EU sets 90% decarbonisation reduction target by 2040

Carbon capture and removals to play an important role in recommendations

The European Commission’s proposal for almost full decarbonisation by 2040 “is revolutionary and reinforces the EU position as a global leader on climate change”, according to a leading policy director at the International Emissions Trading Association (IETA).

Based on initial impact assessments and the advice of the European Scientific Advisory Board on Climate Change, the Commission is recommending an EU-wide target of 90% reduction in greenhouse gas emissions by 2040, with a view to enshrining this into EU law in a similar fashion to the 2050 climate neutrality target.

In order to achieve this, the Commission notes a necessity to harness all zero- and low-carbon solutions to decarbonise the energy system, including renewables, nuclear and bioenergy, energy efficiency and storage and future net-zero energy technologies.

But they also specifically mentioned an earlier deployment of carbon capture and storage (CCS) and carbon removals as a mechanism to achieving their goal, presenting a dedicated communication on industrial carbon management. According to the communication, achieving the target depends on the existence of “a fully developed carbon management industry by 2040, with carbon capture covering all industrial process emissions and delivering sizable carbon removals, as well as high production and consumption of e-fuels.”

Julia Michalak, EU policy director at the IETA, noted that this is a first step towards the revision of the EU emissions trading rules for a net-zero future, highlighting the vital role of carbon pricing, CCS and carbon removals.

“We welcome the acknowledgement of carbon trading as a major instrument to deliver net-zero cost-efficiently,” Michalak continued.

“However, carbon markets must change to deliver net zero as a mechanism as we know it will not take us there. It is crucial that the right policy incentives are introduced with greater urgency for removals technologies to develop at scale. This includes the recognition of industrial carbon removals that can be measured with a high level of accuracy under the EU ETS.”

The IETA noted the Commission analysis does not provide an exact number of removals that will contribute to a 90% target, with the impact assessment examining three mitigation scenarios. These include one for “at least 90% and up to 95%” where gross GHG emissions are projected to be reduced by roughly 84%, with removals responsible for delivering around 8%. Nature-based removals would deliver four times more carbon storage than industrial removals.

EU elections

However, while IETA concludes that the publication is an opening move towards the revision of the European Climate Law, EU elections in 2024 are expected to be a deciding factor upon which direction they move in.

Sebastian Peck, managing partner at Kompas VC, explained there is a perception that the EU postulates these targets without really bringing the broader population along. While particularly the Nordic countries remain very committed to ambitious targets, countries like Germany, France and the Netherlands face significant challenges to convince the public that these goals are unlocking innovation and new economic opportunities.

“It’s terrific that the EU are showing such ambition, but we are living through a time that is not too different from the miner’s strikes in the 1970s and 1980s, a period of major structural and economic change, and there will be winners and losers,” he said.

“I think that period in history holds some extremely important lessons – both good and bad – on how to manage society through a major transition like the one we are entering and ensure that certain parts of the population do not get left behind. The resurgence of the far right is a warning sign that the resentment against the change that is coming is not a temporary phenomenon and needs to be both acknowledged and properly addressed.”