 emissions (153
)) are projected to be 221 MtCO2-eq
(10% lower than in 2015) in the S1 scenario, 188 MtCO2-eq (23% lower than in 2015) in
the S2 scenario, and 185 MtCO2-eq (24% lower than in 2015) in the S3 scenario (see
Table 18 and Figure 85). In 2050, GHG emissions from livestock are 171 MtCO2-eq
(i.e., 30% lower than in 2015) in these three scenarios. These emissions reductions
(compared to 2015) are achieved mainly by implementing the following technologies: a)
breeding through selection to enhance productivity, fertility and longevity; b) farm-scale
anaerobic digestion with biogas recovery; and c) feed additives. Note that, in the S1
scenario, these technologies are only deployed after 2040.
In addition to the implementation of these technologies, LIFE assumes changes in
sectoral activity compared to the other scenarios (notably, a decrease in livestock leading
to a lower production of manure). As a result, GHG emissions caused by livestock
decrease further: they are projected to be 143 MtCO2-eq in 2040 (i.e., 41% lower than in
2015) and 134 MtCO2-eq in 2050 (i.e., 45% lower than in 2015).
GHG emissions from agricultural soils (which are entirely N2O emissions (154
)) are
projected to be 116 MtCO2-eq in S1 (8% lower than in 2015), 102 MtCO2-eq (19%
lower than in 2015) in the S2 scenario, and 74 MtCO2-eq (42% lower than in 2015) in S3
in 2040 (see Table 18 and Figure 85). In 2050, emissions from agricultural soils are 66
MtCO2-eq (48% lower than in 2015) in these three scenarios. These emissions reductions
(compared to 2015) are achieved mainly through the large-scale implementation of
(153
) According to the UNFCCC inventory, around 93% of the GHG emissions from livestock in the EU in
2021 were CH4 emissions, whereas the remainder (7%) were N2O emissions.
(154
) According to the UNFCCC inventory, 100% of the GHG emissions from agricultural soils in the EU
in 2021 were N2O emissions.
117
technologies to improve fertiliser application (notably, nitrification inhibitors and
variable rate technology) and by restoring drained organic soils. The S1 scenario assumes
that these technologies are only deployed after 2040 (see Annex 6).
In addition to the implementation of these technologies, LIFE assumes changes in
sectoral activity compared to the other scenarios, with a decrease in the use of mineral
fertilisers. Consequently, GHG emissions from agricultural soils decrease further: they
are projected to be 55 MtCO2-eq in 2040 (57% lower than in 2015) and 49 MtCO2-eq in
2050 (62% lower than in 2015).
Figure 85: GHG emissions from agriculture by type of source
Note: GHG emissions include CO2 (category 3), CH4 and N2O emissions. *In the S1 and S2 scenarios, emissions
in 2050 are equal to those in the S3 scenario.
Source: GAINS.
0
50
100
150
200
250
300
350
400
S1 S2 S3 LIFE S3* LIFE
2015 2030 2040 2050
MtCO2-eq
Other
Agricultural
soils
Livestock
118
1.8. LULUCF
1.8.1. Introduction
Figure 86 shows the evolution of the EU LULUCF net removals over 1990-2021. They
have been on average about -325 MtCO2-eq between 1990 and 2016, and declining since,
down to -230 MtCO2-eq in 2021.
Figure 86: Historical LULUCF emissions, removals and net carbon removals
Source: UNFCCC 2023
The LULUCF sector generates emissions from wetland, cropland, and grassland,
settlements and other land (69 MtCO2-eq in 2021), which are counterbalanced with
removals from forest land (-281 MtCO2) and through harvested wood products
(-47 MtCO2).
The different categories show relatively stable development for settlements and other
land as well as wetland with changes below 10% throughout the average 2019-2021
compared to 10 years before. Cropland emissions (-44%) and grassland emissions (-36%)
decreased considerably and removals from harvested wood products increased at the
same time (+26%). However, in absolute terms the change in these sectors plays a minor
role with a total change of -38 MtCO2-eq. The changes in forest land are the decisive
factor for the change in the net LULUCF net removal with a change of -34% in the last
ten years of about -148 MtCO2-eq (average 2019-2021 compared to 10 years before).
Ageing forests, increased wood harvest for material and energy purposes, as well as
impacts of climate change and natural hazards are responsible for the variations of the
carbon removals from forests (155
) (156
) (157
).
(155
)JRC, ‘Biomass production, supply, uses and flows in the European Union’, JRC Science for policy report, 2023.
(156
) ICOS ERIC, ‘Forest carbon sinks under pressure’ Fluxes - The European Greenhouse Gas Bulletin Volume 2:
Nature-based solutions for net zero. ICOS ERIC, 2023. https://doi.org/10.18160/99JW-2D3S
(157
) Ceccherini, G., Duveiller, G., Grassi, G. et al. Abrupt increase in harvested forest area over Europe after 2015.
Nature 583, 72–77 (2020). https://doi.org/10.1038/s41586-020-2438-y
- 600
- 500
- 400
- 300
- 200
- 100
100
200
MtCO2-eq
Grassland
Cropland
Wetland
Settlements and
Other land
Harvested Wood
Products
Forest land
Net LULUCF Sink
119
1.8.2. Activity
1.8.2.1.Bioenergy demand
The size of the LULUCF net removals is related to the use of biomass and particularly to
the consumption of woody biomass. An important driver for the biomass demand is
bioenergy, which made up 22% of the total biomass uses in 2015 (158
). Furthermore, 49%
of woody biomass went directly or indirectly into bioenergy in 2015 (159
), underlining the
strong relation of bioenergy and LULUCF net removals.
The modelling exercise shows final demand for bioenergy (160
) in 2040 being only
sightly higher than in 2021 in scenarios S2 and S3, and lower in scenario S1 (see Figure
87).
Figure 87: Final bioenergy demand by sector and scenario
Note: Graph includes consumption of waste for energy purposes. ‘Industry’ includes energy sector. ‘Buildings’
cover household buildings, services, and agriculture.
Source: 2015 and 2021 from Eurostat, projections from PRIMES
However, consumption shifts across sectors. Demand for (mostly solid) biomass for
heating reduces strongly in buildings (by about 20 Mtoe, due to energy efficiency gains
and electrification of the sector), as well as in electricity and district heating (notably in
S1), compared to 2021. Conversely, the demand for (liquid) biofuels develops
significantly in aviation and maritime in 2040 by respectively about 15 Mtoe and 20
Mtoe. After 2040, bioenergy demand decreases across all scenarios, which is driven
(158
) JRC, ‘Biomass production, supply, uses and flows in the European Union’, JRC Science for policy report, 2023.
(159
)Camia, A., Giuntoli, J., Jonsson, K., Robert, N., Cazzaniga, N., Jasinevičius, G., Avitabile, V., Grassi, G., Barredo
Cano, J.I. and Mubareka, S., The use of woody biomass for energy production in the EU, EUR 30548 EN,
Publications Office of the European Union, Luxembourg, 2020, ISBN 978-92-76-27867-2, doi:10.2760/831621,
JRC122719.
(160
) “Final” demand for bioenergy includes here bioenergy used in final energy consumption sectors (industry,
transport, buildings, agriculture, services), in international aviation and maritime and as input to the electiricity
and district heating. It does not consider transformation process losses to produce biofuels, biogas or biomethane.
0
20
40
60
80
100
120
140
160
180
S1 S2 S3 LIFE S1 S2 S3 LIFE
2015 2021 2030 2040 2050
Mtoe
Road transport
Aviation
Maritime transport
Buildings
Industry
Electricity and
District heating
120
notably by reduced demand in road transport where it gets close to zero in a context of
electrification of the vehicles fleet and, although to a lesser extent, in industry where it
gets to levels observed in 2015.
Net imports of bioenergy (including solid biomass, waste, and liquid biofuels) are limited
to 10-13 Mtoe in 2040 before reducing by 2050, against 9 Mtoe in 2021.
The evolution of bioenergy demand by 2040 towards an increasing role of second
generation biofuels converts into higher domestic feedstock supply from lignocellulosic
crops (both annual and perennial), while food crops decline. Bioenergy from agriculture
residues is expected to also increase reflecting an improved mobilisation of their
potential, including manure. S1 shows lower biomass supply needs than S2 and S3 by
2040, reflecting a lower recourse to bioenergy in electricity production and district
heating. Woody biomass for bioenergy shows a limited increase to about 25 Mtoe for
stemwood (161
) and 20 Mtoe for forest residues in 2040, in a context of increasing use of
secondary residues and used wood from consumers within the waste category. This has
very important implications for the forest sink because primary woody biomass for
bioenergy decreases the carbon pool and the LULUCF net removals. Therefore, an
increasing use of secondary woody biomass from other uses (bark, secondary residues
from material production, recovered post-consumer wood), which substitutes woody
biomass coming directly from forests, has an alleviating effect on the LULUCF net
removals. In 2040 wood plantations for energy use start to develop and stay stable in size
in 2050, which also buffers the required harvest removals for energy use.
The total domestic feedstock for bioenergy and waste (including manure) peaks in 2040,
ranging from about 210 Mtoe in S1 to just above 230 Mtoe in S2 and S3. By 2050 the
feedstock supply decreases to a level ranging between 200 Mtoe (S3) and 215 Mtoe (S1).
(162
)
(161
) Forest stemwood for bioenergy can be defined as fuelwood and usually consists of roundwood of
quality that is in general not suitable for other purposes. It is harvested directly from forests.
(162
) Future analyses may assume other supply levels of biomass to stay within the sustainability
boundaries, in view of the on-going scientific debate.
121
Figure 88: Domestic supply of feedstock for bioenergy and waste
Note: ‘Lignocellulosic crops’ includes short rotation coppice and lignocellulosic grass. Manure is included in
'Waste’.
Source: PRIMES, GLOBIOM
As shown in section 1.1.2, scenario S3 requires more industrial carbon removals by
2040. This scenario may require higher biomass use for BECCS if the deployment of the
other key identified option to generate industrial removals, DACCS, would remain
limited in the coming 15 years. Section 1.8.4 below provides a sensitivity analysis on the
impact of a higher need for biomass on the LULUCF net removals.
1.8.2.2. Bioeconomy demand
Beyond bioenergy, the role of bioeconomy at large will have impacts on the future
LULUCF net removals. Notably, a change from short-term to long-term harvested wood
products will increase the temporary carbon stock and lead to a temporary increase in the
net removals. Hence, whether biomass from harvests is used for long-term harvested
wood products such as furniture or woody elements in buildings or whether it is used for
bioplastics, paper or single-use products is important as it has implications on the size of
the temporary sink from harvested wood products. Annex 9 discusses the need for
healthy nature and a sustainable bioeconomy in view of maintaining and enhancing the
LULUCF net removals and other nature services.
1.8.2.3. Harvest of wood and forest increment
The European forests play a decisive role for the EU LULUCF carbon net removals, as
the share from forest land makes up nearly 90% of all carbon removals from the
LULUCF sector (see Figure 86). The ‘forest sink’ depends on the gross annual increment
of a forest, the natural mortality and fellings (harvest and logging residues) (163
). Hence,
the demand for woody biomass and the corresponding harvest and overall forest
management has a direct impact on the forest sink.
(163
)Korosuo, A. et al., ‘The role of forests in the EU climate policy: are we on the right track?’, Carbon
Balance and Management, 18, 15, 2023.
0
20
40
60
80
100
120
140
160
180
200
220
240
260
S1 S2 S3 LIFE S1 S2 S3 LIFE
2015 2021 2030 2040 2050
Mtoe Paper and pulp residues
Forest residues
Forest stemwood
Agriculture residues
Food crops
Lignocellulosic crops
Waste
122
Figure 89 shows the evolution of wood harvest by 2050. Wood production increased
significantly since the beginning of this century to satisfy the increasing demand for
woody biomass (164)
. Compared to 2015, total harvest of wood is expected to be higher in
2040 (ranging from 17% in S1 to 19% in S3), and then decline by 2050. The increase is
driven by harvest for elevating demand of biomass for material uses, combined with an
improved exploitation of secondary residues used for energy purposes, while direct
harvest for energy uses is expected to be similar to 2015 or slightly lower (for S1) in
2040 before declining by 2050.
Figure 89: Harvest of wood for energy and non-energy use
Note: “Secondary residues used for energy use” are forest residues that were initially harvested for material use
(e.g., from the production of sawnwood) but then used for energy production.
Source: GLOBIOM
The gross annual increment of a forest is the second important factor that determines the
forest carbon sink. As an important development, the productivity of the managed forests
has peaked, given recent forest management strategies, and given the fact that the
increase of the biomass stock in the EU has slowed down in recent years (165
). The slower
increase of growth productivity (i.e., the annual increment of the forests) is due to the age
structure of the forests, which show a slower growing rate at higher ages. As shown in
Figure 90, forest increment of managed forest is projected to reach its maximum around
2030 for S1 and around 2040 for S2 and S3 and will then slowly decline. The difference
in forest increment between the scenarios in 2040 is caused by different carbon values to
cover mitigation costs, which incentivize improved forest management and afforestation
in S2 and S3 (see section 1.8.3). In 2050 S1, S2 and S3 use equal carbon values, resulting
in the same forest increment. For LIFE the trend looks more optimistic, because a
significant share of new land is used for afforestation, which leads to a greater forest
increment compared to S2 and S3. In 2050 the discrepancy to the other scenarios
becomes even bigger, because additionally afforested trees achieve high growth rates.
(164
) JRC, ‘Biomass production, supply, uses and flows in the European Union’, JRC Science for policy report, 2023.
(165
)JRC, ‘Biomass production, supply, uses and flows in the European Union’, JRC Science for policy report, 2023.
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
S1 S2 S3 LIFE S1 S2 S3 LIFE
2000 2015 2030 2040 2050
tm3
Harvest of wood for
non-energy use
Secondary residues for
energy use
Harvest of wood for
energy use only
123
Figure 90: Total forest increment of managed forests per year and scenario in EU
Note: The graph depicts the forest increment projections per year for S1, S2, S3 and LIFE. The forest increment
does not take natural disturbances or climate change and CO2 fertilisation effects into account.
Source: GLOBIOM
1.8.2.4.Land use
The distribution of land for different uses impacts GHG emissions and carbon removals
from land but is also influencing the functioning of habitats and ecosystems which play a
vital role for biodiversity and climate. The use of land is under high competition in the
EU to supply land for food, production of materials, bioenergy, housing and
infrastructures, ecosystem services and other purposes. A change in land use for example
by reducing the land for settlements or changing land used dedicated to fodder activities
for carbon farming activities would reduce emissions or enhance carbon removals and
thus have a positive impact on the net removals.
Figure 91 provides an overview of the historic evolution of the land use until 2020.
Overall, the share of land use between different sectors appears very stable with a slow
increase in managed forest land (+4 Mha) and land for settlements (+3 Mha) and a
simultaneous decline of cropland (-7 Mha). The area for settlements has been steadily
increasing until today, which is associated with additional emissions.
600,000
650,000
700,000
750,000
800,000
850,000
900,000
2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
Tm3
historical 2030 LULUCF target S1 S2 S3 LIFE
124
Figure 91: Evolution of land use in EU by category
Note: Evolution of land use by land use category from 2000 until 2020.
Source: UNFCCC 2023, GLOBIOM
From 2020 onwards the different scenarios comprise different developments of land use
(see Figure 92), although the absolute overall land use changes compared to today remain
small in relative terms, which range from 5 Mha (S1) to 9 Mha in S2 and S3 and 12 Mha
in LIFE, which corresponds to 1-3% of the total land.
Figure 92: Changes in land use between 2020 and 2040 by scenario
Source: GLOBIOM
Next to the assumed growing land take by settlements (+2 Mha), the land use changes in
the scenarios are driven by actions to enhance the LULUCF net removals (166
) and
changes on energy demand in S2 and S3, which decrease grassland and other natural land
(166
) The scenarios assume a marginal mitigation cost covered for additional nature-based removals of
EUR 50 for S2, S3, LIFE and no mitigation costs covered in S1. For details see Annex 6, section 3.2.
0
50
100
150
200
250
300
350
400
450
2000 2005 2010 2015 2020
Mha Wetlands
Forest Land
Cropland
Grassland and other natural
land
Settlements and other land
-16
-12
-8
-4
0
4
8
12
16
S1 S2 S3 LIFE
Mha
Wetlands
Forest Land
Cropland
Settlements and other
land
Grassland and other
natural land
125
by 9.3 Mha in S2 and S3 and by 5.2 Mha in S1 (167
). This shift translates for S2 and S3
into more land for forests (+4.9 Mha). Furthermore, additional nature-based removals to
increase the LULUCF net removal are implemented through restoration of wetlands,
which increase by 1.4 Mha in S2 and S3. Very limited land use changes occur in S1 due
to no incentives for additional nature-based removals and lower demand for second
generation lignocellulosic crops. In S2 and S3 about 1.2 Mha are converted into
additional cropland by 2040, while in S1 no additional cropland is converted. The
cropland in S2 and S3 increases by about 1% compared to 2020 and is still substantially
smaller than the total cropland area during the period of 2000 and 2015.
Throughout the scenarios, financial incentives for nature-based removals have a higher
impact on land-use change than a limited use of lignocellulosic crops for bioenergy. Even
though from total cropland area, land for lignocellulosic crops requires 7 Mha in S1 and
10.6 Mha in S2 and S3, the overall land-use change impact from crops for biofuels on
total cropland is with an increase in cropland of about 1% relatively small (168
). This is
because second-generation lignocellulosic crops replace in 2040 to a large extent
cropland from first generation food crops. Lignocellulosic crops for second generation
biofuels produce higher yields (169
) and require less land for the same amount of
bioenergy (170
).
LIFE has significant effects for agricultural land used for livestock and fodder. Because
less livestock and therefore less area for fodder is required, intensively managed
grassland and cropland from fodder production are abandoned and converted into natural
and set aside land partly covered with buffer stripes, hedges and other landscape
elements, extensive grassland, and forests. The additional natural land vegetation is
accounted in the grassland and other natural land category (171
). In comparison to S2 and
S3, the change in the food system in LIFE lead to additional forest land (afforestation;
(167
) ‘Grassland and other natural land’ consists of managed pasture land, unmanaged grassland and
shrubland. The area of managed pasture land remains relatively stable within the category.
(168
)In 2040 total cropland remains unchanged in S1 and increases by 1.2 Mha in S2 and S3, because
around 80% of the required area for lignocellulosic crops comes from cropland currently used for first
generation biofuels (7.5 Mha) or other cropland (1.9 Mha). The total potential for lignocellulosic crops
is however limited. A higher use of biofuels for road transport, maritime transport and aviation than
displayed in the scenarios would have a much bigger impact on land use change or food production,
because no further areas from first generation lignocellulosic crops could be substituted.
(169
)Muylle, H., Van Hulle, S., De Vliegher, A., Baert, J., Van Bockstaele, E., & Roldán-Ruiz, I., ‘Yield
and energy balance of annual and perennial lignocellulosic crops for bio-refinery use: a 4-year field
experiment in Belgium’, European Journal of Agronomy, 63, 62-70, 2015.
(170
)Second-generation biofuel feedstocks often have a higher energy yield per unit of land and water
compared to first-generation crops, which means that more energy can be obtained from the same
amount of resources, making them more efficient in terms of land and water use. Moreover, these
feedstocks are typically non-food feedstocks from energy crops which do not directly compete with
food production and can also be produced on marginal lands; Antizar‐Ladislao, B., & Turrion‐Gomez,
J. L. ‘Second‐generation biofuels and local bioenergy systems.’ Biofuels, Bioproducts and Biorefining:
Innovation for a sustainable economy, 2(5), 455-469, 2008.
(171
)Additional land available from fodder production and for livestock is becoming either afforested land
or abandoned land with buffer stripes, hedges or other natural vegetation. This abandoned land is
attributed here to the UNFCCC grassland sector which also includes shrubland, hence including some
woody vegetation. Some changes in LIFE occur within the grassland sector (from productive to
unproductive grasslands) and are therefore not visible as change in the overview on land use changes.
126
+4.0 Mha), more high-diversity landscape features (172
) which is natural land partly
covered with buffer stripes, hedges, fallow land or other natural vegetation (+6.8 Mha)
and rewetted organic soils (+0.3 Mha). LIFE produces land use changes which result in
less cropland (-7 Mha) and more grassland (+2.7 Mha) compared to S2 and S3.
Lignocellulosic crops require a total area of around 10.2 Mha in 2040. The increase in
wetlands is possible, because less fodder production and less requirement for agricultural
grassland reduce pressure on the food system and make land for rewetting of dried
organic soils cheaper.
1.8.3. Options to increase the net LULUCF net removal
As discussed in previous section 1.1 technical and nature-based carbon removals are an
essential part in each scenario to achieve net zero emissions in 2050. The share between
technical and nature-based removals may vary depending on the development of prices
for industrial carbon removal technologies, nature-based removal options and the
saturation effect of the land sink. Hence, although nature-based removals are expected to
make up the bigger share of carbon removals, it is not clear which options will be more
cost efficient at a certain point in time.
Nature-based removal options in the LULUCF sector include interventions in forests
(e.g., reduce deforestation and peatland degradation, afforestation, forest management,
peatland restoration) and agricultural soils (e.g., soil organic carbon management,
agroforestry) and have different mitigation potentials (173
). The costs for different
mitigation options are specified as a yearly price per ton CO2-eq, which are required for
the implementation of a certain option. Throughout the public consultation, respondents
rated ‘afforestation, reforestation and forest restoration’ as the most relevant solution for
limiting climate change (174
) (Average: 4.44, on a 5-point scale form ‘very irrelevant’ (1)
to ‘very relevant’ (5)), which illustrates the perceived prominent role of forests for
climate action among both citizens and organisations. Though other nature-based
removals such as peatland restoration (rewetting, revegetating, and paludiculture)
(Average: 4.24) as well as Agroforestry and other soil management practices (Average
4.18) were rated second and third among the most relevant solutions for limiting climate
change. Thus, nature-based removals in the LULUCF sector are clearly well known and
seen as the most promising options throughout the portfolio of mitigation options.
For some nature-based removals to contribute to the long-term enhancement of the
LULUCF net removals is a slow process – one that should start now to maximise the
2050 carbon removal potential. However, other options, such as rewetting of peat- and
wetlands, quickly reduce emissions, when implemented. Therefore, the mitigation
(172
)Resulting from the goal to return at least 10% of agricultural area under high-diversity landscape
features; see COM(2020) 380 final. A share of this natural land is formerly intensively managed
grassland which stays within the grassland category.
(173
)For an overview of nature-based removals see: Roe, S., Streck, C., Beach, R., Busch, J., Chapman, M.,
Daioglou, V., Deppermann, A., Doelman, J., Emmet-Booth, J., Engelmann, J., Fricko, O., Frischmann,
C., Funk, J., Grassi, G., Griscom, B., Havlik, P., Hanssen, S., Humpenöder, F., Landholm, D., …
Lawrence, D., ‘Land-based measures to mitigate climate change: Potential and feasibility by country.’
Global Change Biology, 27, 6025–6058, 2021.
(174
) Among a range of possible offered options (e.g., Peatland restoration, Agroforestry, BECCS,
Bioachar, DACCS, nuclear fusion, solar radiation modification)
127
potential of rewetting drained organic soils is substantial already in 2030. Forest and
agriculture related options can also enhance the LULUCF net removal in the short term
but most of their potential plays out in 2040 and 2050. As shown in Figure 93, improved
forest management and afforestation, can provide a comparably large mitigation potential
already by 2030 and largely to a relatively low price of 20 €/tCO2-eq (175
). Similarly,
solutions for agricultural land unfold to a large extent as early as 2030, though mitigation
costs are much more heterogeneous across the entire spectrum of mitigation options
available in the agriculture sector and range from 5 to 150 €/tCO2-eq. The potential of
avoided deforestation is declining and will be almost exhausted after 2050.
Rewetting of drained organic soils makes up about 30% of the total potential for
50 €/tCO2-eq or 100 €/tCO2-eq. It provides a high mitigation potential (176
) (177
) but also
requires substantial investment (178
). It can be achieved by using appropriate forms of
agriculture management such as paludiculture or by completely taking the land out of
production. The elevation of water levels (i.e., ‘rewetting’) reduces emissions that stem
from the organic material in these soils. Notably, a high share of today’s drained
peatlands is used for agricultural purposes, which hampers the peatlands from being
rewetted. Thus, an important element for rewetting practices may be a compensation of
farmers and landowners when switching to other forms of agriculture (e.g., paludiculture)
or abandoning agricultural activity on these soils. Consequently, as shown in Figure 93,
mitigation options for organic soils unfold their potential mainly at costs between
50 €/tCO2-eq and 100 €/tCO2-eq.
(175
) All mitigation costs to cover for nature-based removals in this section are expressed in EUR 2020
values.
(176
)CH4 emissions on rewetted lands decrease the sink potential of active rewetting activities. CH4
emissions have been included, to avoid an overly optimistic assumption of the potential. However, a
high range of uncertainties still exist on CH4 emissions on rewetted lands and therefore the
sequestration potential needs to be interpreted with caution.
(177
) Rewetting of drained peatlands overall reduces climate warming despite CH4 emissions. See for
details: Günther, A., Barthelmes, A., Huth, V. et al. ‘Prompt rewetting of drained peatlands reduces
climate warming despite methane emissions’, Nature Communications, 11, 1644, 2020.
(178
)New assumptions on active rewetting and corresponding prices for land acquisition, active rewetting
and maintenance have been incorporated for this impact assessment.
128
Figure 93: Mitigation potentials in LULUCF at different mitigation costs
Note: Nature-based removals show mitigation (including sequestration) potential in MtCO2 by different
mitigation costs. Bars show the accumulated additional LULUCF net removal per year with the respective yearly
cost. Costs expressed in EUR2020.
Source: GLOBIOM
Importantly, many nature-based removals also provide co-benefits for biodiversity as it
oftentimes involves a land-use change that can shelter diverse ecosystems and habitats
(as in the case of wetlands or when land is converted into primary forest land).
The recently revised LULUCF Regulation sets out a target of -310 MtCO2-eq of net
removals (179
) for the LULUCF sector in 2030 as well as corresponding targets for
Member States. The modelling results (see Figure 94) indicate that most mitigation
options to achieve this target, are available at low mitigation costs (0-20 €/tCO2-eq), but
some nature-based removals with mitigation costs between 40 and 50 €/tCO2-eq (180
)
would be required. Implementing these nature-based removal options will also be
beneficial beyond 2030 since substantial LULUCF net removals will be required to offset
emissions from hard-to-abate sectors in 2040 and 2050.
(179
) See LULUCF regulation: Regulation (EU) 2018/841 (amended by Regulation 2023/839)
(180
) The Impact Assessment accompanying the proposal for a revised LULUCF Regulation indicated that
the target of -310 MtCO2-eq could be achieved at lower mitigation costs (5-10€/tCO2-eq), but the
starting point for those assumptions was the average LULUCF sink in 2016-2018 which was much
larger than the current trend of the LULUCF sink. More importantly, updated mitigation costs have
been taken into account in this impact assessment based on the latest scientific literature.
0
20
40
60
80
100
120
140
160
180
20 50 100 20 50 100 20 50 100
2030 2040 2050
MtCO2-eq
Euro/tCO2
Organic Soils
Agriculture Land
Afforestation
Forest Management
129
Figure 94: LULUCF net carbon removal potential for different mitigation costs
Note: Mitigation costs specify the price in Euro per tonne CO2-eq removed by different nature-based removal
options. The columns indicate the additional, marginal potential of nature-based mitigation available for the
respective prices. Costs expressed in EUR2020.
Source: GLOBIOM
LIFE produces a consistently higher potential of carbon removals compared to S1, S2
and S3. This is because the agricultural area that is freed up in this scenario is expected to
be used in part for carbon farming activities.
1.8.4. The LULUCF net removal
1.8.4.1.Analysis of the scenarios
The 2030 LULUCF target of -310 MtCO2-eq (181
) is met by applying a carbon value of
50 €/tCO2-eq (182
). The exact size of the future level of LULUCF net removals bears
many uncertainties, depending on the effect of future policy measures in the sector,
potential additional nature-based carbon removals through certification schemes, climate
change impacts, extreme events, biomass demands, resulting harvesting levels and other
factors. A range for the LULUCF net removals is introduced in the analysis to illustrate
this uncertainty for the period after 2030, by looking at three levels of net removals:
- A ‘lower level’, showing a lower boundary for the LULUCF net removals, which
is technically implemented in the modelling by applying in the modelling a
carbon value of 0 €/tCO2-eq;
- A ‘central level’, showing the resulting net LULUCF removals when applying the
carbon value of 50 €/tCO2-eq necessary to meet the 2030 target;
(181
)Regulation (EU) 2018/841 (amended by Regulation 2023/839)
(182
)In EUR 2020. The carbon value per tCO2-eq are calculated as a yearly cost for mitigation. In the
following only the marginal carbon values are specified, which means large shares of additional
nature-based removals are available at lower costs (see previous section for details).
-500
-450
-400
-350
-300
-250
-200
-150
-100
-50
0
S1 S2 S3 LIFE S1 S2 S3 LIFE
2030 2040 2050
MtCO2-eq 200 €
150 €
100 €
50 €
20 €
10 €
0 €
130
- An ‘upper level’, showing an upper boundary of the LULUCF net removals,
which is technically implemented in the modelling by applying a carbon value of
200 €/tCO2-eq (which translates into higher net removals than in the “central”
level).
To calculate the overall net GHGs of the scenarios across the economy (see section 1.1),
the “Central” level of net LULUCF removals is applied for all scenarios in 2040 and
2050, except for S1 in 2040, which applies the “Lower level”.
Figure 95 provides an overview of the LULUCF emissions and removals and the
corresponding evolution of the central level as well as the range (i.e., lower and upper
level) of the LULUCF net removals for the different scenarios. The difference across
scenarios in terms of energy demand translate in differences into forest sink levels as
well as different emission levels in cropland. Carbon stored in harvested wood products,
and emissions from grassland, settlements and other land, as well as from drained
wetlands remain fairly similar across scenarios.
S2, and S3 show very similar net removal levels in 2040 of about -320 MtCO2-eq. S1
shows much smaller net removals in 2040 of about -220 MtCO2-eq due to less nature-
based removals from cropland, grassland, and forest land. Furthermore, S2 and S3 show
higher removals from cropland due to more plantation of lignocellulosic crops in 2040
(183
).
2050 illustrates a general increase in the net removals across all scenarios by roughly 15
MtCO2-eq (S2, S3) to 120 MtCO2-eq (S1), reaching -330 to -340 MtCO2-eq. Despite this
average increase by 2050, the range illustrates that the net removal depends considerably
on the capacity of policies to safeguard the net removal to fall below the 2030 target or,
conversely, to deliver a stronger contribution towards climate neutrality up of about -
400 MtCO2-eq.
LIFE produces a higher LULUCF net removal, because agricultural land is converted
into high-diversity landscape elements covered with buffer stripes, hedges and other
landscape elements or provided for carbon farming activity (afforestation) which allows
for a considerable increase in the forest sink (30 MtCO2-eq) and decreases net emissions
on agricultural land (15 MtCO2-eq). The net effect for the LULUCF net removal in LIFE
is approximately -45 MtCO2-eq.
(183
)Lignocellulosic crops create a singular short-term sink effect, when being planted the first time. This
growing carbon stock is resulting in carbon removals in cropland starting by 2035 is fading out by
2050 when the carbon pool through these crops has been saturated and no additional carbon removal is
achieved. This temporary sink is therefore not a reliable source for the LULUCF sink in the long term.
S1 uses less lignocellulosic crops for biofuels compared to S2 and S3.
131
Figure 95: LULUCF net removal emissions and removals
Note: Emissions and removals include all GHG-emissions from the LULUCF sector and are reported in MtCO2-
eq. For the calculation of LULUCF net removals of the scenarios in 2040, S1 considers the “lower level”, while
S2 and S3 the “central level”. All scenarios consider the “central level” in 2050.
Source: UNFCCC 2023, GLOBIOM
The ESABCC analysis defines an environmental risk level of 400 MtCO2 per year as a
maximum net removals level by 2050 (184
). All scenarios analysed in this impact
assessment stay below this environmental risk level.
A complementary analysis scenario S2 was run with the JRC forest sector carbon model
(FSCM) to crossvalidate the level of the forest sink and the temporary sink of harvested
wood products (HWP), which are the main drivers of the LULUCF removals. The results
show similar results across both models for these two major carbon removals
categories (185
) in the LULUCF sector throughout the period with somewhat higher
projections of net removals with the FSCM for 2040: FSCM projects -334 MtCO2-eq in
2030 (compared to -345 MtCO2-eq in GLOBIOM model), -331 MtCO2-eq in 2040
(compared to -298 MtCO2-eq in GLOBIOM model) and -347 MtCO2-eq in 2050
(compared to -333 MtCO2-eq in GLOBIOM model).
1.8.4.2.Sensitivity of the LULUCF net removals to woody biomass use
The scenario S3 relies significantly more than S1 and S2 on industrial carbon removals
from DACCS and on e-fuels, two novel technologies with uncertain deployment
(184
)This risk level was based on research by Pilli et al. (2022) who provide as a probable range of -100
to -400 MtCO2-eq for the LULUCF net removals in 2050 taking future climate change impacts based
on RCP 2.6 into account. Scenarios exceeding the upper bound of -400 MtCO2-eq may rely on
implausibly high LULUCF net removal levels.
(185
) Carbon removals from Forest land and harvested wood products from both models are compared
against each other in an aggregated form because neither of the two subcomponents deviated
systematically from that aggregate. The numbers are missing emissions from other lands and do not
show the total LULUCF net removal. The GLOBIOM model numbers derive from the central level
LULUCF case with a carbon value of 50 €/tCO2, the JRC FSCM does not make these assumptions
and assumes a market-driven process.
-500
-400
-300
-200
-100
0
100
S1 S2 S3 LIFE S1 S2 S3 LIFE
2015 2030 2040 2050
MtCO2-eq
Harvested Wood
Products
Forest land
Grassland
Cropland
Wetland
Settlements/ Other land
lower level
central level
132
prospects, which could be substituted by biomass-based options (respectively BECCS
and 2nd
generation biofuels).
To assess the risks for LULUCF net removals from a higher uptake of biomass, a
sensitivity analysis was produced with the GLOBIOM model based on the scenario S3
simulating a higher demand of 20 Mtoe of woody biomass, to showcase the worst
possible impact on the LULUCF net removals. The increased demand of woody biomass
results in a decrease of the LULUCF net removals by around 100 MtCO2-eq in 2040, and
around 65 MtCO2-eq in 2050. However, if additional biomass would originate from other
sources such as secondary residues, used wood products, lignocellulosic crops, or other
waste, the impact on the sink would be much more limited. Still, the analysis shows that
the mitigation obtained from a high use of bioenergy, associated to for instance BECCS,
needs to be compared with the possible corresponding losses in the LULUCF net
removals (186
) (187
), depending on the biomass type.
1.8.5. Analysis of climate change impacts and CO2 fertilisation
Increasing climate change and GHG emissions have the potential to affect the LULUCF
sector, both in a negative (e.g., from lower rainfall, natural disturbances, extreme heat)
and beneficial way (e.g., from CO2 fertilisation, extended growing seasons) (188
). What
remains certain however is that the forest net removals are threatened by climate impacts
and their future robustness is far from guaranteed. Hence, there exist large uncertainties
on the future capacity of the LULUCF net removal due to the complex impacts of both
human and natural drivers. Consequently, high uncertainties in current and future levels
of nature-based carbon removals mean that it may not be precisely known if the
LULUCF net removal is on track to match the required size in the scenarios (189
). It is
important to stress that water availability plays a crucial role for EU’s forests. It appears
that impact of climate change on forest productivity depends strongly on water
availability (190
) (191
). While the impact of climate change on precipitation levels can be
(186
)Because the model assumes only sustainable harvest, yearly harvesting levels cannot exceed the yearly
increment from growth. The higher bioenergy demand therefore leads to price feedbacks on biomass
for materials, leading to a decline in material demands for harvested wood products.
(187
) Merfort, L., et al., ‘Bioenergy-induced land-use-change emissions with sectorally fragmented policies’
Nature climate change, 2023
(188
) It should be noted that the valence of an impact depends on different factors and therefore even natural
disturbances may have long-term beneficial effects for the sink. Thus, the listed examples only
illustrate the standard case.
