At Climate.Table, we’re always searching somewhat desperately for good or at least not-so-bad news. For this one, we’re immediately issuing our special report, an alert: The EU’s new climate target of minus 90 percent by 2040. And, yes: The target could and should indeed be much more ambitious, it’s currently only the Commission’s proposal. Concrete laws and measures are still missing.
The proposal shows how climate policy works in Europe. On one hand, with less courage than before and than necessary. But even in times of inflation, global conflicts and despite the populist mood ahead of the European elections, the EU shows that it still wants to move towards decarbonization. This fundamental signal to the EU capitals, to the economy for clear guidelines, and to the international community may not be loud but clear. We’ll closely monitor how climate policy emerges from the elections and the new Commission.
Already, we’re paying close attention: Lukas Scheid writes about the details and significance of the Commission’s proposal. Manuel Berkel has examined the role of e-fuels and CCS. And he also writes about a previously unmentioned problem: How the planned EU expansion jeopardizes these climate targets for 2040.
Finally, we are also looking at the country that is most important in EU climate policy, and one that is essential for achieving Europe’s targets: Germany must now agree on how to finance the energy transition and climate action in the long term after the agonizing negotiations on the national budget. This is what the experts from the think tank Agora Energiewende demand with their own ideas in today’s Opinion.
Just as the implementation of European climate laws has just begun, the European Commission is now proposing a new climate target for 2040. The effectiveness of the Fit-for-55 package in achieving the 2030 climate goals remains to be seen. Nevertheless, the Commission must already think a decade ahead and set the 2040 target, as required by the EU Climate Law.
However, some members of the European Parliament criticize that industry and people should not be subjected to further “coercion and bans”, as CDU/CSU group leader Daniel Caspary commented on the EU climate target for 2040. But even his party voted for the Climate Law, which obliged the Commission to present a climate target for 2040 shortly after the Global Stocktake, completed in December at COP28 in Dubai.
The Commission has no choice. However, support for climate measures appears to be waning shortly before the EU elections. This is reflected not least in the EPP’s calls for less regulation in the environmental sector. The temptation to oppose further measures is strong, especially amid the pressure from protesting farmers.
Yet, the current proposal falls at the lower end of the EU Climate Advisory Board’s recommendation, which suggested a target of 90 to 95 percent. This has drawn criticism, especially from Green members of Parliament. “Not particularly courageous,” says Michael Bloss. He criticizes, in particular, that CCS should also be used to avoid emissions from fossil fuels rather than just in the heavily carbonized industrial sectors.
The Commission defends these plans by citing unavoidable residual emissions from oil combustion in the maritime sector and gas for heating and industrial purposes. The clear goal that the EU pursued at COP28, to end the combustion of fossil fuels as soon as possible, is only partially reflected in the proposal now presented. Approximately 10 percent of captured emissions in 2040 and even in 2050 are expected to come from the combustion of fossil fuels, according to the Commission’s Industrial Carbon Management Strategy.
In addition to the existing instruments aimed at achieving a 55 percent reduction in CO2 by 2030, further measures will be introduced for the 2040 climate target. These include:
However, on Monday, the Commission rejected aid for the European solar industry, which fears cheaper imports from China. The Commission’s stance thus also contains contradictions.
Germanwatch, an environmental and development organization, also highlights this aspect. On one hand, it praised the Commission for intending to continue the existing legal framework of EU climate policy. It also acknowledged the aim to make the green transition socially equitable, indicating an understanding in Brussels that “climate action and social justice need to be considered together for success”, as stated.
However, Lutz Weischer, head of the Berlin office of Germanwatch, criticizes this proposal as “conservative” and “barely the absolute minimum of what is necessary”. He also notes the absence of an end date for fossil fuels, which would demonstrate that the EU takes the groundbreaking decisions of the Dubai World Climate Summit seriously. The plans for international engagement in climate policy are also disappointingly lacking in ambition.
Although the Commission acknowledges that agriculture can play an important role, specifics remain vague. In a previous version of the proposal, the agricultural sector was much more strongly obligated and identified as one of the key sectors for CO2 reduction. However, in the final proposal, there is no mention of this. “Under pressure from industry and lobby groups that do not represent the entire agricultural sector, the Commission has excluded agriculture from the equation,” laments the Brussels-based environmental NGO European Environmental Bureau (EEB).
