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The 2015 Paris Agreement underscores the imperative to restrain global temperature escalation to well below 2 °C, ideally 1.5 °C, in relation to pre-industrial levels. This necessitates nations achieving net zero greenhouse gas (GHG) emissions, commonly termed climate neutrality, in the latter half of the current century. As of now, countries representing roughly 70% of global GHG emissions have committed to attaining climate neutrality, spanning from 2035 to 2070. However, a considerable portion of these commitments lacks substantive short-term policy support.
The European Union (EU) has positioned itself as a vanguard in climate policy, aspiring to become the inaugural climate-neutral continent by 2050. This commitment, delineated in the European Green Deal, is designed to achieve net zero GHG emissions by 2050, concomitant with decoupling economic growth from both GHG emissions and resource utilization. In September 2020, grounded in a public consultation and comprehensive impact assessment, the Commission introduced a communication on the climate target plan. This plan recommended elevating the 2030 target from a 40% emissions reduction to a 55% net emissions reduction relative to 1990 levels. An exhaustive impact assessment affirmed that a 55% reduction constitutes the most cost-effective means of attaining climate neutrality by 2050.
The legislative underpinning for these commitments materialized through the European Climate Law in 2020, mandating the climate neutrality commitment and the 55% emissions reduction target. The 'fit for 55' package, unveiled in July 2021, entails legislative proposals for the revision of extant EU legislation and the introduction of new initiatives to effectuate the 55% target. These propositions primarily target the revision of key EU climate and energy policy instruments, including the EU emissions trading system (ETS), the Effort-sharing Regulation, and the Land Use and Forestry Regulation (LULUCF). To catalyze decarbonization in specific sectors, the Green Deal employs an array of interconnected measures, strategically influencing energy, mobility, buildings, and food production domains.
Next, let’s take a closer look at what is emerging in terms of regulation with Transportation, Industries, Energy and Buildings - which also happens to be Greencode’s main investment themes.
Transportation
In a significant move towards a greener future, Europe is undergoing a transformative shift in its transportation policies. The ambitious goal is to ensure that all new cars and vans registered in the continent will be zero-emission by 2035.
By 2030, stringent emission reduction targets are set, demanding a 55% decrease in average emissions for new cars and a 50% reduction for new vans. These targets mark crucial milestones on the path to achieving complete zero-emission mobility.
Active efforts are underway to establish a comprehensive charging infrastructure for zero-emission vehicles, covering both short and long journeys. The EU is mandating the deployment of electric recharging and hydrogen refueling stations along European roads to ensure widespread accessibility.
Starting in 2027, road transport will be included in emissions trading, introducing a pricing mechanism for pollution. This strategic move aims to encourage cleaner fuel usage and channel funds into the development of clean technologies.
Initiatives in the aviation sector include the extension of carbon pricing to non-domestic flights to and from outermost regions starting in 2024. To promote sustainable aviation fuels (SAF), there is an increase in the required minimum blend of SAF with kerosene for aviation fuel supplied to EU airports.
The maritime sector is no exception, as carbon pricing has been extended to encourage the adoption of renewable and low-carbon fuels. A target has been established for gradual reductions in the annual average greenhouse gas intensity of energy used onboard ships.
In conclusion, Europe's comprehensive approach, encompassing strict emission standards, infrastructure development, and carbon pricing mechanisms, showcases a steadfast commitment to a sustainable and eco-friendly future in the realm of transportation.
Industries
In February 2023, the Green Deal Industrial Plan was unveiled with the goal of boosting Europe's net-zero industry competitiveness and expediting the shift to climate neutrality. This plan, designed to position Europe as a hub for industrial innovation and clean technology, revolves around four core pillars: establishing a predictable regulatory environment, expediting funding access, enhancing skills, and fostering open and fair trade for robust supply chains.
A crucial component of this initiative is the Net-Zero Industry Act, introduced in March 2023. Aligned with the Green Deal Industrial Plan, the act aims to amplify the production of clean technologies within the EU, generate green employment opportunities, and equip the Union for a seamless transition to clean energy. The act is poised to create favorable conditions for net-zero projects in Europe, fostering an environment conducive to attracting investments. The overarching objective is to meet at least 40% of the EU's annual deployment requirements for strategic net-zero technologies by 2030.
