CLEW Guide – How the European Union is trying to legislate a path to net-zero

• The energy sector is responsible for around 25 percent of the EU’s greenhouse emissions, making it the most polluting part of the bloc’s economy. Emissions have, however, fallen more than 40 percent since 1990;

• In 2023, renewables reached a record 44 percent share of the EU's electricity mix. In overall electricity generation, nuclear held the top spot, producing 22.9 percent, and wind overtook gas for the first time to produce 17.6 percent;

• Wind and solar combined enjoyed a record-setting year in 2022, overtaking fossil gas as the EU’s top source of electricity generation for the first time;
• The EU’s new 2030 renewable energy target stipulates that renewables need to make up 42.5 percent of gross final energy consumption. The initial benchmark written into law in 2018 was just 32 percent but a 2021 proposal aimed to increase that to 40 percent. In 2022, as part of a sector-wide strategy to reduce the EU’s dependence on Russian energy imports, a 45-percent target was proposed. Governments and members of the European Parliament eventually settled on a 42.5 percent compromise in March 2023;
• In 2021, the EU derived 22 percent of its energy from renewable sources, achieving its 20-percent 2020 target. Oil and petroleum products still topped the ranking for final energy consumption;
• EU countries vary greatly in terms of how much of their energy is sourced from renewables: Sweden and Finland lead, while Belgium, Malta and Ireland lag the furthest behind;
• Progress in this sector, particularly power generation, will hinge on electricity grid modernisation and build out. A lack of advanced infrastructure is already limiting the amount of clean energy that can be distributed. Renewable power associations urged governments and the EU in August to address the risk of curtailment – when clean energy generation is switched off due to lack of grid capacity – by improving grid resilience, developing 100 percent renewables scenarios and stepping up permitting and construction. The European Commission released an action plan in November 2023 to help improve the situation;
• Following Russia’s invasion of Ukraine in 2022, EU energy policy has shifted to focus on reducing dependence on Russian hydrocarbons. This meant fine-tuning existing policies as part of the REPowerEU strategy and other measures, such as joint gas purchasing and mandatory targets for gas storage. Energy imports from non-EU countries have decreased nearly 10 percent in early 2023 compared with 2021-2022 as a result.

Next big thing:

Forty-two-point five percent renewables is a joint target that the EU must achieve as a whole by 2030, which means that all 27 member countries must make a significant-enough contribution to that effort. Each government must submit updated energy and climate plans (NECP) to detail exactly how they will meet all the new 2030 targets, including the renewables benchmark. They had to submit their plans to the European Commission by 30 June 2024. The EU executive has already told certain countries to up their ambition.

• Forty percent of EU energy demand stems from the building sector and around 13 percent of emissions are produced by it, thanks largely to heating and cooling, as well as lighting;
• Badly insulated buildings are the root cause of the sector’s immense energy and climate impact but annual renovation rates in the EU barely scrape above 1 percent. The EU’s main strategy, the Renovation Wave, aims to at least double those rates by 2030;
• Two main pieces of legislation govern the buildings sector in the EU: the energy performance of buildings directive (EPBD) and the energy efficiency directive (EED). Both have been revised under the Green Deal;
• According to the new EED, total combined energy savings of 11.7 percent must be met by 2030 and unlike previous iterations, that target is mandatory rather than voluntary. Annual savings of at least 1.5 percent must be met by EU countries;
• Under the REPowerEU plan, an additional 10 million heat pump installations are to be installed by 2027 as part of a push to reduce the energy impact of heating and cooling buildings. A push to phase out ‘stand alone’ boilers that do not have any hybrid elements by 2029 should mean that number could top 30 million, according to the European Commission. However, the EU’s heat pump industry is currently struggling;
• Buildings will also be subject to emissions trading for the first time as part of a separate carbon market – the ETS II (See Transport section below for details). A new instrument known as the Social Climate Fund was established to help cushion households from extra financial burdens caused by the addition of carbon pricing. The fund should provide more than €60 billion between 2026 and 2032.

• Agricultural emissions account for about 11 percent of the EU’s total greenhouse gases and are largely comprised of methane and nitrogen. CO2 and other polluting gases make up a comparatively small proportion of the total;
• Sector emissions have remained relatively stable in recent years, and only a 2 percent decrease by 2030 compared to 2005 levels is projected under current policies. Government plans across the EU could increase that figure to 6 percent if implemented;
• Agriculture emissions are governed by the Effort Sharing Regulation (ESR), which aims to reduce emissions in covered sectors by 30 percent by 2030 compared to 2005. Given that little progress is expected in agriculture, bigger cuts will have to be made in other sectors such as waste, buildings and road transport;
• Agriculture is also subject to the Land use, land-use change and forestry (LULUCF) regulation, which governs how EU land use contributes to climate goals. By 2030, land-based net removals of CO2 by carbon sinks should reach 310 million tonnes, a 15 percent increase on current levels. This means that governments will have to make provisions for agriculture’s role in their Common Agriculture Policy (CAP) planning;
• When the ETS was revised most recently, policymakers decided to keep the sector out of the carbon market, meaning CO2 emissions from agricultural equipment – predominantly diesel – are not subject to pollution pricing.

Next big thing:

On 4 September, around thirty organisations from the sector, ranging from environmental NGOs to farmers' professional organisations, presented their conclusions of the strategic dialogue which European Commission’s president Ursula von der Leyen launched in early 2024. Divided into three parts, the document sets out ‘guiding principles’ for EU policy-makers. The main recommendation concerns the future of the CAP: The committee is maintaining payments to support farmers' incomes but is calling for a fundamental reform. The direct payments should no longer be allocated on an area basis, but instead prioritised to those who ‘need the support the most.’ Based on the paper, the re-elected European Commission President intends to present a vision paper on agriculture in the first 100 days of her new term of office.