EU will miss 2050 climate targets by a decade, without urgent action

Despite ambition across its members, the European Union (EU) won’t meet climate targets until well into the 2060s, as focus shifts to energy security and economic stability. Renewables and electrification uptake is due to progress steadily, but nascent technologies, such as hydrogen and carbon capture, need urgent action in the forms of investment, demand certainty, and policy commitment, according to new report from Wood Mackenzie.

The report ‘EU27: Energy Transition Outlook’ is part of Wood Mackenzie’s ETO research series which maps three different routes* through the global energy transition with increasing levels of ambition.

On its current trajectory, the EU’s emissions are expected to fall short of its net zero pledges at 684 million tonnes per annum (Mtpa) by 2050, despite unity between members to meet the EU 2050 net zero target, which falls under the European Green Deal.

To meet global net zero goals, the EU would need to reach net zero by 2048 in order to offset other regions that will still be emitting throughout the following decade, according to Wood Mackenzie’s net zero 2050 scenario.

“The EU remains a leader in the energy transition with ambitious, legally binding targets, but a turbulent start to the decade has thrown up several obstacles, shifting focus to energy security and economic stability while pushing net zero targets lower on the agenda,” said Lindsey Entwistle, senior research analyst at Wood Mackenzie, and lead author of the report.

Entwistle added: “The good news is that these goals align for the EU in the longer-term and the wider industry is seeing the Union double down on efforts to streamline policy and strengthen cross-border infrastructure for power, carbon capture and low-carbon hydrogen. Targeted investment in these areas could accelerate the EU’s transition and achieve net zero by 2050.”

The pace of renewables rollout is constrained

Electricity demand is forecasted to increase to 2.5 times from current levels, with 82% of domestic power supply forecasted to be renewable by 2050 in Wood Mackenzie’s base case. Renewables capacity increases by an additional 70% in the net zero scenario, requiring an extra 10 gigawatts (GW) per year compared to Wood Mackenzie’s base case.

Smaller economies require support with electrification through funding for critical infrastructure, low-carbon power supply and public incentives. Wood Mackenzie base case projections highlight a wide gap between levels of electric vehicle (EV) and heat pump adoption. Sweden is at the higher end, with 88% EV share and 78% heat pump penetration expected by 2050, while Bulgaria is expected to reach just 35% and 33% respectively.  

“Reducing bottlenecks is critical to deploying the extra 10GW of renewables capacity per year that is required to enable sufficient electrification of demand sectors. Policy makers are keenly aware of this, and half of the Projects of Common Interest identified in 2023 are related to international power, grids, and infrastructure. The TEN-E policy and the Grids Action Plan both aim to ease power infrastructure bottlenecks through targeted investment and collaboration across members,” stated Entwistle.

New technologies receive varying support – hydrogen and CCUS in focus

In Wood Mackenzie’s base case, hydrogen is forecasted to grow to nearly 10% of industrial energy demand by 2050 in the EU, displacing the equivalent of 16% of today’s fossil fuel consumption in the sector and reducing more than 100 million tonnes (Mt) of CO₂ emissions. Hydrogen infrastructure projects account for 40% of Projects of Common Interest (PCIs) in 2023, helped by the launch of the Hydrogen Bank’s first auction round of €800 million.

Entwistle said: “Hydrogen Bank’s auction is a strong response to the US’ Inflation Reduction Act and the swift execution shows that the EU is serious about competing in the global hydrogen economy. But with 10Mtpa of imported low-carbon hydrogen required in our base case and 18Mtpa in our net zero scenario by 2050, the real export opportunity lies in EU expertise and low-carbon manufacturing of electrolysers, fuel cells and their components.”

“Norway, Denmark, Finland, and Spain are well positioned to become key exporters for regional hydrogen trade within the EU, and are expected to reach more than 5.5 Mtpa net export capacity by 2050,” Entwistle added.

While few members have set domestic targets for carbon capture or storage, there are 14 PCIs that focus on carbon capture, utilisation, and storage (CCUS) infrastructure, and the EU Innovation Fund has poured €1.7 billion into CCUS since 2021. The Danish Greensand demonstration project began North Sea storage in 2023, exporting CO₂ from Belgium via ship. The consortium expect the FID for the full-scale project in 2024. This is a promising start but there is a long way to go to scale up CCUS cross-border carbon transport and storage, stated the report.

Entwistle said: “Despite being late to the game, the EU has now been very clear about the importance of CCUS in its net zero strategy. The latest announcement of a 280 Mtpa capture target by 2040, as part of the Net Zero Industrial Act, is ambitious considering some members’ historic reluctance to embrace the technology.”

“There is no doubt that the EU views CCUS as essential to tackling the hard to abate emissions without impeding the industrial sector, where gross emissions are expected to exceed 270 Mtpa by 2050. The EU will rely on the ability to export captured CO₂ to neighbouring countries like Norway and the UK, with abundant North Sea storage, and there are several live projects developing the necessary pipelines and export infrastructure,” Entwistle added.

The EU continues to have the highest global carbon prices, at 2.5 x the average for developed economies. But prices need to increase from 2027 onwards at twice Wood Mackenzie’s forecast rate in order to facilitate the widespread adoption of nascent technologies that is required to achieve net zero.

Progress varies between members

Germany and the Nordic countries have more ambitious targets of 2045, while more members need to accelerate their efforts to achieve global net zero by 2050, stated the report.

Nordic members already use a large share of renewables in generating power, mainly a combination of wind, solar and hydro, alongside a high uptake of nuclear in Sweden and Finland. Wood Mackenzie figures show that Sweden operates 100% low-carbon generation (66% renewable) and Finland with 98%, while Poland uses 66% fossil fuels for power generation, followed by Germany at 47% and Romania at 44%.

The report also highlights variation regarding nuclear power policy, with several members planning to phase it out entirely or have already done so. While France, Poland and Romania are investing in new conventional nuclear plants as well as establishing themselves as up-and-coming small modular reactors (SMR) supply and customer bases.