(189
)Smith, S. M., Geden, O., Nemet, G., Gidden, M., Lamb, W. F., Powis, C., Bellamy, R., Callaghan, M.,
Cowie, A., Cox, E., Fuss, S., Gasser, T., Grassi, G., Greene, J., Lück, S., Mohan, A., Müller-Hansen,
F., Peters, G., Pratama, Y., Repke, T., Riahi, K., Schenuit, F., Steinhauser, J., Strefler, J., Valenzuela,
J. M., and Minx, J. C. (2023). The State of Carbon Dioxide Removal - 1st Edition. Available at:
https://www.stateofcdr.org
(190
) Pastor, J., & Post, W. M. (1988). Response of northern forests to CO2-induced climate change.
Nature, 334(6177), 55-58.
(191
) Ruiz-Benito, P., Madrigal-Gonzalez, J., Ratcliffe, S., Coomes, D. A., Kändler, G., Lehtonen, A., ... &
Zavala, M. A. (2014). Stand structure and recent climate change constrain stand basal area change in
European forests: a comparison across boreal, temperate, and Mediterranean biomes. Ecosystems, 17,
1439-1454.
133
modelled, it is difficult to assess the full impact of climate change on regional water
availability including groundwater levels because of high cascading uncertainties.
To assess these uncertainties, climate change impacts of different warming potentials
were modelled in GLOBIOM, taking different drivers such as an increase of CO2,
extended growing seasons, a higher frequency of natural disturbances and changing
precipitation levels into account (192
). Starting from the evolution of LULUCF net
removals in absence of dedicated policies, two different representative concentration
pathways for GHG concentrations (RCPs) 2.6 and 7.0 are used to illustrate the range of
impacts through different levels of global warming (193
), and four different climate
models were used per RCP to estimate the range of possible outcomes (194
). Furthermore,
because the magnitude of the CO2 fertilisation effect on forest growth is still part of a
scientific debate (195
) (196
), the eight trajectories are assessed both with and without
persistent CO2-fertilisation. To illustrate the entire range of uncertainty, all 16 climate
impact trajectories entail an additional soil related range due to uncertainty of the to
heterotrophic respiration (i.e., soil, deadwood and litter decomposition rates), which vary
by different degrees of climate change (197
).
Even though climate change impacts vary on the different activities such as forest
management, cropland management, grassland management, and harvested wood
products the most severe impact is on forests and to a lesser extent on harvested wood
products. The impact on forest depends on several factors such as the species used in
forests, water availability in different regions, and CO2 fertilisation.
Figure 96 shows a very wide range for the EU LULUCF net removal due to the effects of
climate change. The range shows a deviation from the standard projection in 2040 by 68
(192
) As factors were considered climate change impacts (temperature, precipitation, vapor pressure
deficit), increased in damage of wood due to natural disturbances (wind damage, fire, and instect
damage) as well as CO2 fertilisation.
(193
)RCP 2.6 is associated with a best estimate long-term temperature increase until 2100 of 1.8°C,
therefore assuming coordinated global action to keep climate change below 2.0°C. RCP 7.0 represents
a medium-to-high end of range of emissions and associated global warming, associated to a baseline
outcome rather than ambitious climate action on a global level and results in 3.6 °C long-term
temperature increase until 2100.
(194
) UKESM1-0-LL - The UKESM1.0-N96ORCA1 climate model run by the Met Office Hadley Centre,
UK; IPSL-CM6A-LR - The IPSL-CM6A-LR climate model run by the Institute Pierre Simon Laplace,
France; GFDL-ESM4 - The GFDL-ESM4 climate model run by the National Oceanic and
Atmospheric Administration, Geophysical Fluid Dynamics Laboratory, USA; MPI-ESM1-2-HR - The
MPI-ESM1.2-HR climate model run by the Deutsches Klimarechenzentrum, Germany
(195
) Jiang, M., Medlyn, B.E., Drake, J.E. et al., ‘The fate of carbon in a mature forest under carbon dioxide
enrichment’, Nature, 580, 227–231, 2020.
(196
) Haverd, V., Smith, B., Canadell, J.G., Cuntz, M., Mikaloff‐Fletcher, S., Farquhar, G., Woodgate, W.,
Briggs, P.R. and Trudinger, C.M., ‘Higher than expected CO2 fertilization inferred from leaf to global
observations’, Global Change Biology, 26,4, 2390-2402, 2020.
(197
)The uncertainty is caused by changes in mortality and foliage/root turnover rates, as well as the
influence of temperature and precipitation on the decomposition rates of these carbon pools. The
different climate change trajectories entail different rates of carbon input to the soil (due to changes in
forest dynamics) and different decomposition rates of deadwood, litter and soil carbon, resulting from
changes in temperature and precipitation.
134
MtCO2-eq to the upper bound (maximum net removals level) and 111 MtCO2-eq to the
lower bound (minimum net removals level). In 2050 the unsecurity increases further,
resulting in a range with a deviation of 84 MtCO2-eq to the upper bound and 133
MtCO2-eq to the lower bound. Hence, depending on RCP, climate model and CO2
fertilisation, the analysis projects for 2050 a possible range of net removals between
roughly -70 MtCO2-eq and -290 MtCO2-eq (in absence of additional LULUCF policies).
The finding is corroborated by other analyses (198
) and also roughly concurs with the
identified range of -100 to -400 MtCO2-eq for the LULUCF net removal by 2050, as
mentioned by the ESABCC, when taking future impacts of climate change into account.
Figure 96: Estimated climate change impacts on LULUCF net removal in EU
Note: The graph displays a model-based projection of the development of the LULUCF net removal in absence
of dedicated mitigation policies [lower level]. The historical trajectory shows the historical inventory data based
on UNFCCC 2023. and the ‘projection’ shows the trajectory of the LULUCF net removal without considering the
impact of climate change. The different 16 trajectories show RCP 2.6 vs. 7.0 (2) X different climate models (4)
X CO2 fertilisation vs. no fertilisation (2). The range illustrates the uncertainty due to climate change impacts
across all trajectories including uncertainty on carbon storage in soils.
Source: GLOBIOM, UNFCCC 2023
Taking a closer look at the individual climate scenarios, one can see the important role of
CO2 fertilisation (199
) and its potential impact on the EU-wide LULUCF net removals.
When considering no effect from CO2 fertilisation, all scenarios show a decline in the
LULUCF net removals. When including assumptions on effective CO2 fertilisation, the
(198
) For example: Pilli, R., ‘The European Forest carbon budget under future climate conditions and
current management practices’, Biogeosciences, 19, 3263–3284, 2022.
(199
) There is a high confidence among the scientific community of the existence of a positive effect of
CO2 fertilisation and extended growing seasons on forests. However, uncertainty remains on the on
the size of the effect, IPCC, Summary for Policymakers. In: Climate Change and Land: an IPCC
special report on climate change, desertification, land degradation, sustainable land management, food
security, and greenhouse gas fluxes in terrestrial ecosystems, 2019.
-400
-350
-300
-250
-200
-150
-100
-50
0
2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
MtCO2-eq/yr)
Range
Projection
Historical
RCP2.6_CO2fert
RCP7.0_CO2fert
RCP2.6_noCO2fert
RCP7.0_noCO2fert
135
scenarios show predominantly an increase in the LULUCF net removal in both RCPs.
This is because the fertilization effects of increased atmospheric CO2 lead on average to
an increase in forest productivity in future climate scenarios. Considering regional
variations in climate change effects, the highest gains occurred in the boreal zone,
especially central Sweden and Finland, as well as montane areas in central Europe.
Mediterranean forests displayed decreases in standing stocks compared to the reference
climate, due to the increase in aridity in the region, with lower precipitation and higher
temperatures. Hence, it should be noted that the CO2 fertilisation effect varies between
tree species and regions.
1.8.6. Impacts from simulated extreme events on the LULUCF net removal
European forests are vulnerable to a variety of disturbances such as windstorms, forest
fires, pest attacks, and water scarcity. Climate change is closely linked to these
disturbances in Europe, making them more frequent and more severe (200
). The hotter and
drier conditions in the future due to climate change, the more drought and fire
disturbances are expected to increase across Europe, especially in the Mediterranean
areas (201
). The last decades brought a variety of extreme events with 2022 showing the
second largest wildfire burnt area on record in Europe with a total of 900 000 ha burnt
across EU countries (202
) and unprecedented droughts since 2018 leading to large
outbreaks of bark beetles in Northern and Central Europe. Importantly, different regions
within the EU are not expected to be affected similarly by the same type of disturbances.
General hotspots of damage may be located in Scandinavia and mountain forests of
Central Europe, which are particularly exposed to the impacts of winter storms, leading
to higher risk of wind damage in forests (203
). Modelling results also point to future
damage hotspots in Portugal, Spain, southern France and Greece corresponding to
regions with high wildfire activity in recent years. Annex 7 provides a more in-depth
analysis on how disturbances affect different regions.
While climate change impacts including the increase of natural disturbances unfold their
detrimental effects evenly in the mid- and long-term, extreme wheather events have an
uneven and short-term impact on net removals from the LULUCF sector in general and
on the forest sink in particular. In other words, these exceptional events add an additional
layer of uncertainty on the evolution of forest stocks particularly for individual member
states.
To illustrate the potential impacts for the LULUCF net removal, the year 2035 is
simulated as a year with exceptional weather events resulting in a combination of fire,
wind and biotic damages that occur across different regions across the EU (see Figure
97).
(200
) Seidl, R., Thom, D., Kautz, M., Martin-Benito, D., Peltoniemi, M., Vacchiano, G., ... & Reyer, C. P.,
‘Forest disturbances under climate change’, Nature climate change, 7(6), 395-402, 2017.
(201
) Asensio, D., Zuccarini, P., Ogaya, R., Marañón-Jiménez, S., Sardans, J., & Peñuelas, J., ‘Simulated
climate change and seasonal drought increase carbon and phosphorus demand in Mediterranean forest
soils’, Soil biology and biochemistryä, 163, 108424, 2021.
(202
) Copernicus Climate Change Service, ‘European State of the Climate Summary 2022’, 2022.
(203
) corroborating with the results (Laurila et al. 2021)
136
Figure 97: Area coverage of simulated series of extreme events in 2035
Note: The graph shows the distribution of the different disturbance agents (extreme fire, extreme wind and
extreme biotic disturbance) across the EU from the simulated extreme events.
Source: GLOBIOM
To model the damage on forests, historically the worst wind, fire, and biotic events over
the period 1990-2020 for each disturbance agent were selected (204
). The approximate
damage from these events (205
) is simulated to affect the most vulnerable forest stands
across the EU (see Figure 97). In the simulation the Mediterranean region is strongly
affected by extreme fires, while large parts of central Europe are affected by extreme
wind and biotic events causing in total more than 300 000 000 m³ of forest damage. It is
important to note, that the model assumes that salvage logging and replanting of the
damaged trees occur the same year as the disturbance and that they predominantly affect
more vulnerable older and larger trees, which are then salvage logged to the extent
possible (206
). Consequently, a partial compensation of the disturbance-induced forest
loss through reduced harvesting rates is assumed. Thus, the simulation entails the
assumption of an ideal environment for the recovery of the carbon pool and the LULUCF
(204
)Patacca, M., Lindner, M., Lucas-Borja, M. E., Cordonnier, T., Fidej, G., Gardiner, B., Hauf, Y.,
Jasinevičius, G., Labonne, S., Linkevičius, E., Mahnken, M., Milanovic, S., Nabuurs, G.-J., Nagel, T.
A., Nikinmaa, L., Panyatov, M., Bercak, R., Seidl, R., Ostrogović Sever, M. Z. … Schelhaas, M.-J.
‘Significant increase in natural disturbance impacts on European forests since 1950’, Global Change
Biology, 29, 1359–1376, 2023.
(205
)In total, 333,066,346 m³ of forest are damaged in the simulation, wind damages 228,520,374 m³, biotic
agents 77,828,111m³, and fire 26,717,862 m³ of forest wood.
(206
)Disturbances usually damage older and larger trees, therefore, the extreme disturbance event
eliminates a considerable amount of older trees, shifting the age structure of the damaged forest and
enhancing forest regrowth. The model assumes that 86% of wood damaged by wind, 72% of wood
damaged by biotic and 54% of wood damaged by fire, is harvested. The rest of the damaged wood is
becoming deadwood and litter when disturbed by wind or biotic agents, while for wildfires about 10%
of merchantable wood and 22% of litter and deadwood are burnt.
137
net removals. If these conditions are not met in a real event, the recovery of the LULUCF
net removals might significantly impeded. The extreme events will cascade not only to
the European forest carbon pool, but also to wood processing industry and markets, via
changes in wood supply and market shocks (207
).
Figure 98: Estimated climate change impacts and extreme events on LULUCF net removal
Note: The graph displays a model-based projection of the range of the LULUCF net removal under impacts
from climate change and simulated extreme events. The ‘historical’ trajectory shows the inventory data based
on UNFCCC 2023, the ‘projection’ shows the trajectory of the lower boundary of the LULUCF range (lower level
net removal) without impacts from climate change and extreme events. The different 16 trajectories show RCP
2.6 vs. 7.0 (2) X different climate models (4) X CO2 fertilisation vs. no fertilisation (2). The range illustrates the
range of uncertainty due to climate change impacts across all trajectories including uncertainty due to soil
carbon removals. In 2035 a series of extreme events is simulated to illustrate its impact on the LULUCF net
removal.
Source: GLOBIOM, UNFCCC 2023
In Figure 98 the impacts of a series of possible extreme events in one year for the
LULUCF net removal are depicted through an uncertainty range that takes climate
change impacts into account. The net removal level of the LULUCF sector drops to a
range between -160 and +30 MtCO2-eq at the time of the disturbance but recovers
relatively quickly in the next 5 years (-105 to -265 MtCO2-eq). Over the next 15 years the
simulation provides a slightly higher range for the LULUCF net removals in 2050 (-130
to -330 MtCO2-eq) than a scenario without extreme events (-70 to -285 MtCO2-eq; see
previous section), because of the enhanced forest regrowth of younger trees and under
the assumption of immediate reforestation.
(207
)Gardiner, B., Schuck, A. R. T., Schelhaas, M. J., Orazio, C., Blennow, K., & Nicoll, B. (Eds.). ’Living
with storm damage to forests’, Vol. 3, pp. 129-p, Joensuu: European Forest Institute, 2013.
-400
-350
-300
-250
-200
-150
-100
-50
0
2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
MtCO2-eq/yr
Range
Projection
Historical
RCP2.6_CO2fert
RCP7.0_CO2fert
RCP2.6_noCO2fert
RCP7.0_noCO2fert
138
However, it should be noted that the modelling of such extreme events is at an early stage
of development and assumptions on the severity of events, the share of wood that can be
harvested after the event and replace otherwise planned harvests, the speed of forest
recovery (i.e., cleaning and replanting), is critical for the outcome. For example, salvage
logging preparation for replanting and afforestation may take several years due to lack of
capacity, which will delay the forest recovery and consequently its capacity as a carbon
removal. Furthermore, the range of uncertainty illustrates, that even when taking properly
the development of the LULUCF net removal and climate change impacts into account,
disturbances can disrupt the net carbon removal levels for years.
1.9. Environmental and health impacts
In addition to reducing GHG emissions, the different policy options directly or indirectly
affect other environmental indicators.
Air quality is impacted in particular by the evolution of the energy and transport sector as
well as the agricultural sector. Changes in the LULUCF and agricultural sector influence
biodiversity and ecosystems, food security and the sustainable use of natural resources
such as water.
1.9.1. Air quality
Clean air is essential to human health and sustaining the environment. Air quality has
improved in the EU over the past three decades as a result of joint efforts by the EU and
national, regional and local authorities in the Member States to reduce the adverse
impacts of air pollution. However, nowadays, around 300 000 premature deaths per year
and a significant number of diseases such as asthma, cardiovascular problems and lung
cancer, among others, are still attributable to air pollution (and especially to particulate
matter, nitrogen dioxide and ozone) (208
). There is also increasing evidence that low air
quality may be associated with changes in the nervous system, cognitive decrements, and
dementia (209
).
Air pollution remains the most frequent environmental cause of early death in the EU,
and it disproportionally affects vulnerable groups such as children, elderly people and
persons with pre-existing conditions, as well as socioeconomically disadvantaged
groups (210
). In addition, air pollution threatens the environment through acidification and
eutrophication, causing damage to natural ecosystems and crops. Currently,
eutrophication from deposition of nitrogen exceeds critical loads in two thirds of
ecosystem areas across the EU, with significant impact on biodiversity (211
). This has a
direct impact on the health of ecosystems and can aggravate situations of nitrogen surplus
via water pollution. Furthermore, high ground-level ozone concentrations negatively
affect plant growth.
(208
) European Environment Agency (2021). Air Quality in Europe 2021.
(209
) United States Environmental Protection Agency (2022). Supplement to the 2019 Integrated Science
Assessment for Particulate Matter.
(210
) European Environment Agency (2018). Unequal exposure and unequal impacts: social vulnerability to
air pollution, noise and extreme temperatures in Europe.
(211
) COM(2022) 673 final (The Third Clean Air Outlook).
139
Research to quantify the benefits of climate action associated with improved air quality
highlights the significant magnitude of such co-benefits (212
). In general, the economic,
technological and societal transformations required to reduce GHG emissions in the EU
have positive impacts on air quality because they lead to lower energy consumption and a
shift to non-emitting renewable energy sources and to less polluting combustion fuels.
Therefore, these developments lead to lower emissions of pollutants such as fine
particulate matter with a diameter of 2.5 μm or less (PM2.5) and nitrogen oxides (NOx).
In addition, climate action will contribute to mitigate the increasing negative effects that
climate change itself has on air quality, due notably to heatwaves or wildfires (213
).
The GAINS model has been used to produce projections of air pollutant emissions and
their impacts on public health and ecosystems for the decarbonisation pathways analysed
in this impact assessment (214
). The combination of existing air pollution policies as well
as ambitious climate policies result in strong reductions of air pollutants by 2040. As
shown in Table 19, in scenarios S1, S2 and S3, primary PM2.5 emissions in the EU
decrease by 62% by 2040 compared to 2015 levels. Moreover, primary SO2, NOx, NH3
and VOC emissions decrease by 77%, 71%, 16% and 29%, respectively, over the same
period. Note, however, that the consumption of solid biomass, which still represents a
large share of renewable energy consumption in Europe, emits large amount of
particulate matter (PM2.5 and PM10), non-methane volatile organic compounds
(NMVOCs) and polycyclic aromatic hydrocarbons (PAHs) (215
). In 2021, in the EU,
more than 60% of PM2.5 emissions were generated by the residential sector, showing the
large share of domestic heating (and, particularly, bioenergy) in fine particulate matter
emissions (216
). Thanks to further electrification of heating needs and more energy
efficient buildings, the consumption of solid biomass in the residential sector is much
lower in 2040 than today in all analysed scenarios (see section 1.3.3 in this Annex). The
small differences in particulate matter emissions between scenarios are mainly due to
differences in solid biomass consumption.
Differences in air pollutant emissions between LIFE and the other scenarios stem from
significant differences in agricultural activity levels (i.e., reduction in livestock numbers
and fertiliser application in LIFE). The largest reduction is observed for NH3 emissions
(from livestock, manure management and mineral fertiliser application), but there are
also substantial reductions in NOx emissions (from the fertilisation of agricultural soils)
and VOC emissions (from manure). More specifically, in LIFE, in 2040, NH3 emissions
are 36% lower than in 2015 (i.e., the decrease is 20 percentage points higher than in the
S1, S2 and S3 scenarios), NOx emissions are 74% lower than in 2015 (i.e., the decrease
(212
) Vandyck, T. et al. (2018). Air quality co-benefits for human health and agriculture counterbalance
costs to meet Paris Agreement pledges, Nature Communications, Vol. 9, No. 4939.
(213
) World Meteorological Organization (2023). WMO Air Quality and Climate Bulletin, No 3, September
2023.
(214
) Note that the methodology used in this impact assessment is similar to the one used in the Third Clean
Air Outlook (COM(2022) 673).
(215
)European Environment Agency (2019). Renewable energy in Europe: key for climate objectives, but
air pollution needs attention.
(216
)European Environment Agency. National air pollutant emissions data viewer 2005-2021 (online).
[Retrieved in August 2023.]
140
is 3 pp higher than in the other scenarios) and VOC emissions are 33% lower than in
2015 (i.e., the decrease is 4 pp higher than in the other scenarios). A relatively small
reduction in primary PM2.5 emissions is also observed, due to lower crushing of bedding
material by livestock movements. The level of SO2 emissions is similar to that of the
other scenarios, since agriculture activities do not emit much SO2.
Table 19 also shows the positive impact that reducing air pollutant emissions has on
public health (217
). In the S1, S2 and S3 scenarios, the number of premature deaths per
year caused by PM2.5 and ozone exposure in the EU drops by 58% in 2040 compared to
2015. This means around 270 000 less premature deaths per year in total. Furthermore,
the annual number of years of life lost due to PM2.5 and ozone (218
) exposure decreases
by 55% (i.e., around 3.3 million years of life lost per year less) between 2015 and 2040.
In LIFE, the number of premature deaths per year goes down by 60% between 2015 and
2040 (which means 277 000 cases per year less), and the annual number of years of life
lost decreases by 57% (i.e., 3.4 million years of life lost per year less) over the same
period. This implies reductions in the annual number of premature deaths and years of
life lost between 2015 and 2040 that are 2 percentage points greater than in the other
scenarios.
The decrease in air pollutant emissions reduces the costs of air pollution control in the
EU. Table 19 shows that in 2040 these costs are EUR 25-27 billion lower than in 2015 in
the S1, S2, S3 scenarios, and EUR 27 billion lower than in 2015 in LIFE. There is a
reduction in air pollution control costs for the agricultural sector in LIFE compared to the
S2 scenario (EUR 1 billion less), since agricultural activity is lower. However, as the
main part of the air pollution control costs are associated with sectors other than
agriculture, the overall difference in control costs is relatively small.
Moreover, the reduction in mortality has been assessed economically using two methods:
Value of Statistical Life (VSL) and Value of a Life Year (VOLY). In this impact
assessment, the value of a statistical life is assumed to be EUR 4.36 million, and the
value of a life year is assumed to be EUR 114 722 (219
). As shown in Table 19, in the S1,
S2 and S3 scenarios, in 2040, the premature mortality costs are EUR 1 046 to 1 051
billion lower compared to 2015 (i.e., a 61% reduction) if the VSL method is used, and
EUR 380 to 382 billion lower compared to 2015 (i.e., a 56% reduction) if the VOLY
method is used (220
). In LIFE, the premature mortality costs are slightly lower because of
the decrease in PM2.5 emissions: EUR 1 077 billion lower in 2040 compared to 2015 if
(217
) The analysis considers the direct effects of PM2.5 (full exposure range) and ozone on human health,
together with the indirect effects of NOx as precursors of particulate matter and ozone. However, the
direct effects of NO2 are not considered to avoid the risk of double counting, since there is conflicting
scientific evidence on the extent to which the health impacts of PM2.5 and NO2 overlap.
(218
) Like the Third Clean Air Outlook, this impact assessment assumes that on average one year of life is
lost for each premature death caused by ozone exposure.
(219
) In accordance with the premature mortality valuation methodology used in the Third Clean Air
Outlook (COM(2022) 673). Note that in the Third Clean Air Outlook the value of a statistical life and
the value of a life year are expressed in EUR 2015, whereas in this impact assessment these values are
expressed in EUR 2023.
(220
)As indicated in the Third Clean Air Outlook (Annex to the Final Report, p. 122), premature mortality
caused by ozone exposure is considered only in the VOLY method, but not in the VSL method.
141
the VSL method is used, and EUR 394 billion lower in 2040 relative to 2015 if the
VOLY method is used.
Table 19: Air pollution emissions, impacts on public health and costs
2015* 2040 Change 2015-2040
S1, S2 & S3 LIFE S1, S2 & S3 LIFE
Primary
emissions
Air pollutant
emissions (kt)
SO2 2316 525 to 529 529
-1787 to -1791
(-77.1% to -77.3%)
-1787
(-77.1%)
NOx 7392 2114 to 2140 1913
-5252 to -5277
(-71.1% to -71.4%)
-5478
(-74.1%)
PM2.5 1380 521 to 524 517
-857 to -859
(-62.1% to -62.2%)
-863
(-62.5%)
VOC 6362 4497 to 4503 4259
-1860 to -1865
(-29.2% to -29.3%)
-2103
(-33.1%)
NH3 3690 3086 to 3091 2346
-599 to -604
(-16.2% to -16.4%)
-1345
(-36.4%)
Public
health
Premature mortality
caused by PM2.5
exposure
Expressed in 1000
cases/year
395 154 to 155 148
-240 to -241
(-60.7% to -61.0%)
-247
(-62.5%)
Expressed in million life
years lost/year
5.91 2.61 to 2.63 2.50
-3.28 to -3.30
(-55.6% to -55.8%)
-3.40
(-57.6%)
Premature mortality
caused by ozone
exposure
Expressed in 1000
cases/year
71 42 40
-28
(-40.1% to -41.3%)
-30
(-42.8%)
Expressed in million life
years lost/year
0.07 0.04 0.04
-0.03
(-40.1% to -41.3%)
-0.03
(-42.8%)
Costs
Economic costs (EUR
2023 billion/year)
Air pollution control** 83 56 to 58 56
-25 to -27
(-30.3% to -32.6%)
-27
(-32.4%)
Premature mortality
(VSL)***
1724 673 to 677 646
-1046 to -1051
(-60.7% to -61.0%)
-1077
(-62.5%)
Premature mortality
(VOLY)****
686 304 to 306 292
-380 to -382
(-55.6% to -55.8%)
-394
(-57.4%)
Note: *Historical values for 2015 are slightly different than the ones reported in the Third Clean Air Outlook
because of a different emission scope as well as recent updates in the emission factors assumed by the GAINS
model. **Air pollution control costs are the costs associated with the measures/technologies employed in the
control strategies of each scenario. ***In accordance with the valuation methodology used in the Third Clean Air
Outlook, the value of a statistical life is assumed to be EUR 4.36 million (in EUR 2023), and the premature
mortality costs estimated using the VSL method do not consider premature deaths caused by ozone exposure.
****In accordance with the valuation methodology used in the Third Clean Air Outlook, the value of a life year is
assumed to be EUR 114 722 (in EUR 2023), and the premature mortality costs estimated using the VOLY
method consider premature deaths caused by ozone exposure.
Source: GAINS.
Note that not all air pollution costs have been included in the quantitative analysis
presented in this section and shown in Table 19. Besides reducing premature mortality,
improving air quality also reduces morbidity (impact of diseases) caused by air pollution
(e.g., asthma). Consequently, improved air quality can reduce healthcare costs (due to
avoided hospital admissions, lower need for medication, etc.), as well as trigger
economic growth (by reducing employee absenteeism and increasing work productivity).
Furthermore, improved air quality increases crop yields and reduces damage to materials
and sensitive ecosystems. These co-benefits have not been quantified in this impact
142
assessment. However, regarding the last point, Table 20 shows the total ecosystem area
in the EU where acidification and eutrophication exceed critical loads harmful to these
ecosystems. The total area where acidification exceeds critical loads decreases by around
126 000 km2 between 2015 and 2040 in the S1, S2 and S3 scenarios (which means an
80% reduction). The largest part of this reduction involves forest areas. Note that
acidification is caused by atmospheric deposition of SO2, NOx and NH3. In addition, the
total ecosystem area where eutrophication exceeds critical loads decreases by 272 000 to
274 000 km2 between 2015 and 2040 in these scenarios (23.5% reduction). The
reduction in eutrophication effects is lower than the reduction in acidification effects (in
relative terms) because the primary source of eutrophication is NH3 leakage from
agricultural activities, and emissions of this air pollutant do not decrease as much as SO2
and NOx emissions, which are an important cause of acidification. In LIFE, the
ecosystem area in the EU affected by severe acidification and/or eutrophication decreases
more than in the other scenarios because of the lower NOx and NH3 emissions from
agricultural activities: the total area where acidification and eutrophication exceed critical
loads decreases by 88% (around 7 percentage points more than in the other scenarios)
and 36% (around 13 pp more than in the other scenarios), respectively, between 2015 and
2040.
Table 20: Area affected by acidification and eutrophication per scenario
2015 2040 Change 2015-2040
S1, S2 & S3 LIFE S1, S2 & S3 LIFE
Acidification (1000 km2) 157 30.6 to 30.7 19.3
-126
(-80.4%)
-137
(-87.7%)
Eutrophication (1000 km2) 1164 890 to 892 742
-272 to -274
(-23.4% to -23.5%)
-422
(-36.3%)
Note: The table shows the affected ecosystem area within the EU (expressed in 1000 km2) where acidification
or eutrophication exceed critical loads.
Source: GAINS.
1.9.2. Biodiversity and ecosystems
Climate change is expected to have significant influences on biodiversity including
species-level reductions in range size and abundance (221
) as it is one of the five main
drivers of global biodiversity loss, with change of land and sea use, direct exploitation,
pollution, and invasive alien species (222
). For example, fire-prone areas are expected to
expand across Europe due to climate change threatening not only carbon sinks but also
biodiversity through habitat loss and fragmentation (223
). At the same time, more
biodiverse forests may deliver more ecosystem services necessary for climate mitigation
and adaptation (224
). In other words, making forest ecosystems more biodiverse can help
(221
)Warren, R., VanDerWal, J., Price, J. et al. Quantifying the benefit of early climate change mitigation
in avoiding biodiversity loss. Nature Clim Change 3, 678–682 (2013)
(222
)IPBES (2019) Global assessment report on biodiversity and ecosystem services of the
Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services. Zenodo.
Available at: https://doi.org/10.5281/ZENODO.3831673.
(223
)For more details on the complex interaction see IPCC AR6 WGII Chapter 13
143
to increase their resilience against forest fires. Forest management practices like
monoculture plantations of fast-growing trees (eucalyptus, pines) are more prone to fires
(225
) than biodiverse forests such as primary or old-growth forests (226
). However, the
relationship goes both ways: an improved biodiversity and functioning ecosystems also
positively impact both climate mitigation and adaptation (227
).
On a general level, limiting the magnitude of climate change via GHG mitigation is
necessary to preserve biodiversity and prevent further loss. More specifically, stringent
GHG mitigation that includes nature-based mitigation efforts can deliver a net benefit to
global biodiversity even if it comes at the cost of regional biodiversity loss in Europe.
But, in view of these potential losses, policies in EU should be be carefully designed to
conserve local biodiversity and to minimize the conversion of natural habitats (228
). It is
therefore important to focus on the many nature-based removals for carbon removals,
which entail positive side-effects for biodiversity as they can provide new habitats and
ecosystems and to consider biodiversity impacts from nature-based removals that can
alter the habitat available for wildlife.
Modelling results showed that across all scenarios, overall species and habitats co-benefit
from nature-based removals, which proved to be the main driver of change while at the
same time providing additional carbon removals. Additional nature-based removals,
applied in S2 and S3, delivered clear benefits for the suitable habitat of species and
therefore biodiversity. The main factors for the improvement are afforestation, an
increase in deadwood in forests and intensification coupled with longer rotation time of
managed forests, and additional rewetting of peatlands. The impact of a second driver for
biodiversity, the increased biomass demand from lignocellulosic crops and forestry, had a
minor impact on biodiversity, resulting in statisticall non-significant differences between
the scenarios.
On average the suitable habitat for European species increases by about 3% (S3) to 4%
(S2) in 2040 compared to 2020. For S1 the average suitable habitat declined slightly by
around 1% in 2040 compared to 2020 (229
). The application of a carbon value to cover
mitigation costs in the land sector of up to 50 €/tCO2-eq in S2 and S3 results in small but
positive biodiversity trends although it is worth noting the large variations around the
(224
)Pukkala, T. 2016. Which type of forest management provides most ecosystem services? Forest
Ecosystems 3:9; https://forestecosyst.springeropen.com/track/pdf/10.1186/s40663-016-0068-5
(225
) Barquín, J., L. Concostrina-Zubiri, I. Pérez-Silos, G. Hernández-Romero, A. Vélez-Martín, and J. M.
Álvarez-Martínez. "Monoculture plantations fuel fires amid heat waves." Science 377, no. 6614
(2022): 1498-1498.
(226
) Barredo, J.I., Mansuy, N. and Mubareka, S.B., Primary and old-growth forests are more resilient to
natural disturbances – Perspective on wildfires, European Commission, 2023, JRC133970.
(227
)Pörtner, H.-O. et al. (2021) Scientific outcome of the IPBES-IPCC co-sponsored workshop on
biodiversity and climate change. Zenodo. Available at: https://doi.org/10.5281/ZENODO.5031995
(228
)Ohashi, H., Hasegawa, T., Hirata, A. et al. Biodiversity can benefit from climate stabilization despite
adverse side effects of land-based mitigation. Nat Commun 10, 5240 (2019)
(229
) Biodiversity impacts were calculated with GLOBIOM modelling framework. The biodiversity
indicator provides the average suitable habitat change since 2020, by assessing the suitability of a
habitat for each species. The indicator is based on a total set of 1033 species living across five land
categories.
144
mean trend. In 2050, the average change in suitable habitat stays stable in S2 and S3 and
returns to 2020 levels for S1.
In sum, the effects on biodiversity related to additional nature-based removals are
positive but small. However, the results also confirm the need to align climate and
environmental action in a co-beneficial way to obtain synergistic effects. Overall, on
biodiversity and ecosystems, the effects on suitable habitats in Europe in S1 to S3 need to
be complemented with the effects on acidification and eutrophication as shown in Table
20. The scenarios show a decline of affected area by 80% for acidification and 23.5% for
eutrophication in 2040, which provides a significant positive impact for ecosystems.
LIFE evolves around a dietary change from consumers towards more healthy and
sustainable food consumption, the implementation of the Farm to Fork Strategy, and food
waste reduction (see Annex 6). Derived from the Farm to Fork Strategy and the
Biodiversity Strategy for 2030, the scenario produced some relevant outputs (230
) which
have a beneficial impact on biodiversity as shown in Table 21.
Table 21: Overview of Farm to Fork objectives indicators in LIFE in 2040
total
Change to
2020
Change to
S1 - S3 in
2040
Nutrient surplus total [in 1000t] 5,504.794 -49% -48%
Mineral fertilizer use 5,904 -41% -44%
Chemical pesticide Use 7307 -39% -50%
High-diversity landscape features (Set aside and
fallow land) - Share of EU's agricultural land
14%
Share of EU's agicultural land for organic agriculture 25%
Source: CAPRI
Key factors in agriculture, such as the nutrient surplus, the amount of fertilizer and
pesticides applied, and the intensity of farming practices impact ecosystems and
biodiversity across different regions. Consequently, since LIFE has substantial impacts
on agricultural land and farming practices (Table 21), the changes also affect ecosystems
and biodiversity on these lands positively. Next to changes of farming practices, LIFE
shows a decline in livestock from cattle and other animals, which also leads to a
reduction in livestock density (Table 22). This reduction of livestock is due to the
declining demand for meat and dairy products, the implementation of the objective to
reduce nutrient losses by 50%, and to a limited extent to a reduction of food waste.
(230
)The exact steering towards the different objectives from the Farm to Fork and Biodiversity strategy,
the dietary changes, as well as the targets for the food waste reduction in the modelling is technically
difficult, which results in the overfullfillment of some targets and missing the threshold for others in
the LIFE scenario.
145
Table 22: Overview of LIFE outputs related to biodiversity in 2040
total per ha
Change to
S1 - S3
Beef meat activities [in 1000 LSU] 7,877 -49%
All Dairy [in 1000 LSU] 29,151 -18%
Pigs, poultry, sheep [in 1000 LSU] 42,875 -24%
All cattle activities [LSU/ha] 0.23 -29%
Other (non-cattle) animals [LSU/ha] 0.26 -26%
Note: LSU indicates livestock units, either as ‘total’ in 1000t or ‘per ha’ kg/ha.
Source: CAPRI
To assess biodiversity impacts on LIFE an indicator for biodiversity was necessary that
can account for impacts on agricultural land. The biodiversity impacts of the LIFE setting
uses the “BFP index” (Biodiversity-friendly farming practices), which assesses
biodiversity friendly practices and reflects the likelihood to find agricultural areas with a
high value for biodiversity and ecosystems in a region on NUTS 2 level (231
). The total
index is an area weighted average of the partial indices for arable crops, permanent crops,
grassland and set aside / fallow land. In LIFE, this index increases by 14% compared to
the three scenarios, reaching on EU level up to about 71%. The estimated improvement
in biodiversity is mostly driven by three factors. Biodiversity on areas with arable crops
improves by about 20% due to the nutrient surplus reduction on the fields (232
),
supplemented with reduced pesticide use. Areas with permanent crops benefit (38%),
mainly due to the reduction of pesticides, while lower nutrient surpluses are a secondary
driver here. Also managed grassland improves to a limited extent (3%), because the
stocking intensity of livestock units decreases, resulting in a substantial increase of
extensive use of grassland (see Table 23), while the pesticide reduction is less influential
on grassland.
