Europe Update: The EU’s race to carbon neutrality as focus shifts to COP26

Europe Updates

European Union climate change proposals aimed at becoming carbon neutral by 2050

Last month the EU announced a set of proposals that would aim at moving the institution towards its goal of becoming carbon neutral by 2050. The draft proposals will need the approval of 27 member states and the European Parliament. The proposals at the centre of the EU’s ‘European Green Deal’ could involve years of negotiations and global political scrutiny, as they are the most radical climate change proposals to date, reducing greenhouse gases by 55%.

Key features of the proposals

The proposals include plans to tax jet fuel and ban the sale of petrol and diesel powered cars within the next twenty years. For Germany, such proposals would result in the cessation of car manufacturing with internal combustion engines, revolutionising one of the key drivers of the German economy. Some of the additional proposals include a ten-year tax holiday for low-carbon aviation fuel alternatives, more ambitious targets for expanding renewable energy around the European Union and a requirement for countries to quickly renovate buildings that are not deemed energy efficient. The proposals will result in raising the cost of emitting carbon for heating, a rise in flight costs in the EU as a by-product of higher taxes for high-carbon aviation fuel and charging importers for the carbon emitted for the transportation of raw materials.

What does this mean for the renewable energy market?

Companies such as Iberdrola and BHP are currently examining the long-term valuation of their renewable assets including offshore wind and the sale of oil and gas assets as the world shifts away from fossil fuels. The European Union’s new legislative framework for climate change would largely benefit such companies as they will be able to use it as an opportunity to generate wealth, employment and long-term investment.

How will the UK respond to the EU’s climate commitment?

Domestically, in November 2020 the UK Government set out a ten point plan for a green industrial revolution. The plans published by the Department for Business, Energy & Industrial focus on the following areas; advancing offshore wind, driving low carbon hydrogen, delivering new and advanced nuclear power, accelerating the shift to zero emission vehicles, green public transport, green ships, greener buildings, investing in carbon capture, protecting our natural environment, and green finance and innovation – all of which are aimed at cutting emissions by 78% by 2035 to bring the UK more than three-quarters of the way to becoming net-zero by 2050.

With COP now less than 100 days away, the spotlight will remain very squarely focused on how the UK drives forward the climate agenda, and industry will be on the lookout for meaningful policy announcements from central UK and devolved governments.