The 90 percent target itself represents only a minimal increase in ambition. According to Commission forecasts, with the continuation of the measures outlined in the Fit-for-55 package for 2030, Europe would already achieve an 88 percent reduction in emissions by 2040. Whether the EU will maintain its role as a global climate leader remains uncertain.
As this proposal is not a legislative one, the debate now begins on an informal level. Parliament and member states are not required to develop their own positions, but they could still do so, and some are already doing it. The corresponding legislative package is not expected until early 2025 – during the term of the next EU Commission. This makes it a campaign issue for the European elections in June.
As a guiding star that all climate laws orient themselves around, Green Party Member of Parliament Michael Bloss has described the EU Commission’s communication on the 2040 climate target. Concrete legislative proposals for individual economic sectors, such as the increase in wind, solar, and hydrogen targets in the Renewable Energy Directive, are still pending. However, the consequences of decarbonization by 90 percent instead of 55 percent for various sectors can already be well deduced from today’s overall package.
Firstly, there is the comprehensive impact assessment of the Commission’s proposal. A target of minus 90 percent greenhouse gases lies exactly between scenarios two and three from the hundreds of pages of the Impact Assessment.
The differences lie primarily in the increased use of synthetic fuels (e-fuels) and Carbon Capture and Storage (CCS). The Commission also released its own strategy on Carbon Management on Tuesday, which is particularly important for industry and agriculture – and not least for the upcoming strategy of the German federal government on the same subject.
According to the EU paper, by 2030, 7,300 km of CO2 transport pipelines and shipping routes need to be established. By 2050, the network is expected to grow to 19,000 km. The Commission estimates that 16 billion euros in investments will be necessary. An extensive presentation of a possible CO2 transport network is included in an analysis released by the EU’s Joint Research Centre (JRC) on Tuesday. In none of the scenarios are CO2 storage facilities on the German mainland necessary.
The Commission’s goal is a European market for carbon dioxide. Particularly interesting for the many smaller industrial plants in Germany is that the Commission intends to develop special solutions for facilities outside industrial clusters to “strengthen their bargaining power against infrastructure operators”, enabling them to connect to the network.
The Commission plans to start work on several laws by 2024: a dedicated regulatory package similar to the Gas Internal Market Package and a basis for network planning. Where possible, existing gas pipelines and storage facilities should also be converted – where green gases like hydrogen are given explicit priority.
Similar to hydrogen and natural gas, there will also be a new platform by early 2026 to bring providers, users and storage operators together in the future CO2 market. At the same time, there will be an investment atlas for storage projects. The first storage capacities should be available before 2030. By June of this year, EU member states must provide an overview of storage options in their National Energy and Climate Plans (NECPs).
According to the Commission’s analysis, the costs of CO2 capture vary considerably – ranging from 13 to 103 euros per ton – excluding transportation and storage. The price for CO2 futures in 2030 is currently around 77 euros, meaning that a large portion of projects could already be economically viable. As a consequence, the Commission will assess next year whether the traditional project funding, for example, for cement manufacturers, can be replaced by market-based support.
CCS is also expected to play a role in the energy sector. As hinted at in drafts, the Commission no longer aims to completely eliminate natural gas from the electricity supply by 2040. Instead, it only expects renewables and nuclear energy to generate over 90 percent of electricity: “The remaining ten percent will be offset by negative emissions or equipped with low-carbon solutions, including the use of Carbon Capture and Storage.”
Just a few years ago, CCS for gas or even coal-fired power plants was considered politically dead. However, even the current coalition government is keeping this backdoor open in its power plant strategy and has deferred the decision on this technology to its own Carbon Management Strategy.
The EU Commission expects electric mobility to gain momentum. According to the impact assessment, by 2040, internal combustion engines will account for only 26 percent of the car fleet. Ten years later, only residual inventories of two percent are expected. Accordingly, the share of battery-electric cars will be 57 percent in 2040, rising to 79 percent by 2050.
Surprisingly, hybrid cars may persist longer than expected; the Commission expects them to account for eleven percent of the fleet by 2040: “This suggests that this technology will play an important role in moving away from fossil fuels. However, by 2050, the share of plug-in hybrids will decrease to five percent.”
The role of e-fuels and biofuels for the rapidly declining number of internal combustion engine cars is not clearly addressed in the impact assessment. While the consumption of e-fuels is expected to steeply increase in scenarios with high CO2 reduction, a large part of it is directed towards maritime and aviation transport and the tanks of trucks.
