Europe’s new 2030 emissions target has made it the undisputed global leader in climate ambition. The European Union (EU) aims to cut greenhouse gas (GHG) emissions to 55% below 1990 levels by 2030. This is a huge and highly ambitious leap from its previous target of 40% but one that is necessary if the bloc is to be a net-zero emitter by 2050.

With Europe still a long way from achieving this rapidly approaching new target, dramatic changes are required this decade. The EU needs more renewable generation and a shift from internal combustion engines to electric vehicles. It also needs to step up the phase-out of coal and find ways to encourage energy efficiency and accelerate the electrification of buildings.

Reforming the carbon market will be critical, especially for the hard-to-decarbonise industrial sectors, such as cement and steel. Though the EU Emissions Trading System (ETS) covers sectors that generate half of the bloc’s emissions — power, industry and aviation — these sectors will only deliver a third of the cuts needed by 2030.

The EU must provide more certainty on the future cost of carbon, ensuring that it delivers the highest practical levels of coal-to-gas switching. The carbon price that would put gas-fired combined-cycle gas turbines ahead of lignite in the merit order is $65 per tonne — twice today’s level.

Certainty over the cost of carbon by 2030 would also accelerate coal phase-out plans, as it did in the UK. Renewable generation would be more competitive, and the array of projects would expand. The rapidly growing pipeline of low-carbon hydrogen projects would be bolstered, and the market would become more engaged in the development of carbon capture and storage (CCS).

Carbon abatement cost ranges (2030). Photo: Wood Mackenzie

The 2030 target poses major challenges for the energy industry, but it also presents great opportunities. Vast amounts of capital, private and public, are primed to invest in decarbonisation. As such, there is an ever-growing list of investable opportunities to achieve Europe’s carbon emissions ambitions:

  • Utility-scale renewable generation: embracing onshore and offshore wind and solar to at least double today’s levels.

  • Infrastructure and integrated solutions: to deliver electrification and energy efficiency across the transport, industrial and buildings sectors.

  • Bioenergy: set to be a growing part of the energy mix.

  • Gas and liquified natural gas (LNG): for flexibility in power and heating (though value-chain emissions must be reduced, and large-scale CCS become a reality to secure a future beyond 2030).

The largest opportunities centre on the build-out of wind, solar and energy-storage capacity necessary for the 2030 target to become a reality. A total of $585bn is required for this, however that figure begins to materially increase once you add in the additional infrastructure investment needed to transform the power market. Europe must rapidly shift from being a power market where centrally dispatched supply follows demand to one where demand can respond to an increasingly variable, weather-driven supply from renewable sources

The EU needs to move faster, sooner to hit its 2030 target. European policymakers will need to make difficult and, in many cases, unpopular decisions to deliver greater emissions reductions. However, the region also hopes that its bold step will inspire other nations to do the same.

Ahead of the United Nations Climate Change Conference (COP26) in Glasgow in November 2021, which is intended to spur greater global commitment to tackling climate change, all eyes will be on how Europe maps out its path to net zero.