Table 23: Agricultural area change in 2040 by scenarios.
Area use [in 1000 ha] S1 - S3 LIFE Change
Utilized agricultural area 160,108 161,763 1%
Fodder activities 65,922 54,185 -18%
- of which: Gras and grazings intensive 23,872 5,174 -78%
- of which: Gras and grazings extensive 23,867 36,595 53%
Total set aside or rewetted land* 7,084 22,360 216%
*This includes fallow land set aside and rewetted cropland or grassland. The additional area is partly mobilized
by displacing agricultural crops and partly by converting other “unproductive” land.
Source: CAPRI
The third key driver for improved biodiversity friendliness would be the expansion of
areas for landscape elements such as hedges, buffer strips etc. The share of this set aside
(231
)Using the ‘Biodiversity Friendly Practices’ (BFP), a biodiversity indicator capturing the likelihood to
find High Nature Value farmland in a region. Partial indices for different land use categories are
weighted according to their proportion of the total utilized agricultural area.
(232
)The nutrient reduction through the farm to fork strategy aims to reduce nutrient losses by 50%. The
areas for arable crops make up almost 60% of the total farmland, therefore this partial index plays a
significant role.
146
or fallow land would more than double to about 14.5 Mha in total. Figure 99 Shows the
regional biodiversity impacts through LIFE, indicating that the improvements are evenly
distributed across the EU, shifting particularly southern and eastern European regions
into a much more favourable state for biodiversity.
Figure 99: Biodiversity impacts from LIFE by region.
Note: Results on the total BFP index in LIFE (right) against the default setting of the scenarios S1, S2 and S3
(left) in 2040 on NUTS 2 level. The Biodiversity Friendly Practices (BFP) indicator depicts the likelihood to find
High Nature Value farmland in a certain NUTS 2 region. The indicator ranges from red (17%-51%) to dark
green (<100%).
Source: CAPRI
1.9.3. Food security, animal welfare and health
The food system itself is not only contributing to climate change but is also highly
exposed to climate change itself, which jeopardises food security (233). Foodborne
diseases and an increase in extreme weather events are expected in the future under
altered climatic conditions, such as draughts and heavy rainfall, impacting the food
system and food safety. For Europe a combination of heats and droughts resulting from a
2°C to 3°C global warming level will lead to substantive agricultural production losses
for most European areas which will not be offset by possible gains; an effect that will
also affect the economic output from agriculture in the EU (234
).
Food security and sustainable and healthy diets are strongly interlinked (235
). A
sustainable food system makes optimal use of natural resources. Dietary patterns with
high meat consumption require more energy, water and land resources. One hectare of
land may produce enough lamb or beef to feed one to two people, while the same hectare
(233
) IPCC AR6 SPM
(234
) IPCC AR6 WG II, 13
(235
) Capone, R., et al., ‘Food System Sustainability and Food Security: Connecting the Dots.’, Journal of
Food Security, 2, 1, 13-22, 2014.
147
can produce rice or potatoes for 19 to 22 people per annum (236
). Thus, because livestock
farming demands extensive land use, a decrease of animal-based products in human diets
would reduce demand for feed and make more land available for growing human food.
Today, more than 50% of EU’s use of cereals goes into animal feed (237
). Reducing the
demand of cereals for animal feed would contribute to strengthen strategic autonomy in
the food sector and thereby enhance food security.
However, a closer look at the net production of agricultural products (see Table 24: )
shows that LIFE with its shift towards healthier diets and a reduction of food waste not
only decreases demand for food but also decreases livestock herds and agricultural area
related to animal products (see Table 22; Table 23), but also net production of animal
based and many other agricultural products. In part this is due to market adjustments due
to declining demand but partly this is also reflecting the desired move to less intensive
production systems with higher shares of organic agriculture, lower pesticide use, and
nutrient surpluses and some additional agricultural area taken out of production in view
of biodiversity targets. On a global perspective it is important to mention that only the
combination of supply side measures through the Farm to Fork objectives, together with
demand side measures (i.e., dietary shift and food waste reduction) result in a mutual
decline of production and demand, which does not jeopardise global food security.
Table 24: Net production of agricultural outputs in 2040 by scenarios
Net production [in 1000 t] S1, S2, S3 LIFE Change
Feed energy input 704,146,368 563,934,976 -20%
Cereals 267,900 214,751 -20%
Vegetables and Permanent crops 126,013 122,510 -3%
Wheat 118,239 98,450 -17%
Meat 45,368 33,841 -25%
Other Animal products 168,985 151,862 -10%
Raw milk 161,303 145,473 -10%
Dairy products 64,444 57,295 -11%
Source: CAPRI
Compared to scenarios S1, S2 and S3, LIFE leads to a shift from intensive grazing to
extensive grazing (Table 22) and to an overall reduction in livestock density per ha for
cattle and dairy cows but also for pigs and poultry (238
). This may also positively impact
animal welfare and increase resilience against transboundary animal diseases in animal
related food production (239
).
(236
) Institution of Mechanical Engineers-UK, ‘Global food, waste not, want not’. London. 2013. Available
online at: global-food---waste-not-want-not.pdf (imeche.org)
(237
) Based on the years 2020 to 2022; European Commission, DG Agriculture and Rural Development,
‘EU agricultural outlook for markets, income and environment, 2022-2032’, Brussels, 2022.
(238
)In LIFE the overall animal density [lifestock units / ha] decrease by -27%; for all cattle activities by -
29% and other animals -26%. See Table 22
(239
)Sundström, J.F., Albihn, A., Boqvist, S. et al. ‚Future threats to agricultural food production posed by
environmental degradation, climate change, and animal and plant diseases – a risk analysis in three
economic and climate settings’, Food Security, 6, 201–215, 2014.
148
LIFE incorporates significant health benefits for its citizens. For Europe, research finds a
greater consumption of red meat, eggs and dairy products than recommended
consumption levels of healthy reference diets (240
) (241
). Studies indicate that reducing
meat consumption, while maintaining a broad and varied diet is beneficial for human
health as it reduces the risk of cardiovascular diseases (242
) (243
), cancer (244
), diabetis and
obesity (245
). This has also significant economic benefits on health costs. For example,
adopting an energy-balanced, low-meat dietary pattern is associated with large reductions
in premature mortality, both for a flexitarian (-19%) and a vegan (-22%) diet (246
).
The reduction of meat consumption (i.e., shift to more plant-based diets) and fertiliser
application in LIFE also generates significant co-benefits for air quality, since it reduces
methane emissions, a short-lived climate forcer but also a precursor of ozone (247)
, and
ammonia emissions. Hence, an increase in plant-based diets in the EU is improving
human health both directly through more healthy diets and indirectly through cleaner air,
which creates economic benefits from improved human health that would compensate
some part of the economic losses in agricultural sector (248)
.
(240
) Willet et al., ‘Food in the Anthropocene: the EAT–Lancet Commission on healthy diets from
sustainable food systems’, Lancet, 2019.
(241
) WHO/FAO (2003) Diet, nutrition and the prevention of chronic diseases: report of a joint WHO/FAO
expert consultation. World Health Organization, Geneva.
(242
) Koch et al. (2023) Vegetarian or vegan diets and blood lipids: a meta-analysis of randomized trials.
European Heart Journal
(243
) Westhoek, Henk, Jan Peter Lesschen, Trudy Rood, Susanne Wagner, Alessandra De Marco, Donal
Murphy-Bokern, Adrian Leip, Hans van Grinsven, Mark A. Sutton, and Oene Oenema. ‘Food choices,
health and environment: Effects of cutting Europe's meat and dairy intake.’ Global Environmental
Change, 26, 196-205, 2014.
(244
) Chan, Doris SM, Rosa Lau, Dagfinn Aune, Rui Vieira, Darren C. Greenwood, Ellen Kampman, and
Teresa Norat. "Red and processed meat and colorectal cancer incidence: meta-analysis of prospective
studies." PloS one 6, no. 6 (2011): e20456.
(245
) Tukker et al. (2011) Environmental impacts of changes to healthier diets in Europe. Ecological
Economics
(246
) Springmann et al. ‘Health and nutritional aspects of sustainable diet strategies and their association
with environmental impacts: a global modelling analysis with country-level detail’, Lancet Planet
Health, 2018.
(247
) COM(2022) 673 final
(248
) A shift to flexitarian diets could reduce ammonia emissions by 33% in the EU. Through avoided
premature mortality rates, economic losses in the agricultural sector from dietary shifts could be
mitigated by 39% in the EU in such a scenario. See Himics et al. ‘Co-benefits of a flexitarian diet for
air quality and human health in Europe’, 2022
149
1.9.4. Raw materials
The demand for raw material is expected to grow considerably by 2050 (249
), and this
growth in raw materials use is likely to increase the pressure on the planet resources.
The material growth is expected to be driven only partially by the climate transition, with
the rest is distributed among the electronic sector, the automotive and building sector and
production of alloys for different applications. The share of the raw material increase
attributed to climate actions depends strongly on the material. BNEF calculates that the
share of manganese, and silver needed for clean energy use are responsible for less than
25% of the total demand increase by 2050 (250
), while the IEA indicates that the share of
nickel, cobalt and copper needed by the energy transition will represent per each of these
materials less than 40% of total demand in 2040 (251
). The IEA estimates that clean
energy technologies and infrastructure account for 2-3% of cement and steel demand
today, and this value will increase to only about 2% (for cement) and 7% (for steel) in
2050 (252
).
Furthermore, climate policy, together with increase material efficiency, circular economy
actions and possible sufficiency measures can create synergies to reduce the need of
primary raw materials and pressure on planet resources to produce them (253
).
The IEA estimates that most of the growth in the total global material demand associated
to clean technologies and infrastructure in the NZE scenario will occur between 2021 and
2030, while after 2030, growth in demand is much more modest, despite the continuously
increasing of the in-use stocks of these materials (254
). This is attributed to several factors
often associated to direct climate policy or related measures. Technology innovation
accelerates quickly with economy of scale (255
), leading for example to more energy-
dense batteries (requiring lower material needs) in a world with higher share of electric
vehicles, or faster development of innovative catalysts reducing the need for platinum
group metals in electrolysers in a decarbonised energy system requiring hydrogen.
Material substitution with low-carbon technologies can also play a role in limiting the
increase in material demand the pressure on resources. In efforts to reduce demand for
nickel, Tesla is producing Evs with a lithium iron phosphate (LFP) battery that contains
no nickel and have suggested that a large share of the future EV battery market will
contain iron-based cells rather than nickel based (256
). Likewise, efforts to eliminate
(249
)World Bank (2020), Minerals for Climate Action: The Mineral Intensity of the Clean Energy
Transition.
(250
) BNEF (2023b), Transition Metals Outlook 2023.
(251
)As per the STEPS scenario of the IEA, described in The Role of Critical Minerals in Clean Energy
Transitions, Revised Version in May 2022.
(252
)IEA (2023) Energy Technology Perspectives.
(253
)Desing et al., Resource pressure – A circular design method, Resources, Conservation and Recycling,
Volume 164, 2021, 105179, ISSN 0921-3449.
(254
)IEA (2023) Energy Technology Perspectives.
(255
)See for instance Moore’s law and Swanson’ law
(256
) Tesla to use iron-based batteries in Semi electric trucks and affordable electric car | Reuters
150
lithium from batteries have seen battery manufacture CATL announce a sodium-ion EV
battery (257
). Material efficiency measure associated to less energy-intensive production
methods reducing resource intensity of products, while providing the same service. Some
metals have high potential for recycling in the future. Cobalt and copper are supplied
almost completely by primary supply today but has the potential to have over 80% for
cobalt and approximately 60% for copper being supplied from recycled metals in
2050 (258
). Circularity actions, and more in general sufficiency-driven behavioural
change can decrease primary demand of critical materials in favour of products with
longer life, repair or products manufactured from secondary raw materials that stay
longer in the market.
2. SOCIO-ECONOMIC IMPACTS
The options under consideration for the 2040 target in this impact assessment take the
legally defined ambition for 2030 and 2050 as a given. The impact assessment for the
2030 Climate Target Plan (259
) made a detailed analysis of the socio-economic impacts of
the achievement of the net GHG reduction 55% target for 2030. It assessed these impacts
in relation to a baseline defined by the Reference 2020 scenario, which reflects the first
national energy and climate plans as submitted by Members States and the EU legislation
prior to the adoption of the Fit-for-55 proposals. The impact assessment covered a wide
range of issues, from the impacts on GDP and employment to sectoral transformations,
competitiveness and distributional effects. Issues relating to impacts on households or
competitiveness, among others, were further assessed in the impact assessments that
accompanied the legislative proposals of the Fit-for-55 package.
Overall, the impact assessment for the 2030 Climate Target Plan concluded that the 55%
objective was expected to have only limited impacts on broad macro-economic
aggregates, including GDP and total employment. It nevertheless stressed that the
impacts of the transition are projected to be significant in terms of sectoral output and
employment, investment and relative prices. Transformations across sectors and within
sectors, including as they related to skills needs, and in consumption patterns will be
major and would need to be managed carefully in order to ensure a fair and orderly
transition process that preserves the competitiveness of the EU economy and leaves no
one behind. Similar conclusions were derived from the in-depth analysis in support of the
EU long-term strategy, which underpinned the endorsement of the climate neutrality
objective by the European Council in December 2019 and its subsequent adoption in the
EU Climate law.
This impact assessment therefore does not seek to revisit the expected impacts of the
2030 targets or assess the economic pathways to climate neutrality in relation to a
baseline that would significantly deviate from that objective. Instead, the macro-
economic models use S2 as the point of comparison for the other scenarios. To some
extent, deviations from the macro-economic benchmark are therefore less relevant for the
(257
)https://www.bloomberg.com/news/articles/2021-07-29/catl-debuts-sodium-ion-batteries-amid-raw-
material-cost-spike#xj4y7vzkg
(258
)BNEF (2023). Transition material outlook.
(259
) SWD(2020) 176 final.
151
analysis than under previous impact assessments. An increased focus is therefore placed
in the following sections on the transformation requirements over time across pathways
to climate neutrality, with specific attention placed on investment needs, competitiveness,
and social and regional impacts. The co-benefits of the transition are also assessed.
The model-based analysis is a technical exercise based on a number of assumptions that
are shared across scenarios. Its results do not prejudge the future design of the post-2030
policy framework.
2.1. Macro-economic impacts (260)
2.1.1. GDP and employment
As indicated in previous impact assessments, the transition to climate neutrality is
unlikely to be a major driver of GDP growth and employment levels in and of its own.
The transition will nevertheless imply transformations in production and consumption
patterns. These are assessed in more details in the sections below.
At aggregate level, the models consistently show that a higher level of mitigation in 2040
is associated with a somewhat larger negative impact on GDP, at least on a transitory
fashion. With the highest level of climate ambition (S3) in 2040, GDP is projected to be
at best unchanged and at worst 0.8% lower than under S2 (Table 25). A lower level of
ambition by 2040 (S1) translates at best into a slightly higher level (+0.6%) of GDP. By
2050, however, GDP is projected to return broadly to the same level under all three
scenarios. As projected by the JRC-GEM-E3, the impact of the transition on GDP is also
somewhat more negative under a “global action” scenario (where the rest of the world
implements policies aligned with the 1.5°C objective under the Paris agreement) than
under a “fragmented action” scenario (where the rest of the world implements NDCs).
This is driven by the fact that higher climate ambition in the rest of the world is
associated with higher negative impacts on global GDP, which reduces external demand
for EU producers.
The negative impact is therefore mainly a transition effect, with no lasting impact, and it
remains small across models and scenarios. As total employment is mostly driven by
trends in aggregate output, the impact of a higher level of ambition is also only
marginally negative in 2040, before converging across scenarios by 2050.
(260
) The model-based analysis is a technical exercise based on a number of assumptions that are shared
across scenarios. Its results do not prejudge the future design of the post-2030 policy framework.
152
Table 25: Macro-economic impacts (% change compared to S2)
Source: JRC-GEM-E3, E3ME and E-QUEST.
The macro-economic models also indicate that a higher level of ambition for GHG
mitigation in 2040 is associated with a more significant shift in the composition of GDP
from consumption towards investment, at least on a transitory basis. The negative impact
on private consumption is nevertheless small across models and levels of ambition.
Further, the JRC-GEM-E3 model projects that while private consumption is likely to be
negatively impacted, the composition of consumption should also evolve, with a gradual
decrease in the share of consumption of non-durables linked to the use of durable goods
(i.e. mainly energy consumption) and a corresponding increase in the share of other non-
durables (Figure 100). This shift in composition would be positive from a welfare
perspective, as energy-related services would not be negatively affected by lower
consumption of energy itself (e.g., a better insulated house provides the same – or likely
better – level of comfort than a poorly insulated one, with lower energy consumption).
2040 2050 2040 2050 2040 2050 2040 2050
JRC-GEM-E3
GDP 0.5% 0.1% 0.6% 0.2% -0.2% -0.1% -0.2% -0.1%
Private consumption 0.7% 0.1% 1.8% 2.1% -0.5% -0.1% -0.5% -0.1%
Investment -0.1% 0.3% -0.5% -0.5% 1.1% -0.1% 1.1% -0.1%
Exports 1.2% 0.1% -0.1% -2.6% -0.8% -0.1% -0.7% 0.0%
Imports 0.3% 0.1% 1.6% 1.5% 0.1% -0.1% 0.1% 0.1%
Employment 0.3% 0.1% 0.3% 0.1% -0.1% 0.0% -0.1% -0.1%
E3ME
GDP 0.00% 0.04% 0.01% 0.04% 0.04% -0.02% 0.00% -0.04%
Private consumption 0.3% 0.0% 0.4% 0.0% -0.2% 0.0% -0.3% 0.0%
Investment -0.9% 0.1% -0.9% 0.1% 0.7% -0.2% 0.7% -0.2%
Exports -0.2% 0.0% -0.2% 0.0% 0.1% 0.0% 0.1% 0.0%
Imports -0.03% 0.02% -0.03% 0.02% 0.02% 0.00% 0.01% 0.00%
Employment 0.03% 0.00% 0.03% 0.01% -0.01% 0.00% -0.02% -0.01%
E-QUEST
GDP 0.4% -0.02% n.a. n.a. -0.8% 0.01% n.a. n.a.
Private consumption 0.3% 0.03% n.a. n.a. -0.5% -0.01% n.a. n.a.
Investment 0.3% 0.03% n.a. n.a. -0.5% -0.03% n.a. n.a.
Employment 0.02% 0.00% n.a. n.a. -0.03% 0.00% n.a. n.a.
S1 fragmented S1 global S3 fragmented S3 global
153
Figure 100: Composition of private consumption (% of total, S3)
Source: JRC-GEM-E3.
DG ECFIN’s E-QUEST model shows that S3 generates some cumulative impacts in
terms of output loss over the whole transition period (2025 to 2050) compared to S2,
even if output levels converge by 2050 (Figure 101). In contrast, S1 generates very
modest cumulative output gains compared to S2, with the GDP level converging across
scenarios by 2050. Further, it indicates that using the economy-wide carbon revenues to
subsidise green investment is more efficient in terms of output than lump sum transfers to
households or the recycling of revenues to reduce personal income taxation on low-
skilled workers. This is strictly an efficiency gains in terms of output, and it abstracts
from distributional and equity considerations, which are discussed below.
Figure 101: Real GDP, deviation from S2
Source: E-QUEST.
2.1.2. The impact of frictions in the economic transition
Macro-economic models typically assume that frictions in the reallocation of capital and
labour across sectors are limited. Capital is reallocated sectorally over time mostly via
new investment and the depreciation of existing assets. In turn, the labour force is
assumed to be mobile and responsive to evolving demand across sectors of the economy.
While frictional unemployment is modelled and labour matching functions can operate
0%
2%
4%
6%
8%
10%
12%
83%
84%
85%
86%
87%
88%
89%
2015 2020 2025 2030 2035 2040
Non-durables (LHS) Non-durables linked to durables (RHS) Durables (RHS)
-1.0%
-0.8%
-0.6%
-0.4%
-0.2%
0.0%
0.2%
0.4%
0.6%
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
2050
%
deviation
GDP S1 - transfers GDP S1 - personal income tax
GDP S1 - green subsidies GDP S3 - transfers
GDP S3 - personal income tax GDP S3 - green subsidies
154
more or less efficiently, workers are assumed to be in a position to take new jobs as they
arise in any sector of the economy.
Such assumptions are simplifications used for modelling purposes, which are reasonable
in particular when assessing impacts under a long-term perspective. However, the faster
the transition, the more the simplifications diverge from the reality of the sectoral
transformations. Model-based simulations were therefore used to provide an assessment
of frictions in capital markets and investment decisions, and frictions in the reallocation
of the labour force across sectors.
DG ECFIN’s E-QUEST model is a dynamic stochastic general equilibrium model with
fully forward-looking agents, which enables the assessment of the impacts of fully
credible, partly credible or non-anticipated policies. While the main scenarios modelled
in this impact assessment assume that the pathways under consideration are fully
anticipated by economic agents (i.e., fully credible), a variant was used to assess the
impact of potentially “erroneous” investment decisions on the economy, modelled via
partial anticipations (or partly credible pathways). In essence, this aims to capture
investment decisions that are not aligned at all times with the targeted GHG pathway. In
this modelling variant, economic agents fail to recognise that additional policies
(introduced as carbon values in the model) will be put in place to achieve the climate
neutrality pathway and they base their expectations on the continuation of existing
policies. Expectations are sequentially updated every five years to correct for erroneous
predictions and align with the actual pathway, which is consistent with climate neutrality.
As economic agents do not act fully in accordance with the climate neutrality pathway,
they miss the opportunity to take early action by increasing their investment in
decarbonised technologies and the value of the capital invested in fossil fuel intensive
technologies or sectors is negatively affected, i.e., the economy suffers from stranded
assets. The other types of investment represented in the model are not affected (261
), as
they are not contingent upon the level of mitigation ambition. These investments
represent the majority of aggregate investment in the model.
Such a sequential, 5-yearly adjustment of expectations leads to negative outcomes on all
key macro-economic variables compared to the scenarios where expectations, and hence
the investment decisions of economic agents, are aligned with the climate neutrality
pathway. The sequential adjustment in investment on a 5-year basis leads to a type of
“catching up” process in investment in decarbonised technologies. To illustrate the
impact of this type of frictions, the sequential scenario was modelled based on the level
of climate ambition of scenario 1, and impacts are measured in relation to S1 as a
baseline. While all scenarios achieve the same level of ambition in 2050, the sequential
scenario (S1.A) leads to a gradually larger loss of output over time, with GDP about
0.4 percentage point lower than under S1 in 2050. In contrast, the higher level of
ambition under S2 entails only a transitional cost in terms of lower output compared to
S1, with GDP marginally higher in 2050. Over the whole transition period, the sequential
scenario therefore entails a significant cost in terms of lost output relative to the S2
(Figure 102).
(261
)E-QUEST includes a representation of 3 types of investment: (1) electricity intensive (clean
technologies); (2) fuel-intensive technologies; and (3) all other types of investments.
155
Figure 102: Impact of frictions in investment decisions
Source: E-QUEST.
A recent analysis by the European Central Bank (262
) also shows that an accelerated
transition would provide significant benefits for firms, households and the financial
system compared with a late-push scenario, which achieves the same level of ambition
by a given year than under earlier action but postpones climate-related investment.
Although the ECB’s analysis is set with a 2030 horizon and is based on scenarios that are
not aligned with those considered in this impact assessment, the conclusions concur with
those above in that delaying action (or misreading policy signals and making errors in
expectations as in the modelling exercise above) is costly. The ECB analysis concludes
that credit risk would increase during the transition under all scenarios, but that it would
be particularly so in case of a “late-push” configuration that would require very high
levels of investment under a shorted period. They conclude that while early action would
lead to greater costs for households and firms in the short-term, it would lower financial
risks in the medium term because of a decrease in energy-related expenses and that the
earlier the transition happens, the smaller the financial risks and potential costs in terms
of policy support. Finally, they indicate that their analysis does not find financial stability
concerns of the euro area, even if the transition would increase banks’ expected losses
and provisioning needs.
Cambridge Econometrics’s E3ME model was further used to assess the potential impact
of increased investment costs (captured in modelling terms as a lower return on
investment) due to decisions that are not fully aligned with the transition and GHG
mitigation requirements. Assets in selected sectors (mining, manufacturing, electricity
supply, land transport and real estate) are assumed to generate lower returns or to operate
for a shorter lifetime than projected under the investment decision, which means that
investors incur an additional cost to either scrap and replace assets earlier than planned,
or to refurbish them to extend their lifetime. The assumed increase in costs range from
1% in the real estate sector to about 4% in manufacturing and 3% in electricity supply.
Higher investment costs driven by misaligned investment decisions lead to an increase in
(262
)Occasional Paper Series N°328. The Road to Paris: stress testing the transition towards a net-zero
economy. The energy transition through the lens of the second ECB economy-wide stress test.
-0.45
-0.40
-0.35
-0.30
-0.25
-0.20
-0.15
-0.10
-0.05
0.00
0.05
0.10
-12
-10
-8
-6
-4
-2
0
2
4
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
2050
GDP
%
devation
from
S1
Clean
tech
invest
%
deviation
from
S1
Clean tech investment S1.A Clean tech investment S2 GDP S1.A GDP S2
156
consumer prices over the transition period as well as a negative impact on private
consumption (-0.7%), investment (-0.2%) and GDP (-0.5%) by 2040, compared to the
baseline without misallocations in investment decisions. Higher production costs also
negatively impact total exports (-0.5%) and aggregate employment (-0.1%).
Cambridge Econometrics’ E3ME model was also used to assess the impact of frictions
and costs in the reallocation of the labour force across sectors of the economy.
Transformations within sectors and across sectors constitute one of the main challenges
of the transition to climate neutrality. Regardless of the scale of impacts on aggregate
output, sectors will need to transform to adjust to the adoption of new production
technologies and/or the production of new or different types of goods and services. On
top of the capital investment needs that this will entail, the transformation will have
significant impacts on the labour market, whether in terms of absolute and relative
demand within and between sectors, occupations and skills requirements. It will also
impact the investment needs in terms of labour force training, reskilling or upskilling.
Two types of effects were therefore modelled to assess potential macro-economic
impacts. First, the risks and impacts related to the reallocation of the labour force across
occupations and sectors is modelled by assuming that the economy faces
retraining/reskilling costs that would not occur otherwise. It is assumed that on average
10% of the workforce receives training specifically to adapt to the climate and energy
transition every year (up to 2050). The training costs are assumed to amount to
EUR 10 000 per worker in mining and extraction (i.e., to transition them to other sectors
as such jobs gradually disappear), EUR 1 500 per worker in manufacturing and
agriculture, and EUR 500 in other sectors, where the skills implications of the green
transition are likely to be much less significant (263
). In addition, basic training at a cost
of EUR 1 100 per annum for around 300 000 new workers in low carbon jobs is
projected up to 2030 (264
). It is further assumed that the costs are fully borne by the
employers, which therefore translates into a small increase in labour costs.
Modelling results suggest that such training costs have negligible impacts at macro-
economic levels. The larger training/re-skilling costs for workers in mining and
extraction apply to a marginal segment of the labour force and even the skilling costs in
manufacturing are relatively small in comparison to the total labour force and labour
costs. While the model suggests a small increase in aggregate labour costs to employers,
the negative impact on GDP or private consumption by 2040 amounts to less than
0.1 percentage point relative to the no-skilling costs baseline.
Higher assumptions regarding training/re-skilling costs amplify the impacts to some
extent, though they remain limited. Using the same assumption as above on the training
cost per worker in mining and extraction but doubling the percentage of the workforce
receiving training to 20%, doubling the costs of training for workers in manufacturing (to
EUR 3 000) and other sectors (to EUR 1 000), introducing a cost of training of
EUR 5 000 per worker in construction and of EUR 10 000 per worker in energy intensive
(263
) These figures draw on European Economy Discussion Paper 176, December 2022: The Possible
Implications of the Green Transition for the EU Labour Market.
(264
) This assumptions builds on SWD(2023) 68 final and Employment and Social Developments in
Europe 2023 (Box 2.4)
157
industries and increasing the number of new workers receiving training in low-carbon
clean technology sectors to 568 000 generates a negative impact of about 0.25% and
0.35% of GDP in 2040 for GDP and private consumption, respectively. It is important to
note, however, that these results do not simulate the potential impact of skills/qualified
labour not being sufficiently available for the deployment of green technologies. The
latter remains a critical factor in the transition process, and it is assumed here that
investing in training ensures that skills are indeed available as needed.
Second, there is firm-level evidence that on-the-job training leads to productivity and
wage gains (265
). An economy-wide effort to train the work force in the context of the
climate transition could therefore lead to productivity gains overall. The joint effect of
such productivity gains and the small increase in labour costs due to training costs is
assessed with the E3ME model by assuming that training positively impacts labour
productivity of the affected labour force and that workers consequently benefit from a
1% increase in average wages from 2035, by when a full round of training is completed
(assuming again that 10% of the labour force benefits from training each year). Higher
wages feed into an increase of about 1.4% and 0.8% in private consumption and GDP,
respectively, in 2040, with an associated small increase in consumer prices.
2.2. The investment agenda (266)
2.2.1. Aggregate investment needs
The transition to climate neutrality requires that the EU’s energy system be decarbonised
rapidly and comprehensively. All policy options envisaged in this impact assessment
imply an intensification in efforts to replace fossil fuels with renewable and carbon-free
sources of energy, achieving significant energy savings and the deployment of innovative
processes in industry. Existing capital assets (e.g., fossil-based power plants, heating and
cooling systems or industrial processes) will be replaced with renewables, carbon-free or
electricity-based assets, whose capital intensity may be larger than fossil-based assets.
Therefore, the transformations of the energy system will require a general substitution of
fossil fuels inputs with capital.
As the technologies to decarbonise the energy system are mostly identified, if in certain
cases still in need of deployment at scale and at lower costs, the transition of the energy
system is to a large extent an investment challenge, associated to questions on
deployment capacity, including in terms of availability of raw materials and skilled
labour force or acceptability. The impact assessments for the 2030 Climate Target
Plan (267
) and the legislative proposals under the Fit-for-55 package (268
) already assessed
the scale of the investment requirements up to 2030 and stressed the need for a
significant increase in energy system investment compared to the decade 2011-2020. The
(265
) See for example Konings J. and Vanormelingen S. The impact of training on productivity and wages:
firm-level evidence.
(266
)The model-based analysis is a technical exercise based on a number of assumptions that are shared
across scenarios. Its results do not prejudge the future design of the post-2030 policy framework.
(267
) SWD(2020) 176 final
(268
) See for example SWD(2021) 621 final
158
REPowerEU plan further identified additional investment needs in order to reduce the
EU’s dependence on Russian fossil fuels (269
).
The scenarios assessed under this impact assessment generate differentiated requirements
in terms of aggregate investment over the entire transition period from 2031 to 2050, as
well as in terms of the sectoral composition of these investment requirements and their
timing during the post-2030 period. What is most saliant across all scenarios, however,
are the commonalities and the need for a significant investment effort over a prolonged
period, as carbon-intensive systems and processes are substituted with capital intensive,
carbon-free solutions on the supply and demand side (Table 26). What this indicates as
well is the necessity to ensure that the conditions be in place to facilitate this level of
investment and avoid investment decisions that are not compatible with the transition,
including in terms of the clarity of signals sent to investors and in terms of access to
finance, for businesses and households alike.
(269
) SWD(2022) 230 final
159
Table 26: Average annual energy system investment needs (billion EUR 2023)
Source: PRIMES.
EU27
2031-
2040
2041-
2050
2031-
2050
2031-
2040
2041-
2050
2031-
2050
2031-
2040
2041-
2050
2031-
2050
2031-
2040
2041-
2050
2031-
2050
Supply 236 377 306 289 328 308 341 281 311 282 268 275
Power grid 79 88 84 88 81 85 96 75 85 80 73 76
Power plants 97 187 142 128 157 142 151 133 142 123 128 125
Other 59 102 81 72 90 81 94 73 83 79 67 73
Demand excluding transport 332 377 354 355 357 356 372 338 355 349 339 344
Industry 38 31 35 46 24 35 48 22 35 40 19 30
Residential 225 250 237 237 242 239 248 230 239 236 234 235
Services 49 78 63 53 73 63 57 67 62 53 68 60
Agriculture 19 19 19 19 19 19 20 18 19 19 19 19
Transport 866 875 870 861 885 873 856 882 869 777 798 787
Total 1433 1629 1531 1505 1570 1537 1570 1501 1535 1407 1405 1406
Total excluding transport 567 754 661 644 685 664 713 619 666 631 607 619
Memo:
Real GDP (period average) 19444 22369 20906 19444 22369 20906 19444 22369 20906 19444 22369 20906
S1 S2 S3 LIFE
160
Overall, the scenarios and associated pathways imply annual energy system investment
needs (excluding transport) at or above 3% of GDP for the two decades from 2031 to
2050 (Figure 103). This amounts to an additional 1.5 to 2 percentage points of GDP
compared to the average in 2011-2020. A higher level of ambition in 2040 is, as
expected, associated with higher annual investment needs in 2031-2040 than lower levels
of ambition in 2040, but also with comparatively lower investment requirements in 2041-
2050 due to the early push on decarbonisation projects.
Figure 103: Average annual energy system investment needs, excluding transport
Source: PRIMES.
Cumulatively over the two decades (2031-2050), S3 implies a somewhat higher level of
investment as well, partly because technologies need to be deployed faster, which
reduces the gains from the projected decrease in the cost of decarbonisation technologies
over time through learning-by-doing. S2 yields a smoother investment profile over the
entire period 2031-2050 and avoids either anticipating or delaying investments. In turn,
behavioural changes (LIFE), including in terms of mobility, consumption and energy use
in the residential sector, enable a reduction in investment needs across the entire period
(Figure 104). Excluding transport, average annual investment needs in 2031-2050 can be
reduced by about EUR 47 billion (7%) compared to S3 over 2031-2050. The lowering of
investment needs is evident across the board as reduced energy demand enables a
reduction in average annual investment of about EUR 36 billion (12%) on the supply side
in 2031-2050 while circularity enables a drop in annual investment needs of about
EUR 5 billion (15%) in industry. As far as transport is concerned, lifestyle changes
towards more active and public transport modes lead to a drop of around EUR 80 billion
(9%) in annual investment needs in 2031-2050.
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
2011-2020 2021-2030 2031-2040 2041-2050
%
GDP
S1 S2 S3 LIFE
161
Figure 104: Average annual energy system investment needs by sector
Source: PRIMES.
The projected increase in the investment to GDP ratio is significant, but not exceptional
in historical terms. More mature economies typically have lower gross fixed capital
formation (GFCF) to GDP ratios, as the need to invest in core infrastructure is lower than
is less-developed economies. In the EU, the GFCF/GDP ratio was on a declining trend
between the mid-1970s to the mid-1990s, before stabilising at around 21-22% (Figure
105). There has always been a fair bit of volatility in the ratio, however, with a marked
low point in the mid-2010s followed by a return in more recent years towards the average
of the first decade of the 2000s. Changes in the ratio of 1-2 percentage points of GDP
within a relatively short period have not been uncommon in the past. The key difference
in the current context is that an increase in the GFCF/GDP ratio would need to be
sustained for an extended period, and that higher investment for decarbonisation
purposes would need to be combined with higher investment on climate adaptation and
higher investment to secure the EU’s ability to benefit from the growth and employment
opportunities in green technologies and its strategic security, as discussed in section 2.2.7
(270
). The latter would indeed require that the EU be in a position to manufacture a
significant share of the green technologies necessary for the climate transition
domestically.
(270
)SWD (2023) 68 final estimates investment needs for 2023-2030 associated with boosting EU
manufacturing capacity for a part of strategic net-zero technologies, focusing on wind, solar
photovoltaic, heat pumps, batteries and electrolysers, as part of the Net Zero Industry Act proposal.
0
50
100
150
200
250
300
Power grid Power plants Other supply Industry Residential Tertiary
Billion
EUR
2023
S1 2031-2040 S1 2041-2050 S2 2031-2040 S2 2041-2050
S3 2031-2040 S3 2041-2050 LIFE 2031-2040 LIFE 2041-2050
162
Figure 105: Ratio of gross fixed capital formation to GDP and GDP growth (5-year
backward moving average)
Source: World Bank.
2.2.2. Supply-side investment needs
The continued large-scale deployment of renewable and carbon-free sources of energy, in
particular electricity, is a necessity across all scenarios and the shares of renewable
electricity and energy reach very similar levels by 2050. However, the levels of primary
and final energy demand vary somewhat across scenarios, and the speed at which
renewable and carbon free energy sources are deployed differ, together with the
composition of energy sources (section 1.2).