The Commission did not release exact numbers for passenger cars on Tuesday. However, they can be estimated from a bar chart (Figure 68). According to this, e-fuels will cover just over ten percent of the energy consumption of passenger cars in 2040. By 2050, the share will decrease significantly, with the lion’s share being electricity for EVs and hydrogen for fuel cell vehicles.
When the Commission announces its proposal for a new climate target on Tuesday, the future of Europe will likely not be mentioned. By 2040, member states are expected to reduce 90 percent of their greenhouse gas emissions. All member states?
Ten countries in the east and southeast of the continent aim to join the EU27, and at least the Western Balkan countries have a good chance of celebrating this event in the 2030s. However, the Commission indirectly admits that it has not involved the candidate countries in the most important undertaking of its future climate policy.
A Commission official points to the public consultation conducted by the authority last year: “No position papers were received from the accession candidates.” The question of expansion was also not addressed in meetings with interest groups. However, the Commission is playing it very slim with this approach.
The Commission’s consultations usually involve citizens of the Member States, scientists, and above all, NGOs and business associations. They are not the format for government negotiations.
“The EU is turning a blind eye to the big picture despite some efforts in detail,” complains Eleonora Allena from the Climate Action Network. “It is missing the opportunity to involve the Western Balkans in setting the climate targets for 2040.” Even in a well-established format for cooperation with Eastern neighbors, the goals have not yet been negotiated.
“The Commission and the member states could have also started consulting the candidate countries within the framework of the Energy Community – as they did with the 2030 goals,” says Jörg Mühlenhoff from the Böll Foundation. Unfortunately, this step has not yet been taken.
The Energy Community is supposed to help the European Union’s neighbors adopt its energy and climate laws. All EU candidate countries are parties to the Energy Community – except for Turkey, which has observer status. The Energy Community attributes the lack of participation in the 2040 framework to the current Fit-for-55 package for 2030: “Our main focus is currently on the practical implementation of this goal.“
On paper, the contracting parties aim to reduce their emissions by 2030 even more strongly than the EU – according to the Energy Community by 60.9 percent. “However, our analysis has shown that the Western Balkan countries are far from achieving even their goals for 2030,” says Allena.
Already last June, the Climate Action Network demanded that expansion be considered in setting the climate target. The high share of fossil energy in many future EU states becomes a shared problem upon accession.
“Their strong dependence on coal-fired power plants could make it particularly difficult for Serbia and Bosnia and Herzegovina to reduce their emissions by 90 percent by 2040,” says Mühlenhoff. According to the International Energy Agency (IEA), coal consumption is even much higher in Ukraine and especially in Turkey compared to the Western Balkans. If all ten candidate countries were to join the EU, the coal consumption of the community would increase by around 46 percent based on 2021 data.
If these countries do not align their energy supply with EU goals, they risk high costs through emissions trading upon accession. For the Commission and the EU states, this means that they must better support the candidate countries – materially and personnel-wise.
“The Moldovan authorities are already benefiting from the gradually increasing EU support in energy and climate legislation,” explains a spokesperson for the Moldovan delegation in Brussels. “However, they rely on additional technical and expert assistance from the EU for implementation.” Lea Fanku, an employee of the Albanian delegation, also sees overwhelmed government apparatuses in the Western Balkan states in a guest contribution for the European Council on Foreign Relations.
Financially, NGOs consider the usual pot for candidate countries – the Instrument for Pre-accession Assistance (IPA) – insufficient. The issue must be considered in negotiations for the next Multiannual Financial Framework, says Allena. Already now, the EU could open the Just Transition Fund, the Recovery and Resilience Facility, and REPowerEU for the candidates, according to the Böll Foundation.
“It is important to act now, as there could be a backlash from national governments,” warns Mühlenhoff. “Individual candidate countries could stick to their fossil energy companies, possibly supported by energy companies from China and Russia.”
So far, however, the Commission also has its reasons why it does not expand financial assistance further. Recent commitments from the new growth plan for the Western Balkans are more dependent on progress in the rule of law than before, writes Fanku.
However, the major EU candidate countries have recently announced forward-looking steps. Turkey plans to introduce emissions trading in 2026, reports Germany Trade & Invest. At the end of January, the Ukrainian government promised a pilot phase of its certificate trading as early as 2025. Even during the war, it is possible to enable the industry to understand how this market works, said Environment Minister Ruslan Strilets.
