The pace at which the EU is transitioning towards a net-zero future is too slow to achieve its 2030 and 2050 climate targets, according to a report from new net-zero watchdog the European Climate Neutrality Observatory (ECNO).

The report, titled 'State of EU Progress to Climate Neutrality', warns that although most sectors studied are moving in the right direction to eventually reach net zero, the overall pace of change needs to accelerate “significantly” if the bloc’s targets are to be maintained.

It assessed 13 economic “building blocks”, ranging from agriculture, transport and industry to electricity, carbon removals, finance and lifestyles. Within these building blocks, 104 indicators were identified to analyse and measure past progress, using available data mainly up to 2021 – the year in which major policies to implement the European Green Deal were proposed.

Electricity “almost on track”

Greenhouse gas (GHG) emissions from electricity within the EU have been steadily decreasing at a rate sufficient for reaching the bloc’s 2040 benchmark set out in the EU long-term strategy, the report found. However, the development and uptake of renewable electricity generation and its integration into the power system are currently developing too slowly, knocking the sector off-track to reach net zero by 2050.

The report identified several areas in need of further progress, beginning with overcoming barriers to renewable investment as well as the necessary scale-up of grid flexibility regarding clean energy capacity.

It also highlighted pitfalls in the EU’s own legislation, stating that while the bloc’s Emissions Trading System (ETS) provides incentives for the acceleration of coal phase-out, the RePowerEU plan’s short-term measures to move away from oil and gas as part of sanctions on Russia’s energy supply means that an increase in coal power is inevitable. As a result, the bloc is set to “undermine its own emissions reduction efforts”.

Within the transport sector, analysis rated the transition to electric and zero-emission vehicles as “far too slow”, despite the increasing uptake of electric vehicles by consumers. The EU’s plans to ban the sale of all new combustion engine vehicles by 2035 is expected to help address this issue.

Emissions from buildings and industry still too high

Progress in the building sector also remains far too slow, according to the report. Annual reductions in GHG emissions in buildings must increase by 7.5 times until 2030 if the bloc is to meet targets set out in the EU’s Renovation Wave Communication. Lack of progress is due in part to a far-too-slow switch from fossil fuels to renewable or electric heating.

Progress within industry was rated overall as far too slow, although detailed analysis of the transition towards a climate neutral industry was not possible due to a lack of available data. However, the report found that a reduction in GHG emissions for the sector needs to happen 2.7 times faster to meet net-zero targets.

Indeed, one of the report’s key conclusions was that available, reliable data and benchmarks from the EU are severely lacking. As a result, “significant” gaps in knowledge on the current state of decarbonisation in some sectors remain, making future predictions and targets difficult.

Carbon dioxide removals are moving in the wrong direction

Carbon dioxide (CO₂) removals, both natural and engineered, are considered an essential counterweight to residual emissions released from industries that are more difficult to decarbonise, such as energy, industry and aviation.

According to the report, the state of development for natural carbon removals is not only too slow, but actively heading in the wrong direction. Deforestation, land use changes and limited carbon stores in soil have driven an average annual decrease in CO₂ absorption from the atmosphere of almost 14 million tonnes of CO₂ equivalent (mtCO₂). This must change to an increase of more than 6mtCO₂ per year if the EU’s 2030 targets are to be met.

Engineered, or technical, removals are still in their relative infancy and as such their projected impact on emissions reductions remains limited. The report notes they are moving in the right direction, albeit far too slowly.

When asked at a press briefing about the significance of natural carbon sinks vs. engineered carbon removals, such as carbon capture and storage and direct air capture technologies, Thomas Pellerin-Carlin, EU director at the Institute for Climate Economies and co-author of the report, says “when it comes to the natural [removals], it’s going in the wrong direction for both objectives and enablers. For the technical removals, it’s going in the right direction, but at far too slow a pace.

“So essentially, it’s not whether you should focus more on natural or technical [carbon removals]. Actually, it is both of them that are struggling. The challenges are different for both of them… but they don’t need to be opposed, you can work on both,” he added.

Fossil fuel subsidies reign supreme

The report found that of all the building blocks, results from analysis of the finance sector came out as “the most worrying” and rated it as moving in the wrong direction.

Fossil fuel investment and subsidies continue to plague the bloc’s commitments to emissions reductions. Between 2015 and 2020, public authorities within the EU decreased environmental taxation and increased funding for fossil fuels to approximately €1.5bn ($1.64bn) per year. This dependency on the fossil industry was made worse in 2021 and 2022 as most member states increased fossil fuel subsidies and decreased taxation on fossil fuel companies, the report states.

According to the report, the current state of finance could “put the whole transition to climate neutrality at risk”, because investment in renewable and clean technology and infrastructure is essential for global emissions reductions.

To offset the ongoing financing of fossil fuels and to maintain its 2030 targets, the EU must increase its annual climate investment by €360bn, the report estimates.