Over 2031-2050, average investment needs in power plants is projected at around
EUR 140 billion per annum across scenarios (Table 26), more than 80% of which would
be in renewables, mainly wind and solar. S3 entails a much faster deployment of
renewable and other carbon-free power generation, with average annual investment of
around EUR 135 billion in 2031-2040, while S1 entails a significant delay in such
investments, with very high deployment levels in 2041-2050 (Figure 106). S2 entails a
smoother investment profile overall, with lower investment needs in 2031-2040
compensated by higher investment needs in 2041-2050 compared to S3. In turn, LIFE
enables a reduction of about EUR 17 billion (12%) in annual investment in power plants
in 2031-2050 compared to S3. It also translates into a significant reduction in power grid
investment needs of close to EUR 10 billion (10%) per annum.
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
18
19
20
21
22
23
24
25
26
27
28
%
GDP
GFCF (% GDP, 5-year backward moving average) GDP growth (5-year backward moving average)
163
Figure 106: Average annual investment in power supply
Source: PRIMES.
Given the similar high reliance on variable sources of renewable electricity, all scenarios
require significant investment in electricity storage, starting this decade already and
extending to 2050, at about EUR 8 billion annually in 2031-2050. Similarly, integrating a
very high share of variable and geographically dispersed renewable electricity sources
into the electricity network will require the upscaling and upgrading of the transmission
and distribution networks. Average annual investment needs in the power grid are
comparable across scenarios at about EUR 85 billion per annum, with an early push in
investment under S3, a delayed deployment under S1, a more even profile under S2 and a
reduction in investment needs under LIFE. Infrastructure investment in carbon storage is
projected at around EUR 5 billion per annum on average in 2031-2050 and is similar
across scenarios. The faster development of carbon capture and storage under S3 and S2
means that investment in carbon storage infrastructure is anticipated compared to S1,
with average annual investment of EUR 9 billion in 2031-2040 under S3, compared to
EUR 6 billion under S2 and EUR 1 billion under S1.
The bulk of investment needs on the supply side of the energy system will originate from
power utilities and by the regulated operators of the transmission and distribution
systems, many of which in the EU are fully or partly publicly owned corporations.
Industrial companies also invest to some extent in their own (decarbonised) energy
supply infrastructure, as illustrated by recent developments in investments in the
generation of green hydrogen from electrolysis by large players in the steel industry. So
far, the deployment of renewable electricity has mainly taken place with public support
via a range of State aid schemes providing operating aid for generation (271
). EU funding
(271
) The Guidelines for Energy and Environmental Aid (EEAG) facilitated the provision of State aid for
the deployment of renewable electricity and promoted the competitiveness of aid mechanisms by
promoting competition auction mechanisms for the allocation of aid and requiring aid to be granted as
a premium over market prices. The Guidelines on State aid for climate, environmental protection and
energy (CEEAG), as adopted in 2022, further improved the framework for the allocation of aid for
renewable electricity generation. Finally, the Temporary Crisis and Transition Framework further
facilitates the granting of aid to accelerate the rollout of renewable energy and energy storage relevant
for REPowerEU.
0
50
100
150
200
250
300
350
400
2031-2040 2041-2050 2031-2040 2041-2050 2031-2040 2041-2050 2031-2040 2041-2050
S1 S2 S3 LIFE
Billion
EUR
2023
Power grid Renewables Other power gen Other supply Total
164
has also facilitated the deployment of renewables in the power sector, including via the
Modernisation Fund. To some extent, households are also involved as investors on the
supply side via the installation of rooftop solar panels and or/via energy communities,
which have risen in importance in recent years. Investment costs for the deployment of
renewable electricity have fallen sharply in the last decades, and renewable electricity is
set to become cost-competitive on a market basis in a broad range of market situations
encountered in Europe by 2030 (272
). The need for public support should therefore
decrease in future and it is expected that deployment should be increasingly driven under
market conditions.
2.2.3. Demand-side investment needs, industry,services and agriculture
The shift towards electricity as the principal energy carrier on the demand side, the
decarbonisation of industrial processes and improvements in energy efficiency will
require significant investment over the coming decades. Investment needs to decarbonise
industrial output will be most significant in energy-intensive industries, which tend to be
dominated by large privately owned corporations. The estimated investment needs in iron
and steel, non-ferrous metals, chemicals, non-metallic minerals and pulp and paper
account for about 70% of investment needs in industry in 2031-2050 and the amounts
vary little across scenarios (Figure 107). However, LIFE shows clear benefits from
higher levels of circularity in industry, with investment needs reduced by 15% compared
to S3 (Table 28). This is particularly noticeable in sectors where circularity offers most
potential, including pulp and paper (-33%), non-ferrous metals (-31%), iron and steel
(-21%) and chemicals (-19%).
Figure 107: Average annual energy system investment needs in industrial sectors
Source: PRIMES.
In the decade 2031-2040, annual energy-system investment needs in energy-intensive
industries are projected at around EUR 28-34 billion in S1-S2-S3 (with a reduction of
about EUR 7 billion under LIFE compared to S3). These estimates do not capture the full
investment costs of new or refurbished production facilities, but only the part that relates
(272
)Sebastian Busch, Ruben Kasdorp, Derck Koolen, Arnaud Mercier, Magdalena Spooner: The
Development of Renewable Energy in the Electricity Market. Directorate-General for Economic and
Financial Affairs. Discussion Paper 187. June 2023.
0
2
4
6
8
10
12
14
16
18
2031-2040 2041-2050 2031-2040 2041-2050 2031-2040 2041-2050 2031-2040 2041-2050
S1 S2 S3 LIFE
Billion
EUR
2023
Iron and steel Non-ferrous metals Chemicals Non-metallic minerals Pulp and paper Other industries
165
to decarbonisation, e.g., the additional cost of a hydrogen-based steel plant relative to a
baseline fossil-fuel based plant or investment in carbon capture. In turn, the investment
needs related to hydrogen production are captured in supply-side investments (section
2.2.2). The estimates also do not capture possible investment in R&D itself. The faster
deployment of industrial carbon capture under S3 and S2 means that investment is
anticipated compared to S1, with average annual investment in carbon capture for
industry as a whole of EUR 4 billion in 2031-2040 under S3 and S2, compared to less
than EUR 1 billion under S1. On average over 2031-2050, however, industrial
investment in carbon capture is almost the same across scenarios at about EUR 2 billion
per annum.
Investment needs in other industrial sectors are more diffuse, both in terms of sectors
concerned and in terms of size of enterprises. While there are no estimates of investment
needs by size of enterprises, most SMEs active in manufacturing fall under these “other”
sectors. SMEs active in manufacturing account for about 9% of total SMEs, and the vast
majority are involved in non-energy intensive manufacturing activities (Table 27). While
manufacturing-oriented SMEs account for a large share of total SME gross value added
and employment in the economy with a share of 20%, the majority of that is again in
SMEs involved in non-energy intensive manufacturing. SMEs are therefore most likely
to decarbonise their production processes mainly via electrification and improvements in
energy efficiency. The scenarios differ little in terms of investment needs for non-energy-
intensive sectors in 2031-2050 at an average of around EUR 10 billion per annum, but S3
and S2 imply a fair degree of early push compared to S1.
Table 27: Indicators of SME activity by sector (2019)
Source: Eurostat (273
).
(273
)The data is calculated from the Structural Business Statistics (SBS), except for agriculture, which is
not included in the dataset. For SBS sectors, the table is based on an aggregation of sectors by size
class for special aggregates of activities (NACE 2). Fossil fuel sectors (B05, B06, C19); other mining
and extraction activities (B07, B08, B09); energy intensive industries (C17, C20, C21, C23, C24);
Share in GVA
Share in
employment
Number of
companies
GVA Employment
Fossil fuels 7.0% 6.6% 0.0% 0.1% 0.0%
Other mining and extraction 53.1% 59.2% 0.1% 0.3% 0.2%
Energy intensive industries 29.1% 34.4% 0.6% 2.9% 2.0%
Manuf. transport equipment (incl. parts and accessories) 7.9% 14.1% 0.1% 0.6% 0.6%
Manuf. electrical equipment and other machinery 32.0% 35.4% 0.5% 3.1% 2.0%
Other manufacturing 44.4% 65.0% 7.5% 14.3% 15.9%
Electricity, gas, steam and air conditioning supply 22.3% 29.0% 0.7% 1.4% 0.5%
Construction and architecture services 77.8% 89.1% 19.0% 16.4% 17.5%
Transport and storage 49.0% 43.6% 5.4% 5.2% 4.9%
Services 62.7% 69.5% 65.7% 54.3% 55.5%
Water, treatment and waste 46.7% 45.3% 0.3% 1.3% 0.9%
Total 52.9% 64.4% 100.0% 100.0% 100.0%
Memo:
Million
Billion
EUR
Million
people
All sectors above 52.9% 64.4% 23.1 3332 76.3
Agriculture 66.7% 95.6% 8.7 128 8.3
SME shares in the
economy (% of total)
Sectoral split of SMEs (% of economy-
wide SMEs)
167
Table 28: Average annual energy-related side investment needs in industry,services and agriculture (billion EUR 2023)
Source: PRIMES.
EU27
2031-
2040
2041-
2050
2031-
2050
2031-
2040
2041-
2050
2031-
2050
2031-
2040
2041-
2050
2031-
2050
2031-
2040
2041-
2050
2031-
2050
Industry 38 31 35 46 24 35 48 22 35 40 19 30
Iron and steel 8 2 5 8 2 5 9 1 5 7 1 4
Non-ferrous metals 1.3 0.4 0.8 1.4 0.3 0.8 1.4 0.2 0.8 1.0 0.2 0.6
Chemicals 14 11 13 15 10 12 16 10 13 13 8 10
Non-metallic minerals 2.1 4.3 3.2 4.8 1.9 3.3 4.9 1.5 3.2 4.0 1.2 2.6
Pulp and paper 3.3 2.6 3.0 3.5 2.4 3.0 3.8 2.2 3.0 3.0 1.0 2.0
Other 10 10 10 13 8 10 13 7 10 13 8 10
Services 49 78 63 53 73 63 57 67 62 53 68 60
Renovations 6 15 10 11 9 10 16 3 10 14 6 10
New constructions 3 3 3 3 3 3 3 3 3 3 3 3
Energy equipment 40 60 50 39 61 50 38 60 49 36 58 47
Heating 21 40 30 21 40 30 20 40 30 18 38 28
Cooling and others 6 7 7 6 7 6 6 7 6 6 7 6
Electrical appliances and lighting 13 13 13 13 13 13 13 13 13 13 13 13
Agriculture 19 19 19 19 19 19 20 18 19 19 19 19
Memo:
Real GDP (period average) 19444 22369 20906 19444 22369 20906 19444 22369 20906 19444 22369 20906
LIFE
S1 S2 S3
168
It is also to be noted that the assessment of investments needs, including on the supply
side, relate to the investment by the user/investor in asset, e.g., the investment costs
related to the installation of windmills, solar panels, a hydrogen-based plant or a heat
pump. While the installation costs of these technologies are fully accounted for, the
assessment is silent on the sourcing of the equipment, which can be produced
domestically or imported, without impact on the figures reported in these sections.
The sourcing of the technologies required for the decarbonisation of the economy,
including manufacturing capacities, raw material supply chain and deployment of clean
innovative processes, is nevertheless anything but neutral in terms of impacts on the
economy, including GDP, investment, sectoral output and employment or skills needs
and in terms of geo-strategic implications. The Commission recently conducted an
evaluation of investment needs in key net-zero technologies for the period up to 2030 for
key sectors in green technologies (274
). It estimated that achieving a situation of no
dependency on imports in wind, solar photovoltaic, heat pumps, batteries, and
electrolysers would require a cumulative investment of about EUR 120 billion (in
constant euros of 2022) until 2030. These investments, together with those to decarbonise
the different industrial sector, typically require support and market creation to cover the
capital and operational expenditure. Maintaining a strategic autonomy in key
decarbonisation technologies post 2030 would further add to the economy’s overall
investment needs. Section 2.2.7 elaborates on investment needs in key net-zero
technologies for the period 2031-2040.
As for investments on the supply side, the bulk of investment in industry should originate
from private investors. Member States have nevertheless actively supported the
decarbonisation of industry in recent years via State aid mechanisms in favour of R&D&I
or in favour of the deployment at scale of innovative, low-carbon processes (275
).
Similarly, EU funding has been established to support innovation for decarbonisation,
including the Innovation Fund and the Horizon Europe programme.
While the deployment at scale of innovative production processes will be an important
factor driving investment needs in industry on the path to climate neutrality, investment
needs in tertiary sectors involve essentially the deployment of well-established
technologies and a renovation drive. To the extent that investments in energy efficiency
and the substitution of fossil fuels-based technologies with carbon-free ones generate a
positive economic return over their lifetime, the potential barriers to deployment would
therefore mainly relate to awareness, access to (long-term) finance at moderate costs and
(274
)SWD (2023) 68 final
(275
)For example, the Commission approved the granting of EUR 1 billion of State aid by Gemarny to
Salzgitter to green its steel manufacturing processes, and over EUR 130 million of aid to BASF to
replace natural gas-based hydrogen with renewable hydrogen at its chemical production facilities.
Recently as well, the Commission approved two schemes notified by Slovakia, with a total budget of
over EUR 1.1 billion from the RRF and the Modernisation Fund, aiming at reducing CO2 emissions in
industrial production processes as well as to implement energy efficiency measures in industrial
installations. The measures supported under the schemes range from electrification projects to the
installation of industrial waste heat recovery technologies. The projects will be selected through an
open competitive bidding process and will be ranked on the basis of two criteria: (i) the lowest amount
of aid requested per ton of CO2 emissions avoided, and (ii) the highest contribution to the achievement
of the CO2 emission reduction objective.
169
access to skills, rather than a matter of innovation and new production processes. These
potential barriers would likely be more significant for SMEs than for large players in the
tertiary sectors.
The investment needs will also be much more diffuse among sectors and players than in
industry, as they will involve a very wide range of services sectors, from retailers,
hospitality or finance to energy-intensive data centres and encompass a wide mix of
large, medium, small and even micro enterprises. SMEs are likely to account for a
significant share of investment needs in the tertiary sector, given that a high proportion of
them are active in services sectors and that they represent a large share of economy-wide
gross valued added and employment. In 2019, SMEs accounted for about 63% of
economy-wide gross value added and close to 70% of overall employment in services.
Within SMEs, about 65% of companies are involved in the services sector (Table 27).
Public sector investment will also be an important source of investment in the tertiary
sector, given the scale of its buildings portfolio in central, regional and local
administration, schools, hospitals or judiciary system.
On the buildings themselves, the main driver for investment will consist in the renovation
of existing assets with the view to improve overall energy efficiency via insulation. The
higher ambition in 2040 under S3 implies a significant early push in the renovation drive
compared to S2 and S1, although cumulative investments over the full period 2031-2050
would be similar. Investment in new construction is projected to be relatively small in the
three pathways, as the estimates capture only the additional investment in the building’s
energy performance relative to a baseline, which already entails high energy
performances given the existing stringent standards for new constructions at national and
EU level (Figure 108).
170
Figure 108: Average annual energy system investment needs in services
Source: PRIMES.
The bulk of the investment needs in tertiary sectors is projected to take place via the
acquisition of energy equipment for heating, cooling, appliances and lighting. The full
acquisition cost of such equipment is captured in the numbers as reported in Table 28,
contrary to investments in on the building structure. The deployment of heat pumps is
projected to start at a large scale during this decade already and to continue into the
2031-2050 period as the technology almost entirely replaces conventional technologies
for heating. Investment in heat pumps in tertiary sectors is projected at around
EUR 23 billion per annum in 2031-2050 under all main scenarios, with a comparable
time profile. LIFE, however, enables a slightly lower investment level in tertiary sector
heating and cooling systems.
2.2.4. Demand-side investment needs, households
Investments needs for the decarbonisation of the residential sector will be similar in
nature to those in the tertiary sectors, focusing on improvements in the energy efficiency
of buildings and the substitution of fossil fuels-based technologies for heating and
cooling with carbon-free options. However, the scale of the residential building stock and
current energy efficiency levels are such that investment needs will be a multiple of those
in the tertiary sectors.
0
5
10
15
20
25
2031-2040 2041-2050 2031-2040 2041-2050 2031-2040 2041-2050 2031-2040 2041-2050
S1 S2 S3 LIFE
Billion
EUR
2023
Renovations New constructions Total
0
10
20
30
40
50
60
70
2031-2040 2041-2050 2031-2040 2041-2050 2031-2040 2041-2050 2031-2040 2041-2050
S1 S2 S3 LIFE
Billion
EUR
2023
Heating and cooling Electrical appliances and lighting Total
171
As in the tertiary sector, the higher level of ambition in 2040 under S3 would require an
early push in renovation rates compared to S2 and S1. The latter would see higher
renovation rates in 2041-2050, however, which means that average investment levels
over the full period 2031-2050 would be very similar across scenarios, with differences
mainly in terms of timing (Figure 109). On average in 2031-2050, renovation investment
in the residential sector amounts to around EUR 50 billion per annum across scenarios
(Table 29). This represents a significant increase compared to historical investment levels
(2011-2020) in renovation and is about 5 times as much as the investment level required
in renovation for tertiary sectors. As far as new constructions are concerned, the
investment needs are relatively limited and do not vary across scenarios, as the estimates
capture only the additional investment in the building’s energy performance relative to a
baseline.
Figure 109: Average annual energy system investment needs in residential sector
Source: PRIMES.
As in the tertiary sectors, the second big component of investment needs in the residential
sector relates to heating and cooling equipment, and electrical appliances and lighting.
The full acquisition cost of such equipment is again captured in these numbers (Table
29), which implies that households would incur a non-negligible share of such expenses
under any circumstances. The estimated annual investment needs in 2031-2050 in energy
equipment amount to around EUR 185 billion across scenarios, about twice the level in
0
10
20
30
40
50
60
70
80
2031-2040 2041-2050 2031-2040 2041-2050 2031-2040 2041-2050 2031-2040 2041-2050
S1 S2 S3 LIFE
Billion
EUR
2023
Renovations New constructions Total
0
20
40
60
80
100
120
140
160
180
200
2031-2040 2041-2050 2031-2040 2041-2050 2031-2040 2041-2050 2031-2040 2041-2050
S1 S2 S3 LIFE
Billion
EUR
2023
Heating and cooling Electrical appliances and lighting Total
172
2011-2020. The increase in energy equipment is most significant in heating and cooling
systems (+240%) and less so in appliances and lighting (+56%).
The deployment of heat pumps is projected to start at a large scale in this decade and to
continue in the following two decades. Average annual investment in heat pumps in
2031-2050 is projected at almost EUR 60 billion across scenarios and the timing of
investment over the two decades is very similar, with slightly higher investment levels in
2041-2050 than in 2031-2040. The switch to heat pumps is a constant across the main
scenarios, but the LIFE setting enables a reduction in investment in heating systems
overall of about EUR 7 billion (10%) per annum in 2031-2050.
As for heating and cooling systems, investment needs for electrical appliances and
lighting are estimated at full acquisition costs, which again implies that households
would incur a significant share of such expenses under any circumstances. The estimated
investment needs in appliances and lighting nevertheless represent about a third of
estimated total investment needs in the residential sector, at around EUR 80 billion per
annum in 2031-2050 across scenarios.
Investments in the residential sector will fall upon a range of players. While the costs of
appliances will be borne mostly by households themselves, the situation is more
contrasted for other types of investment needs. Homeowners will bear the full costs of
improvements in energy efficiency and shifting to carbon-free heating and cooling
systems. They will also reap the full benefits in terms of reduced utility bills and comfort
levels.
In contrast, funding the necessary investment in energy efficiency and heating and
cooling system for rented accommodation will fall upon a range of actors, from landlords
owning a single asset to large property owners/developers and public housing entities.
While access to affordable finance could be better for such players than for many home-
owning households, the incentives to renovate and upgrade heating and cooling systems
might not be as strong, as the benefits of lower utility bills and higher comfort levels
arise to tenants. Finally, where distributed heating is well developed, households will
also not directly face the need to provide up-front finance for investment, though the
capital cost of modernising the centralised heating system will be reflected in their utility
bills. Overall, the funding of investment needs in the residential sector will therefore
involve a multiplicity of actors, who will need to be provided the appropriate incentives
or financial support to act in accordance with the needs to decarbonise the sector.
173
Table 29: Average annual demand side investment, residential sector (billion EUR 2023)
Source: PRIMES.
EU27
2031-
2040
2041-
2050
2031-
2050
2031-
2040
2041-
2050
2031-
2050
2031-
2040
2041-
2050
2031-
2050
2031-
2040
2041-
2050
2031-
2050
Total 225 250 237 237 242 239 248 230 239 236 234 235
Renovations 42 55 49 51 46 49 63 35 49 60 45 52
New constructions 7 6 7 7 6 7 7 6 7 7 6 7
Energy equipment 176 188 182 179 189 184 179 189 184 169 183 176
Heating 66 74 70 68 75 72 67 75 71 59 69 64
Cooling and others 30 32 31 30 33 31 31 33 32 30 33 31
Electrical appliances and lighting 81 82 81 81 82 81 81 82 81 81 82 81
Memo:
Real GDP (period average) 19444 22369 20906 19444 22369 20906 19444 22369 20906 19444 22369 20906
S1 S2 S3 LIFE
174
2.2.5. Demand-side investment needs, transport
Estimated average annual investment needs in transport in 2031-2050 are similar across
the main scenarios at about EUR 870 billion (276
). LIFE nevertheless enables a significant
lowering of investment needs of about EUR 80 billion (9%) per annum in 2031-2050
compared to S3. While investment in public road transport and rail is 4% and 6% higher
under the LIFE setting, the modal shift enables a decrease in the purchase of private cars
of nearly EUR 70 billion (13%) per annum in 2031-2050. Similarly, changes in
behavioural patterns under LIFE could reduce investment needs in aviation by about
EUR 14 billion (23%) annually compared to S3 (Table 30).
The acquisition of private cars represents the bulk of the investment needs in transport,
accounting for around 60% of the total over 2031-2050. This is also the case in historical
terms, as the share was 65% in 2011-2020. Average annual investment in the acquisition
of private cars in 2031-2050 amounts to about EUR 510 billion across scenarios, which
is almost 30% higher than on average in 2011-2020 (Figure 110).
This increase reflects two factors. An increase of around 18% in the number of new
private cars purchased annually is projected between 2011-2020 and 2031-2050 under
the three main scenarios. LIFE enables this increase to be limited to only 2%. As electric
vehicles are deployed, it is also projected that the average purchasing cost of vehicles
will increase during the transition. The increase is expected to take place mainly during
2031-2040, before tapering off in the last decade to 2050 as the cost of electric vehicles
decreases. Over the entire 2031-2050 period, the average purchasing cost of vehicles is
expected to be only around 10% higher than in 2011-2020. In addition, it must be noted
that the maintenance and operating costs of electric vehicles, which will become
dominant under all pathways, is significantly lower than internal combustion engine cars,
which would generate net benefits to users, i.e., mainly households (277
).
(276
)These figures represent the full acquisition cost of new vehicles, not only the incremental cost related
to the decarbonisation of transport. In addition, it should be noted that investments in transport reflect
here the expenditures on vehicles, rolling stock, aircraft and vessels plus recharging and refuelling
infrastructure. They do not cover investments in infrastructure to support multimodal mobility and
sustainable urban transport.
(277
) SWD(2021) 613 final.
175
Figure 110: Average annual investment needs in transport
Source: PRIMES.
While timely investment in recharging and refuelling infrastructure is critical for the
transition to vehicles with zero tailpipe emissions, total investment in alternative fuelling
infrastructure is relatively small from the perspective of overall investment needs. The
needs are virtually the same across scenarios, with an average annual investment of
around EUR 15 billion (1.7% of total investment needs in transport) in 2031-2050, and in
terms of timing. The phasing in of zero tailpipe emission vehicles and the EU-wide ban
on the sale of other types of light-duty vehicles as of 2035 implies a peak in annual
investment in recharging and refuelling infrastructure of around EUR 20 billion in 2036-
2040 before tapering off somewhat.
The second large component of investment in road transport relates to trucks, for which
average annual investment is projected to increase by around 60% compared to the
average in 2011-2020 (Table 30). Investment needs are broadly similar across scenarios.
As far as public road transport is concerned the investment needs are relatively small and
do not vary much across scenarios, with the exception of the LIFE setting and its
associated modal shift towards public transport entails an increase in investment in the
sector.
The 3 main scenarios differ little in terms of investment needs for rail, aviation and
navigation. As a share of total transport annual average investments over 2031-2050, rail
transport represents 5%, aviation represents 7%, and domestic navigation and
international maritime transport represent 5-6% of the total. However, they do typically
represent a significant increase relative to investment levels in 2011-2020. In contrast, S3
and S2 entail somewhat higher investment levels in international maritime transport than
S1. As indicated above also, LIFE also implies a moderately higher level of investment
in rail, and a decrease in average annual investment in aviation of EUR 14 billion (23%)
in 2031-2050 compared to S3.
0
100
200
300
400
500
600
700
800
2011-2020
2021-2030
2031-2040
2041-2050
2031-2040
2041-2050
2031-2040
2041-2050
2031-2040
2041-2050
S1 S2 S3 LIFE
Billion
EUR
2023
Private cars Trucks Total
176
Table 30: Average annual demand side investment needs, transport (billion EUR 2023)
Source: PRIMES.
EU27
2031-
2040
2041-
2050
2031-
2050
2031-
2040
2041-
2050
2031-
2050
2031-
2040
2041-
2050
2031-
2050
2031-
2040
2041-
2050
2031-
2050
Total 866 875 870 861 885 873 856 882 869 777 798 787
Road 718 688 703 712 693 702 704 686 695 640 617 629
Public transport 24 29 26 23 30 27 24 30 27 25 31 28
Private cars 531 491 511 526 494 510 523 493 508 459 421 440
Two-wheelers 18 19 19 18 20 19 18 20 19 18 20 19
Trucks 145 149 147 143 150 147 139 144 142 137 147 142
Rail 41 51 46 42 51 47 43 52 47 46 54 50
Aviation 51 70 60 51 70 61 52 70 61 36 58 47
Domestic navigation 13 12 13 13 13 13 12 13 13 13 13 13
International maritime 26 41 33 27 42 35 31 47 39 27 42 35
Alternative fuel infrastructure 16 14 15 16 15 16 16 15 15 14 13 14
Memo:
Real GDP (period average) 19444 22369 20906 19444 22369 20906 19444 22369 20906 19444 22369 20906
S1 S2 S3 LIFE
177
2.2.6. Sensitivity of investment needs to technology costs assumptions
Cost assumptions for the deployment of mitigation technologies are exogenous to the
modelling exercise and constant across all scenarios. They are discussed in more details
in annex 6, and summarised in Table 31 for a few technologies on the supply side and for
heat pumps, based on averages in each case (average of sizes of installations for solar,
wind and heat pumps and average of centralised and decentralised technology for
hydrogen).
Over the past decades, the cost of solar, wind or heat pumps has decreased sharply as a
result of technological progress and learning by doing fostered by the rising scale of
deployment in the EU and globally. However, as demand for renewables and
electrification – and the associated raw materials needed for the production of such
technologies – is set to increase globally, the sector could potentially be subject to price
shocks or sustained price pressures, depending on the capacity of global markets to
respond to rising demand, on the ability of circular economy policies to create a resource
base for “secondary” materials production in the EU and on the capacity of the EU to
create a domestic value chain for primary materials.
Table 31: Technology investment costs assumptions (EUR 2015 per kW)
2020 2030 2040 2050
Solar, residential 1399 1067 878 841
Solar, commercial 941 711 580 561
Solar, utility 511 394 322 284
Wind onshore 1347 1021 941 920
Wind offshore, shallow 2673 2067 1708 1619
Wind offshore, floating 5107 3212 2531 2478
Hydrogen, low temperature electrolysis – PEM 1586 833 683 529
Hydrogen, low temperature electrolysis – alkaline 1423 675 572 518
Hydrogen, high temperature electrolysis – SOEC (centralised) 2250 1050 792 580
Heat pumps, air to air * 468 551 445 424
Heat pumps, air to water * 1172 1243 1107 1068
Note: * residential sector only.
Source: PRIMES.
Understanding how investment needs could be affected by potential increases in
technology costs is important. A sensitivity analysis on what a stylised price shock on the
cost of renewable technologies would mean in the different scenarios is therefore
presented in Table 32. It assumes that supply-side technologies are subject to a 20%
increase in costs relative to the standard assumptions used across scenarios. Supply side
technologies are most susceptible to be subject to price shocks as they rely on critical raw
materials. The shock is tested for the 2031-2040 as it is more likely that demand could
outpace supply for such technologies during that time, as the rest of the world also steps
up investment to deploy renewables and as EU and worldwide manufacturing facilities
take time to be established in response to the likely increase in global demand. It is
178
simulated for solar, wind, new fuels and heat pumps, i.e., green technologies at the core
of the Commission proposal on a Net Zero Industry Act that will be critical as enablers of
the EU’s decarbonisation objectives (278
).
Given the scale of the investment needs, wind and heat pumps are the technologies that
would be most susceptible to trigger an increase in energy system investment
requirements. A 20% price shock on wind would add between EUR 9 billion (S1) to
EUR 17 billion (S3) to annual investment needs in 2031-2040, while the same shock on
heat pumps would add between EUR 11 billion (S3) to EUR 14 billion (S2) annually. A
shock on all four technologies considered in this sensitivity analysis would increase
annual energy system investment needs (excluding transport) in 2031-2040 by 5.5%,
6.1% and 6.3%, respectively under S1, S2 and S3. As expected, S3 is most affected as it
anticipates investment in renewable technologies (Table 32).
It is important to note that the increase in total investment needs from such a shock
nevertheless remains relatively small, with a cumulative impact of EUR 44 billion
annually under S3, which is equivalent to 0.2% of average GDP over the period. Further,
the impact on energy system costs should be smaller still, as capital costs represent only a
share of total costs and as the shock would only affect new capacity installed during the
period and not the entire capital stock. In this regard, a price shock on renewables
technologies (or raw materials needed for their production) is therefore fundamentally
different from a price shock on fossil fuels.
Table 32: Sensitivity of average annual energy system investment needs (excluding
transport) to a price shock
Source: PRIMES.
2.2.7. Investment needs for net-zero technology manufacturing capacity
The resilience of future energy systems will be measured notably by a secure access to
the technologies that will power those systems: wind turbines, solar PV, electrolysers,
batteries, heat pumps and others. In this context, the Net-Zero Industry Act is part of the
actions announced in the Green Deal Industrial Plan of February 2023, aiming at
simplifying the regulatory framework and improving the investment environment for the
Union’s manufacturing capacity of technologies that are key to meet the Union’s climate
neutrality goals and energy targets.
(278
) Given that there is very little difference across scenarios regarding the deployment of electric
vehicles, no shock is simulated on the transport side.
EU27 S1 S2 S3 S1 S2 S3
Energy system invest. (default costs) 566 634 700
Impact of 20 % cost increase vs. default::
Solar 5 6 7 0.9% 1.0% 1.0%
Wind 9 14 17 1.7% 2.1% 2.4%
New fuels 3 5 9 0.6% 0.8% 1.2%
Heat pumps 13 14 11 2.4% 2.2% 1.6%
Cumulative increase on all of the above 31 38 44 5.5% 6.1% 6.3%
% change over default
Deviation vs. default (bn EUR
2023)
179
Net-zero technologies are at the centre of strong geostrategic interests and at the core of
the global technological race, as exemplified by the United States’ Inflation Reduction
Act and China’s dominance in manufacturing of some cleantech. Fostering a competitive
and resilient European net-zero industry can play a significant role in reducing high
import dependence for key net-zero technologies, while guaranteeing affordable, reliable
and sustainable clean energy to EU citizens and businesses.
This section estimates the investments needed to build an EU-based manufacturing
capacity for five key net-zero technologies: wind, solar PV, batteries, heat pumps and
electrolysers. The analysis focuses on the investment needs for the decade 2031-
2040 (279
).
Table 33: Manufacturing capacity and investment needs per technology (2031-2040)
Note: manufacturing capacity needed and investment needs per technology. Capacity is expressed in GWh/year
for batteries and GW/year for the other technologies (GW of electricity for electrolysers, GWAC for solar PV)
Source: Commission own calculations based on PRIMES (280
)
In a scenario where the EU achieves the market shares indicated in the Net-Zero Industry
Act proposal(281)
, total investment needs reach a cumulative EUR 23 billion over 2031-
2040. Two thirds of those investments are for battery manufacturing, one fifth to one
quarter are for manufacturing of wind technologies, and electrolysers, solar PV and heat
pumps represent each between 2 and 6% of the total. This level of investment needs takes
into account that investments in manufacturing capacity already take place by 2030, so
the EU has already a manufacturing base in place in 2030. Manufacturing investment
needs would be lower in scenarios S1 and S2, as in 2040, net installed renewable power
capacity is lower by 7% in S2 and by 16% in S1 compared with S3.
2.2.8. Technical feasibility
The cost-efficient decarbonisation relies on the deployment of net-zero technologies with
varying but sufficient degree of maturity to be used on a large scale. The maturity of
(279)
Investment needs until 2030 have been assessed in the Commission Staff Working Document
Investment needs assessment and funding availabilities to strengthen EU’s Net-Zero technology
manufacturing capacity (SWD(2023) 68 final.
(280
)See Annex 8 of SWD(2023) 68 final.
(281)
Objectives of global market shares of 85% for wind, 45% for solar PV, 60% for heat pumps, 90% for
battery cells and 100% for electrolysers.
180
technologies is an important driver of the projected portfolio of net-zero technologies. In
recent years, pressing innovation gaps have been addressed which resulted in significant
improvements of the technology readiness. (282
) For the bulk of net-zero technologies
needed to reach the 2040 targets, the Technology Readiness Level (TRL) already
amounts to at least 8 (out of 9) which means that they are in an advanced deployment
stage. (283
)
DAC is at the lower end of the deployment stage having a TRL of 7. Bioenergy with
carbon capture and storage (BECCS) is the only technology that has a TRL of 5-6
(“Technology demonstrated in relevant environment”) indicating that it is not fully
established. However, there are already a variety of BECCS demonstration projects in
Japan, Norway, Sweden and the United Kingdom.
Due to their relatively low maturity, DAC and BECCS come into play only between
2030 and 2040 allowing the technology to be further developed over the coming years. In
2040, DAC and BECCS is projected to capture 16 MtCO2 (S1) to 155 MtCO2 (S3)
making up around 0.3% (S1) to 3.3% (S3) of 1990 total GHG emissions. The S3 scenario
anticipates decarbonisation via DAC up to 2040.
2.2.9. Other related investment needs
The needs analysed above concern mainly the investment required to decarbonise the
energy system, and to some extent the investment required to increase the domestic
production of the clean technologies that will be essential to decarbonisation efforts.
Beyond the energy system, additional climate-related investments will be necessary in
the coming decades, in two main areas: LULUCF sectors and agriculture, and climate
adaptation.
Investment in the land sector. The Bioeconomy Strategy Progress Report 2022 (284
)
finds that although at least EUR 2.7 billion of private investment have been unlocked to
develop new technologies for sustainable and circular bio-based value chains more is
needed to transfer knowledge into innovations due to the lack of financing. These
investments are needed for example to tap the biomass potential, new biorefineries and
plant lignocellulosic crops on EU cropland as feedstock for bioenergy.
The LULUCF sector plays already a very important role with its net removal, and it will
become even more important in the future. Importantly investments into the sector are
needed to maintain and enhance its capacity as a carbon sink, particularly considering the
recent decline of the LULUCF net removals. Nature-based removals in the LULUCF and
agricultural sector provide many options for implementation at large scale, but they
require significant additional investments. Examples for such nature-based removals are
afforestation and reforestation, peatland restoration activities, as well as the reduction of
(282
) IEA (2023). “Net Zero Roadmap. A Global Pathway to Keep the 1.5°C Goal in Reach”
(283
) The TRL evaluation is based on the EU’s Clean Energy Technology Observatory (CETO).
(284
) European Commission, Directorate-General for Research and Innovation, European bioeconomy
policy – Stocktaking and future developments – Report from the Commission to the European
Parliament, the Council, the European Economic and Social Committee and the Committee of the
Regions, Publications Office of the European Union, 2022, https://data.europa.eu/doi/10.2777/997651
181
emissions from agricultural soil (e.g., through practices such as agroforestry or
paludiculture). More generally, nature-based solutions currently receive only a small
proportion of the existing financing on climate-mitigation, if one considers their potential
(285
). Globally, they can provide about one-third of the cost-effective climate mitigation
needed until 2030 to stabilize warming to below 2°C (286
). Notably, offsets on the
voluntary market are of variable quality, which is why investments should be directed
towards nature-based solutions that are ecologically sound, socially equitable and
designed for the medium and long-term (287
). According to GLOBIOM modelling, within
the EU about 85% of available nature-based solutions with costs up to 200 €/tCO2-eq are
available for up to 100 €/tCO2-eq in 2040 and about 65% for up to 50 €/tCO2-eq (see
Annex 8).