After weeks of heated debates and protests, the Bundestag provided clarity on the 2024 budget in its session last Friday. However, the government fails to provide an answer on how urgently needed investments in climate policy can be ensured despite the substantial cuts in many areas – from agriculture to investments in future technologies to support for building renovation.
Moreover, the weeks-long debate on cuts has cost societal acceptance for climate action and provided opportunities for exploitation by far-right forces. It is, therefore, all the more important to present sustainable solutions for the coming budget years. Two things are central to this:
Even before the extent of the Climate and Transformation Fund was abruptly reduced by 60 billion euros following the Federal Constitutional Court’s ruling on Nov. 15 of last year, it was clear that more balanced instruments were needed in climate policy. The Council of Experts on Climate Change has repeatedly criticized the federal government’s climate policy for focusing too much on the allocation of funding. Moreover, these funds have been distributed indiscriminately in recent years. In the short term, funding should be more closely aligned with needs, especially in the building sector.
Furthermore, switching from a flat-rate subsidy to a low-interest loan may be sensible for certain cases. This makes the purchase of a climate-neutral heating system or energy-efficient renovation affordable while also relieving the state budget. In the transportation sector, reforming the vehicle tax to incentivize the purchase of climate-friendly vehicles could be a sensible substitute for the discontinued environmental bonuses.
While reverting to the originally planned CO2 pricing path for the building and transportation sectors is a step towards a more balanced climate policy that also utilizes market-based instruments, the additional increase of five euros per ton of CO2 – equivalent to 1.4 cents per liter of gasoline and less than one percent of the fuel price – is too low to have a steering effect. Moreover, this money should not be used to plug the budget hole. Instead, it should be returned to the population so that even individuals with lower incomes can afford the transition to climate-neutral alternatives.
Even after a readjustment of the instruments, additional revenue will be needed to achieve the climate targets. A second fiscal problem therefore needs to be solved to ensure long-term prosperity: Increasing digitalization, demographic change and the transformation to net-zero are changing the traditional revenue sources of state coffers. For example, the mineral oil tax will disappear if oil is no longer sold. As emissions fall, carbon revenues shrink. And if more added value is generated by fewer people, this also has an impact on income tax revenue.
These challenges affect the entire tax and fiscal policy. However, climate and energy policy also offer solutions here: A Europe-wide levy based on resource consumption could finance the transformation of existing and the establishment of future-oriented industries. Specifically, this would mean that, for example, newly produced steel would incur a new levy, which would be lower or not levied at all when using recycled steel. The associated revenues persist in the long term, even after the climate transformation is completed. Against this background, it is regrettable that the plastic levy for 2024 is now supposed to be financed again from the budget – levying the charge on consumers would have been a step in the right direction.
Germany has accumulated a large backlog in investments. Significant investments are also needed to achieve climate goals. The state has a central role to play in mobilizing private capital. This is not happening sufficiently under the current conditions.
To structurally close the financing gap, the debt rule in the Basic Law needs to be modernized. The energy transition is a large-scale investment project. It replaces, simply put, the ongoing costs for fossil resources such as natural gas, coal and oil with investments – such as in wind and solar plants. Some of these investments can already be made by the state today without being counted towards the debt brake, as planned, for example, through Deutsche Bahn’s equity increase. However, this approach will not be sufficient. Establishing a special fund, as for the Bundeswehr, also does not solve the problem sustainably. A rigid budget is unsuitable for responding to technological and social changes. If the pot is too large, there is no prioritization. If it is too small, we will face a similar problem in a few years.
State borrowing has always been constitutionally limited, serving to protect future generations – albeit with the important distinction between investment and consumptive purposes. Only since its 2009 version has the debt brake been absolute and thus highly restrictive: It prevents investments, even if they secure prosperity in the medium to long term.
Applying this to households, this means that the house would have to be paid off immediately, as property loans would generally be prohibited. The debt brake thus leads to an investment backlog, jeopardizes Germany as a sustainable business hub, and slows down the transformation to net zero. However, achieving net zero quickly – as the Federal Constitutional Court made clear in 2021 – has constitutional priority, as does protecting the freedom and prosperity of future generations.
Simon Müller is the Director of Agora Energiewende Germany. Lea Nesselhauf is a lawyer at Agora Energiewende.
