The expansion of fossil fuel subsidies and a slowdown in reforestation are impacting the EU’s net zero trajectory
An increase in fossil fuel subsidies during the energy crisis triggered by the invasion of Ukraine and a declining rate of carbon stored in trees is compromising the EU’s progress towards climate neutrality by 2050, concludes a report by the European Climate Neutrality Observatory.
The independent monitoring initiative, which was launched last year, tracks and assesses the EU’s decarbonisation journey across 13 “building blocks”, which it believes are necessary to reach a climate neutral society and economy. These building blocks are: electricity, mobility, industry, buildings, agrifood, carbon dioxide removal, lifestyles, clean technologies, finance, a just and inclusive transition, governance, adaptation and external action.
This year’s progress check covers the rates of change from 2016-2022, while last year’s inaugural report was largely based on data covering 2015-2021.
Consistent with last year’s report, ECNO found that finance and CO₂ removals are the EU’s Achilles heel, with both heading in the wrong direction.
Channelling public money towards short-term relief rather than long-term resilience during the energy crisis has caused a spike in fossil fuel subsidies, further exacerbating the climate finance investment gap, the report says.
It also questions the quality of information disclosed by banks on climate finance, highlighting that the timeline for the publication of transition plans from financial institutions remains uncertain. The report’s authors hope the adoption of the Corporate Sustainability Due Diligence Directive and the revision of the Capital Requirement Directive mean it will become mandatory for banks to implement such plans.
Meanwhile, to address the decrease in natural sinks that absorb CO₂, the report suggests shifting away from monoculture forests and ensuring a greater mix in tree species, while also promoting biodiversity, forest resilience, and data monitoring for soils.
Improvements and recommendations
Electricity, industry and clean tech are the building blocks to have improved the most compared with last year’s analysis, but the overall pace of change is still too slow, with only climate governance on track to reach its objectives by 2050, says the report.
Agrifood, buildings and mobility are areas where progress is still too slow, with insufficient policy backing, says the report. One proposal put forward by the report’s authors entails shifting public funds under the Common Agricultural Policy to better support farmers, by encouraging the adoption of low-emission and climate-resilient agriculture.
Promising signs for a just transition are found, however. The authors highlight that employment in regions most affected by the transition is the highest on record with almost 1.7mn people employed in the renewable energy sector across the EU.
You can access the full report here.