Investments in adapatation. The European Climate Law requires the Union institutions
and Member States to ensure continuous progress in enhancing adaptive capacity,
strengthening resilience and reducing vulnerability to climate change. As part of this, the
Commission adopted a new EU strategy on adaptation to climate change in 2021 (288
).
The strategy sets out how the European Union can adapt to the unavoidable impacts of
climate change and become climate resilient by 2050. It builds on four principal
objectives: smarter adaptation, faster adaptation, more systemic adaptation and stepped-
up international action on adaptation.
While the need for increased investment in climate adaptation and resilience is obvious,
there is a big knowledge gap regarding the scale of the investment needs, in part because
of methodological complexities. Existing estimates of adaptation investment needs at
Member State level vary significantly depending on the methods used, the underlying
assumptions (e.g., about the frequency and scale of hazards in future, or the time horizon
chosen), the hazards taken into consideration, or the level of adaptation/resilience sought.
The fact that the returns to investment are frequently reaped at the societal level rather
than at the individual level and insufficient knowledge about adaptation investments also
means that private agents do not sufficiently assess their own needs.
At EU level, there is currently no consolidated and coherent estimate of climate
adaptation investment needs. The Commission is nevertheless addressing this knowledge
gap via a number of initiatives, including the ongoing European Climate Risk
Assessment (289
) exercise and a tender (290
) that will lead to a comprehensive assessment
of adaptation investment needs at the EU level.
(285
)Girardin, C. A., Jenkins, S., Seddon, N., Allen, M., Lewis, S. L., Wheeler, C. E., ... & Malhi, Y.
(2021). Nature-based solutions can help cool the planet—if we act now. Nature, 593(7858), 191-194.
(286
)Griscom, Bronson W., Justin Adams, Peter W. Ellis, Richard A. Houghton, Guy Lomax, Daniela A.
Miteva, William H. Schlesinger et al. "Natural climate solutions." Proceedings of the National
Academy of Sciences 114, no. 44 (2017): 11645-11650.
(287
)Girardin, C. A., Jenkins, S., Seddon, N., Allen, M., Lewis, S. L., Wheeler, C. E., ... & Malhi, Y.
(2021). Nature-based solutions can help cool the planet—if we act now. Nature, 593(7858), 191-194.
(288
)COM(2021) 82 final and accompanying impact assessment SWD(2021) 25 final.
(289
)European Climate Risk Assessment.
(290
)CINEA/2023/OP/0013.
182
2.2.10. The role of the public sector and carbon pricing revenues
As pointed at above, direct public sector investment is likely to be important but
contained to a relatively limited number of sectors. The key investment requirement on
the public sector will relate to the renovation of buildings and the shift to decarbonised
heating and cooling systems and transport modes across all levels of public
administration and public services.
Indirectly, however, the public sector is likely to play a much more significant role in
fostering the necessary levels of investment, as has been the case in the past. In past
decades, public funding at the level of the EU and Member States has played a critical
role in enabling the deployment of renewable electricity and the sharp reduction in the
costs of solar, wind or other renewable sources of energy. Similarly, Member States have
long provided support for the renovation of the residential housing stock. While such
expenditures are accounted as current expenditure in government accounts, in essence
they positive impact the capital stock of the economy as a whole.
Looking forward, public support will remain critical for the successful research,
development and deployment at scale of the technologies that will underpin the necessary
transformation of the EU economy. The need to ensure a fair transition will likely require
continued targeted support from the public sector for the renovation of the residential
building stock and the transition to carbon-free sources of heating and cooling. Similarly,
support might be needed in transport in order to address concerns about transport poverty
(section 2.4.1).
Similarly, direct public support will be essential for the decarbonisation of industry, the
deployment of renewable hydrogen at scale and the development of carbon capture and
storage/use. Finally, as evidenced recently with the adoption of the Inflation Reduction
Act in the United States, the Temporary Crisis and Transition Framework for State aid in
the EU, and the Commission proposal for the Net Zero Industry Act and Green Deal
Industrial Plan, public support will be essential for the EU to build or strengthen its
position in strategically and economically critical manufacturing sectors and their
associated value chains, including wind and solar energy technologies, electrolysers and
fuel cells, batteries and electricity storage, heat pumps and carbon capture and storage. It
is necessary to collectively address those challenges and coordinate national measures to
avoid any risk of distorting competition and fragmenting the single market.
The extent to which public finances could be affected by the transition itself and by the
policy options reviewed in this impact assessment will depend on a multiplicity of
factors, many of which will be determined at the level of Member States. On the revenue
side, there should be a base erosion for environmental taxes as the EU progresses towards
climate neutrality. In 2021, environmental taxes represented about 2.2% of GDP or 5.5%
of total government revenue from taxes and social contributions (291
), the bulk of which
is linked to energy taxes linked to fossil fuels.
While no model-based assessment of direct and indirect public investment needs or
impacts on total government revenues has been carried out, the pathways considered in
(291
) Environmental tax statistics
183
this impact assessment provide an indication of the level of resources that the public
sector could obtain from carbon pricing. While the use of these revenues will face
competing demands, including to ensure a fair transition, they should be sizeable enough
to also fund public support for investment.
Revenues from carbon pricing are very difficult to predict. While the emissions pathways
for the sectors subject to the ETS (which will cover nearly the entire scope of domestic
CO2 emissions by 2030) are well defined in the scenarios, the price of ETS allowances is
not a variable that the Commission predicts as such. The revenues from carbon pricing
are nevertheless assessed on the basis of the carbon values that underpin the mitigation
scenarios in the PRIMES model. These are not predictions of ETS carbon prices per se,
but rather model-based carbon values necessary to achieve given levels of mitigation
under the policy and techno-economic assumptions made in each scenario. Using such
carbon values and based on the profile of CO2 emissions over the transition period,
carbon revenues are projected to peak around 2035. While carbon values are projected to
increase beyond that time, the fall in CO2 emissions will quickly erode the revenue base
itself.
At their peak, revenues from carbon pricing could amount to close to 0.7% of GDP,
which is significant in relation to the total energy investment needs for the transition to
climate neutrality, and the contribution that may be required from the public sector
(Figure 111). Between 2031 and 2050, total revenues from carbon pricing, based on the
carbon values from the PRIMES model, would amount to about EUR 1 500 billion. This
compares with cumulative energy system investment needs (excluding transport) of
about EUR 13 100 billion, i.e., close to 11% of the total. Such projections are obviously
very sensitive to assumptions regarding carbon values.
Figure 111: Carbon pricing payments
0.0%
0.1%
0.2%
0.3%
0.4%
0.5%
0.6%
0.7%
0.8%
2015 2020 2025 2030 2035 2040 2045 2050
%
GDP
S1 S2 S3 LIFE
184
Source: PRIMES.
2.3. Competitiveness
2.3.1. Total energy system costs
Total energy system costs (292
) include capital costs (for energy installations such as
power plants and energy infrastructure, end-use equipment, appliances and energy related
costs of transport), energy purchase costs (fuels, electricity and heat) and direct
efficiency investment costs, the latter being also expenditures of capital nature. Capital
costs (also for the equipment that is scrapped prematurely, i.e., reflecting the costs of
stranded assets) are expressed in annuity payments, calculated on the basis of sector-
specific discount rates. For transport, only the additional capital costs for energy
purposes (additional capital costs for improving energy efficiency or for using alternative
fuels) are covered, but not other costs including the significant transport related
infrastructure costs e.g., related to rail to accommodate the increased rail capacity. Direct
efficiency investment costs include additional costs for house insulation, double/triple
glazing, control systems, energy management and for efficiency enhancing changes in
production processes not accounted for under energy capital and fuel/electricity purchase
costs. Unless specified, energy system costs do not include any disutility costs associated
with changed behaviour, nor the cost related to the auctioning of allowances that leads to
corresponding revenues that can be used in e.g., in the social climate fund. Energy
system costs are calculated ex-post after the model is solved (293
).
(292
) The model-based analysis is a technical exercise based on a number of assumptions that are shared
across scenarios. Its results do not prejudge the future design of the post-2030 policy framework.
(293
)The calculated cost is influenced by the discount rate used. The discount rate of 10% is used to reflect
in the perspective of the private investor faced with real world investment constraints. It is also applied
ex-post to calculate system costs. The value of 10% is kept constant between modelling scenarios, to
ensure comparability across scenarios. For planning investments, the model uses slightly different
discount rates that are representative of investors’ hurdles rates in the sector. A detailed explanation of
this methodology is provided in the annex of the 2016 reference projection:
https://ec.europa.eu/energy/data-analysis/energy-modelling/eu-reference-scenario-2016_en.
185
Table 34: Sectoral disaggregation of energy system costs (% difference vs. S2)
Source: PRIMES.
Total energy system costs are relatively close across scenarios. In 2031-2040 they are
2.1% lower in the S1 scenario and 1.5% higher in S3 compared with the S2 scenario. In
the residential sector, system costs are lower by 1.4% in S1 and higher by 1% in S3
compared with S2. While for the tertiary sector system costs are relatively similar across
scenarios, they are 3.1% lower in S1 and 2% higher in S3 compared with S2 in 2031-
2040. Capital costs and direct efficiency investment costs are increasing from S1 to S2
and S3 (-1.8% for S1 and +1.3% for S3 compared with S2 in 2031-2040), as higher
ambition requires investments. For the tertiary sector, higher ambition and investments
are also associated with lower energy purchases. This is illustrated by the fact that energy
purchases are higher by 0.3% in S1 vs S2 and lower by 0.5% in S3 vs S1 for this sector
in 2031-2040. For the following decade, the difference is even +0.8% and -1%
respectively for S1 and S3 vs S2. As regards LIFE, energy system costs are lower than
for the other scenarios in 2041-2050, as the increase in capital costs and direct efficiency
investment costs is more than compensated by the 5.5% decrease in energy purchases
compared with S3.
EU27
S1 vs.
S2
S3 vs.
S2
LIFE vs.
S3
S1 vs.
S2
S3 vs.
S2
LIFE vs.
S3
Total energy system costs -2.1% 1.5% -2.6% -0.8% 0.1% -4.6%
Industry -3.4% 2.3% -3.8% -1.1% 0.6% -8.7%
Tertiary -0.5% 0.5% -1.1% 0.2% -0.3% -2.7%
Residential -1.4% 1.0% -1.4% -0.6% 0.2% -2.0%
Transport -3.1% 2.0% -4.0% -1.4% -0.1% -6.0%
Capital and direct efficiency investment costs -1.8% 1.7% -2.4% -1.3% 1.2% -3.4%
Industry -3.2% 1.6% -3.5% -2.0% 0.8% -8.1%
Tertiary -2.1% 2.4% -1.9% -0.7% 1.0% -1.9%
Residential -1.9% 1.6% -1.6% -1.0% 0.9% -0.4%
Transport -1.1% 1.6% -4.0% -2.0% 2.0% -7.5%
Energy purchases -2.3% 1.3% -2.7% -0.4% -0.7% -5.5%
Industry -3.4% 2.5% -3.8% -0.8% 0.5% -8.9%
Tertiary 0.3% -0.5% -0.6% 0.8% -1.0% -3.1%
Residential -0.7% 0.3% -1.1% 0.0% -0.8% -4.3%
Transport -3.9% 2.1% -4.0% -1.0% -1.3% -5.1%
2031-2040 2041-2050
186
Figure 112: Total energy system costs as a percentage of GDP
Source: Commission based on the PRIMES model.
As a percentage of GDP, energy system costs decrease between 2030 and 2040 as GDP
growth offsets the slight increase in system costs. As a result, the percentage of system
costs over GDP decreases from 13.3% in 2030 to 11.7%-12.3% in 2040 and to 10.6% in
2050 for S1, S2 and S3 (10.4% for LIFE), as illustrated by Figure 112. In 2040, energy
system costs represent a lower share of GDP in S1 (11.7%) than in S2 (12.1%) and S3
and LIFE (12.2-12.3%). Decreasing energy purchases are the main reason for the
decrease in the share of energy system costs as a percentage of GDP.
Importantly, energy system modelling captures well the energy system costs but the costs
associated with the transition are much broader and the challenge to address them much
bigger. Rapid structural change will lead to the devaluation of equipment and other assets
of several industries notably in fossil fuels extraction and processing. It will also force
consumers to replace durable consumer goods and renovate houses more quickly.
Workers with sector specific knowledge might lose part of their investment in training
and education. These phenomena will have to be addressed by active labour market
policies with greater demand on public expenditures.
2.3.2. Energy system costs and prices for industry
Table 35 shows energy costs for industry in relative terms compared to S1. Necessary
implementation of low-carbon processes and energy efficiency improvements lead to
stronger differentiation of capital-related costs across scenarios for energy-intensive
industries in 2031-2040, with a difference of -3.4% for S1 and +1.7% for S3 compared
with S2 (respectively -2.6% and +1.4% for non-energy intensive industries). Energy
purchases increases across scenarios by 2040, with e-fuels driving the variation from S1
to S2 (-3.4% for S1 vs S2) and to S3 (+2.5% vs S2), in line with the level of
decarbonisation and their role to substitute remaining fossil fuels. The part of the energy
purchases that are linked to carbon revenues could also be channelled back toward
industry through funding mechanisms encouraging the transition.
9%
10%
11%
12%
13%
14%
2030 2035 2040 2045 2050
S1
S2
S3
LIFE
187
Table 35: Energy system costs for industry (% difference vs. S2)
Note: Energy purchases include carbon revenues.
Source: PRIMES.
Table 36 shows the evolution of the average electricity prices for industry in 2040 and
2050. They remain fairly stable on the long run and are similar across all scenarios,
reflecting the evolution of the electricity production system costs that evolve towards
lower operating costs and higher capital-related costs. Low-carbon capacities substitute
CO2-emitting assets progressively driving the system to a more capital-based structure
less exposed to fossil fuels prices.
EU27
S1 vs. S2 S3 vs. S2
LIFE vs.
S3
S1 vs. S2 S3 vs. S2
LIFE vs.
S3
Total energy system costs -3.4% 2.3% -3.8% -1.1% 0.6% -8.7%
Energy intensive industries -4.4% 2.9% -5.0% -1.3% 0.3% -11.5%
Non-energy intensive industries -1.1% 0.9% -0.9% -0.3% 1.3% -1.7%
Capital and direct efficiency investment costs -3.2% 1.6% -3.5% -2.0% 0.8% -8.1%
Energy intensive industries -3.4% 1.7% -4.5% -1.8% 0.4% -10.3%
Non-energy intensive industries -2.6% 1.4% -0.6% -2.3% 1.9% -1.9%
Energy purchases -3.4% 2.5% -3.8% -0.8% 0.5% -8.9%
Energy intensive industries -4.7% 3.3% -5.1% -1.2% 0.3% -11.9%
Non-energy intensive industries -0.8% 0.8% -1.0% 0.3% 1.1% -1.7%
2031-2040 2041-2050
188
Table 36: Average final price of electricity for industry
EUR23/MWh 2030 2040 2050
S1, S2, S3, LIFE S1, S2, S3, LIFE (S2)
Industry 133 130-131 131
Note: The electricity prices shown here reflects the evolution of the average electricity production costs to
supply industry (i.e., considering their load profile) as well as the taxes applied to the sector.
Source: PRIMES.
Figure 113: Consumption of electricity by industry
Source: PRIMES.
Figure 113 Shows also that electrification is delayed in the scenario S1 and has to
accelerate significantly in 2040-2045 to catch up with the needed level by 2050. In
scenario S1, the necessary increase of almost 20 Mtoe of electricity consumption by
industry in only 5 years between 2040 and 2045 will put the system under pressure and
will make it vulnerable to any possible delay in the deployment of some technologies
such as renewables or storage.
70
75
80
85
90
95
100
105
110
2030 2035 2040 2045 2050
Mtoe
S1
S2
S3
LIFE
189
Figure 114: Consumption of gas by industry
Source: PRIMES.
Figure 114 Shows that the increase in electricity consumption is concomitant with a swift
decrease of gas consumption in industry. This is possible thanks to the investments made
by industry in energy equipment, both in energy efficiency and in switching from fossil
fuels to electricity. The phase-out of gas is slower in S1 compared with the other
scenarios due to the lower investments made in energy equipment but catches up with the
other scenarios by 2045. In all scenarios, gas consumption is reduced to around 10 Mtoe
for all EU industry in 2050.
2.3.3. Energy system costs and prices for services
For services, total energy system costs are 0.5% lower in S1 and 0.5% higher
respectively in S1 and S3 vs S2 for the decade 2031-2040 (Table 34). On the contrary,
for the following decade 2041-2050, energy system costs are slightly higher in S1
(+0.2%) and lower in S3 (-0.3%) compared with S2. This illustrates that more ambitious
scenarios lead to lower system costs for services. LIFE shows even lower cost, 2.7% less
than in the S3 scenario in 2041-2050.
Increases in the capital-related cost in 2031-2040 are mostly related to investments to
renovate buildings, with stronger energy efficiency related renovation effort in S3 (up to
2.4% more) than in S2, and which results in lower energy purchases expenses. Indeed,
energy purchases are 0.5% lower in S3 compared with S2 in 2031-2040.
Table 37 shows the evolution of the average electricity prices for services in 2040 and
2050, which follow a similar trend as the prices for industry, remaining fairly stable on
the long run and similar across all scenarios.
0
10
20
30
40
50
60
2030 2035 2040 2045 2050
Mtoe
S1
S2
S3
LIFE
190
Table 37: Average final price of electricity for services
EUR23/MWh 2030 2040 2050
S1, S2, S3, LIFE S1, S2, S3, LIFE (S2)
Services 255 249 255
Note: The electricity prices shown here reflects the evolution of the average electricity production costs to
supply the services sector (i.e., considering its load profile) as well as the taxes applied to the sector.
Source: PRIMES.
2.3.4. Energy system costs and prices for transport
For transport too, total energy system costs are lower in S1 and higher in S3 compared to
S2, respectively 3-3.1% and +2% for the decade 2031-2040 (see Table 34). LIFE leads to
even lower system costs in 2041-2050, 6% lower than S3 in 2041-2050.
For LIFE, an increase in car occupancy due to higher use of shared mobility, as well as a
stronger modal shift from passanger cars to public transport and rail explain the lower
capital related costs in both decades in S2 and S3 compared with S1. Higher capital-
related costs in S3 in 2031-2040 translate in lower energy purchases for this scenario in
the following decade (-1.3% in S3 vs S2).
Table 38 shows the evolution of prices of electricity and gasoline for private transport in
2040 and 2050, which remaining stable on the long run.
Table 38: Energy prices for private transport in S2
EUR23/MWh 2030 2040 2050
Electricity* 226 222 225
Gasoline 215 279 280
Note: *Average final price of electricity. The electricity prices shown here reflects the evolution of the average
electricity production costs to supply the sector of private transport (i.e., considering its load profile) as well as
the taxes applied to the sector.
Source: PRIMES.
2.3.5. Costs related to mitigation of GHG emissions in the LULUCF sector
and non-CO2 GHG emissions
2.3.5.1.Sectoral mitigation costs
Table 39 provides an overview of the average annual costs in the LULUCF sector and for
non-CO2 emissions in the different scenarios. The costs are related to the implementation
of abatement technologies or nature-based removal solutions. The technical available
potential for nature-based removals and mitigation measures differs between the two
decades, leading to varying annual costs across decades, as the entire potential up to the
respective maximum carbon value is implemented.
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Table 39: Costs related to GHG emissions mitigation in LULUCF and non-CO2
Average annual costs
[EUR 2023 billion/year]
2031-2040 2041-2050 2031-2050
S1 S2 S3 S1 S2 S3 S1 S2 S3
Mitigation of LULUCF GHG
emissions
1.1 2.5 2.5 1.6 2.8 2.8 1.3 2.7 2.7
Mitigation of non-CO2 GHG
emissions
0.0 0.7 3.4 3.9 4.1 5.0 2.0 2.4 4.2
- of which in the agriculture
sector
0.0 0.4 3.2 3.8 3.9 4.8 1.9 2.2 4.0
Note: All costs are expressed in EUR2023.
Source: GLOBIOM, GAINS.
S1 does not assume specific LULUCF and non-CO2 policies in 2040, showing smaller
mitigation costs for the 2031-2040 period. Both sectors have to contribute to meeting
climate neutrality in 2050 also in that scenario, which entails some mitigation action and
associated costs in the last decade 2041-2050.
For LULUCF, additional nature-based removals such as improved forest management,
afforestation or rewetting are applied in S2 and S3 by 2040. The associated average
annual cost in these scenarios amount to EUR 2.5 billion in 2031-2040 and EUR 2.8
billion in 2041-2050.
The average annual costs associated to mitigation of non-CO2 emissions over the 2031-
2040 period are around EUR 0.7 billion per year in S2 and around EUR 3.4 billion per
year in S3. Over the 2041-2050 period, the average annual costs are higher than in the
previous decade: EUR 3.9 billion in S1, EUR 4.1 billion in S2, and EUR 5 billion in S3.
Most of the annual mitigation costs take place in the agriculture sector, which represents
the bulk of the unabated non-CO2 GHG emissions after 2030. The mitigation costs of the
sector are reflected in the macro-economic analysis presented in section 2.3.6.
2.3.5.2.The LIFE variant
The LIFE variant shows limited impacts on the agricultural sector. An analysis with the
CAPRI model shows a decrease in 2040 by -5.4% (294
) of the total revenues, most
pronounced in meat production (-12% to -20%), while other activities such as vegetables
and permanent crops benefit (+12%).
The LIFE variant demonstrates that freed up land from fodder production could be used
for additional forest management land, which may counterbalance the overall decrease
with additional income opportunities for example through other agricultural products,
carbon farming, payment for ecosystem services (PES), and other activities.
(294
)Consumer prices for products from organic agriculture are conservatively assumed to be similar to
conventional agricultural products. However lower outputs of products or higher quality of products
may lead to higher producer prices, partly buffering the losses. Also, consumers’ budgetary savings for
food, which result from changing diets, which may be reinvested into food products with higher
quality are not considered.
192
2.3.6. Sectoral output and international trade
As highlighted in section 2.4.3, the impacts of the climate and energy transition and the
2040 target need to be assessed while bearing in mind a general context that is affected
by a multiplicity of factors, including the increased share of services in mature EU
economies, digitalisation, the projected gradual decline in the EU population and the
falling share of the EU in global GDP. Abstracting from such changes, the level of
ambition in 2040 does nevertheless impact sectoral output in somewhat contrasted
manners.
As expected, a higher level of ambition is associated with a bigger decline in the output
of fossil fuel industries by 2040. Output under S3 is about 6% lower compared to S2 in
2040 (fragmented action scenario), which already entails a sharp drop in the sector’s
activity relative to current levels (Table 40). The sector’s output is higher under S1 than
S2, but only temporarily as the levels converge by 2050. The output of energy intensive
industries is also projected to be affected by a higher level of ambition. The impact under
S3 is small at -0.2% (relative to S2) in 2040 and 2050 under the fragmented action
scenario. The lower level of ambition under S1 only generates a small positive impact of
+1.4% in 2040 and +0.2% in 2050, relative to S2 (fragmented action). It must be noted
also that the output of energy intensive industries is projected to continue growing across
all scenarios in future decades. The growth rate between 2015 and 2040 is projected to
range between 25.5% and 27.6%.
It must be noted also that under the global action scenario, the output of energy intensive
industries is higher than under the lower ambition S1 scenario both for S2 and S3, with
S3 yielding only a marginally lower output level than S2. This is driven by the early
adoption of decarbonised technologies in EU industry relative to the rest of the world,
which increases its competitiveness in a setting where the rest of the world also needs to
invest in low-carbon processes. In addition, the decarbonisation of production processes
in energy-intensive industries and the associated fall in fossil fuel inputs are susceptible
to shelter EU industry from potential shocks on fossil fuel prices. They would indeed be
impacted by such shocks to a lower extent than competitors elsewhere and less advanced
in their decarbonisation process.
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Table 40: Sectoral output, deviation vs. S2 (%)
Source: JRC-GEM-E3.
Other sectors that are likely to be affected by a higher level of ambition include transport
(road, maritime and air), equipment goods and consumer goods industries, which would
be impacted by the overall decline in GDP and private consumption. Under a global
action setting, these sectors could actually be better off with a higher level of climate
ambition as global demand for equipment goods linked to decarbonisation increases and
as the EU gains competitiveness and export market shares, thereby also driving up
transport activity (S2 and S3 both have a higher level of output under a global action
setting than S1 in 2050, with S3 only marginally lower than S2). Agriculture is mildly
affected by higher levels of ambition, with output only 2% higher under S1 than under S3
in 2040, and 1% lower under S3 than under S2. In contrast, output in the forestry sector
in 2040 is significantly higher under the higher ambition scenarios than under S1 as a
result of the increased demand for biomass. By 2050, the differences are much less
significant as biomass uses tend to converge across scenarios.
In terms of output shares, it is assumed that the past trend towards a more services-
oriented economy continues in the coming decades. Output in key industrial sectors,
including energy intensive industries, is projected to grow significantly between 2015
and 2040 or 2050, and the growth rates across sectors is affected by the level of climate
ambition for 2040 only to a very limited extent, with output levels in 2040 and 2050
broadly unchanged across the three scenarios (Table 41).
2040 2050 2040 2050 2040 2050 2040 2050
Fossil fuel industries 10.2% -0.3% 15.0% 6.4% -5.6% -0.7% -5.2% -1.0%
Energy intensive industries 1.4% 0.2% -0.3% -2.3% -0.2% -0.2% -0.2% -0.3%
Transport equipment 0.7% 0.2% 0.6% -0.5% -0.5% -0.1% -0.4% -0.1%
Other equipment goods 0.5% 0.2% -1.3% -4.9% 0.2% -0.1% 0.3% -0.1%
Consumer goods industries 0.7% 0.1% -0.8% -3.6% -0.6% 0.0% -0.8% -0.1%
Transport 2.0% 0.1% 1.0% -3.1% -1.0% -0.2% -1.1% -0.1%
Construction 0.0% 0.2% 0.0% 0.3% 0.5% -0.1% 0.6% -0.1%
Market services 0.5% 0.1% 1.1% 1.5% -0.2% 0.0% -0.2% 0.0%
Non-market services 0.2% 0.0% 0.4% 0.3% -0.2% 0.0% -0.2% 0.0%
Agriculture 2.0% 0.1% 1.0% -3.1% -1.0% -0.2% -1.1% -0.1%
Forestry -10.9% -1.0% -13.1% -6.8% -0.5% -2.2% -1.4% -2.3%
Memo:
GDP 0.5% 0.1% 0.6% 0.2% -0.2% -0.1% -0.2% -0.1%
S1 fragmented S1 global S3 fragmented S3 global
194
Table 41: Sectoral output, % change vs. 2015
Source: JRC-GEM-E3.
The secular trend towards a relatively higher growth rate in services than in industry
nevertheless implies that the share of energy intensive industries, consumer goods
industries and transport equipment is projected to decline across scenarios over the
coming decades, with a corresponding increase in the share of market services. The share
of fossil fuel industries in total sectoral output would become negligible by 2040 already
across scenarios, at about 0.5% of the total (Table 42).
Table 42: Sectoral output, share of total (%)
Source: JRC-GEM-E3.
The extent to which SMEs are affected by the trends described above is in good part
determined by the sectors of activity in which SMEs are most prominent. As indicated in
Table 27 (section 2.2.3), around 66% of SMEs are active in services sectors and close to
55% of their total gross value added and employment are generated in services. Another
20% of SMEs and 16-18% of gross value added and employment are accounted for by
the construction sector. Overall, SMEs therefore seem to be well positioned to gain from
the projected continued rise in the share of market services in the economy and from a
very resilient construction sector. In contrast, a very small proportion of SMEs are
involved in fossil fuel industries, mining and extraction or energy intensive industries,
and they account for a very small share of the gross value added and employment of the
SME sector.
2030 2040 2050 2040 2050 2040 2050
Fossil fuel industries -32.9% -59.4% -73.0% -63.1% -72.9% -65.2% -73.1%
Energy intensive industries 17.6% 27.6% 39.7% 25.8% 39.4% 25.5% 39.1%
Transport equipment 15.3% 30.8% 43.3% 30.0% 43.1% 29.4% 43.0%
Other equipment goods 21.5% 38.7% 58.6% 38.0% 58.3% 38.3% 58.1%
Consumer goods industries 12.6% 21.3% 31.4% 20.4% 31.3% 19.7% 31.2%
Transport 25.7% 44.5% 68.1% 41.7% 67.9% 40.2% 67.6%
Construction 27.9% 47.9% 70.7% 47.9% 70.3% 48.7% 70.2%
Market services 22.6% 40.5% 62.6% 39.9% 62.4% 39.5% 62.4%
Non-market services 21.3% 38.3% 59.7% 38.0% 59.7% 37.8% 59.7%
Agriculture and forestry 9.7% 33.6% 47.8% 36.6% 47.4% 36.3% 46.3%
Memo:
GDP 22.8% 40.6% 62.1% 39.9% 61.9% 39.5% 61.8%
S1 S2 S3
2020 2030 2040 2050 2040 2050 2040 2050
Fossil fuel industries 1.6% 1.1% 0.6% 0.3% 0.5% 0.3% 0.5% 0.3%
Energy intensive industries 10.4% 9.7% 9.3% 8.9% 9.2% 8.9% 9.2% 8.9%
Transport equipment 3.8% 3.5% 3.5% 3.4% 3.5% 3.4% 3.5% 3.4%
Other equipment goods 6.3% 6.2% 6.3% 6.2% 6.3% 6.2% 6.3% 6.2%
Consumer goods industries 6.0% 5.7% 5.4% 5.1% 5.4% 5.1% 5.4% 5.1%
Transport 4.6% 5.1% 5.2% 5.3% 5.1% 5.3% 5.1% 5.3%
Construction 7.3% 7.2% 7.3% 7.3% 7.3% 7.3% 7.4% 7.3%
Market services 38.3% 39.3% 39.6% 39.9% 39.6% 39.9% 39.6% 39.9%
Non-market services 14.7% 15.0% 15.0% 15.1% 15.1% 15.1% 15.1% 15.1%
Agriculture and forestry 1.8% 1.7% 1.8% 1.7% 1.8% 1.7% 1.8% 1.7%
Other 5.2% 5.5% 6.0% 6.7% 6.1% 6.7% 6.1% 6.7%
S3
S1 S2
195
The impact of the scenarios on EU businesses, particularly on competitiveness, can also
be viewed through the lens of their impact on the EU’s export market shares across a
range of sectors. The EU is not only the world’s largest economy, but also the largest
trading block, with a share of around 17% of global exports currently (Table 43). Export
market shares are somewhat larger than this overall figure for energy intensive industries
and significantly larger for transport equipment and market services. Given that the EU
economy is projected to grow slower than most other large economies in the world,
mainly as a result of contrasted population trends and the maturity of its economy, the
share in global exports is set to decline in the coming decades. This pattern is unlikely to
be much affected by the degree of climate ambition by 2040 and the three main scenarios
show very similar patterns for all key sectors of the economy.
A more relevant factor concerning export market shares lies in the degree to which the
rest of the world is projected to step up efforts to mitigate greenhouse gas emissions. A
higher degree of ambition outside the EU (global action) is projected to increase the EU’s
export market shares across the board compared to a scenario with lower ambition
(fragmented action). The benefits of a “first-mover” advantage for EU exporters is
significant for most sectors, with the exception of market services, where decarbonisation
is a less relevant factor.
Table 43: EU shares in global exports (% of total)
Source: JRC-GEM-E3.
Besides affecting domestic businesses, the level of ambition for 2040 is susceptible to
affect partner countries via trade channels, as the EU is also a major importer, with a
share in world imports similar to its share in world exports of close to 18%. As is the
case on the export side, this share is set to decline in the coming decades with higher
economic growth rates elsewhere, but the EU will remain a major global trading partner,
also on account of its openness and number of free trade agreements. As is again the case
on the export side, there is very little differentiation across scenarios (level of ambition)
in terms of the absolute amounts of EU imports or their share in global imports. The
changing nature of the EU economy, however, implies that the share of the EU’s imports
in global imports could decline faster for some sectors than for others. In particular, the
EU’s share of imports of goods from energy intensive industries in world trade could
decline significantly, while its share in global imports of consumer goods and market
services could remain broadly stable. In turn, the EU’s place as an importer of agriculture
and forestry products is projected to increase in relative terms (Table 44).
As is the case on the export side, a bigger impact is projected to arise depending on
whether the rest of the world implements a higher degree of climate ambition (global
action) or not (fragmented action). Under a global action scenario, the EU’s share in
world imports is projected to be slightly higher than under a fragmented action scenario
overall, with a most significant positive impact in terms of market services. As far as
2015 2020 2030 2040 2050 2030 2040 2050
Scenario 3
All exports 17.8% 17.2% 16.8% 16.1% 15.9% 17.6% 16.6% 16.8%
Energy intensive industries 19.1% 19.7% 18.3% 17.1% 16.8% 19.8% 17.6% 17.5%
Transport equipment 28.7% 28.4% 26.4% 25.0% 24.1% 26.9% 25.0% 24.3%
Other equipment goods 22.1% 21.1% 19.2% 17.1% 16.7% 21.1% 17.8% 18.7%
Consumer goods industries 15.0% 14.1% 13.4% 12.3% 12.0% 14.1% 13.0% 13.6%
Market services 25.2% 23.9% 23.7% 22.7% 21.5% 21.4% 21.7% 19.1%
Agriculture and forestry 8.2% 7.6% 7.8% 6.7% 6.0% 9.2% 7.1% 6.3%
Fragmented Global
196
more carbon-intensive products are concerned (e.g., energy intensive industries, transport
equipment or consumer goods), the EU would account for a smaller share of global
imports under a global action scenario than under a fragmented action scenario. This is
the converse of the “first mover advantage” highlighted above, as trading partners would
be in a situation of “second mover” under a global action scenario, which would reduce
imports by the EU as domestic producers gain in terms of competitiveness.
Table 44: EU shares in global imports (% of total)
Source: JRC-GEM-E3.
The extent to which the EU’s trade partners may be affected by the transition and the
level of ambition for 2040 also depend to a significant extent on the type of goods that
the EU imports, and how this may change over time and across scenarios. Table 45
provides further detail on the projected structure of EU imports. Fossil fuels (coal, crude
oil, oil and gas) currently represent an important share of the EU’s total imports. The
share and absolute value of such imports are projected to decline sharply as the EU
decarbonises its energy system (Section 2.6.1) across all scenarios. A higher level of
ambition (S3) is associated with an even faster drop than a lower level of ambition (S1
and S2), but the trend is clear and inevitable with fossil fuel imports projected to account
for no more than 3% of the EU’s total imports by 2050 (Table 45). Although trade in the
raw materials critical for the climate and energy transition is not captured explicitly in the
JRC-GEM-E3 macro-economic model, the EU is likely to import a higher level of such
goods as the transition progresses (Section 1.9.4).
The share of imports of goods from energy intensive industries and transport equipment
in total EU imports is projected to decline across scenarios, but this is likely mostly due
to factors unrelated to the climate transition and the level of ambition for 2040, such as
the maturity of the economy and the gradual decline in the EU population in the long
term. In contrast, the share of imports of consumer goods, equipment goods, market
services and agriculture and forestry in total EU imports could increase over the coming
decades. The share of market services, in particular, could rise sharply as it offsets the
falling share of fossil fuel imports. Finally, the contrast between trends under fragmented
action vs. global action scenarios are confirmed by figures regarding sectoral shares in
EU total imports.
2015 2020 2030 2040 2050 2030 2040 2050
Scenario 3
All imports 17.6% 17.3% 16.4% 15.7% 15.4% 16.4% 15.8% 15.7%
Energy intensive industries 14.8% 14.4% 12.8% 12.0% 11.2% 12.2% 11.8% 11.0%
Transport equipment 11.2% 11.6% 10.7% 10.6% 10.1% 10.7% 10.7% 10.3%
Other equipment goods 13.4% 13.1% 12.3% 11.8% 10.9% 11.7% 11.5% 10.4%
Consumer goods industries 18.7% 18.9% 18.6% 18.5% 18.4% 18.2% 18.1% 17.3%
Market services 29.6% 31.0% 30.1% 29.6% 29.9% 31.8% 30.1% 31.4%
Agriculture and forestry 17.6% 17.3% 16.3% 18.5% 19.7% 15.5% 17.3% 17.4%
Fragmented Global
197
Table 45: Structure of EU imports (% of total)
Source: JRC-GEM-E3.