At Climate.Table, we’re always searching somewhat desperately for good or at least not-so-bad news. For this one, we’re immediately issuing our special report, an alert: The EU’s new climate target of minus 90 percent by 2040. And, yes: The target could and should indeed be much more ambitious, it’s currently only the Commission’s proposal. Concrete laws and measures are still missing.
The proposal shows how climate policy works in Europe. On one hand, with less courage than before and than necessary. But even in times of inflation, global conflicts and despite the populist mood ahead of the European elections, the EU shows that it still wants to move towards decarbonization. This fundamental signal to the EU capitals, to the economy for clear guidelines, and to the international community may not be loud but clear. We’ll closely monitor how climate policy emerges from the elections and the new Commission.
Already, we’re paying close attention: Lukas Scheid writes about the details and significance of the Commission’s proposal. Manuel Berkel has examined the role of e-fuels and CCS. And he also writes about a previously unmentioned problem: How the planned EU expansion jeopardizes these climate targets for 2040.
Finally, we are also looking at the country that is most important in EU climate policy, and one that is essential for achieving Europe’s targets: Germany must now agree on how to finance the energy transition and climate action in the long term after the agonizing negotiations on the national budget. This is what the experts from the think tank Agora Energiewende demand with their own ideas in today’s Opinion.
Just as the implementation of European climate laws has just begun, the European Commission is now proposing a new climate target for 2040. The effectiveness of the Fit-for-55 package in achieving the 2030 climate goals remains to be seen. Nevertheless, the Commission must already think a decade ahead and set the 2040 target, as required by the EU Climate Law.
However, some members of the European Parliament criticize that industry and people should not be subjected to further “coercion and bans”, as CDU/CSU group leader Daniel Caspary commented on the EU climate target for 2040. But even his party voted for the Climate Law, which obliged the Commission to present a climate target for 2040 shortly after the Global Stocktake, completed in December at COP28 in Dubai.
The Commission has no choice. However, support for climate measures appears to be waning shortly before the EU elections. This is reflected not least in the EPP’s calls for less regulation in the environmental sector. The temptation to oppose further measures is strong, especially amid the pressure from protesting farmers.
Yet, the current proposal falls at the lower end of the EU Climate Advisory Board’s recommendation, which suggested a target of 90 to 95 percent. This has drawn criticism, especially from Green members of Parliament. “Not particularly courageous,” says Michael Bloss. He criticizes, in particular, that CCS should also be used to avoid emissions from fossil fuels rather than just in the heavily carbonized industrial sectors.
The Commission defends these plans by citing unavoidable residual emissions from oil combustion in the maritime sector and gas for heating and industrial purposes. The clear goal that the EU pursued at COP28, to end the combustion of fossil fuels as soon as possible, is only partially reflected in the proposal now presented. Approximately 10 percent of captured emissions in 2040 and even in 2050 are expected to come from the combustion of fossil fuels, according to the Commission’s Industrial Carbon Management Strategy.
In addition to the existing instruments aimed at achieving a 55 percent reduction in CO2 by 2030, further measures will be introduced for the 2040 climate target. These include:
However, on Monday, the Commission rejected aid for the European solar industry, which fears cheaper imports from China. The Commission’s stance thus also contains contradictions.
Germanwatch, an environmental and development organization, also highlights this aspect. On one hand, it praised the Commission for intending to continue the existing legal framework of EU climate policy. It also acknowledged the aim to make the green transition socially equitable, indicating an understanding in Brussels that “climate action and social justice need to be considered together for success”, as stated.
However, Lutz Weischer, head of the Berlin office of Germanwatch, criticizes this proposal as “conservative” and “barely the absolute minimum of what is necessary”. He also notes the absence of an end date for fossil fuels, which would demonstrate that the EU takes the groundbreaking decisions of the Dubai World Climate Summit seriously. The plans for international engagement in climate policy are also disappointingly lacking in ambition.
Although the Commission acknowledges that agriculture can play an important role, specifics remain vague. In a previous version of the proposal, the agricultural sector was much more strongly obligated and identified as one of the key sectors for CO2 reduction. However, in the final proposal, there is no mention of this. “Under pressure from industry and lobby groups that do not represent the entire agricultural sector, the Commission has excluded agriculture from the equation,” laments the Brussels-based environmental NGO European Environmental Bureau (EEB).
