EU Makes Headway Towards Net-Zero Goal

    Stockholm (NordSIP) – In an effort to keep track of the progress that the European Union (EU) is making towards reaching its net-zero goals, the European Commission (EC) published four reports this week, reviewing what was accomplished and what remained to be done by the end of 2020.

    Together with the annual State of the Energy Union Report, the EC adopted reports on the EU Climate Action Progress Report, the Carbon Market Report and the Fuel Quality Report. The reports paint an encouraging picture regarding the progress that the EU has made in advancing renewable energy sources, reducing CO2 emissions and channelling revenues from its Emission Trading System (ETS) towards green projects. However, concerns remain that many of these achievements are the one-off result of the COVID-19 pandemic than actual efforts by EU countries.

    State of the Energy and Climate Action Progress

    The State of the Energy Union Report shows that, in 2020, renewables overtook fossil fuels as the number one power source in the EU for the first time, generating 38% of electricity, compared to 37% for fossil fuels. So far, only 9 EU Member States have already phased out coal, 13 others have committed to a phase-out date, and 4 are considering possible timelines.

    As detailed in the EU Climate Action Progress Report, EU27 greenhouse gas emissions in 2020 also fell by almost 10% compared to 2019, an unprecedented drop in emissions due to the COVID-19 pandemic. Following 2020, the overall emission reductions tally vis-à-vis 1990, reaches 31%. The report also notes that the EU has substantially exceeded its target under the UNFCCC Kyoto Protocol of reducing emissions by 20% by 2020 compared to 1990.

    While there are a number of encouraging trends, greater efforts will be required to reach the 2030 goal of cutting net emissions by at least 55% and achieving climate neutrality by 2050.

    However, the State of the Energy Union Report expresses a concern that many of the achievements were driven by decreases in consumption motivated by the COVID-19-related restrictions. In that case, the fear is that without Member States action, fossil fuel subsidies are likely to rebound as economic activity picks up.

    CO2 Emissions Trading System

    According to the EU Climate Action Progress Report, emissions in sectors covered by the EU ETS, between 2019 and 2020, fell by 11.4% from power generation and the bulk of industrial production, and by 63.5% from aviation. Non-ETS emissions, such as those from non-ETS industry, transport, buildings, agriculture and waste, fell by 6%.

    Since the introduction of the EU ETS in 2005, emissions have been cut by around 43%, exceeding the contribution of 21% set in the EU ETS legislation. In sectors not currently covered by the EU ETS, emissions were 16% lower than in 2005,

    However, transport and agriculture emissions are not likely to fall substantially without additional measures, as they have remained largely unchanged since 2005, except for the fall in transport emissions in 2020 due to the COVID-19 pandemic. Furthermore, net removals from land use, land-use change and forestry have been on a worrying downward trend over the last decade, driven by the situation in forest ecosystems, including an increasing share of forests reaching maturity, increase in natural disturbances, an increase in wood demand, and a decrease of afforestation rates.

    Carbon Market Reports and Fuel Quality

    The Carbon Market Report shows that the EU ETS remains robust, withstanding the economic downturn caused by the pandemic. After an initial drop, carbon prices rebounded, and compliance in the 2020 cycle remained consistently high.

    Since 2018, the allowance price of the EU ETS has increased, leading to a rise in auctioning revenues from €3.2 billion in 2013 to €14.4 billion in 2020, which goes to the Member States. In 2020, 76% of these revenues were used, or planned to be used, for climate and energy purposes.

    According to the Fuel Quality Report, further action is needed to meet the target of reducing the greenhouse gas (GHG) intensity of transport fuels by a minimum of 6% by 2020 compared to 2010, as set by the Fuel Quality Directive. The report found that the average GHG intensity of fuels in 2019 had fallen by 4.3% compared to 2010.


    Image courtesy of Jai79 from Pixabay
    Filipe Albuquerque
    Filipe Albuquerque
    Filipe is an economist with 8 years of experience in macroeconomic and financial analysis for the Economist Intelligence Unit, the UN World Institute for Development Economic Research, the Stockholm School of Economics and the School of Oriental and African Studies. Filipe holds a MSc in European Political Economy from the LSE and a MSc in Economics from the University of London, where he currently is a PhD candidate.

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