How such trends in the composition of EU imports and in the size of the EU in global
imports could affect trading partners will depend on the composition of their own exports
and the extent to which they depend on the EU as a market for their goods and services.
The JRC-GEM-E3 model cannot be the basis for a detailed assessment of how individual
countries and trade in specific commodities could be affected by the transition to climate
neutrality and the level of ambition for the 2040 target as it lacks the level of granularity
required to do so. It nevertheless provides useful indications of what could be the impact
of the transition in terms of broad trade aggregates and possible trends.
The sharp decline in fossil fuel imports over the course of the transition will affect the
Middle East most negatively, together with other major exporters of fossil fuels
elsewhere. The share of imports from the Middle East in total EU imports could fall by as
much as 2 percentage points between 2015 and 2050 under all scenarios (Table 46). This
trend could potentially be reduced if trade in RFNBOs were to pick up, though the
modelling does not suggest that the latter could compensate for the fall in exports of
fossil fuels (295
).
In contrast, the modelling indicates that Africa could benefit from an increase in the share
it represents as the place of origin for total EU imports. The increase in the continent’s
share as the origin of EU imports could be significant for primary goods, namely crops,
livestock and forestry, but the modelling shows a positive evolution for other sectors,
including energy intensive goods and market services. Overall, the rising share of Africa
in EU imports and the increase in imports over time could lead total EU imports from
Africa to more than double between 2020 and 2050.
The difference across scenarios is minimal, as the trends are driven by the overall climate
and energy transition and wider economic considerations. Similarly, the geographic
origin of EU imports does not change much between the fragmented and global action
scenarios, at last as far as total imports are concerned. This is likely linked to the fact that
(295
)This was analysed in more details in the Joint Research Centre’s Global Energy and Climate Outlook
2022: Energy trade in a decarbonised world.
2015 2020 2030 2040 2050 2030 2040 2050
Scenario 3
Coal 0.5% 0.3% 0.2% 0.0% 0.0% 0.1% 0.0% 0.0%
Crude oil 10.5% 8.7% 6.0% 2.9% 1.6% 6.7% 2.8% 1.5%
Oil 2.4% 2.5% 2.4% 1.2% 0.9% 2.0% 1.1% 0.8%
Gas 2.2% 2.6% 1.3% 0.7% 0.4% 1.4% 0.7% 0.4%
Energy intensive industries 17.5% 17.5% 16.1% 15.6% 14.5% 15.5% 15.4% 14.2%
Transport equipment 4.8% 4.9% 4.6% 4.5% 4.1% 4.6% 4.6% 4.1%
Other equipment goods 8.3% 9.1% 10.0% 11.2% 11.5% 9.5% 11.0% 11.0%
Consumer good industries 10.3% 10.5% 11.0% 11.6% 11.8% 10.7% 11.3% 10.9%
Electric goods 11.1% 11.5% 11.5% 11.6% 11.0% 11.3% 11.5% 10.9%
Market services 18.2% 19.9% 22.1% 24.0% 26.3% 23.8% 25.0% 28.5%
Agriculture and forestry 2.9% 2.8% 3.0% 3.7% 4.0% 2.8% 3.7% 4.1%
Other 11.2% 9.7% 11.8% 13.0% 13.9% 11.6% 12.9% 13.6%
Fragmented Global
198
all EU partners are required to significantly step up mitigation efforts under the global
action scenario, which means they are all similarly affected. One can notice, however,
that the share of imports from the OECD slightly increases between the fragmented and
global action scenarios, which is likely linked to their lower initial carbon intensity than
other regions, including as far as energy intensive industries are concerned.
Table 46: Origin of EU imports by main trading parterns (% of total EU imports, S3)
Source: JRC-GEM-E3.
The cost-efficient decarbonisation relies on the deployment of net-zero technologies with
varying but sufficient degree of maturity to be used on a large scale. The maturity of
technologies is an important driver of the projected portfolio of net-zero technologies. In
2015 2020 2030 2040 2050 2030 2040 2050
Total imports
Africa 6.9% 6.8% 7.5% 8.7% 10.2% 7.8% 8.7% 10.3%
China 15.2% 16.2% 17.5% 17.5% 16.4% 16.8% 17.1% 16.1%
India 3.0% 3.2% 4.3% 5.0% 5.6% 4.4% 5.0% 5.5%
Latin America 4.7% 4.4% 4.6% 4.8% 4.9% 4.7% 4.8% 4.8%
Middle East 5.4% 5.2% 4.4% 4.3% 4.3% 4.5% 4.5% 4.9%
OECD 44.2% 43.5% 42.6% 41.7% 40.6% 43.0% 42.2% 41.4%
Other Asia 9.3% 9.4% 10.4% 11.5% 12.3% 10.6% 11.6% 11.7%
Rest of Euro-Asia 11.3% 11.3% 8.6% 6.6% 5.7% 8.2% 6.1% 5.4%
Crops, livestock and forestry
Africa 18.7% 19.8% 22.1% 26.7% 30.9% 24.0% 29.9% 38.5%
China 4.4% 4.7% 5.1% 4.7% 4.3% 4.8% 4.6% 7.2%
India 2.6% 2.7% 3.5% 3.9% 4.5% 3.5% 3.1% 3.4%
Latin America 23.6% 22.7% 21.4% 19.4% 18.0% 23.4% 20.1% 17.9%
Middle East 3.3% 3.5% 3.3% 3.6% 3.5% 3.5% 4.3% 4.3%
OECD 29.6% 28.7% 28.1% 25.3% 23.4% 23.6% 22.3% 17.1%
Other Asia 6.4% 6.5% 7.0% 6.9% 6.8% 7.8% 5.7% 2.4%
Rest of Euro-Asia 11.3% 11.3% 9.6% 9.6% 8.6% 9.3% 10.0% 9.2%
Energy intensive goods
Africa 6.1% 6.5% 7.4% 8.4% 8.1% 8.2% 8.8% 8.1%
China 9.3% 9.8% 10.6% 10.6% 10.6% 9.6% 10.5% 10.3%
India 2.3% 2.4% 2.7% 2.9% 2.9% 2.5% 2.8% 2.7%
Latin America 5.5% 4.9% 5.2% 5.3% 5.5% 5.7% 5.4% 5.5%
Middle East 4.7% 4.4% 3.9% 4.0% 4.0% 3.7% 4.1% 4.1%
OECD 56.0% 55.8% 54.7% 53.2% 53.0% 59.1% 55.0% 56.1%
Other Asia 4.7% 5.1% 6.0% 7.1% 8.5% 6.5% 7.4% 8.7%
Rest of Euro-Asia 11.4% 11.2% 9.4% 8.5% 7.4% 4.7% 6.0% 4.6%
Market services
Africa 2.3% 2.5% 2.9% 3.7% 4.5% 2.5% 3.5% 4.2%
China 11.5% 12.4% 13.5% 13.2% 12.4% 14.2% 12.4% 10.6%
India 6.9% 7.0% 9.0% 9.9% 10.9% 10.6% 10.0% 11.9%
Latin America 4.2% 4.0% 4.1% 4.2% 4.2% 3.6% 4.1% 4.1%
Middle East 5.8% 5.8% 4.6% 5.0% 5.1% 6.7% 7.6% 9.1%
OECD 53.8% 52.2% 50.2% 48.0% 46.5% 46.6% 46.7% 42.6%
Other Asia 11.6% 11.8% 12.4% 12.9% 13.4% 11.1% 12.4% 14.6%
Rest of Euro-Asia 4.0% 4.3% 3.2% 3.1% 3.0% 4.8% 3.3% 2.9%
Fragmented Global
199
recent years, pressing innovation gaps have been addressed which resulted in significant
improvements of the technology readiness (296
). For the bulk of net-zero technologies
needed to reach the 2040 targets, the Technology Readiness Level (TRL) already
amounts to at least 8 (out of 9) which means that they are in an advanced deployment
stage. (297
)
DAC is at the lower end of the deployment stage having a TRL of 7. Bioenergy with
carbon capture and storage (BECCS) is the only technology that has a TRL of 5-6
(“Technology demonstrated in relevant environment”) indicating that is not fully
established. However, there are already a variety of BECCS demonstration projects in
Japan, Norway, Sweden and the United Kingdom.
Due to their relatively low maturity, DAC and BECCS come into play only between
2030 and 2040 allowing the technology to be further developed over the coming years. In
2040, DAC and BECCS is projected to capture 16 MtCO2 (S1) to 155 MtCO2 (S3)
making up around 0.3% (S1) to 3.3% (S3) of 1990 total GHG emissions. The S3 scenario
anticipates decarbonisation via DAC up to 2040.
2.4. Social impacts and just transition
2.4.1. Fuel expenses, energy and transport poverty, distributional impacts
Energy-related expenses (298
) represent a high share of total expenditure for a large
proportion of EU households, in particular middle- and low-income households. The
recent increase in energy prices has generated major negative social impacts and
increased the rates of energy (and transport) poverty. Assessing the implications of the
energy transition and the 2040 policy options on energy system costs for households is
therefore of critical importance.
The following assessment is based on model results, reflecting the current legislation and
understanding of the possible evolution of technologies and costs. This assessment will
feed into the development of the future policy framework and support measures in the
coming years to meet the 2040 target and will determine the actual costs and how they
impact individuals, regions and society.
The cost structure is characterised by an increase of capital-related costs in purchasing
more efficient appliances and investment in enhancing the energy insulation of
dwellings. This increase allows savings on energy purchases despite the assumed
increasing fossil fuels international prices over time and the impact of ETS revenues and
diffusion of new low carbon fuels.
The relative importance of energy-related cost for households in private consumption is
projected to decline in 2041-2050 compared to 2031-2040, due to the decreasing
importance of fuel purchases in all scenarios. For instance, the share of private
(296
)IEA (2023): “Net Zero Roadmap. A Global Pathway to Keep the 1.5°C Goal in Reach”
(297
)The TRL evaluation is based on the EU’s Clean Energy Technology Observatory (CETO).
(298
) The model-based analysis is a technical exercise based on a number of assumptions that are shared
across scenarios. Its results do not prejudge the future design of the post-2030 policy framework.
200
consumption dedicated to energy-related expenditures decreases from 8.1%-8.2% to
7.1% between the decades 2031-2040 and 2041-2050. Anticipated action in S3, driven by
a larger direct efficiency investments (see section 2.2), also translates in a slightly higher
share of energy-related expenses in S3 in 2031-2040, where it represents 8.2% of private
consumption as opposed to 8% in S1 and 8.1% in S2. Electricity prices are projected to
be very similar across both periods in real terms.
Table 47: Average annual energy system costs as % of private consumption and average
final price of electricity for households in the residential sector
Average across all income
categories
2031-2040 2041-2050
S1 S2 S3 LIFE S1 S2 S3 LIFE
Total (% of private consumption) 8.0% 8.1% 8.2% 8.1% 7.1% 7.1% 7.1% 7.0%
Capital related costs* 4.5% 4.6% 4.7% 4.6% 4.1% 4.1% 4.1% 4.1%
Energy purchases** 3.4% 3.5% 3.5% 3.4% 3.0% 3.0% 3.0% 2.8%
Low Income Categories S1 S2 S3 LIFE S1 S2 S3 LIFE
Total (% of private consumption) 14.0% 14.3% 14.4% 14.2% 12.0% 12.0% 12.1% 11.8%
Capital related costs 7.8% 7.9% 8.1% 7.9% 6.5% 6.5% 6.6% 6.6%
Energy purchases 6.3% 6.3% 6.3% 6.3% 5.5% 5.5% 5.4% 5.2%
Electricity price (EUR/MWh)***
Residential 288 288 288 288 289 290 290 290
Note: * includes purchase of appliances and cost of renovation. ** It does not include carbon revenues.
*** Average final price of electricity. The electricity price shown here reflects the evolution of the average
electricity production cost to supply the sector (i.e. considering its load profile) as well as the taxes applied to
the sector.
Source: PRIMES.
Figure 115: Annual fuel purchasing expenses in buildings per low-income household
Source: PRIMES model.
Figure 116 illustrates that improved insulation leads to a decrease in annual fuel
purchasing expenses, in particular for high-income households. As a result, the gap
between expenses of different types of households closes and the level of expenses is
closer for all categories in 2040 than in 2020. Low-income households have higher
annual fuel expenses than middle-income households as of 2030, due to their dwellings
1700
1750
1800
1850
1900
1950
2000
2020 2025 2030 2035 2040 2045 2050
S1
S2
S3
LIFE
201
not being as well insulated, despite significant efforts in renovation. For all households,
fuel expenses are on a downward trend as of 2025 (despite a temporary increase in 2045),
illustrating that investments in renovation of buildings pay off.
Figure 116: Annual fuel purchasing expenses in buildings in S2
Source: PRIMES model.
Following the post-COVID recovery, annual expenditures for private vehicles (299
) are
projected to increase in all scenarios by 2040, from around EUR 3770 per year per
household during 2021-2025 to around EUR 4610-4660 per year per household in the S1,
S2 and S3 scenarios and around EUR 4065 in LIFE during 2036-2040 (see Figure 117).
These changes are driven by the increase in the capital expenditures for the replacement
of the vehicle fleet, including for meeting the CO2 standards regulation. Post-2040,
households’ expenditures for private vehicles are projected to remain stable or slightly go
down. In LIFE, the annual expenditures for private vehicles are lower, mostly because of
lower activity by passenger car (expressed in passenger-km) due to modal shift to active
modes and collective transport, and because of higher use of shared mobility. Expressed
as share of private consumption, annual expenditures for private vehicles are however
projected to be stable over time until 2040 and decrease after 2040, from around 7.5-
8.5% during 2021-2025 and 2036-2040 to 6-7% during 2046-2050. This is mainly due to
the sustained increase in the private consumption over time following the post-COVID
recovery.
(299
)The annual expenditures for private vehicles cover the total expenditures to purchase vehicles as well
as the fixed operation costs (excluding taxes).
EUR2023/Household
1650
1700
1750
1800
1850
1900
1950
2000
2050
2100
2020 2025 2030 2035 2040 2045 2050
Low-income
households
Middle-
income
households
High-income
households
202
Figure 117: Annual expenditures for private vehicles per household
Note: Expenditures are expressed in EUR’2023.
Source: PRIMES.
Expenditures for transport-related energy purchases by households are projected to
reduce from around EUR 1450 per year per household during 2021-2030 (21-23% of
total transport expenditures per household) to around EUR 915-1025 per year per
household during 2036-2040 (13-15% of total transport expenditures per household) and
EUR 480-550 during 2046-2050 (around 7-9% of total transport expenditures), driven by
the use of more energy efficient vehicles and multimodality. Scenario S1 shows the
highest decrease in expenditures for energy purchases by 2040, around EUR 65 higher
per year per household than in scenario S2 and around EUR 105 higher than in scenario
S3 (see Figure 118). Expressed as share of private consumption, total annual
expenditures on energy products are projected to decrease over time (from 3.2% during
2021-2025 to 1.7-1.9% during 2036-2040 and 0.8-0.9% during 2046-2050), due to the
sustained increase in the private consumption over time.
Figure 118: Annual expenditures for transport-related energy purchases per household
Note: Expenditures are expressed in EUR’2023.
Source: PRIMES
Annual expenditures on transport services are projected to increase from EUR 830 per
3000
3200
3400
3600
3800
4000
4200
4400
4600
4800
2021-2025 2026-2030 2031-2035 2036-2040 2041-2045 2046-2050
Euro
S1
S2
S3
LIFE
400
600
800
1000
1200
1400
1600
2021-2025 2026-2030 2031-2035 2036-2040 2041-2045 2046-2050
Euro
S1
S2
S3
LIFE
203
year per household in 2021-2025 (13% of total transport expenditures per household) to
around EUR 995-1040 per year per household during 2036-2040 (14-15% of total
transport expenditures per household) and around EUR 1095-1135 during 2046-2050
(17-18% of total transport expenditures), as shown in Figure 119. This projected increase
is linked to higher use of public transport and multimodality. Expressed as share of
private consumption, total annual expenditures on transport services are however
projected to remain relatively stable over time at around 1.8-1.9% due to the sustained
increase in private consumption.
Figure 119: Annual expenditures for transport services per household
Note: Expenditures are expressed in EUR’2023.
Source: PRIMES.
The concept of transport poverty describes the situation of people who are unable to
meet the costs of private or public transport or do not have access (including availability),
especially to public transport. The co-legislators agreed on a definition of transport
poverty in the context of the Social Climate Fund (300
). No appropriate EU indicators
currently exist to regularly monitor the affordability of transport services. However,
according to the latest available data from Eurostat, 2.4 % of all people in the EU and
5.8% of those at risk of poverty cannot afford to use public transport regularly (301
). In
addition to costs, access to transport depends on other factors, including the quality and
frequency of services, the state of the infrastructure and accessibility (both digital and
physical). Due to the lack of data, it is not possible to assess the evolution of the transport
(300
) Regulation (EU) 2023/955 of the European Parliament and of the Council of 10 May 2023
establishing a Social Climate Fund and amending Regulation (EU) 2021/1060: ‘transport poverty’ means
individuals’ and households’ inability or difficulty to meet the costs of private or public transport, or their
lack of or limited access to transport needed for their access to essential socio-economic services and
activities, taking into account the national and spatial context.
(301
) Information collected ad hoc by Eurostat in 2014. New data on affordability of public transport will be
collected by Eurostat in 2024, as part of the new ad hoc module on access to services. See Commission
Implementing Regulation (EU) 2022/2498 of 9 December 2022 specifying technical items of data sets of
the sample survey in the income and living conditions domain on access to services pursuant to Regulation
(EU) 2019/1700 of the European Parliament and of the Council.
550
650
750
850
950
1050
1150
1250
2021-2025 2026-2030 2031-2035 2036-2040 2041-2045 2046-2050
Euro
S1
S2
S3
LIFE
204
poverty over time in the scenarios. It is however clear that up-to-date EU-level data on
transport affordability is needed to closely monitor developments over time.
2.4.2. Electricity prices
Low-income households are particularly vulnerable to electricity price increases. The
Commission proposal to reform the electricity market design on 14 March 2023 (302
)
aims at strengthening consumer protection, particularly for the most vulnerable
households. With this reform, consumers would be entitled to secure fixed-price
contracts, with the option of multiple or combined tailor-made contracts, as well as
access to clearer pre-contractual information.
For the most vulnerables, a supplier of last resort would be selected so that no consumer
ends up without electricity in case of supplier failure. This is complemented by an
obligation on Member States to ensure that vulnerable customers are protected from
electricity disconnections. Also, the proposal suggests allowing Member States to extend
regulated retail prices to households and SMEs in the event of a crisis. The possibility to
access renewable energy directly through participation in energy sharing arrangements
allow all consumers to benefit from renewable energy, hence being less subject to
electricity wholesale prices movements which depend on fossil fuel prices.
The Social Climate Fund (‘the Fund’) aims at addressing any social impacts that arise
from the extension of the emissions trading system to the building and road transport
sectors. This is achieved by financing temporary direct income support for vulnerable
households and supporting measures and investments that reduce emissions in the road
transport and buildings sectors. As a result, this contributes to reducing costs for
vulnerable households, micro-enterprises, and transport users.
For the transport sector, the fund grants an improved access to zero- and low-emission
mobility and transport with financial support to purchase low emission vehicles. It can
also serve to provide free access to public transport or adapted tariffs for access to public
transport.
2.4.3. Sectoral employment, skills and occupation groups
2.4.3.1.General impacts
As indicated in previous impact assessments and confirmed in Section 2.1.1, the
transition to climate neutrality is projected to have a limited impact on aggregate
employment, driven primarily by the expected impacts on GDP. However, the
consequences of the transition on workers, the labour market and skills will still be
significant. While some sectors including a large share of services activities (303
), which
represent a major share of the labour market, are likely to be affected marginally, other
sectors will undergo very significant transformations whether in terms of employment
levels or skills needs and occupations. A limited number of sectors accounting for a small
(302
) Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL
amending Regulations (EU) 2019/943 and (EU) 2019/942 as well as Directives (EU) 2018/2001 and
(EU) 2019/944 to improve the Union’s electricity market design
205
share of total employment will decline sharply, while significant employment
opportunities should emerge elsewhere.
While macro-economic models project that the transition will have a limited effect on
aggregate employment relative to a business-as-usual scenario, it is important to bear in
mind the evolving general context, and in particular demographic and technological
changes that impact the labor market independently from climate objectives and policies.
The EU’s population is projected to decline slowly from the mid-2020s onwards
alongside continued ageing. As a result, the overall employment will be on a significant
declining trend at EU level. The age dependency ratio is projected to increase from
around 55% currently to around 75% by 2050, as the population of working age (15-64)
declines by almost 13% (close to 37 million people). Other structural and technological
changes will also affect the labour market and skills demand in fundamental ways. The
rapid development and uptake of artificial intelligence could upend many services jobs
that have been so far relatively sheltered from structural changes and that represent a
large share of total employment in the EU.
In addition, it must be noted that the structure of employment in the EU has not been
static in recent years. Even looking back only about a decade and in a context of a rising
number of total jobs, significant changes have taken place in terms of employment by
economic activity, by occupation and by wage dynamics. Services (market and non-
market) activities currently represent close to 130 million jobs, or 65% of total EU
employment, up from 60% in 2008 (Table 48). Public administration, education, health
and social work account for nearly 40% of services employment.
In contrast, the share of industry and manufacturing in total employment declined by
around 2 percentage points between 2008 and 2022 (to 16% of the total), even though the
number of jobs has remained broadly stable in the past decade. Construction, architecture
and engineering are another major source of jobs in the EU at around 8% of the total,
though its share also declined by about 1 percentage point between 2008 and 2022.
Finally, agriculture, fisheries and fishing, and fossil fuel extraction and refining have
experienced a significant decline in the level and share of employment. While the share
of agriculture employment remains significant at 3.5% of the total currently, employment
in fossil fuel extraction and refining was down to about 370 000 jobs in 2022, 40% below
the level in 2008.
206
Table 48: Employment by economic activity (million people and % of total)
Source: Eurostat. (304
)
The recent trends in sectoral employment in the EU are mirrored in the evolution of
employment by occupations (Table 49), which also reflects the rising trend in tertiary
educational attainment among the population in general and among those aged 25-34 in
particular. For the latter, attainment in tertiary education rose from 23.1% of the total
population in 2002 to 42% in 2022. The increase was particularly sharp among women
with a rate of 47.6% in 2022, compared to a rate of 36.5% for men. The share of
professionals and managers in total employment increased by 4.5 percentage points in the
past decade to 26.7% of the total in 2022. This contrasts sharply with occupations whose
share in total employment declined over the same period, mainly service and sales
workers, crafts and trade, elementary occupations and agriculture, forestry and fisheries.
The absolute number of workers with these occupations has nevertheless remained
broadly stable (except skilled workers in agriculture) as total employment was on a rising
trend.
(304
)The table is based on an aggregation of NACE 2 sectors. Fossil fuel sectors (B05, B06, C19); other
mining and extraction activities (B07, B08, B09); energy intensive industries (C17, C20, C21, C23,
C24); manufacturing of transport equipment (C29, C30); manufacturing of electrical equipment and
other machinery (C27, C28); other manufacturing (all other C codes); electricity, gas, steam and air
conditioning supply (D35); construction and architecture services (F41, F42, F43, M71); transport and
storage (H49 to H53); services (all codes not listed in other sectors); water, treatment and waste (E36
to E39); agriculture, forestry and fishing (A01, A02, A03).
2010 2015 2020 2021 2022
Fossil fuel sectors 0.60 0.51 0.46 0.41 0.37
(% total) (0.3%) (0.3%) (0.2%) (0.2%) (0.2%)
Other mining and extraction activities 0.32 0.30 0.30 0.30 0.33
(% total) (0.2%) (0.2%) (0.2%) (0.2%) (0.2%)
Energy intensive industries 5.03 4.70 4.90 4.87 4.98
(% total) (2.7%) (2.5%) (2.6%) (2.5%) (2.5%)
Manufacturing of transport equipment (incl. parts and accessories) 3.44 3.84 4.15 4.05 3.84
(% total) (1.9%) (2.1%) (2.2%) (2.1%) (1.9%)
Manufacturing of electrical equipment and other machinery 3.97 4.34 4.57 4.57 4.58
(% total) (2.2%) (2.3%) (2.4%) (2.4%) (2.3%)
Other manufacturing 18.07 17.60 17.96 17.77 18.08
(% total) (9.8%) (9.5%) (9.4%) (9.2%) (9.2%)
Electricity, gas, steam and air conditioning supply 1.47 1.37 1.46 1.50 1.48
(% total) (0.8%) (0.7%) (0.8%) (0.8%) (0.7%)
Construction and architecture services 16.29 14.89 15.37 15.68 16.25
(% total) (8.9%) (8.0%) (8.0%) (8.1%) (8.2%)
Transport and storage 9.43 9.67 10.06 10.26 10.50
(% total) (5.1%) (5.2%) (5.2%) (5.3%) (5.3%)
Services 113.92 118.28 123.20 124.85 128.15
(% total) (62.0%) (63.7%) (64.2%) (64.7%) (65.0%)
Water supply, sewerage, waste management 1.37 1.47 1.61 1.62 1.64
(% total) (0.7%) (0.8%) (0.8%) (0.8%) (0.8%)
Agriculture, forestry and fishing 9.79 8.76 7.72 6.98 6.91
% total (5.3%) (4.7%) (4.0%) (3.6%) (3.5%)
207
Table 49: Employment by occupations
Source: Eurostat. (305
)
Looking forward, modelling under JRC-GEM-E3 projects that recent trends in sectoral
employment are set to continue at an accelerated pace (Table 50). These developments
will also take place in the context of a decrease in the working age population and
declining overall employment levels, contrary to what happened in the past decade when
employment was still on a rising trend. Employment in fossil fuel industries will further
decline to negligible levels from an already low level. The decline would take place
faster still under a higher level of ambition in 2040. Employment trends in energy
intensive industries and transport equipment are also projected to continue, in part as the
EU economy continues to be more services-oriented. This is a constant across scenarios
and there is little difference between S1 and the scenarios with a higher level of ambition
in 2040.
Given the scale of services employment, given that services jobs are among those more
marginally affected by the climate and energy transition and given that the long-term
trend towards a rising share of services sectors in GDP is projected to continue to some
extent, the share of market and non-market services jobs is projected to continue growing
in the coming decades. The flipside of the increase in the share of services sector jobs is a
gradual decrease in the share of employment in energy intensive industries, consumer
goods industries and transport equipment. The share of employment in other equipment
goods, however, is projected to remain stable as the transition should increase EU and
(305
)The table is based on ISCO-08 two-digit level occupations. Managers (OC1); professionals (OC2);
professional (science and engineering) (OC21); technicians (OC3); technicians (science and
engineering) (OC31); clerical support (OC4); services and sales (OC5); skilled workers in agriculture,
forestry and fisheries (OC6); crafts and trade (OC7); crafts and trade (building) (OC71); crafts and
trade (electrical and electronic) (OC74); crafts and trade (metal, machinery related) (OC72); plant and
machine operators (OC8); elementary occupations (OC9), elementary occupations (mining, constr.,
manuf. and transport) (OC93); other (OC0 and NRP).
2011 2015 2022 2011 2015 2022
Managers 9.90 9.49 9.93 5.4% 5.1% 5.0%
Professionals 30.87 33.24 42.61 16.8% 17.9% 21.6%
(Science and engineering) (5.25) (5.41) (7.00) (2.9%) (2.9%) (3.6%)
Technicians 29.27 30.76 31.46 15.9% 16.6% 16.0%
(Science and engineering) (7.33) (7.25) (6.86) (4.0%) (3.9%) (3.5%)
Clerical support 18.27 18.06 19.79 9.9% 9.7% 10.0%
Service and sales 30.77 30.93 31.29 16.8% 16.7% 15.9%
Skilled workers in agri, forest. and fish. 7.72 7.24 5.47 4.2% 3.9% 2.8%
Craft and trades 23.50 22.86 22.86 12.8% 12.3% 11.6%
(Building) (7.96) (7.40) (7.75) (4.3%) (4.0%) (3.9%)
(Electrical and eletronic) (2.89) (3.05) (3.07) (1.6%) (1.6%) (1.6%)
(Metal, machinery and related) (7.49) (7.28) (7.22) (4.1%) (3.9%) (3.7%)
Plant and machine operators 14.49 14.43 15.01 7.9% 7.8% 7.6%
Elementary occuptions 17.03 17.22 16.61 9.3% 9.3% 8.4%
(Mining, constr., manuf. and transport) (5.36) (4.91) (5.38) (2.9%) (2.6%) (2.7%)
Other 1.79 1.52 2.09 1.0% 0.8% 1.1%
Million people % of total
208
global demand for the type of equipment needed for decarbonisation. While output in
these sectors is projected to grow significantly between 2015 and 2040 or 2040, they will
be outpaced by overall GDP growth. In the context of a declining aggregate level of
employment, driven by a shrinking labour force, it is therefore not surprising to see these
sectors’ share of employment (and absolute employment) decline over the coming
decades.
In contrast, the shares of construction and transport activities are projected to increase
moderately or remain stable. Output growth in these sectors in the period 2015-2050 is
projected to outpace GDP growth, driving a reallocation of labour. These trends are not
affected to any significant extent by the level of ambition in 2040 (Table 50), but they
imply a reallocation of the labour force over time. Such a reallocation is typically not
without frictions and costs, and it would require accompanying policies to ensure that
reskilling and retraining opportunities are available for workers in need (see Annex 9).
Table 50: Sectoral employment, share in total employment (%)
Source: JRC-GEM-E3 model. (306
)
The importance of reskilling and retraining in the course of the transition is further
highlighted by projections based on the linking of the macro-economic simulation of the
3 main scenarios and the skills forecast from the European Centre for the Development
of Vocational Training (307
). These projections show that trends in the share of
employment by occupation are broadly projected to continue up to 2040, and that the 3
main scenarios are extremely similar in terms of their impacts on occupation
requirements. Two key occupational groups are projected to experience a significant
increase in their share of total employment, i.e., professionals and technicians. In the
crafts and trade group, occupations related to buildings as well as plant and machine
operators are also projected to experience an increase in employment share relative to
2022 (Figure 120). In contrast, the shares of clerical support as well as services and sales
occupations are projected to decline significantly.
(306
)The sectoral classifications resulting from the JRC-GEM-E3 modelling differ to some extent from
those based on NACE 2 sectors.
(307
)Cedefop skills forecast: green and digital transitions to have positive employment impacts.
2020 2030 2040 2050
Fossil fuel industries 0.13% 0.11% 0.05% 0.05%
Energy intensive industries 6.7% 6.5% 6.2% 5.9%
Transport equipment 2.1% 2.0% 1.9% 1.8%
Other equipment goods 6.3% 6.2% 6.1% 6.1%
Consumer goods industries 4.4% 4.2% 4.0% 3.9%
Transport 3.6% 3.9% 3.7% 3.7%
Construction 7.8% 7.6% 7.7% 7.7%
Market services 34.0% 34.6% 34.9% 35.3%
Non-market services 26.6% 27.1% 27.3% 27.5%
Agriculture 3.5% 3.2% 3.1% 2.8%
Forestry 0.4% 0.3% 0.5% 0.4%
Other 4.4% 4.3% 4.6% 5.0%
S3
209
Figure 120: Historical and projected shares of employment by occupations in 2040 (% of
total)
Source: JRC-GEM-E3 model and CEDEFOP skills forecast.
Useful as they are to assess broad economic trends and, in particular, interactions
between a range of factors and developments, macro-economic models are not in the best
position to assess the impact of transformations within sectors. A bottom-up analysis of
sectors that will be particularly relevant for the transition is therefore provided below,
linking projections from the PRIMES model and further building on the results from
JRC-GEM-E3. An assessment is provided for the automobile sector, construction and
heating systems, and the deployment of renewable power generation.
2.4.3.2.Automobile sector, construction, heating and electricity
Regulation (EU) 2023/851 amending Regulation (EU) 2019/631 imposes a ban on the
sale of new non-zero emission cars and vans in the EU from 2035 onwards. This implies
a major transformation of the automobile manufacturing sector and has implications
across the whole value chain. A version of the JRC-GEM-E3 model was augmented with
an explicit representation of vehicle manufacturing and an upgrade of the modelling of
vehicle purchase and operation, as electric vehicles (which were assumed as the zero-
tailpipe emission technology deployed) have different needs not only in terms of
manufacturing, but also operation and maintenance. On this basis, Tamba & al. find that
transport electrification alters supply chains and leads to structural shifts in employment
from traditional vehicle manufacturing towards battery production, electricity supply and
0%
5%
10%
15%
20%
25%
Oc1 Oc2 Oc3 Oc4 Oc5 Oc6 Oc7 Oc8 Oc9 Oc10 Oc11
2011 2015 2020 2022 S1 S2 S3
Oc1 Managers Oc7 Building
Oc2 Professionals Oc8 Electrical and eletronic
Oc3 Technicians Oc9 Metal, machinery and related
Oc4 Clerical support Oc10 Plant and machine operators
Oc5 Service and sales Oc11 Elementary occuptions
Oc6 Skilled workers in agri, forest. and fish.
210
related investments (308
). They find that, in the medium term, reaching a given climate
target with limited road transport electrification has negative impacts on GDP compared
to an alternative option with higher electrification as further efforts are then needed in
other sectors with potentially higher abatement costs.
Importantly, the authors find that the shift towards the production of electric vehicles
implies a small net increase in employment in the car manufacturing sector overall,
driven primarily from costs reductions over time (including learning in batteries and
lower maintenance and operation costs) leading to increases in demand for vehicles. In
turn, the net employment effect on the services side is projected to be negative due to the
lower maintenance services requirements of electric vehicles compared to internal
combustion engine ones. The batteries sector and power generation, in contrast, are
positively impacted by the electrification of road transport.
As indicated above, the share of the construction sector in total employment is projected
to remain broadly stable across all scenarios under the JRC-GEM-E3 model. A major
driving force in construction employment, which currently represents about 16 million
jobs, will be the need to achieve much higher renovation rates of the existing building
stock over the next decade to improve energy efficiency and enable the transition to
decarbonised heating systems (mainly heat pumps). The construction sector should also
benefit from the building of new green infrastructure, including in power generation and
transport. At aggregate level, the requirements for construction jobs will also be
influenced by factors that are exogenous to the climate and energy transition, mainly a
gradual decline in total population in the long term, ageing and patterns and choices in
terms of geographic spread of the population or urban densification.
A sharp increase in renovation rates in the residential sector will be unavoidable as part
of the transition to climate neutrality, regardless of the level of ambition for 2040.
Annual renovation rates in 2011-2020 were about 0.8% of the residential building stock
and were driven mainly by light renovations. Under S1, overall renovation rates are
projected to double throughout the transition period to 2050, with a particularly high
increase in medium renovations. S2 and S3 would require even higher renovation rates.
This would imply more than 4 million renovations per annum on average in 2031-2050
under the 3 main scenarios, with a significant early push under S3, delay under S1 and a
more even level of renovation across the two decades under S2 (Table 51).
What is particularly important in terms of employment is that this push in renovation is
not only large in terms of scale and compared with previous decades, but also that it is to
be sustained over several decades, starting in the current one already. This should
therefore provide job opportunities with long-term prospects for a significant number of
people. Based on an average labour intensity of 5 full-time jobs equivalent per million
euro invested in renovation (309
), the renovation drive alone could generate about 250 000
jobs over the period 2031-2050. This represents an additional 160 000 jobs compared to
(308
)Marie Tamba, Jette Krause, Matthias Weitzel, Raileanu Ioan, Louison Duboz, Monica Grosso, Toon
Vandyck, Economy-wide impacts of road transport electrification in the EU, Technological
Forecasting and Social Change, Volume 182, 2022.
(309
) This corresponds to the average number of full-time jobs equivalent per million euro of turnover in
the construction of residential and non-residential buildings in 2016-2020, as per Eurostat data.
211
the level in 2011-2020, as estimated on the basis of the same labour intensity per million
euros invested. While this remains small compared to total construction employment
(Table 48), it is nevertheless significant, and it is to be noted that this figure accounts
only for the direct employment impact, without considering further effects along the
value chain (310
). Similarly, to the investment requirements, the levels of job creation
linked to the renovation drive are highest in 2031-2040 under S3, with S2 generating a
more even impact across the two decades than S3 and S1.
Table 51: Average annual renovations in residential and tertiary sectors
Note: floor stands for floor surface and is in million m2, units in millions (residential) and thousands (tertiary).
