Energy transition outlook: EU

Net zero strategies and progress vary across the EU27 – a collective acceleration is required to hit shared targets

3 minute read

In response to a turbulent start to the decade, the EU has doubled down on its net zero commitments. Support for key energy transition technologies has accelerated. Gas demand has already peaked and oil demand is expected to follow suit this year, while wind and solar are forecast to generate nearly 75% of power by 2050.

There is still a difficult road ahead. Individual member states' strategies and progress vary, and they are collectively falling short of the pace required to meet net zero by 2050. But EU-wide efforts to streamline policy and strengthen cross-border infrastructure for power, carbon capture (CCUS) and low-carbon hydrogen are gaining momentum.

Our energy transition outlook (ETO), from our Energy Transition Service, maps three different routes through the global energy transition with increasing levels of ambition. And our regional updates delve into the detail at country level. You can access a complimentary copy of the ETO executive summary by filling in the form at the top of this page. And read on for three key themes from the EU-27 outlook.

1. Diverse strategies are united in a common goal – but the pace needs to pick up

EU27 members are united under the EU 2050 net zero target. Germany and the Nordic countries have more ambitious targets of 2045, and our analysis shows that more members need to accelerate their efforts to achieve global net zero by 2050.

Under our net zero scenario, EU emissions reach net zero by 2048. But in our base case scenario, the EU does not reach net zero until well into the 2060s.

Progress to date does vary across member countries. Smaller economies require support with electrification. Our base case projections highlight a wide gap between levels of electric vehicle (EV) and heat pump adoption at ranges of 45-67% between members, with the Nordics generally at the higher end. The Nordics too stand out as already using a large share of renewables in generating power. Sweden operates 100% low-carbon generation capacity (66% renewable) and Finland 98%.

2. Energy security is at the heart of EU energy transition policy

The EU must choose its friends wisely to reduce third-party supply risk. REPower EU aims to reduce gas demand and dependence on Russia. But in the short-term weather, prices and economic slowdown all played an arguably much larger role in reducing demand by 15% between 2021 and 2023. And gas is here to stay. In our base case, it only declines from 363 bcm to 295 bcm by 2030 and 116 bcm by 2050. In our net zero scenario it declines to 91 bcm by 2050, but is paired with carbon capture, utilisation and storage (CCUS).

Supply chain risk is not restricted to gas, of course. The European Commission’s Critical Raw Materials Act (CRM) Act seeks to ensure access to secure and affordable supply of raw materials critical to the net zero industry (as well as for other strategic sectors.) The list of materials includes graphite, lithium, cobalt and rare earths. With limited domestic resources, the focus of the CRM Act appears to be risk spreading – setting limits of 65% reliance on a single third party, per material. Putting this into practice is unlikely to be practical in all instances.

3. New energy transition technologies receive varying support in the EU

Hydrogen infrastructure projects account for 40% of the EU’s projects of common interest (PCIs) in 2023. And the launch of the Hydrogen Bank’s first auction round of €800 million is a strong response to the Inflation Reduction Act (IRA) in the US. The swift execution shows that the EU is serious about competing in the global hydrogen economy.

Meanwhile, the EU has woken up to the necessity of carbon capture, with a target of 50 Mtpa CO2 storage capacity by 2030. But with few projects in the pipeline and some members yet to adopt the EU CCS directive, this is unlikely to be achieved.

Small modular reactors (SMR) are gaining traction in pro-nuclear member states. France, Poland and Romania are investing in new conventional nuclear plants as well as establishing themselves as up-and-coming SMR supply and customer bases. However, several members plan to phase out nuclear power entirely or have already done so.

Get a closer look at energy transition scenarios in the full ETO report

Our ETO report includes a more detailed look at:

  • EU energy transition policy
  • Support for different energy transition technologies
  • The energy mix and emissions in different energy transition scenarios
  • The impact of carbon prices
  • Country spotlights: Germany, France, Italy, Spain, Poland and Sweden.

Fill in the form at the top of the page for a complimentary copy of the ETO executive summary.