The 90 percent target itself represents only a minimal increase in ambition. According to Commission forecasts, with the continuation of the measures outlined in the Fit-for-55 package for 2030, Europe would already achieve an 88 percent reduction in emissions by 2040. Whether the EU will maintain its role as a global climate leader remains uncertain.
As this proposal is not a legislative one, the debate now begins on an informal level. Parliament and member states are not required to develop their own positions, but they could still do so, and some are already doing it. The corresponding legislative package is not expected until early 2025 – during the term of the next EU Commission. This makes it a campaign issue for the European elections in June.
As a guiding star that all climate laws orient themselves around, Green Party Member of Parliament Michael Bloss has described the EU Commission’s communication on the 2040 climate target. Concrete legislative proposals for individual economic sectors, such as the increase in wind, solar, and hydrogen targets in the Renewable Energy Directive, are still pending. However, the consequences of decarbonization by 90 percent instead of 55 percent for various sectors can already be well deduced from today’s overall package.
Firstly, there is the comprehensive impact assessment of the Commission’s proposal. A target of minus 90 percent greenhouse gases lies exactly between scenarios two and three from the hundreds of pages of the Impact Assessment.
The differences lie primarily in the increased use of synthetic fuels (e-fuels) and Carbon Capture and Storage (CCS). The Commission also released its own strategy on Carbon Management on Tuesday, which is particularly important for industry and agriculture – and not least for the upcoming strategy of the German federal government on the same subject.
According to the EU paper, by 2030, 7,300 km of CO2 transport pipelines and shipping routes need to be established. By 2050, the network is expected to grow to 19,000 km. The Commission estimates that 16 billion euros in investments will be necessary. An extensive presentation of a possible CO2 transport network is included in an analysis released by the EU’s Joint Research Centre (JRC) on Tuesday. In none of the scenarios are CO2 storage facilities on the German mainland necessary.
The Commission’s goal is a European market for carbon dioxide. Particularly interesting for the many smaller industrial plants in Germany is that the Commission intends to develop special solutions for facilities outside industrial clusters to “strengthen their bargaining power against infrastructure operators”, enabling them to connect to the network.
The Commission plans to start work on several laws by 2024: a dedicated regulatory package similar to the Gas Internal Market Package and a basis for network planning. Where possible, existing gas pipelines and storage facilities should also be converted – where green gases like hydrogen are given explicit priority.
Similar to hydrogen and natural gas, there will also be a new platform by early 2026 to bring providers, users and storage operators together in the future CO2 market. At the same time, there will be an investment atlas for storage projects. The first storage capacities should be available before 2030. By June of this year, EU member states must provide an overview of storage options in their National Energy and Climate Plans (NECPs).
According to the Commission’s analysis, the costs of CO2 capture vary considerably – ranging from 13 to 103 euros per ton – excluding transportation and storage. The price for CO2 futures in 2030 is currently around 77 euros, meaning that a large portion of projects could already be economically viable. As a consequence, the Commission will assess next year whether the traditional project funding, for example, for cement manufacturers, can be replaced by market-based support.
CCS is also expected to play a role in the energy sector. As hinted at in drafts, the Commission no longer aims to completely eliminate natural gas from the electricity supply by 2040. Instead, it only expects renewables and nuclear energy to generate over 90 percent of electricity: “The remaining ten percent will be offset by negative emissions or equipped with low-carbon solutions, including the use of Carbon Capture and Storage.”
Just a few years ago, CCS for gas or even coal-fired power plants was considered politically dead. However, even the current coalition government is keeping this backdoor open in its power plant strategy and has deferred the decision on this technology to its own Carbon Management Strategy.
The EU Commission expects electric mobility to gain momentum. According to the impact assessment, by 2040, internal combustion engines will account for only 26 percent of the car fleet. Ten years later, only residual inventories of two percent are expected. Accordingly, the share of battery-electric cars will be 57 percent in 2040, rising to 79 percent by 2050.
Surprisingly, hybrid cars may persist longer than expected; the Commission expects them to account for eleven percent of the fleet by 2040: “This suggests that this technology will play an important role in moving away from fossil fuels. However, by 2050, the share of plug-in hybrids will decrease to five percent.”
The role of e-fuels and biofuels for the rapidly declining number of internal combustion engine cars is not clearly addressed in the impact assessment. While the consumption of e-fuels is expected to steeply increase in scenarios with high CO2 reduction, a large part of it is directed towards maritime and aviation transport and the tanks of trucks.