Source: PRIMES.
Such significant needs for construction jobs will also require that training and skilling
systems are put in place to ensure the availability of workers for all necessary
occupations and at all levels of skills, including relevant craft and trades, developers and
architects/engineers. The long-term visibility afforded by the sustained requirement in the
sector should also enable the establishment of the necessary education and training
programmes for the younger segments of the population. By nature, the renovation sector
is also one where SMEs are likely to be particularly active, and where they should benefit
from business opportunities.
A similar renovation drive will be necessary in the tertiary sector, where around 90 000
units are projected to be renovated on average per annum in 2031-2050 under S1, rising
to an annual average of about 140 000 units under S3. While the number of units is much
(310
) SWD(2021) 453 final, part 1/4 provides an additional discussion of the employment impacts of
renovations, focusing on the effect of the Commission proposal for a Directive of the European
Parliament and of the Council on the energy performance of buildings (recast).
2011-
2020
2021-
2030
2031-
2040
2041-
2050
Residential
S1 units 2.0 5.0 3.7 4.5
S1 floor 137 379 286 384
S2 units 2.0 5.0 4.2 4.0
S2 floor 137 381 331 343
S3 units 2.0 5.0 5.1 3.3
S3 floor 137 380 392 282
LIFE units 2.0 5.0 4.7 4.0
LIFE floor 137 378 370 342
Tertiary
S1 units 62 155 86 149
S1 floor 24 66 41 79
S2 units 62 158 131 108
S2 floor 24 68 63 57
S3 units 62 162 187 55
S3 floor 24 69 88 30
LIFE units 62 156 165 86
LIFE floor 24 67 77 46
212
lower than in the residential sector, the floor area to be renovated is still large at around
14% of the floor area in the residential sector.
An additional driver of employment creation and skills requirement in the course of the
transition to climate neutrality relates to the decarbonisation of heating and cooling
systems, mainly via the installation of heat pumps. This should not only generate job
creation in installation and maintenance, but also in manufacturing. The deployment of
heat pumps in the residential and tertiary sectors will need to take place rapidly during
the transition to climate neutrality, at an estimated average of more than 3 million units
per annum in 2031-2050 in the residential sector and around 200 000 to 300 000 (larger
scale) units in the tertiary sector. The deployment level is similar across scenarios.
To a large extent, heat pumps will substitute other types of heating equipment that would
also require to be replaced at the end of their operational lifetime. Their installation will
therefore only impact total employment in the sector at the margin, to the extent that
installation may be more labour intensive than for other types of equipment and to the
extent that the shifting to heat pumps may anticipate the end of the operational lifetime of
the assets they replace. The impacts on the labour market would be significant, however,
as the installation levels would require skills adaptation and retraining (311
). Based on an
estimated labour intensity ratio of 1 full time job equivalent for about 36 heat pumps
installed annually (312
), around 100 000 full time installers would be required for the
time period 2031-2050.
On the manufacturing side, the Commission estimated that producing the entirety of the
heat pumps installed up to 2030 in the EU would lead to an increase of about 60 000 jobs
(313
). The projections for the needs for heat pumps beyond 2030 indicate that the ramping
up of production capacity and the associated job creation should be sustained in the long-
term.
As far as power generation is concerned, the deployment of on-shore and off-shore wind
and solar energy will rise sharply throughout the transition period to 2050. While S3
requires a faster ramp up or renewable electricity generation than S2 and S1, the three
pathways rely on similar overall annual new capacity installation. Close to GWe 100 of
net power capacity installation will be required for solar and wind energy. The
employment opportunities generated by such a level of installation are very large, both in
terms of installation and in terms of manufacturing. On the installation side, solar power
is more likely to generate business opportunities and job creation among SMEs, while the
deployment of wind turbines will be more tilted towards larger companies.
(311
)The Employment and Social Developments in Europe 2023 Annual Review (adressing labour
shortages and skills gaps in the EU) provides first estimates of the job creation potential up to 2030
related to the deployment of certain clean technologies, as well as estimates of the necessary spending
on retraining, reskilling and upskilling.
(312
)The European Heat Pump Association’s European Heat Pump Market and Statistics Report 2023
indicates that close to 3 million heat pumps were installed in the EU in 2022, with 67 000 installers
employed in the sector (a ratio of 44 to 1). Similarly, a report from the Heat Pump Association
projected the needs for heat pump installation and installers to decarbonise heating the UK up to 2035.
Their projections indicate a ratio of 28 to 1 on average for the period.
(313
) SWD(2023) 68 final.
213
On the manufacturing side, the Commission also assessed the job creation potential from
the domestic manufacturing of solar panels and wind turbines, in a 2030 horizon. While
the solar PV manufacturing industry is extremely small in the EU currently, it estimated
that around 66 000 jobs could be created in the sector if the EU were to become self-
sufficient in the production of solar PVs. Continued needs in 2031-2050 for the
installation of solar PVs at around the level needed to achieve the climate and energy
targets under the Fit-for-55 legislation indicates that domestic demand will be sustained
for an extended period of time and that employment in the sector could remain large if
production capacity is ramped up. Similarly, it was estimated that around 40 000
additional jobs would be needed to make the EU self-sufficient in the production of wind
turbines in a 2030 horizon. Given that the annual installation needs for wind power are
projected to increase by around 60% between 2021-2030 and 2031-2050, one could
foresee the creation of large additional employment opportunities in the technology in the
horizon 2050.
As indicated in the same assessment, the scaling-up of manufacturing capacities would
not only require investing capital in factories and technologies, but also to ensure that the
workforce is available and that it has the necessary type and level of skills to operate in
new sectors. The re-skilling and up-skilling investment needs, with a 2030 horizon, were
estimated at up to EUR 4.1 billion. Extending this horizon to the 2031-2050 period
would clearly also broaden the scope and the scale of skills-related investment needs, as
the range of sectors affected widens and the overall capital investment needs remain
large.
2.4.3.3.LIFE
Further labour market impacts from a higher uptake of circularity in the economy, as
explored under the LIFE setting, could also be expected, even though macro-economic
models are not well equipped to assess them. Enhanced circularity will likely entail job
creation as well as job destruction in certain sectors, together with job substitution and
redefinition. Labour market impacts can be expected to occur at three stages of the
materials cycle: (1) as materials are transformed into products, infrastructure and assets,
resource efficiency will shift the relative balance of companies’ inputs from materials to
labour; (2) while products are functional, value retention activities (repair, refurbishment,
servicing, upgrading) and use-optimisation services (product-as-a-service and sharing
models) imply job creation in proximity to where the products are consumed; and (3)
when products and assets become waste, there are generally far more jobs generated
through treatment at the higher echelons of the waste hierarchy, with one study showing
that in dealing with 10 000 tonnes of waste, 1 job is created by incineration, 36 by
recycling and between 300 and 800 by repair and re-use (314
).
The CAPRI model provides indicators on employment effects from the LIFE setting. The
results show limited labour impacts on agriculture. Total labour (in hours/ha) in the crop
sector decreases by 0.6%, characterized by a decrease in labour related to cereals (-7%)
and a slight decrease in labour on vegetables and permanent crops (-0.4%). Furthermore,
a stronger decline in labour hours in cattle activities (-25%) and other animals (-24%)
contributes to an overall reduction of total labour of 10.4% on all agricultural activities.
(314
) GAIA. Zero Waste and Economic Recovery. The Job Creation Potential of Zero Waste Solutions.
214
However, it needs to be considered that this assessment based on the CAPRI model
ignores the labour requirements for management of second-generation lignocellulosic
crops, payment for ecosystem services (PES), and carbon farming activities and it also
does not reflect the additional labour requirements from the expansion of organic
agriculture, both of which tend to alleviate the decline in agricultural labour use.
2.4.4. Changes in relative prices and distributional impacts
The transition to climate neutrality is susceptible to affect relative prices in the economy,
as consumption and production patterns change in accordance with the GHG mitigation
needs. Sections 1.1.1 and 1.1.2 assess the direct impact on households of projected
changes in fuel expenses and electricity prices. The latter will become particularly
important as household energy consumption is set to gradually shift overwhelmingly
towards electricity. To complement this analysis, the JRC-GEM-E3 model was used to
assess the potential impact on households of changes in relative prices across the
economy. A macro-economic model is indeed best suited to capture the full effects and
interactions across sectors that will affect relative prices.
Estimating changes in relative prices is a first step towards assessing the impact on
welfare for households, as the latter have very different consumption patterns depending
on their income or expenditure levels. Poorer households spend a higher share of their
disposable income on basic necessities than households with higher income, including on
energy consumption or housing and food, whose relative prices are more susceptible to
be affected by the transition to climate neutrality (Figure 121).
Figure 121: EU household mean budget shares by expenditure decile, 2015 (%)
Source: Household Budget Survey.
Overall, relative prices are projected to vary relatively little across scenarios. The relative
price of housing is nevertheless likely to be somewhat higher under S3 than under S2 in
2040, and slightly lower under S1 than under S2 as higher levels of renovation associate
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
sec1 sec2 sec3 sec4 sec5 sec6 sec7 sec8 sec9 sec10 sec11 sec12 sec13 sec14
D1 D2 D3 D4 D5 D6 D7 D8 D9 D10
sec1 Food beverages and tobacco sec8 Purchase of vehicles
sec2 Clothing and footwear sec9 Operation of personal transport equipment
sec3 Housing and water charges sec10 Transport services
sec4 Fuels and power sec11 Communication
sec5 Household equip. and operation excl heating and cooking appl.sec12 Recreational services
sec6 Heating and cooking appliances sec13 Miscellaneous goods and services
sec7 Medical care and health sec14 Education
215
with higher climate ambition increase costs for homeowners and renters alike. Similarly,
the relative price of the operation of transport equipment is projected to increase with a
higher level of mitigation in 2040. In contrast, the accelerated shift towards
electrification and renewables power generation is projected to decrease the relative
prices of fuels and power in S3 relative to S2, and increase it in S1 relative to S2 (Table
52).
Table 52: Changes in relative prices, S1 and S3 vs. S2 (% change)
Source: JRC-GEM-E3.
Linking these estimated changes in relative prices to micro-data from the household
budgetary survey, the JRC estimated distribution impacts per expenditure and income
deciles (315
). This work elaborates on what was done in the impact assessment for the
2030 Climate Target Plan and for the Council Recommendation on fair transition (316
). It
improves the previous estimation of impacts by allowing the structure of household
consumption to vary over time. Previous estimates instead used the household budgetary
survey in a fully static manner, i.e., it assumed that the expenditure structure across
income groups did not change over time, and it applied changes in relative prices across
scenarios to the (static) historical expenditure structure from the data.
(315
)The analytical tool was developed under two joint projects between the Directorate-General
Employment, Social Affairs and Inclusion and the Joint Research Centre. The two projects are:
“Assessing and monitoring employment and distributional impacts of the Green Deal (GD-AMEDI)”
and “Assessing distributional impacts of geopolitical developments and their direct and indirect socio-
economic implications, and socio-economic stress tests for future energy price scenarios (AMEDI+)”.
The projects combine macro- and micro-economic modelling approaches to enhance the
Commission’s analytical capacities for assessing and monitoring employment, social and distributional
impacts of climate and energy policies.
(316
)Council Recommendation of 16 June 2022 on ensuring a fair transition towards climate neutrality
(2022/C 243/04). See also SWD(2021) 452 final, which provides an overview and discussion of the
available analytical evidence underpinning the recommended policy interventions.
2040 2050 2040 2050
Food beverages and tobacco -0.3% 0.0% 0.2% 0.0%
Clothing and footwear -0.1% 0.0% 0.1% 0.0%
Housing and water charges -0.5% 0.0% 0.7% 0.0%
Fuels and power 0.5% 0.5% -0.9% -0.6%
Household equipment -0.2% 0.0% 0.1% 0.0%
Heating and cooking appliances -0.2% 0.0% 0.1% 0.0%
Medical care and health -0.1% 0.0% 0.1% 0.0%
Purchase of vehicles -0.2% 0.0% 0.0% -0.1%
Operation of transport equip. -0.7% 0.0% 0.5% 0.0%
Transport services -1.7% -0.1% 0.9% 0.2%
Communication 0.0% 0.0% 0.1% 0.0%
Recreational services -0.2% 0.0% 0.2% 0.0%
Miscellaneous goods and services -0.1% 0.0% 0.1% 0.0%
Education 0.0% 0.0% 0.1% 0.0%
S1 S3
216
The estimates show that lower income households will be more affected than higher
income households as the level of climate ambition rises, as measured in terms of
compensating variation, i.e., the monetary transfer that would be necessary to maintain
the same level of utility as under the previous set of relative prices. Assuming that none
of the additional revenue from carbon pricing are redistributed to households to tamper
impacts, the welfare impact of S2 would amount to about -0.8% (% of total expenditure)
for the lowest expenditure deciles, and about -0.7% for the highest expenditure decile
(Figure 122). The effects would be larger under S3 at about -1.1% and -0.9%,
respectively (Figure 123).
Figure 122: Change in relative welfare by expenditure decile, S2
Source: JRC.
Figure 123: Change in relative welfare by expenditure decile, S3
Source: JRC.
Redistributing some or all of the additional carbon revenue would sharply reduce this
negative impact on the lower expenditure deciles, and it could even reverse it if the
redistribution is targeted, e.g., to the households with expenditure levels below 60% of
the median. Even a partial (50%) redistribution of additional carbon revenue would be
sufficient to reverse the negative distributional impacts on the lowest expenditure deciles,
if it is targeted on households with income below 60% of the median. It is important to
note also that the estimates of the effectiveness of redistributing carbon revenues are
-0.9
-0.7
-0.5
-0.3
-0.1
0.1
0.3
0.5
0.7
0.9
1.1
1.3
1.5
1.7
1 2 3 4 5 6 7 8 9 10
Welfare
impact,
%
of
total
expenditure
Expenditure deciles
Share of additional carbon revenue recycled
100% 50% 0%
Via lump sum transfers to
households with expenditure
below:
Maximum (all)
Median
60% of the median
-1.2
-1.0
-0.8
-0.6
-0.4
-0.2
0.0
0.2
0.4
0.6
1 2 3 4 5 6 7 8 9 10
Welfare
impact,
%
of
total
expenditure
Expenditure deciles
Share of additional carbon revenue recycled
100% 50% 0%
Via lump sum transfers to
households with expenditure
below:
Maximum (all)
Median
60% of the median
217
based on the use of only additional carbon revenue between S2 or S3 and S1. They do
not account for full extent of carbon revenues, which would be much larger than the
additional ones given that S1 already factors in the vast majority of carbon revenues.
2.4.5. The equity dimension
According to the UNEP Gap Report 2022 (Figure 124), there are high-emitting
households in all major economies. Different levels of household GHG emissions exist
both within and between countries. The low-emitting households have relatively close
levels of emissions throughout countries, but the emission range for the top 1% emitting
households is quite broad.
Figure 124: Household GHG emissions per income category
Note: Per capita emissions include emissions from domestic consumption, public and private investments,
and imports and exports of carbon embedded in trade with the rest of the world. Households are ranked
according to total emissions and divided accordingly into groups (e.g., the bottom 50 per cent refers to the
50 per cent of households with the lowest emissions in that country or region).
Source: UNEP Gap Report 2022
2.5. Regional impacts
2.5.1. Regional exposure to climate change
For the regional impacts of climate change, we refer to Annex 7 on the cost of climate
change.
2.5.2. Regional exposure to the transition
The European Climate Law specifies that, “[when] proposing the Union 2040 climate
target in accordance with paragraph 3, the Commission shall consider […] fairness and
solidarity between and within Member States”. The macro-economic modelling work
conducted for 2030-2050 is at the EU and sectoral level (GEM-E3, E3ME, E-QUEST). It
218
does not examine the impacts at the regional level. Below, we characterise regions as
they stand today in order to anticipate their exposure to the transition. This is based on
EDGAR, regional emissions inventory which monitors the emissions of greenhouse
gases since 1990 for 26 broad sectors (317).
2.5.2.1.GHG intensity of the regions
The total emissions at the regional level (Figure 125), the emissions per capita (Figure
126) as well as the emission intensity of the regions (Figure 127) show the diversity of
circumstances in which regions are. These figures have to be interpreted carefully as
some regions with relative low emissions levels may depend on some emission intensive
industries (for example for power generation) that are located in other regions. Changes
in regional emissions may be the result of the decarbonisation of economic activities but
also of the closure, opening or relocation of activities, as well as of population
migrations. Some regions, such as the capital region of Lithuania (Sostinės regionas) and
Western Macedonia (EL), have seen their total emissions being reduced by about 70% in
the last three decades. Others, such as the Groningen (NL) and central Greece (EL)
regions, have a high emission intensity and have not yet shown a strong decarbonisation
trend in the last decades (318
).
The total emissions at regional level reflect the economic activities of the regions and the
emission intensity of these activities. For example, the regions with the highest per capita
emissions are Zeeland (NL) and Western Macedonia (Greece). In Zeeland, 60% of
emissions are caused by industry, while in Western Macedonia almost 70% of emissions
are due to electricity generation.
Figure 125: Total emissions at regional level (left) and corresponding change since 1990
(right)
(317
) Guizzardi, Diego; Pisoni, Enrico; Pagani, Federico; Crippa, Monica (2023): GHG Emissions at sub-
national level. European Commission, Joint Research Centre (JRC) [Dataset] doi:
10.2905/D67EEDA8-C03E-4421-95D0-0ADC460B9658 PID: http://data.europa.eu/89h/d67eeda8-
c03e-4421-95d0-0adc460b9658
(318
)In the case of Groningen, emissions might decrease after the permanent closure of the region’s gas
field in 2023.
219
Note: leaving out aviation and shipping.
Source: EDGAR emissions database
Figure 126: GHG emissions per capita in 2021 and change in GHG emissions per capita
between 1990 and 2021
Note: leaving out aviation and shipping.
Source: EDGAR emissions database
For 174 regions out of 242, emissions per capita (Table 53) in 2021 were above 5 tCO2-eq per
person), which is approximately the emission per capita level implied by the 2030 target.
Among the 242 NUTS2 regions, 68 regions reached emission levels below 5 tCO2-eq per
person in 2021. Decarbonization is not a linear process. For the richest western Member
States, regional emissions have mostly been declining. But for most of the countries that
accessed the EU in or after 2004, the fall in emissions in the years after the collapse of the
Soviet Union was followed by a relative stable trend or even an increase. In aggregate, out of
the 242 NUTS 2 regions, 155 experienced a downward trend in emissions per capita since
1990, 74 since 2005, eight since 2010, and three since 2015. In two Polish regions, per capita
emissions are still increasing.
Overall, between 1990 and 2021, emissions per capita in regions (see Table 53) have
decreased. For example, in Denmark, the national average was 6.9 tCO2-eq per person in
2021, with regional levels ranging from 3.2 to 13.2 tCO2-eq per person, in comparison with a
national average of 13.4 tCO2-eq per person in 1990 and regional levels between 8.8 and
21.1 tCO2-eq per person in that year. Only in Hungary the level of emission per capita in the
less emitting region has significantly increased between 1990 and 2021 (from 2.9 to 4.5
tCO2-eq per person). This is due to the installation and closure of coal fired power stations.
220
Table 53: National per capita emissions and range across regions
TCO2-EQ PER PERSON 1990 2021
Austria 10.8 (4.5 - 15.4) 9.2 (4.2 - 13.7)
Belgium 14.5 (4.4 - 20.8) 10.8 (3.9 - 15.6)
Bulgaria 11.8 (7.5 - 21.5) 8.6 (5.8 - 20.5)
Croatia 7.5 (3 - 10.2) 6.1 (3.5 - 7.9)
Cyprus 9.3 9.5
Czechia 18.9 (7.4 - 39.2) 11.3 (4 - 27.9)
Denmark 13.4 (8.8 - 21.1) 6.9 (3.2 - 13.2)
Estonia 27.2 14.8
Finland 16.9 (2.1 - 22.1) 11.6 (1 - 13.8)
France 9.6 (0.1 - 33.2) 6.3 (0.1 - 21.6)
Germany 15.5 (6.5 - 30.6) 9.3 (4.7 - 19.7)
Greece 9.6 (3.7 - 101.2) 6.7 (3.8 - 33.4)
Hungary 9.3 (2.9 - 20) 7.1 (4.5 - 11.7)
Ireland 16.5 (10.8 - 23.5) 12.4 (8.7 - 16.4)
Italy 9.3 (4.9 - 16.8) 6.6 (4.1 - 13.3)
Latvia 10.5 6.2
Lithuania 12.9 (11.9 - 15.7) 8.4 (5.2 - 9.7)
Luxembourg 33.5 14.7
Malta 7.1 4.2
Netherlands 16.3 (10.4 - 64.2) 11.1 (5.8 - 35.2)
Poland 13.6 (5.2 - 28.2) 11 (4.6 - 22.8)
Portugal 5.9 (2.1 - 24.8) 5.4 (2.5 - 15)
Romania 10.1 (5.3 - 17.1) 6.2 (2.9 - 10.4)
Slovakia 14.2 (10 - 18.9) 8.8 (6.2 - 11.6)
Slovenia 11.6 (8.4 - 14.2) 9.1 (6.4 - 11.5)
Spain 7.4 (2.8 - 35.2) 6.3 (2.3 - 16.7)
Sweden 9.2 (6.6 - 17.2) 5.8 (3.9 - 13.7)
Note: For countries with one region only, a figure instead of a range is reported.
Source: EDGAR emissions database
In 214 out of the 242 EU regions, the GHG intensity (emissions per regional economic
output) is above 0.15 (Figure 127), i.e. above the EU average that is compatible with an at
least 55% net GHG emission reduction by 2030 (319
). However, in all but eight regions
emission intensity has declined since 1990. In fact, more than half of the EU’s regions
(122 out of 242) have seen their emission intensity decrease by more than 50% since
1990, including in several regions that had a very high emission intensity such as
Świętokrzyskie (PL) and Western Macedonia (EL).
(319
)The figure of the EU average GHG intensity compatible with the 55% target depends on the
computation method and on the GDP estimates used. Other computations can give an average of 0.10
tCO2eq per 1000 euros instead of 0.15.
221
Figure 127:Emission intensity (left) and corresponding change since 1990 (right)
Note: leaving out aviation and shipping
Source: EDGAR emissions database
The exposure of regions to the transition is strongly dependent on their economic activities.
While the energy, industry, transport, building and agriculture sectors respectively represent
27, 23, 20, 14 and 11% of total EU GHG emissions (Figure 128), the distribution of sectoral
emissions in specific regions is more diverse. For example, the sector contributing the most
to GHG emissions is agriculture (39%) in the west of France, industry (33%) in Romania,
energy (34%) in most Polish regions, and transport (45%) in the north of Sweden (in the
region Mellersta Norrland).
Figure 128: Greenhouse gas emissions by sector in the EU27 and sector with the highest
contribution at the regional level in 2021
Note: leaving out aviation and shipping
Source: EDGAR emissions database(320)
Table 54 and Table 55 present the sectoral per capita emissions at the national level and
the range of these across regions in each country, in 1990 and 2021 respectively. The
(320
) Emissions data in EDGAR include CO2, CH4, N2O, F-gases.
222
national averages reflect the structure of the country’s economy. For example, emissions
in Ireland are largely driven by the agricultural sector (6 tCO2-eq per person in 1990 and
4.6 in 2021). However, the ranges across regions show the diversity within country. For
example, in France, the highest regional agricultural emissions amounted to 18 tCO2-eq
per person in 1990 and decreased to 9.5 in 2021.
For the energy and industry sectors, which have been largely covered by the EU
Emissions Trading System (EU ETS) since 2005, the decarbonisation trend is clear. In
1990 national sectoral emissions per capita were ranging from 0.8 (France) to 6.2 tCO2-
eq per person (Czechia) for the energy sector and from 0.1 (Malta) to 6.8 tCO2-eq per
person (Czechia) for the industry sector. In 2021 these emissions are lower and closer to
one another, from 0.3 tCO2-eq per person (Lithuania) to 4.3 (Estonia) for the energy
sector, and from 0.7 tCO2-eq per person (Malta) to 4.7 (Estonia) for industry. Due to the
regional concentration of some activities, disparities across a country’s regions can be
large. For example, in the Netherlands regional emissions from the energy sector range
from 0.4 – 22 tCO2-eq per person and from industry from 1.2 - 21.4 tCO2-eq per person.
Emissions from the transport and building sectors will be covered by the ETS2. To
address potential social impacts of this new instrument, the Social Climate Fund will
finance temporary direct income support for vulnerable households and support measures
and investments that reduce these emissions (see more details in the enabling framework
in Annex 9).
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Table 54: Sectoral per capita emissions and range across regions in 1990
TCO2-EQ
PER PERSON AGRICULTURE BUILDINGS ENERGY INDUSTRY TRANSPORT WASTE
Austria 1.2 (0 - 1.9) 1.8 (1.2 - 2.3) 1.9 (0.3 - 4.2) 3.2 (1.1 - 7.3) 1.8 (0.3 - 2.8) 0.8 (0.1 - 1.8)
Belgium 1.2 (0 - 4.4) 2.7 (2 - 3.2) 2.6 (0.1 - 5.3) 5.3 (1.5 - 11.7) 2 (0.5 - 6.3) 0.7 (0.3 - 2.4)
Bulgaria 1.4 (0.7 - 1.7) 0.9 (0.8 - 1) 5 (1 - 15) 2.7 (0.8 - 3.8) 0.7 (0.6 - 0.9) 1 (0.5 - 1.4)
Croatia 1 (0.1 - 1.5) 0.9 (0.5 - 1.1) 1 (0.4 - 1.5) 3.6 (1.7 - 5.4) 0.8 (0.2 - 1) 0.2 (0.2 - 0.2)
Cyprus 0.8 (0.8 – 0.8) 0.3 (0.3 – 0.3) 3 (3 – 3) 2.6 (2.6 – 2.6) 2.1 (2.1 -2.1) 0.6 (0.6 – 0.6)
Czechia 1.7 (0 - 3.8) 3 (2 - 3.3) 6.2 (1.4 - 27.4) 6.8 (3.2 - 24) 0.7 (0.2 - 1) 0.4 (0.2 - 1)
Denmark 2.4 (0.2 - 4.4) 1.7 (1.6 - 1.8) 4.9 (1.7 - 12.9) 1.9 (1.2 - 2.9) 1.9 (1 - 2.5) 0.4 (0.2 - 0.7)
Estonia 1.9 (1.9 – 1.9) 1.3 (1.3 – 1.3) 16.8 (16.8 –
16.8)
4.5 (4.5 – 4.5) 1.5 (1.5 – 1.5) 1.1 (1.1 – 1.1)
Finland 1.3 (0.3 - 2.5) 1.9 (0.1 - 2) 3.8 (0.7 - 6.2) 4.1 (0 - 6.4) 2.2 (1.2 - 3.7) 3.5 (0 - 4.6)
France 1.5 (0.1 - 18) 1.8 (0 - 2.6) 0.8 (0 - 3.3) 3 (0 - 7.4) 1.9 (0.6 - 3.6) 0.4 (0.1 - 3.6)
Germany 1.1 (0 - 4.1) 2.8 (1.8 - 3.3) 4.8 (0.4 - 17.8) 4.2 (1.6 - 9.6) 2 (0.5 - 4.4) 0.6 (0.1 - 3.2)
Greece 0.9 (0 - 2.8) 0.9 (0.6 - 1.2) 3.5 (0 - 88.6) 2.7 (1.1 - 7.4) 1.2 (0.5 - 2.5) 0.4 (0.1 - 1.1)
Hungary 1.1 (0 - 1.9) 2 (1.1 - 3) 2 (0.1 - 8.5) 2.7 (0.8 - 8.1) 0.8 (0.2 - 1.1) 0.6 (0.5 - 0.9)
Ireland 6 (2.7 - 9.7) 3.1 (2.8 - 3.6) 3.1 (0.2 - 7.7) 2.4 (1.3 - 3.1) 1.4 (1 - 1.9) 0.6 (0.3 - 1.5)
Italy 0.7 (0.1 - 1.9) 1.4 (1.3 - 1.6) 2.2 (0.1 - 6.2) 2.9 (1.3 - 6) 1.7 (0.9 - 5.6) 0.5 (0.1 - 1.5)
Latvia 2.4 (2.4 - 2.4) 1.4 (1.4 – 1.4) 3.7 (3.7 – 3.7) 1.6 (1.6 – 1.6) 1.1 (1.1 – 1.1) 0.2 (0.2 – 0.2)
Lithuania 2.4 (0.8 - 2.9) 2 (1.6 - 2.1) 3.3 (1 - 10) 3.2 (2 - 3.6) 1.5 (1.1 - 1.7) 0.4 (0.1 - 0.5)
Luxembourg 1.7 (1.7 – 1.7) 3.5 (3.5 – 3.5) 4.6 (4.6- 4.6) 16.3 (16.3 –
16.3)
7 (7 - 7) 0.3 (0.3 – 0.3)
Malta 0.3 (0.3 – 0.3) 0.3 (0.3 – 0.3) 5 (5 – 5) 0.1 (0.1 – 0.1) 1.3 (1.3 – 1.3) 0.1 (0.1 – 0.1)
Netherlands 1.5 (0.3 - 4.2) 2.6 (2.3 - 3.9) 2.9 (0.5 - 9.7) 6.3 (1.5 - 41.9) 1.8 (1.2 - 5.3) 1.2 (0.1 - 5.9)
Poland 1.3 (0.3 - 4.5) 1.5 (1.4 - 1.7) 5.9 (0.4 - 15.4) 3.9 (0.9 - 16.5) 0.5 (0.3 - 0.8) 0.5 (0.1 - 3.1)
Portugal 0.8 (0 - 4.8) 0.4 (0.3 - 0.6) 1.5 (0 - 13.7) 1.6 (0.7 - 2.9) 0.9 (0.4 - 1.9) 0.6 (0.2 - 1)
Romania 1.4 (0.1 - 1.8) 0.8 (0.5 - 0.9) 3.2 (0.3 - 11.4) 4 (1.7 - 7.1) 0.5 (0.2 - 0.6) 0.2 (0.1 - 0.3)
Slovakia 1.3 (0.4 - 1.5) 3.3 (3.2 - 3.4) 2.6 (0.5 - 3.8) 5.5 (3.1 - 9.5) 0.8 (0.7 - 0.9) 0.7 (0.2 - 1)
Slovenia 1.4 (1 - 1.7) 1 (1 - 1.1) 3.1 (1.2 - 4.7) 4.1 (3.3 - 4.8) 1.3 (1.3 - 1.4) 0.6 (0.6 - 0.6)
Spain 1 (0 - 4.1) 0.6 (0.4 - 0.7) 1.7 (0 - 11.2) 2.4 (0.8 - 20.8) 1.4 (0.7 - 3.5) 0.4 (0.1 - 1.1)
Sweden 1 (0.1 - 2.2) 1.3 (1.2 - 1.4) 1 (0 - 2.5) 2.5 (1.2 - 5.6) 2.2 (1 - 5.5) 1.2 (0.6 - 1.5)
Note: leaving out aviation and shipping
Source: EDGAR emissions database
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Table 55: Sectoral per capita emissions and range across regions in 2021
TCO2-EQ PER
PERSON AGRICULTURE BUILDINGS ENERGY INDUSTRY TRANSPORT WASTE
Austria 0.8 (0 - 1.3) 1 (0.8 - 1.2) 1.4 (0.4 - 2.2) 3.1 (1.5 - 6.3) 2.5 (0.4 - 4.3) 0.3 (0.1 - 0.6)
Belgium 0.8 (0 - 2.7) 2 (1.6 - 2.4) 1.3 (0.1 - 2.1) 4.1 (1.5 - 8.2) 2.1 (0.4 - 6.3) 0.4 (0.1 - 2.4)
Bulgaria 0.8 (0.4 - 1.4) 0.3 (0.2 - 0.3) 3.2 (0.1 - 14.3) 2 (1.1 - 3) 1.3 (1 - 1.8) 0.9 (0.4 - 1.2)
Croatia 0.7 (0 - 1.3) 0.8 (0.6 - 0.9) 0.7 (0.4 - 1) 2 (1.2 - 3) 1.5 (0.3 - 1.9) 0.4 (0.4 - 0.5)
Cyprus 0.6 (0.6 - 0.6) 0.6 (0.6 - 0.6) 3.2 (3.2 - 3.2) 2.3 (2.3 - 2.3) 2 (2 - 2) 0.8 (0.8 - 0.8)
Czechia 0.8 (0 - 1.7) 1.2 (1.1 - 1.4) 4.2 (0.8 - 19.8) 2.9 (1.5 - 6.8) 1.7 (0.4 - 2.6) 0.5 (0.1 - 1.3)
Denmark 1.8 (0.1 - 3.5) 0.6 (0.6 - 0.7) 1.2 (0.4 - 3.4) 1.3 (0.8 - 2.9) 1.7 (0.8 - 2.4) 0.2 (0.2 - 0.3)
Estonia 1.3 (1.3 - 1.3) 0.7 (0.7 - 0.7) 4.3 (4.3 - 4.3) 4.7 (4.7 - 4.7) 2 (2 - 2) 1.7 (1.7 - 1.7)
Finland 0.9 (0.1 - 1.8) 0.7 (0.1 - 0.9) 2.5 (0.5 - 4.2) 4.3 (0 - 6.3) 1.7 (0.7 - 3.2) 1.4 (0 - 2.2)
France 1.1 (0.1 - 9.5) 1.1 (0 - 1.6) 0.6 (0 - 3.4) 1.5 (0 - 3.6) 1.7 (0.5 - 3.6) 0.4 (0.1 - 1.7)
Germany 0.7 (0 - 2.4) 1.5 (1.1 - 1.7) 2.8 (0.4 - 7.7) 2.3 (0.9 - 5.6) 1.7 (0.4 - 3.8) 0.3 (0.1 - 1)
Greece 0.6 (0 - 2.2) 0.5 (0.5 - 0.6) 1.9 (0.1 - 23.3) 2 (0.8 - 4) 1.1 (0.4 - 2.8) 0.5 (0 - 1.5)
Hungary 0.8 (0 - 1.4) 1.3 (1.2 - 1.4) 1.1 (0 - 3.4) 2.2 (1.3 - 4.2) 1.4 (0.4 - 2.2) 0.2 (0.2 - 0.3)
Ireland 4.6 (2 - 7.7) 1.7 (1.7 - 1.7) 1.9 (0.8 - 3.3) 1.9 (1.6 - 2.1) 2 (1.4 - 2.8) 0.2 (0.2 - 0.4)
Italy 0.6 (0.1 - 1.7) 1.2 (1.2 - 1.4) 1.6 (0.3 - 5.2) 1.4 (0.8 - 2.4) 1.5 (0.9 - 4.8) 0.3 (0.1 - 0.9)
Latvia 1.3 (1.3 - 1.3) 0.7 (0.7 - 0.7) 0.9 (0.9 - 0.9) 1.3 (1.3 - 1.3) 1.5 (1.5 - 1.5) 0.4 (0.4 - 0.4)
Lithuania 1.5 (0.5 - 1.9) 0.6 (0.5 - 0.6) 0.3 (0.1 - 1) 3.2 (1.6 - 3.9) 2.2 (1.3 - 2.6) 0.5 (0.2 - 0.6)
Luxembourg 1 (1 - 1) 2.4 (2.4 - 2.4) 0.4 (0.4 - 0.4) 2.5 (2.5 - 2.5) 8.3 (8.3 - 8.3) 0.1 (0.1 - 0.1)
Malta 0.1 (0.1 - 0.1) 0.2 (0.2 - 0.2) 1.6 (1.6 - 1.6) 0.7 (0.7 - 0.7) 1.3 (1.3 - 1.3) 0.2 (0.2 - 0.2)
Netherlands 1 (0.2 - 2.9) 1.6 (1.5 - 2.3) 2.7 (0.4 - 22) 3.9 (1.2 - 21.4) 1.6 (1 - 2.8) 0.3 (0.1 - 1.2)
Poland 1 (0.2 - 3.3) 1.4 (1.2 - 1.6) 3.8 (0.5 - 12) 2.8 (1.3 - 6.1) 1.7 (1 - 2.6) 0.2 (0.1 - 0.8)
Portugal 0.7 (0 - 5) 0.4 (0.3 - 0.5) 0.9 (0 - 2.1) 1.6 (0.9 - 3.3) 1.4 (0.5 - 3.2) 0.5 (0.2 - 0.9)
Romania 0.9 (0.1 - 1.1) 0.7 (0.6 - 1) 1.2 (0.1 - 5.7) 2.1 (0.9 - 3.3) 1 (0.3 - 1.3) 0.4 (0.2 - 0.9)
Slovakia 0.5 (0.2 - 0.6) 1 (1 - 1) 1.2 (0.2 - 1.7) 4 (1.9 - 6.8) 1.5 (1.1 - 1.8) 0.6 (0.2 - 0.9)
Slovenia 1 (0.7 - 1.3) 0.6 (0.6 - 0.6) 1.8 (0.5 - 2.9) 3.1 (2.3 - 3.7) 2.4 (2.1 - 2.6) 0.3 (0.3 - 0.3)
Spain 0.9 (0 - 4.4) 0.6 (0.5 - 0.8) 1 (0.1 - 3.9) 1.6 (0.7 - 8.3) 1.6 (0.7 - 4.4) 0.5 (0.1 - 1.6)
Sweden 0.7 (0.1 - 1.6) 0.3 (0.2 - 0.4) 0.8 (0.1 - 2.6) 1.9 (1.2 - 4.6) 1.4 (0.5 - 4.1) 0.8 (0.7 - 1.5)
Note: leaving out aviation and shipping.