Energy
To achieve a 55% reduction in greenhouse gas emissions by 2030 and address vulnerabilities highlighted by the Russian attack on Ukraine, the EU is pushing for a swift transition away from Russian fossil fuels. The REPowerEU plan, introduced in May 2022, focuses on deploying more renewable energy, saving energy, and diversifying energy supplies. In March 2023, the EU enhanced its commitment, raising the binding target for renewables to a minimum of 42.5%, with an ambition to reach 45%, almost doubling the current share of renewable energy.
Simultaneously, the EU established a binding target to improve energy efficiency by 11.7% by 2030, with member states required to achieve annual savings of 1.49% from 2024 to 2030. Emphasizing the importance of reducing energy consumption, this initiative aims to lower both emissions and energy costs for consumers and industries.
Crucially, the new targets also prioritize addressing energy poverty, making it a priority to implement energy efficiency improvements among affected populations.
As part of the green transition, the EU is also working on aligning minimum tax rates for heating and transport with climate objectives. While still under negotiation, this proposal aims to provide the right incentives for a sustainable energy shift while mitigating social impacts and supporting vulnerable citizens.
Buildings
Renovating homes and buildings is a key strategy to save energy, enhance resilience against extreme temperatures, and address energy poverty. The Commission's objective is to double renovation rates within the next decade, ensuring that renovations contribute to increased energy and resource efficiency. This initiative aims to improve living conditions, reduce greenhouse gas emissions, promote digitalization, and advance material reuse and recycling.
The 2021 proposal to revise the EU's Energy Performance of Buildings Directive seeks to gradually enhance the energy performance of buildings throughout Europe, considering national circumstances. Various individual measures, such as insulation installation, window and door replacements, heating system upgrades, and solar panel installations, are identified to achieve necessary improvements.
The newly established Social Climate Fund, with a budget exceeding €86 billion, supports EU citizens most impacted by or vulnerable to energy and mobility poverty. The fund focuses on structural measures and investments in energy efficiency, building renovation (e.g., insulation), clean heating and cooling (e.g., heat pumps), integration of renewable energy (e.g., solar panels), and zero- and low-emission mobility.
To guide Member States, a new indicative national benchmark of 49% renewable energy in the buildings sector has been introduced. The public sector is now obligated to achieve an annual energy consumption reduction target of 1.9%, extending the renovation requirement from central government to all levels of public administration.
Furthermore, starting in 2027, building and transport fuels will be subject to emissions trading, imposing a pollution price to encourage cleaner fuel usage and reinvest in clean technologies. These collective measures signify a comprehensive approach toward sustainable building practices and energy consumption in Europe.
Conclusion
As we wrap up our exploration of the EU's climate commitments, it's evident that the journey from the 2015 Paris Agreement to the ambitious 2050 net-zero emissions goal is marked by substantial strides. The EU's dedication, showcased in the European Green Deal and legislative acts like the European Climate Law, illustrates a continent committed to sustainable transformation.
Delving into specific sectors—Transportation, Industries, Energy, and Buildings—we find a tapestry of policies and innovations. The EU's holistic commitment to a greener future is evident, from zero-emission mobility to clean technologies in industries and transitioning away from fossil fuels.
Regulatory shifts present opportunities for startups, and we are poised to support the most ambitious ideas. However, the path to net-zero is complex, and reaching these targets requires concerted effort. Greencode Ventures recognizes the challenges and commits to being at the forefront of the green revolution.
Operating across all of Europe, we acknowledge the diversity of challenges and opportunities within the region. As it champions ambitious startups, Greencode Ventures acts as a catalyst for change, propelling Europe towards a harmonious balance between economic growth and ecological preservation. The evolving landscape signals a future where environmental stewardship aligns seamlessly with innovation and economic progress.
Sources:
On the path to a climate-neutral Europe by 2050 | European Commission
Economic impacts of the green transition | European Parlament
Five key action areas to put Europe’s energy transition on a more orderly path | McKinsey