The EU’s 2040 Climate Target — context, scope and design

The European Commission has published its vision for the European Union 2040 climate target, including general recommendations for getting there. Let’s have a closer look at some of the elements regarding the recommended target, notably its context, scope, design, and relevant processes.

The context

2023 was the crucial year informing the work that is now in front of us. The Commission Communication, titled “Europe’s 2040 climate target and path to climate neutrality by 2050 building a sustainable, just and prosperous society”, is a vision document prepared by the European Commission. It recommends a way forward and will not be amended further because it’s not a legislative document.

It will be followed by a political debate, which then informs the subsequent legislative proposal. And that is where it all gets real. Hence, the 6 February document should be seen as the first crucial step in establishing a legally binding EU 2040 climate target. Or – as numerous stakeholders advocate – separate 2040 targets for emission reductions, permanent carbon removal and land-based carbon sequestration.

The target

The recommended target for 2040 is a 90% net greenhouse gas emission reduction compared to 1990 levels. The headline target of 90% is presented as a reasonable mid-step between 2030 and carbon neutrality by 2050. It is compatible with the advice from the European Scientific Advisory Board on Climate Change and backed up by the 605-page impact assessment.

Implementing the 2030 energy and climate framework is highlighted as a stepping stone in reaching the 2040 target, given that “an extension of current policies towards 2040 would already lead to a -88% reduction by 2040”. This makes the target seem so easy to reach until we realise how difficult it will be to meet the EU’s 2030 target in practice.

The Commission indicates that remaining EU emissions in 2040 should be less than 850 MtCO2eq, and carbon removals (land-based and industrial) should remove up to 400 MtCO2.

The scope — removals

What remains unclear is the scope of the target when it comes to removals. One of the drawbacks of the 2030 climate target is that novel removals are outside its scope and can’t benefit from the existing policy frameworks. The EU’s upcoming Carbon Removal Certification Framework will help quantify some carbon removal methods, but given the innovation in this ecosystem, definitely not all.

So, what activities will be in the scope of the 2040 climate target and benefit from the policies developed to meet this target? The document refers to “possibly other novel approaches” without further clarification. The guidance for how the countries can account for novel removals in their greenhouse gas inventories is currently largely missing, and the IPCC work on this front does not yet have an established deadline. Hopefully, the legislative proposal offers more details.

A positive development is strong language on net negative emissions after 2050, an element that is weakly worded in the current European Climate Law (“shall aim to achieve”). Referring to absolute negative emissions after 2050 as an inherent part of the pathway reaffirms that policymakers are moving away from 2050 as the final goalpost and realising that there is much more work ahead. The specific reference to the role of carbon capture in this context is also a very positive development.

The design

When the EU’s 2030 climate target was negotiated, there were heated discussions around moving away from a traditional “net” target (emissions after deduction of removals) to fully separate targets for emission reductions and carbon removal. A net target includes the risk that the availability to count carbon removal against the target may delay emission reductions, decreasing the urgency of reductions. This concept has been studied widely, and the most commonly recommended solution is establishing separate targets for reducing emissions and removing carbon. This way, both have an incentive and happen simultaneously.

The Commission’s vision for the 2040 climate target does not specify how the target is designed. There is an indication that “remaining EU emissions in 2040 should be less than 850 MtCO2eq and carbon removals (land-based and industrial) should remove up to 400 MtCO2,” but there are no further details on whether these will become targets of their own. Not to mention that land-based and industrial removals are lumped together despite most stakeholders asking for separating targets for these two.

An earlier leaked version of the document included 75Mt of industrial carbon removal, but that has been scrapped from the final version. Several other elements have disappeared as well, including the quantified contribution of the agriculture sector, elements for decarbonising aviation, and the impact of lifestyle choices. It doesn’t mean that these aspects are off the table. They can surface again either in the legislative proposal or in the changes proposed to it by the Member States and/or the European Parliament.

The structure of the target will get a lot of attention in the political debate that follows in 2024, given that stakeholders are much better aware of the implications now that the role of removals has been more widely understood. Major fine-tuning of these numbers and target structure will no doubt be one of the leading topics during the negotiations over the legislative proposal. The positions of the EU Member States are emerging, at least on the headline target. But where the European Parliament will stand will only be clear after the European Parliament elections held on June 6-9, 2024.

Domestic target or international credits?

There is no specific reference to whether the target is domestic or whether international credits could be used. That is not surprising as the 2030 climate target communication was also vague on such details. The specifics of the “domestic” 2030 target only appeared in the legislative proposal.

Will the 2040 target be domestic? There have been hints that the Commission might consider certain carbon removal projects from abroad. Climate change is a global problem, and there are other examples of policies that recognise removals from other jurisdictions, notably California’s Low Carbon Fuel Standard. Allowing international credits in the 2040 target will no doubt be an element in the upcoming political debate. Whatever the final decision, proper guardrails need to be put in place so that international credits don’t water down the climate impact. If the 2040 target will not be domestic, it would also make sense to align the 2050 target with that, otherwise the policy design would get very unpredictable.

What’s next?

The Commission’s vision for the EU’s 2040 climate target paves the way for a political debate that will take place throughout 2024. These discussions will inform the legislative proposal for the 2040 climate target that will amend the European Climate Law. Given that 2024 is an election year and the new Commission College will only take office around November, the legislative proposal will likely be published only in early 2025. The EU institutions will then spend the rest of the year establishing their positions and negotiating the final text.

Once the 2040 target is agreed, it will be the basis of the EU’s next Nationally Determined Contribution (NDC) – a climate pledge under the Paris Agreement. The 2040 target will inform the EU 2035 target, which will also be part of the EU’s next NDC. The goal is to submit the NDC by November 2025, ahead of COP30 in Brazil.

Looking at the timetable above, it is obvious that concluding a legislative process in the EU in less than a year (from early 2025 to Nov 2025) on such an important file will be a major challenge.

The most nuanced and difficult work, however, will start once the target is set. How to align existing EU policies with the new 2040 target? What new policies should be introduced? What about the three climate policy pillars – the EU Emissions Trading System, the Effort Sharing Regulation and the Land Use, Land Use Change and Forestry Regulation? Will removals be part of all of these, or will there be a separate policy pillar for certain carbon removal methods? The years ahead will be busy with agreeing on a meaningful climate target and on the best way to achieve it.