Source: EDGAR emissions database
2.5.2.2. Regional dependency to sectors that will need to transform
Regions with a relatively high share of employment in sectors significantly impacted by
the transition are more exposed to the transition. This includes the regions with a high
share of employment in sectors which are being phased out in several countries (mining
of coal,lignite and oil shale; extraction of crude petroleum, natural gas and peat; and
refining of petroleum products),, in energy intensive sectors, as these will have to
produce the same goods differently (manufacturing of chemicals and chemical products,
manufacturing of other non-metallic mineral products, manufacturing of basic metals),
225
and in sectors that will have to produce different goods (manufacturing of motor
vehicles, trailers and semi-trailers) (321
).
In 2020, only two EU regions (NUTS-2 level) had employment shares of more than 1%
in terms of direct employment in coal and lignite mining, crude petroleum and natural
gas extraction. The region with the highest employment share (3.67%) in these sectors is
Śląskie/Silesia, in Poland due to its relatively high activity in coal and lignite mining.
The other region is Sud-Vest Oltenia in Romania where the mining and fossil fuel
extraction sectors employ 1.12% of the work force. The local impact on regions reliant
on these sectors is significant as those sectors have a central role in local economies,
driving indirect employment as well. Therefore, the employment and social
consequences of the decline in extraction activities needs to be mitigated, in line with the
European Green Deal’s objective to leave no region behind (see Annex 9).
When considering the energy intensive industries or industries that will have to produce
different goods (e.g., automobile sector), it becomes apparent that more regions will be
affected. Out of the EU’s 27 member states, 23 have regions where more than 1% of the
working population was employed in 2020 in such a sector. The regions with the highest
exposures in 2020 were Śląskie (PL) (10.2%), Közép-Dunántúl (HU) (9.6%) and Střední
Čechy (SK) (9.40%). The regions with a relative high employment in carbon intensive
manufacturing are also significantly exposed to the transition. For example, for the
territories involved in the automobile sector, the move to the manufacturing of electricity
vehicles will require companies from the supply chain to adjust their business models.
The development of an industrial carbon management system will require the
development of a full supply chain and of the necessary infrastructure to link CO2
emitting energy supply and industrial sites to carbon storage or usage sites (notably to
produce e-fuels). The territories with strong presence of energy intensive industries (e.g.,
cement production, chemicals industries, etc) will have to anticipate and develop the
corresponding capacities.
(321
) See also OECD (2023), Regional Industrial Transitions to Climate Neutrality, OECD Regional
Development Studies, OECD Publishing, Paris.
226
Figure 129: Share of employment in sectors most negatively impacted
(a) Regional exposure to sectors expected
to decline
Share of total employment in mining of coal and lignite
(B06) and extraction of crude petroleum and natural gas
(B07) in 2020
(b) Regional exposure to energy intensive
sectors
Share of total employment paper and paper
products (C17), coke and refined petroleum
products (C19), chemicals and chemical products
(C20), other non-metallic mineral products (C23) and
basic metals (C24) in 2020
(c) Regional exposure to sectors that will
have to produce the same goods
differently
Share of total employment in motor vehicles, trailers and
semi-trailers (C29) in 2020
Source: Eurostat structural business statistics and labour force survey
The transition is also an opportunity for new activities or sectors to develop. For
example, while Sweden’s Upper Norrland and Middle Norrland regions have a relatively
high share of employment in carbon-intensive manufacturing sector, they are also areas
where the technical potential for electricity from renewable was more than 100TWh
227
higher than the actual demand in 2019 (see Figure 130). The untapped potential for
electricity production from renewable energy technologies is mostly in rural areas. The
Member States with the highest absolute green hydrogen potential are Spain (1388 of
excess TWh), France (917), Romania (493) and Poland (456). The three EU regions with
the highest absolute potential are all located in Spain: Castilla y León (488), Castilla-La
Mancha (366), and Aragón (263). (322
)
Figure 130: Untapped potential for electricity production from solar and wind in 2019 (left)
and present-day annual hydrogen production (right) in EU regions.
Source: Data from Kakoulaki et al., 2021. Green hydrogen in Europe – A regional assessment: Substituting
existing production with electrolysis powered by renewables, Energy Conversion and Management 228 (2021)
113649
The potential contribution of the various economic sectors to EU net emission reduction
(Figure 131) suggests that rural areas can significantly contribute to emission reductions,
for example by carbon sequestration in agriculture. Nature-based removals activities like
afforestation and nature restoration may spur investment and economic activity in these
areas.
(322) According to Kakoulaki et al. (2021), the technical potential for wind and solar for the EU
amounts to 9040 TWh, which is 6441TWh more than the current demand. 10% of this excess (i.e., 644
MWh) is in coal regions in transition with hydrogen infrastructures.
228
Figure 131: Potential contribution of the various economic sectors to the EU emission
reductions
Source: Global outlook based on the IPCC migitation report (323)
Contrary to coal mining, the mining of elements that are useful for the low-carbon transition
(e.g. lithium used for batteries) is a growing sector. Many of the EU’s regions have a
history of raw materials extraction. The possibility to use former mining sites for the
extraction or treatment of elements needed for the decarbonisation is worth being
examined. It has the potential to create economic value and employment in historical
mining regions, which are often declining as a consequence of deindustrialisation. This
may be particularly the case for regions with deposits of high-volume commodities such
as iron and copper, given these typically co-occur with critical raw materials (324
).
Several regions who are not former coal mining regions are considering new mining
activities (e.g., Norte in Portugal).
A downside of the mining of critical raw materials is that it is highly capital intensive
and account for a relatively small share of employment in the countries. It also imposes
environmental costs (325
).
The innovation capacities, the level of instruction, and the quality of infrastructure are
examples of parameters that contribute to the preparedness of the regions for the
transition. Regarding innovation, the ten regions that have contributed the most to the
(323
)IPCC. Climate Change 2022. Mitigation of Climate Change. Working Group III contribution to the
Sixth Assessment Report of the Intergovernmental Panel on Climate Change. 2022
(324
)Proposal for a Regulation of the European Parliament and of the Council establishing a framework for
ensuring a secure and sustainable supply of critical raw materials and amending Regulations (EU)
168/2013, (EU) 2018/858, 2018/1724 and (EU) 2019/1020. Impact Assessment Report accompanying
the document: SWD(2023) 161 final.
(325
)IRENA and ILO (2022), Renewable energy and jobs: Annual review 2022, International Renewable
Energy Agency, Abu Dhabi and International Labour Organization, Geneva.
229
total number of patent application to the European Patent Office in the fields of climate
change, environment, resource efficiency and materials over the period 2000-2018 are Île
de France (FR), Cataluña (ES), Andalucía (ES), Comunidad de Madrid (ES), Lombardia
(IT), Lazio (IT), Oberbayern (DE), Hovedstaden (DE), Zuid-Holland (NL), and Helsinki-
Uusimaa (FI) (326
). The study by Maucorps et al. (2022) (327
) provides indicators of the
regional readiness for the green transition (Figure 132). The best prepared regions are
mainly metropolitan regions specialised in knowledge-intensive services while rural ones
have lower growth potential. In regions such as Madrid (ES) and Attica (EL), a high
potential for economic growth might be further increased by the green transition while in
others such as Sicilia (IT) or Bourgogne (FR) an already low potential for economic
growth might be further reduced by the green transition.
Figure 132: Regional readiness for the green transition and correlation with growth
potential
Source: Bertelsmann Stiftung
The climate transition will have heterogenous consequences for the EU’s regions. It will
both lead to new challenges and opportunities. For instance, the few EU regions
significantly exposed to declining sectors and the more numerous regions which rely on
energy intensive industries and sectors affected most by the transition will likely be more
negatively impacted by the transition. In such regions and territories, the employees from
these sectors will have a higher need of reskilling. On the other hand, regions will be able
to take advantage of new opportunities offered by the transition. This is particularly the
case for regions with higher levels of innovation capacities, which are likely to profit
more from the transition than their less-innovative peers. But also, the numerous EU
regions with an excess of RES electricity potential can benefit from the transition, for
example by developing green hydrogen production. While some extractive facilities have
(326
)Science, Research and Innovation Performance of the EU, 2022 (SRIP) – Publications Office of the
EU.
(327) Maucorps, Ambre, R. Römisch, T. Schwab, N. Vujanovic, (2022). The Future of EU Cohesion.
Effects of the Twin Transition on Disparities across European Region, Bertelsmann foundation.
230
to close, others can be developed for the mining of critical raw materials. The transition
to a low carbon economy might widen disparities between regions (328
). Other EU
policies such as the cohesion policy play an important role to address this. Annex 9
provides examples of EU and national measures and programmes that can support
regions for the transition.
2.6. Energy security
2.6.1. Strategic independence and fuel imports – energy security (329
)
Imports of fossil fuels have historically weighed heavily on the EU’s trade balance. On
average in 2000-2021, gross imports of fossil fuels represented about 20% of total
merchandise imports, equivalent to 2.8% of GDP. With the surge in energy prices in
2022, gross fossil fuel imports rose to more than EUR 800 billion, equivalent to 5.1% of
GDP and 26.9% of merchandise imports, the highest level in the past two decades
relative to GDP. On a net basis (imports minus exports), fossil fuel imports represented
EUR 640 billion in 2022 or 4.1% of GDP, compared to an average of 2.2% of GDP in
2000-2021 (Figure 133).
Figure 133: Net fossil fuel imports, 2000-2022
Based on Eurostat’s trade data for CN code 27, with the exclusion of codes 2712, 2714, 2715 and 2716.
Source: Eurostat.
Figure 134 shows the monetary value of fossil fuels imports in the EU by 2050. Imports
decrease significantly in volume between 2020 and 2030 (see Section 1.2) and the import
bill is projected to decrease by almost 20% by 2030. This result depends on the assumed
trajectories for fossil fuel prices (see Annex 6). These trajectories are input to the
PRIMES energy model and significant uncertainties exists on the long-term evolution of
fossil fuel prices.
(328
)Santos A., J. Barbero, S. Salotti, O. Diukanova and D. Pontikakis. On the road to regional
‘Competitive Environmental Sustainability’: the role of the European structural funds, Industry and
Innovation, 30:7, 801-823, 2023. DOI: 10.1080/13662716.2023.2236048
(329
) The model-based analysis is a technical exercise based on a number of assumptions that are shared
across scenarios. Its results do not prejudge the future design of the post-2030 policy framework.
0%
1%
2%
3%
4%
5%
0
100
200
300
400
500
600
700
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
%
GDP
Billion
EUR
Billion EUR % GDP
231
With the assumptions used, by 2040, the fossil fuel import bill will be 50% to 63% lower
than in 2020 depending on scenarios. Decarbonisation of the energy system will save
Europe approximately 1.3 trillion € in the 2031 – 2040 decade compared to 2021 – 2030.
With the current assumptions about economic growth, fossil fuels import will decrease
from 2.75% of GDP in 2020 to 1.9% in 2030 and to 1% in 2040. This will greatly reduce
the economic impact of eventual disruption in fossil fuels supply.
By 2050, imports are dominated by the fossil fuel used for non-energy purposes and are
almost 80% lower than in 2020 with very small differences across scenarios.
Figure 134: Annual fossil fuels imports
Source: PRIMES.
While the role of fossil fuels will decline, other dependencies will emerge in the coming
decades. Imports of biomass are set to double from approximately 6 Mtoe in 2019 to 12
Mtoe in 2040. While non-existent today, imports of hydrogen and RFNBOs will also
become significant reaching approximately 20 Mtoe in 2040 with negligible differences
across scenarios. However, these imports will be small compared to the approximately
900 Mtoe of fossil fuels imported in 2019.
Other relevant dependencies that might emerge are those related to the raw materials
needed for decarbonisation technologies. However, the economic consequences of these
import will most likely be very different. The risks of import dependency do not depend
only their share, but also on other parameters such as market concentration and
substitution possibilities. Moreover, the economic implications of scarcity would be very
different when dealing with a fuel or a component of specific equipment. Finally, the risk
of dependency depends on the possibility to maintain strategic reserves and the cost of
storing raw materials varies greatly. The sudden increase in the cost of a raw material
used in manufacturing will not have the same macroeconomic impact as the recent stop
of gas imports from Russia.
The high decarbonization levels and the corresponding high demand for deployment of
renewables, storage and novel technologies may create new dependencies for raw
materials or technology imports from other countries. This highlights the role for the
Critical Raw Material Act, and the Net Zero Industry Act. The options with a less steeply
increasing demand for renewables and novel technologies (e.g., S1) show a lower supply
chain and dependence challenges than the higher ambition scenarios (e.g., S3).
0
50
100
150
200
250
300
350
400
S2 S2 S1 S2 S3 LIFE S1 S2 S3 LIFE
20202030 2040 2050
Billion
EUR
Solid fossil fuels
Natural gas
Crude Oil and
Petroleum
Products
232
2.6.2. Vulnerability to external shocks
Fossil fuel price shocks, particularly for crude oil, have affected the EU and world
economy numerous times over the past 50 years or so. Crude oil prices were multiplied
by a factor of around 10 within about a year following the first Arab oil embargo in the
early 1970s. The Iranian revolution and the onset of the Iran-Iraq war led to another
tripling of crude oil prices within a year at the end of the 1970s. Further shocks and high
volatility in crudel oil prices have continued ever since, with the Gulf War, the global
financial crisis and shifts in policy from the Organization of the Petroleum Exporting
Countries (Figure 135). While natural gas (in the EU) and coal prices remained more
stable for several decades, they have also become more volatile. These past shocks and
the most recent one triggered by the Russian war of aggression in Ukraine have
generated large negative economic impacts at the global and EU level, alongside social
hardship and a significant redistribution of wealth across countries.
Figure 135: Monthly fossil fuel prices (US$, 1960-October 2023)
Source: World Bank Commodity Price Data.
As a major net fossil fuel importer, the EU has been particularly vulnerable to such price
shocks. Reducing the dependency on imported fossil fuels would therefore bring clear
socio-economic benefits via improved resilience and strategic autonomy. The JRC-GEM-
E3 model was used to quantify the benefits of the transition to climate neutrality on key
macro-economic variables. The model assessed the impacts of a doubling of fossil fuel
prices (oil, coal and gas) at global level. Some geographic differentiation was integrated
into the simulation, as domestic prices in energy-exporting countries were less affected
than in net importing countries (including the EU). In one set of simulations, spillovers to
electricity prices were not considered, while in the other set of simulations spillovers
were integrated for Europe only.
The model simulated the impacts of these two sets of stylised shocks, should they occur
in 2025 or in 2040. The JRC-GEM-E3 model mirrors the structure of the energy system
as represented in the PRIMES scenarios, which means that a high degree of
decarbonisation is achieved in 2040, but also that the EU economy has reduced its
reliance on fossil fuels to a significant extent in 2025 compared to the 1990s. The impact
of a given shock on the 2025 economy would therefore already be significantly lower
than the impact on the 1990 economy.
0
50
100
150
200
250
300
350
400
450
500
0
20
40
60
80
100
120
140
1960M01
1962M01
1964M01
1966M01
1968M01
1970M01
1972M01
1974M01
1976M01
1978M01
1980M01
1982M01
1984M01
1986M01
1988M01
1990M01
1992M01
1994M01
1996M01
1998M01
2000M01
2002M01
2004M01
2006M01
2008M01
2010M01
2012M01
2014M01
2016M01
2018M01
2020M01
2022M01
Crude oil ($/bbl) Natural gas, Europe ($/mmbtu) Coal, Australian ($mt) (RHS)
233
Table 56 indicates that a doubling of fossil fuel prices in 2025, without spillovers to
electricity prices, would generate a negative shock of about 0.8% on GDP, 2.6% on
private consumption and 1.1% on employment, with an associated increase of 3.0% in
inflation. The same shock in 2040, with the associated progress towards the
decarbonisation of the energy system, would halve the negative impacts on the same
broad macro-economic aggregates.
Table 56: Macroeconomic impacts of energy price shocks (deviation from baseline)
Source: JRC-GEM-E3
It must be noted that the one-year GDP impact in 2040 of such a shock is significantly
larger than the impact of increasing climate ambition from the level under S2 to that
under S3, and that the same shock in 2025 would generate twice that impact on GDP.
Similarly, the negative impact on private consumption from a fossil fuel price shock is
much larger (both under the 2025 and under the 2040 setting) than the negative impact
resulting from an increase in ambition from S2 to S3 (up to -2.2% for the fossil fuel price
shock in 2040 compared to -0.5% for the impact of increasing ambition from S2 to S3).
In addition, a closer look at the dissemination channels of a global fossil fuel price shock
shows that the EU’s lead in decarbonising its economy entails competitiveness gains
when/if such shocks arise. A global shock would indeed negatively affect not only the
EU economy, but also the global economy and the EU’s main trading partners. As a
result, the size of the EU’s export market would be negatively affected, yet the
simulation shows that EU exports would increase overall and that the output of energy-
intensive industries would increase somewhat (fossil fuel price shock only). The driving
force behind this is the more advanced stage of decarbonisation of the EU economy
relative to the rest of the world and hence its reduced vulnerability to increases in fossil
fuel prices. EU companies would therefore be in a position to gain export market shares
via increased competitiveness, while also gaining shares in the domestic market, to the
detriment of imported goods. Decarbonisation therefore reduces the EU’s vulnerability to
fossil price shocks via two key channels: (1) a lower dependency on fossil fuels overall;
and (2) a reduction in the negative impact of a fall in global GDP.
Integrating the effects of spillovers to electricity prices in the EU makes the impacts
described above somewhat larger, but the main finding that a higher degree of
decarbonisation of the energy system in 2040 than in 2025 shelters the EU economy
2025 2040 2025 2040
GDP -0.8% -0.4% -1.5% -1.0%
Private consumption -2.6% -1.2% -3.7% -2.2%
Exports 0.9% 0.4% 0.5% -0.2%
Imports -2.4% -1.2% -3.0% -1.9%
Employment -1.1% -0.5% -2.3% -1.6%
Consumer prices 3.0% 2.0% 3.9% 2.9%
Sectoral output
Energy intensive industries 0.4% 0.2% -1.3% -1.8%
Consumer good manufacturing -0.5% -0.5% -1.1% -1.1%
Construction -0.4% -0.2% -0.8% -0.7%
Transport -1.1% -0.1% -1.7% -1.2%
Market services -1.1% -0.6% -1.6% -1.0%
Fossil only Fossil + elec
234
remains. Further simulations were done to assess the impact of a fossil fuel price shock in
2040 under three main scenarios. The difference between scenarios for the variables
listed in Table 56 is small, but a higher level of ambition is nevertheless associated with a
smaller impact of a fossil fuel price shock on GDP, private consumption, employment
and consumer prices. For energy intensive industries, the positive impact of a higher
ambition is more significant in terms of output as they gain further protection under S2
and S3 in case of fossil fuel price shock than under S1.
These modelling results should also be seen in the context of the support that Member
States have provided to households and businesses to shelter them from the impact of the
recent surge in energy prices following Russia’s war of aggressionin Ukraine. In
response to the crisis, and to foster support measures in sectors which are key for the
transition to a net-zero economy, the Commission adopted in March 2023 the Temporary
Crisis and Transition Framework (TCTF), as subsequently amended. The TCTF replaces
the former Temporary Crisis Framework (TCF) which was adopted in March 2022. The
TCTF facilitates, on a temporary basis, the granting of the following types of aid:
(1) limited aid amounts to companies affected by the crisis; (2) liquidity support in the
form of subsidised loans or State guarantees; (3) aid to compensate for exceptionally high
energy prices; (4) investment aid for accelerating the rollout of renewable energy, (5) aid
for the decarbonisation of industrial production processes, (6) aid for the reduction of
electricity consumption, and (7) aid for accelerated investments in sectors strategic for
the transition towards a net-zero economy.
As of 23 January 2024, the Commission had issued 431 decisions approving 334 national
measures for a cumulative of amount of aid of EUR 777 billion. All Member States
notified schemes under the TCTF. Although aid amounts approved are not evenly
distributed among Member States, this may be due to a number of reasons, including that
aid amounts approved do not equate to aid actually granted or disbursed. Based on a
survey of Member States, the Commission estimates that approximately EUR 141 billion
of aid was actually granted to companies, representing 19.3% of the aid approved by the
end of June 2023 and corresponding to 0.6% of the EU27 GDP in 2022 and first half of
2023.
235
TABLE OF FIGURES
Figure 1: Domestic Gross GHG emissions ....................................................................... 7
Figure 2: Carbon removals by source and use.................................................................. 10
Figure 3: Industrial carbon removals in PRIMES and POTEnCIA in 2040 .................... 12
Figure 4: Net and Gross GHG Emissions and % reductions vs 1990 .............................. 13
Figure 5: Economy-wide GHG emission pathways......................................................... 15
Figure 6: Energy and Industry net CO2 emissions........................................................... 16
Figure 7: Energy and Industry CO2 emissions in 2040 ................................................... 18
Figure 8: Total (left) and additional (right) carbon captured yearly in selected years..... 19
Figure 9: Carbon captured by source................................................................................ 21
Figure 10: Carbon Captured by end application............................................................... 22
Figure 11: Flow of captured carbon in 2040 .................................................................... 23
Figure 12: Evolution of non-CO2 greenhouse gas emissions by sector........................... 25
Figure 13: Evolution of non-CO2 greenhouse gas emissions by gas............................... 25
Figure 14: Gross Available Energy by energy vector, 2015-2050................................... 27
Figure 15: Net imports by energy vector, 2015-2050 ...................................................... 28
Figure 16: Import dependence.......................................................................................... 29
Figure 17: Total Gross Available Energy from different energy models, 2019-2050 ..... 30
Figure 18: Final electricity consumption by end-use sector............................................. 31
Figure 19: Electricity generation by energy carrier, 2015-2050 ...................................... 32
Figure 20: Electricity generation from renewables, 2015-2050....................................... 33
Figure 21: Net installed capacity by energy carrier, 2015-2050 ...................................... 34
Figure 22: Net installed renewable capacity, 2015-2050................................................. 35
Figure 23: Net installed storage and new fuels production capacity, 2015-2050 ............ 35
Figure 24: Stored energy by technology, 2015-2050....................................................... 36
Figure 25: Share of renewables in gross electricity generation, 2019-2050 .................... 37
Figure 26: Gross electricity generation in different energy models, 2019-2050.............. 38
Figure 27: Average annual deployment of wind and PV ................................................. 38
Figure 28: Average change in renewable power generation ............................................ 39
Figure 29: Consumption of gaseous fuels in the gas network, 2040-2050 ...................... 40
Figure 30: Consumption of gaseous fuels by sector, 2040-2050 ..................................... 40
Figure 31: Consumption of hydrogen by sector, 2040-2050............................................ 42
Figure 32: Final Energy Consumption by fuel, 2015-2050.............................................. 42
Figure 33: Share of electricity (left) and RFNBOs (right) in FEC, 2019-2050 ............... 44
Figure 34: FEC by sector, 2015-2050 .............................................................................. 45
Figure 35: Total FEC from different energy models, 2019-2050 .................................... 46
Figure 36: Domestic energy-related CO2 emissions by sector, 2015-2050...................... 47
Figure 37: Comparison of domestic energy-related CO2 emissions, 2021-2050 ............ 47
Figure 38: FEC in the residential sector by energy service, 2015-2050 .......................... 50
Figure 39: FEC in the services sector by energy service, 2015-2050 .............................. 51
Figure 40: Renovation rates in the residential and services sectors, 2020-2050.............. 52
Figure 41: Average useful energy for space heating (S3) ................................................ 53
Figure 42: FEC in the residential sector, 2015-2050........................................................ 54
Figure 43: FEC in the services sector, 2015-2050 ........................................................... 54
Figure 44: Stock of heat pumps in the residential and services sector, 2015-2050.......... 55
Figure 45: Contribution of electricity and gaseous fuels to buildings’ FEC, 2030-2050. 56
Figure 46: Stock of black and white appliances and of lighting equipment, 2015-2050. 57
Figure 47: Electricity demand associated to appliances and lighting, 2015-2050 ........... 58
Figure 48: Buildings CO2 emissions trajectory by sector, 2015-2050 ............................ 58
Figure 49: Final Energy Consumption in industry by sector ........................................... 62
Figure 50: Energy Consumption in industry by fuel........................................................ 63
236
Figure 51: Final Non-Energy Consumption in industry by fuel....................................... 64
Figure 52 : Energy-related CO2 emissions in industry by sector ..................................... 65
Figure 53: Process CO2 emissions in industry by sector ................................................. 65
Figure 54: Carbon captured in industrial processes. ........................................................ 66
Figure 55: CO2 Emissions from industrial sector ............................................................ 67
Figure 56: Historical EU production and future demand for specific materials .............. 71
Figure 57: FEC, FEC-E and FEC-RFNBOs as % of 2019............................................... 72
Figure 58: Share of electricity and RFNBOs in FEC....................................................... 73
Figure 59: GHG emissions by type in % of 2019 values ................................................. 75
Figure 60: Passenger transport activity in the EU disaggregated by mode...................... 77
Figure 61: Change in passenger transport activity between 2015 and 2040 by mode ..... 78
Figure 62: EU freight transport activity by mode (excluding international navigation).. 79
Figure 63: Change in EU freight transport activity between 2015 and 2040 by mode.... 79
Figure 64: EU energy consumption in the transport sector by mode............................... 81
Figure 65: Change in EU energy consumption between 2015 and 2040 by mode .......... 81
Figure 66: EU energy consumption in the transport sector by fuel/energy carrier type .. 83
Figure 67: Distribution of the EU passenger car stock per type of drivetrain.................. 85
Figure 68: EU energy consumption by passenger cars by fuel/energy carrier type......... 86
Figure 69: Distribution of the EU HGV stock by type of drivetrain................................ 88
Figure 70: EU energy consumption by HGVs by fuel/energy carrier type...................... 88
Figure 71: EU energy consumption in the rail sector by fuel/energy carrier type ........... 91
Figure 72: EU energy consumption in domestic navigation by fuel/energy carrier type. 93
Figure 73: Composition of the EU vessel fleet used for international navigation ........... 95
Figure 74: EU energy consumption in international navigation by fuel/energy carrier type
.......................................................................................................................................... 95
Figure 75: EU energy consumption in aviation by fuel/energy carrier type .................... 97
Figure 76: Direct CO2 emissions from the EU transport sector by mode........................ 99
Figure 77: Change in EU transport direct CO2 emissions between 2015 and 2040 by
mode ................................................................................................................................. 99
Figure 78: MACC across all non-land-related sectors in 2040 (per gas)....................... 102
Figure 79: MACC across all non-CO2 greenhouse gases in 2040 (per sector).............. 102
Figure 80: Emissions from Agriculture in the EU by sector.......................................... 107
Figure 81: MACC of the agriculture sector in 2040 per scenario .................................. 112
Figure 82: MACC of the agriculture sector in 2040 in S1, S2 and S3 (by gas and area of
application)..................................................................................................................... 113
Figure 83: MACC of the agriculture sector in 2040 in LIFE (by gas and area of
application)..................................................................................................................... 113
Figure 84: GHG emissions from agriculture by gas....................................................... 115
Figure 85: GHG emissions from agriculture by type of source ..................................... 117
Figure 86: Historical LULUCF emissions, removals and net carbon removals............. 118
Figure 87: Final bioenergy demand by sector and scenario........................................... 119
Figure 88: Domestic supply of feedstock for bioenergy and waste ............................... 121
Figure 89: Harvest of wood for energy and non-energy use.......................................... 122
Figure 90: Total forest increment of managed forests per year and scenario in EU...... 123
Figure 91: Evolution of land use in EU by category...................................................... 124
Figure 92: Changes in land use between 2020 and 2040 by scenario............................ 124
Figure 93: Mitigation potentials in LULUCF at different mitigation costs ................... 128
Figure 94: LULUCF net carbon removal potential for different mitigation costs ......... 129
Figure 95: LULUCF net removal emissions and removals............................................ 131
Figure 96: Estimated climate change impacts on LULUCF net removal in EU............ 134
Figure 97: Area coverage of simulated series of extreme events in 2035...................... 136
237
Figure 98: Estimated climate change impacts and extreme events on LULUCF net
removal........................................................................................................................... 137
Figure 99: Biodiversity impacts from LIFE by region................................................... 146
Figure 100: Composition of private consumption (% of total, S3)................................ 153
Figure 101: Real GDP, deviation from S2 ..................................................................... 153
Figure 102: Impact of frictions in investment decisions ................................................ 155
Figure 103: Average annual energy system investment needs, excluding transport...... 160
Figure 104: Average annual energy system investment needs by sector ....................... 161
Figure 105: Ratio of gross fixed capital formation to GDP and GDP growth (5-year
backward moving average)............................................................................................. 162
Figure 106: Average annual investment in power supply.............................................. 163
Figure 107: Average annual energy system investment needs in industrial sectors ...... 164
Figure 108: Average annual energy system investment needs in services..................... 170
Figure 109: Average annual energy system investment needs in residential sector ...... 171
Figure 110: Average annual investment needs in transport ........................................... 175
Figure 111: Carbon pricing payments............................................................................ 183
Figure 112: Total energy system costs as a percentage of GDP .................................... 186
Figure 113: Consumption of electricity by industry....................................................... 188
Figure 114: Consumption of gas by industry ................................................................. 189
Figure 115: Annual fuel purchasing expenses in buildings per low-income household 200
Figure 116: Annual fuel purchasing expenses in buildings in S2 .................................. 201
Figure 117: Annual expenditures for private vehicles per household............................ 202
Figure 118: Annual expenditures for transport-related energy purchases per household
........................................................................................................................................ 202
Figure 119: Annual expenditures for transport services per household......................... 203
Figure 120: Historical and projected shares of employment by occupations in 2040 (% of
total)................................................................................................................................ 209
Figure 121: EU household mean budget shares by expenditure decile, 2015 (%)......... 214
Figure 122: Change in relative welfare by expenditure decile, S2................................. 216
Figure 123: Change in relative welfare by expenditure decile, S3................................. 216
Figure 124: Household GHG emissions per income category ....................................... 217
Figure 125: Total emissions at regional level (left) and corresponding change since 1990
(right).............................................................................................................................. 218
Figure 126: GHG emissions per capita in 2021 and change in GHG emissions per capita
between 1990 and 2021.................................................................................................. 219
Figure 127:Emission intensity (left) and corresponding change since 1990 (right) ...... 221
Figure 128: Greenhouse gas emissions by sector in the EU27 and sector with the highest
contribution at the regional level in 2021....................................................................... 221
Figure 129: Share of employment in sectors most negatively impacted........................ 226
Figure 130: Untapped potential for electricity production from solar and wind in 2019
(left) and present-day annual hydrogen production (right) in EU regions. .................... 227
Figure 131: Potential contribution of the various economic sectors to the EU emission
reductions ....................................................................................................................... 228
Figure 132: Regional readiness for the green transition and correlation with growth
potential.......................................................................................................................... 229
Figure 133: Net fossil fuel imports, 2000-2022 ............................................................. 230
Figure 134: Annual fossil fuels imports......................................................................... 231
Figure 135: Monthly fossil fuel prices (US$, 1960-October 2023) ............................... 232
238
TABLE OF TABLES
Table 1: Net GHG emissions and reductions compared to 1990 ....................................... 4
Table 2: CO2, non-CO2 and emissions from LULUCF sector.......................................... 5
Table 3: Gross GHG emissions.......................................................................................... 8
Table 4: LULUCF net removals by scenarios in 2040 and 2050....................................... 9
Table 5: LULUCF net removals and industrial carbon removals .................................... 13
Table 6: Energy and Industry net CO2 emissions............................................................ 17
Table 7: Total non-CO2 GHG emissions in all sectors and CO2 emissions from
agriculture......................................................................................................................... 26
Table 8: Assumptions on evolution of industrial domestic production for selected
materials ........................................................................................................................... 61
Table 9: List of circular economy actions applied to the CIRC scenario......................... 70
Table 10: Non-CO2 GHG emissions without add. mitigation in non-land-related sectors
........................................................................................................................................ 101
Table 11: Additional mitigation potentials of non-CO2 GHG emissions across all non-
land-related sectors in 2040 (by gas).............................................................................. 103
Table 12: Additional mitigation potentials of non-CO2 GHG emissions in 2040 (by non-
land-related sector) ......................................................................................................... 104
Table 13: Non-CO2 GHG emissions from the non-land-related sectors ....................... 106
Table 14: GHG emissions in agriculture without additional mitigation in S1, S2, S3... 110
Table 15: GHG emissions in the agriculture without additional mitigation in LIFE..... 111
Table 16: Mitigation potential in the agriculture sector in S1, S2 and S3...................... 114
Table 17: Mitigation potential in the agriculture sector in LIFE.................................... 114
Table 18: GHG emissions from the agriculture sector (by gas and type of source) ...... 116
Table 19: Air pollution emissions, impacts on public health and costs ......................... 141
Table 20: Area affected by acidification and eutrophication per scenario..................... 142
Table 21: Overview of Farm to Fork objectives indicators in LIFE in 2040................. 144
Table 22: Overview of LIFE outputs related to biodiversity in 2040 ............................ 145
Table 23: Agricultural area change in 2040 by scenarios. ............................................. 145
Table 24: Net production of agricultural outputs in 2040 by scenarios ......................... 147
Table 25: Macro-economic impacts (% change compared to S2).................................. 152
Table 26: Average annual energy system investment needs (billion EUR 2023).......... 159
Table 27: Indicators of SME activity by sector (2019) .................................................. 165
Table 28: Average annual energy-related side investment needs in industry,services and
agriculture (billion EUR 2023)....................................................................................... 167
Table 29: Average annual demand side investment, residential sector (billion EUR 2023)
........................................................................................................................................ 173
Table 30: Average annual demand side investment needs, transport (billion EUR 2023)
........................................................................................................................................ 176
Table 31: Technology investment costs assumptions (EUR 2015 per kW)................... 177
Table 32: Sensitivity of average annual energy system investment needs (excluding
transport) to a price shock .............................................................................................. 178
Table 33: Manufacturing capacity and investment needs per technology (2031-2040) 179
Table 34: Sectoral disaggregation of energy system costs (% difference vs. S2).......... 185
Table 35: Energy system costs for industry (% difference vs. S2) ................................ 187
Table 36: Average final price of electricity for industry................................................ 188
Table 37: Average final price of electricity for services ................................................ 190
Table 38: Energy prices for private transport in S2 ....................................................... 190
Table 39: Costs related to GHG emissions mitigation in LULUCF and non-CO2........ 191
239
Table 40: Sectoral output, deviation vs. S2 (%)............................................................. 193
Table 41: Sectoral output, % change vs. 2015 ............................................................... 194
Table 42: Sectoral output, share of total (%).................................................................. 194
Table 43: EU shares in global exports (% of total) ........................................................ 195
Table 44: EU shares in global imports (% of total)........................................................ 196
Table 45: Structure of EU imports (% of total).............................................................. 197
Table 46: Origin of EU imports by main trading parterns (% of total EU imports, S3) 198
Table 47: Average annual energy system costs as % of private consumption and average
final price of electricity for households in the residential sector.................................... 200
Table 48: Employment by economic activity (million people and % of total) .............. 206
Table 49: Employment by occupations .......................................................................... 207
Table 50: Sectoral employment, share in total employment (%)................................... 208
Table 51: Average annual renovations in residential and tertiary sectors...................... 211
Table 52: Changes in relative prices, S1 and S3 vs. S2 (% change) .............................. 215
Table 53: National per capita emissions and range across regions ................................ 220
Table 54: Sectoral per capita emissions and range across regions in 1990.................... 223
Table 55: Sectoral per capita emissions and range across regions in 2021.................... 224
Table 56: Macroeconomic impacts of energy price shocks (deviation from baseline).. 233