The target aims to set the path for climate neutrality by 2050.

By Paul A. Davies, Michael D. Green, and James Bee

On 6 February 2024, the European Commission (Commission) presented its recommendations for the EU’s 2040 climate target, following a detailed impact assessment on potential emission reduction pathways. This publication aligns with the implementation of the EU’s Climate Law, which enshrines the EU’s commitment to become climate-neutral by 2050, alongside the 2030 target to reduce net greenhouse gas (GHG) emissions by at least 55%, relative to 1990.

The Commission recommends a 90% net GHG reduction by 2040, as compared to 1990 levels. Notably, the recommendation refers to “net” GHG reduction, and therefore opens the door for the use of carbon removal technologies within the EU to meet the target.

Background to the 2040 Target

The initiative aims to tackle the absence of an EU-wide ambition level for 2040 regarding net GHG emission reduction and would be used as an interim target to climate neutrality in 2050.

The Commission describes that a 2040 target is needed to provide predictability for Member States and other stakeholders for decision-making purposes. In addition, the EU acknowledges that it needs to increase the existing pace of emission reduction to meet the 2030 target. Since the current decision-making already impacts EU GHG emissions that extend well beyond 2040, the 2040 target will provide the information necessary to define the climate, energy, and wider enabling framework required in the coming years.

Details of the Impact Assessment

The impact assessment sets out the following seven specific objectives by which the Commission evaluated different target options:

  1. Ensure that climate neutrality is delivered
  2. Minimise the EU’s GHG budget
  3. Ensure the transition is just
  4. Ensure that the long-term competitiveness of the EU economy is maintained
  5. Provide predictability for the deployment of best-available, cost-effective, and scalable technologies
  6. Ensure the security of energy supply and resources
  7. Ensure environmental effectiveness

The assessment focused on target reduction levels between 75% and 95%, with three scenarios analysed and compared against the above specific objectives. The scenarios cover: an 80% target, resembling a linear trajectory between the bloc’s 2030 and 2050 goals; a reduction of at least 85% and up to 90%; and a reduction of at least 90% and up to 95%, which covers the range recommended by the European Scientific Advisory Board on Climate Change (ESABCC).[1]

Based on the assessment, the option with the highest emission reduction range (with a target of at least 90%) was found to be the preferred option, providing the best balance between climate ambition and feasibility.

Carbon Removals

A distinctive feature of the preferred scenario is the importance of novel technologies to reduce CO2 emissions in energy, transport, and industry. The 90% emission reduction option requires a greater effort to ensure the availability of these technologies, including carbon capture.

Supporting this aim, the Commission published a further Industrial Carbon Management Strategy, which details the development of the use of carbon capture technology and its contribution to the proposed 90% emission reduction target. The Commission notes that the carbon capture should be targeted to sectors in which alternatives are less economically viable.

The strategy builds on the Net-Zero Industry Act, which establishes a framework to develop industrial deployment of the net zero technologies needed to achieve the EU’s climate goals. The provisional agreement (agreed by the European Council and European Parliament on 6 February 2024) sets a target that the EU develops at least 50 million tonnes of CO2 storage capacity per year by 2030. Based on the impact assessment, this figure will need to significantly grow to around 280 million tonnes per year by 2040.

The strategy further sets out a number of actions to be taken at EU and Member State level to enable the deployment of these technologies, as well as the infrastructure to establish a single market for CO2 in Europe in the coming decades.

Next Steps

The communication from the Commission does not set any legally binding obligations on EU Member States or industry sectors at this stage.

A legislative proposal will be made by the next Commission, following the European elections which occur in June 2024. This proposal will be agreed by the European Parliament and Member States, as required under the EU Climate Law.

Latham & Watkins will continue to monitor developments in this area.

Endnotes


[1] An assessment conducted by the ESABCC in June 2023 recommended that the EU reduce its GHG emissions by 90%-95% by 2040, relative to 1990.