The Commission did not release exact numbers for passenger cars on Tuesday. However, they can be estimated from a bar chart (Figure 68). According to this, e-fuels will cover just over ten percent of the energy consumption of passenger cars in 2040. By 2050, the share will decrease significantly, with the lion’s share being electricity for EVs and hydrogen for fuel cell vehicles.
When the Commission announces its proposal for a new climate target on Tuesday, the future of Europe will likely not be mentioned. By 2040, member states are expected to reduce 90 percent of their greenhouse gas emissions. All member states?
Ten countries in the east and southeast of the continent aim to join the EU27, and at least the Western Balkan countries have a good chance of celebrating this event in the 2030s. However, the Commission indirectly admits that it has not involved the candidate countries in the most important undertaking of its future climate policy.
A Commission official points to the public consultation conducted by the authority last year: “No position papers were received from the accession candidates.” The question of expansion was also not addressed in meetings with interest groups. However, the Commission is playing it very slim with this approach.
The Commission’s consultations usually involve citizens of the Member States, scientists, and above all, NGOs and business associations. They are not the format for government negotiations.
“The EU is turning a blind eye to the big picture despite some efforts in detail,” complains Eleonora Allena from the Climate Action Network. “It is missing the opportunity to involve the Western Balkans in setting the climate targets for 2040.” Even in a well-established format for cooperation with Eastern neighbors, the goals have not yet been negotiated.
“The Commission and the member states could have also started consulting the candidate countries within the framework of the Energy Community – as they did with the 2030 goals,” says Jörg Mühlenhoff from the Böll Foundation. Unfortunately, this step has not yet been taken.
The Energy Community is supposed to help the European Union’s neighbors adopt its energy and climate laws. All EU candidate countries are parties to the Energy Community – except for Turkey, which has observer status. The Energy Community attributes the lack of participation in the 2040 framework to the current Fit-for-55 package for 2030: “Our main focus is currently on the practical implementation of this goal.“
On paper, the contracting parties aim to reduce their emissions by 2030 even more strongly than the EU – according to the Energy Community by 60.9 percent. “However, our analysis has shown that the Western Balkan countries are far from achieving even their goals for 2030,” says Allena.
Already last June, the Climate Action Network demanded that expansion be considered in setting the climate target. The high share of fossil energy in many future EU states becomes a shared problem upon accession.
“Their strong dependence on coal-fired power plants could make it particularly difficult for Serbia and Bosnia and Herzegovina to reduce their emissions by 90 percent by 2040,” says Mühlenhoff. According to the International Energy Agency (IEA), coal consumption is even much higher in Ukraine and especially in Turkey compared to the Western Balkans. If all ten candidate countries were to join the EU, the coal consumption of the community would increase by around 46 percent based on 2021 data.
If these countries do not align their energy supply with EU goals, they risk high costs through emissions trading upon accession. For the Commission and the EU states, this means that they must better support the candidate countries – materially and personnel-wise.
“The Moldovan authorities are already benefiting from the gradually increasing EU support in energy and climate legislation,” explains a spokesperson for the Moldovan delegation in Brussels. “However, they rely on additional technical and expert assistance from the EU for implementation.” Lea Fanku, an employee of the Albanian delegation, also sees overwhelmed government apparatuses in the Western Balkan states in a guest contribution for the European Council on Foreign Relations.
Financially, NGOs consider the usual pot for candidate countries – the Instrument for Pre-accession Assistance (IPA) – insufficient. The issue must be considered in negotiations for the next Multiannual Financial Framework, says Allena. Already now, the EU could open the Just Transition Fund, the Recovery and Resilience Facility, and REPowerEU for the candidates, according to the Böll Foundation.
“It is important to act now, as there could be a backlash from national governments,” warns Mühlenhoff. “Individual candidate countries could stick to their fossil energy companies, possibly supported by energy companies from China and Russia.”
So far, however, the Commission also has its reasons why it does not expand financial assistance further. Recent commitments from the new growth plan for the Western Balkans are more dependent on progress in the rule of law than before, writes Fanku.
However, the major EU candidate countries have recently announced forward-looking steps. Turkey plans to introduce emissions trading in 2026, reports Germany Trade & Invest. At the end of January, the Ukrainian government promised a pilot phase of its certificate trading as early as 2025. Even during the war, it is possible to enable the industry to understand how this market works, said Environment Minister Ruslan Strilets.
