The European Commission’s (EC) 2024 Climate Action Progress Report has highlighted significant strides in reducing greenhouse gas (GHG) emissions across the EU, with an impressive 8.3% decrease in 2023. This marks one of the largest non-COVID-related declines in recent history, primarily fueled by a substantial 24% reduction in emissions from electricity production and heating.
Trading Carbon, Saving the Planet: How EU ETS Drives Climate Action
What makes such a significant reduction in EU emissions possible is the bloc’s Emissions Trading System (ETS). The ETS serves as a crucial policy tool that slashes GHG emissions across several high-emitting sectors, applying the polluter pays principle to hold companies accountable for their emissions in key sectors such as electricity and heat generation, industrial manufacturing, aviation, and maritime transport. Together, these sectors contribute to about 40% of the EU’s total emissions.
Launched in 2005, the ETS has been a cornerstone of the EU’s climate strategy and its ambitious 2050 net zero goals. According to the report, by 2023, the EU ETS had significantly driven down emissions in its covered sectors, achieving a remarkable 47.6% reduction in emissions from electricity, heat generation, and industrial manufacturing compared to 2005. Moreover, the ETS has raised over €200 billion through allowance auctions, with €43.6 billion generated in 2023.
Member States have utilized these funds to support renewable energy projects, enhance energy efficiency, and develop low-emission transport solutions. The 2023 revision of the EU ETS Directive introduced substantial updates, mandating that Member States direct all ETS revenue toward climate action and energy transformation, including measures to address the social impacts of the green transition.
Non-ETS sectors like buildings, agriculture, transport, and waste also witnessed modest reductions, driven by a 5.5% decrease in building sector emissions. Additionally, the EU’s carbon sinks in the Land Use, Land Use Change, and Forestry (LULUCF) sector increased by 8.5%, marking a reversal of a decade-long decline, although further efforts are required to meet long-term targets.
The Transition Powering Europe’s Emissions Drop
Provisional 2023 data from the EC report indicates that the region is on track to meet its goal of reducing GHG emissions by at least 55% by 2030 compared to 1990 levels. To achieve this target, the EU needs to reduce emissions by an annual average of 134 million tonnes of CO₂ until 2030, slightly more than the 120 million tonnes reduced annually between 2017 and 2023.
Achieving this goal will necessitate full enforcement of climate policies and increased investments. Beyond 2030, the focus will shift to more challenging industries and boosting carbon removal to reach net zero by 2050. In 2023, greenhouse gas emissions experienced their largest annual drop in decades, apart from the COVID-19 pandemic year of 2020. By the end of the year, total net emissions were 37% lower than in 1990, while the economy expanded by 68% over the same period, showcasing the ongoing decoupling of emissions from economic growth, demonstrating the feasibility of reducing emissions while growing the economy.
The report attributes the 8.3% emissions drop to a robust transition to renewable energy sources, particularly wind and solar, which now supply nearly 45% of EU electricity. Furthermore, electricity and heat supply decreased slightly by 3.1% and 2.3%, respectively. Preliminary data indicates that renewables have become the top electricity source, generating 44.7%, surpassing fossil fuels at 32.5% and nuclear at 22.8%. Hydropower and nuclear energy also experienced a resurgence.
Gas has increasingly replaced coal in many instances, resulting in a 20% reduction in fossil fuel-generated electricity compared to 2022. The EU’s ambitious climate goals are enshrined in the European Green Deal and the 2021 European Climate Law, with the 2050 net zero goal incorporating a binding target of a 55% reduction in GHG emissions by 2030 relative to 1990 levels. This goal is supported by the “Fit-for-55” legislative package, which includes expanding the EU ETS to cover more carbon-intensive sectors to create additional economic incentives for emissions reduction.
Economic Growth and Climate Action, Together
While the EU has made significant strides in emissions reduction, the report underscores ongoing challenges. For instance, emissions from the EU ETS-covered aviation sector increased by 9.5%, while other sectors showed slower progress in reductions, with agricultural emissions decreasing by 2% and transport emissions by less than 1%. These figures highlight areas where the EU will need to accelerate efforts to meet future targets.
Looking ahead, the EU is considering a new emissions target for 2040, with the Commission proposing a 90% GHG reduction. Achieving this target would necessitate an estimated €660 billion annually for energy systems and €870 billion per year in the transport sector. Priority investments would focus on decarbonizing industrial processes, enhancing energy efficiency, transitioning towards electrification, and developing sustainable fuels for the transport sector.
As the EU prepares for the global climate talks at COP29, Wopke Hoekstra, Commissioner for Climate Action, emphasized that the EU’s efforts showcase how economic growth and climate action can coexist. The report underscores the importance of climate resilience and international cooperation, particularly through the upcoming COP29, as the bloc aims to lead in global climate finance and development assistance, contributing a third of global public climate funding.
