Investment Institute
Macroeconomic Research

Europe’s path to net zero

  • 13 May 2021 (5 min read)

Key points

  • The European Union has been a global leader on climate action and policies. With its European Green Deal, it has committed to reducing greenhouse gas emissions by at least 55% by 2030 from 1990 levels and reaching carbon neutrality in 2050. These ambitions are shaping policy, legislation and investments decisions
  • A successful transition to carbon neutrality requires an overhaul of European energy production and consumption. Some sectors – such as power and transport – look set to make the quickest progress, while some countries’ decarbonisation efforts will have to be supported
  • The transition cost is massive, estimated at €3.5tn over the coming decade. The private sector is expected to contribute two-thirds of this total, with the European Union facilitating investment through legislation and supporting instruments, including taxonomy and its green bond standards. A revision of carbon pricing – its most powerful tool – is due this summer
  • Around €600bn has already been earmarked in public funding from the European Union’s long-term budget and Next Generation deal. At least that amount again is envisioned for total public commitment, estimated at 35% of total funding. We present a preliminary assessment of public spending plans to date
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