After weeks of heated debates and protests, the Bundestag provided clarity on the 2024 budget in its session last Friday. However, the government fails to provide an answer on how urgently needed investments in climate policy can be ensured despite the substantial cuts in many areas – from agriculture to investments in future technologies to support for building renovation.
Moreover, the weeks-long debate on cuts has cost societal acceptance for climate action and provided opportunities for exploitation by far-right forces. It is, therefore, all the more important to present sustainable solutions for the coming budget years. Two things are central to this:
Even before the extent of the Climate and Transformation Fund was abruptly reduced by 60 billion euros following the Federal Constitutional Court’s ruling on Nov. 15 of last year, it was clear that more balanced instruments were needed in climate policy. The Council of Experts on Climate Change has repeatedly criticized the federal government’s climate policy for focusing too much on the allocation of funding. Moreover, these funds have been distributed indiscriminately in recent years. In the short term, funding should be more closely aligned with needs, especially in the building sector.
Furthermore, switching from a flat-rate subsidy to a low-interest loan may be sensible for certain cases. This makes the purchase of a climate-neutral heating system or energy-efficient renovation affordable while also relieving the state budget. In the transportation sector, reforming the vehicle tax to incentivize the purchase of climate-friendly vehicles could be a sensible substitute for the discontinued environmental bonuses.
While reverting to the originally planned CO2 pricing path for the building and transportation sectors is a step towards a more balanced climate policy that also utilizes market-based instruments, the additional increase of five euros per ton of CO2 – equivalent to 1.4 cents per liter of gasoline and less than one percent of the fuel price – is too low to have a steering effect. Moreover, this money should not be used to plug the budget hole. Instead, it should be returned to the population so that even individuals with lower incomes can afford the transition to climate-neutral alternatives.
Even after a readjustment of the instruments, additional revenue will be needed to achieve the climate targets. A second fiscal problem therefore needs to be solved to ensure long-term prosperity: Increasing digitalization, demographic change and the transformation to net-zero are changing the traditional revenue sources of state coffers. For example, the mineral oil tax will disappear if oil is no longer sold. As emissions fall, carbon revenues shrink. And if more added value is generated by fewer people, this also has an impact on income tax revenue.
These challenges affect the entire tax and fiscal policy. However, climate and energy policy also offer solutions here: A Europe-wide levy based on resource consumption could finance the transformation of existing and the establishment of future-oriented industries. Specifically, this would mean that, for example, newly produced steel would incur a new levy, which would be lower or not levied at all when using recycled steel. The associated revenues persist in the long term, even after the climate transformation is completed. Against this background, it is regrettable that the plastic levy for 2024 is now supposed to be financed again from the budget – levying the charge on consumers would have been a step in the right direction.
Germany has accumulated a large backlog in investments. Significant investments are also needed to achieve climate goals. The state has a central role to play in mobilizing private capital. This is not happening sufficiently under the current conditions.
To structurally close the financing gap, the debt rule in the Basic Law needs to be modernized. The energy transition is a large-scale investment project. It replaces, simply put, the ongoing costs for fossil resources such as natural gas, coal and oil with investments – such as in wind and solar plants. Some of these investments can already be made by the state today without being counted towards the debt brake, as planned, for example, through Deutsche Bahn’s equity increase. However, this approach will not be sufficient. Establishing a special fund, as for the Bundeswehr, also does not solve the problem sustainably. A rigid budget is unsuitable for responding to technological and social changes. If the pot is too large, there is no prioritization. If it is too small, we will face a similar problem in a few years.
State borrowing has always been constitutionally limited, serving to protect future generations – albeit with the important distinction between investment and consumptive purposes. Only since its 2009 version has the debt brake been absolute and thus highly restrictive: It prevents investments, even if they secure prosperity in the medium to long term.
Applying this to households, this means that the house would have to be paid off immediately, as property loans would generally be prohibited. The debt brake thus leads to an investment backlog, jeopardizes Germany as a sustainable business hub, and slows down the transformation to net zero. However, achieving net zero quickly – as the Federal Constitutional Court made clear in 2021 – has constitutional priority, as does protecting the freedom and prosperity of future generations.
Simon Müller is the Director of Agora Energiewende Germany. Lea Nesselhauf is a lawyer at Agora Energiewende.
