Expert-Dialogues on the Future of EU Climate Policy
The EU’s Climate Gap: From Green Ambition to Ground-Level Reality

The current state of the EU’s climate policies

 As of now the most recent step was the EU Adaptation Strategy adopted in 2021 with a new integrated framework expected at the end of this year. Adaptation as well as mitigation is extremely important going forward and the EU’s new adaptation framework, labelled European Climate Resilience and Risk Management should aim to reflect that as in recent years Europe has seemed to neglect adaptation.

Ultimately, however, the effect of EU climate policy cannot be examined solely on its own without considering the role of other economies. The EU’s global share of global greenhouse gas emissions has fallen from 15% in 1990 to 6% in the last few years. This means that the EU by itself is not able to deal with this issue alone, however, it can exert influence beyond its borders through trade rules, climate finance and diplomacy. Its ability to convert regulatory leadership into international climate action will be important in ensuring effective climate change strategy.

At the same time, economic pressures, energy needs and dependencies on critical raw materials for the climate transition make it more difficult to defend a pathway that puts climate protection before competitiveness. Finding the right balance between competitiveness and climate protection will be key for the EU to continue playing a leading role in tackling climate change. 

A green transition that puts competitiveness first

Finding a way to navigate a green energy transition while keeping the EU competitive relative to the rest of the world is a key challenge. The energy landscape has changed irreversibly since the Russian invasion of Ukraine which has caused energy prices to rise. EU now faces electricity prices that are two to three times as high as than those in the US and natural gas prices being paid four to five times as high. The Draghi report highlights this and promotes the idea that decarbonisation can be used as an opportunity for Europe to take the lead in clean energies. However, it does not sketch a clear way forward to turn ambition into reality.

It is worth noting that compared to most big economies the EU’s climate goals are more ambitious. Under Trump, the United States has withdrawn from the Paris Agreement, while China only aims for its carbon emissions to peak in 2030. This does pose the EU severe economic hurdles that other large economies do not face, for example, the EU is the only major region worldwide to have introduced a significant CO2 price. Decarbonisation is also projected to cost €500 billion for the four largest energy-intensive industries (EIIs) (chemicals, basic metals, non-metallic minerals and paper) overall in the next 15 years and 100 billion EUR for the transport sector each year from 2031 to 2050.

However, with this does come with an opportunity. As outlined in the Draghi report decarbonisation offers an opportunity for Europe to lower energy prices and take the lead in clean technologies. This would give Europe the chance to be energy secure through different clean energy sources, such as nuclear, solar in Southern Europe and wind in the North and Southeast. However, putting this transition into action requires a clear plan and sufficient investments not only in the technologies themselves, but also in energy grids. The European Commission has noted that at least 16 EU countries currently face grid connection queues, leaving around 120 GW of mature renewable energy projects at risk of missing timely grid access by 2030.The 2023 Grid Action Plan identifies €584 billion is necessary for investments.

The good news is that Europe is already ahead of China and the US in this regard. Renewable energy accounted for around 22% of the EU’s gross final energy consumption in 2023, compared with 14% in China and 9% in the US. While the EU is behind China and the US in digital innovation, it leads in many green technologies, for example, sustainable transport. However, China’s growing foothold in clean-tech manufacturing does present a challenge to the EU’s competitiveness. As rapid innovation and low manufacturing costs have allowed China to build significant production capacity in areas such as solar photovoltaic (PV) manufacturing. Due to low domestic demand and other economies placing tariffs on China, the EU is seeing a sharp deterioration of its trade balance with China. While, access to cheap Chinese clean technologies may help Europe achieve its decarbonisation targets, it risks dependence on Chinese supply and placing Europe in a weaker position competitively. As highlighted in the Draghi report Europe must choose between competitiveness and autonomy at the risk of higher costs or pursuing decarbonisation at the risk of damaging domestic industrial markets and competitiveness. The EU must aim for a mixed approach that aims to increase competitiveness and defend domestic industries while also continuing to lead the global energy transition.

An attempt to bring balance to the Global South

The EU’s Carbon Border Adjustment Mechanism (CBAM) entered its definitive regime at the beginning of 2026. The Mechanism requires authorised declarants importing covered goods like aluminium, steel and cement to purchase CBAM certificates reflecting the embedded emissions of those products. Importers exceeding the 50-tonne threshold for CBAM goods are required to apply for authorised CBAM declarant status.

This mechanism marks a further landmark of EU climate policy extending the EU’s carbon pricing framework to certain imports. Similarly, the Global Gateway strategy aims to mobilise €300 billion in investment in partner countries (many of which are developing countries) to channel partly towards climate mitigation and clean energy).

CBAM itself brings troubling effects that do not align with the EU’s values and commitments. Analysis has suggested that it could reduce exports of developing countries by around 1.4% as many of the products affected by this legislation form the backbone of certain countries' trade. Modelling points have pointed to export declines from Africa to the EU of up to 13.9% in aluminium, 8.2% in iron and steel, 3.9% in fertiliser, and 3.1% in cement which could potentially translate into an estimated 0.5% hit to Africa’s GDP overall and most severely Mozambique’s GDP with up to 1.6% hit. This difficult outcome is hard to reconcile with considering the historical record of the Global North bearing a disproportionate share of cumulative emissions compared to the Global South, while this latter is expected to bear a disproportionate share of the impacts of global warming in the coming decades.

To move forward the EU could either reconsider the rules for some of its partners, or could propose to redirect some of the CBAM revenues to Least Developed Countries (LDCs) with the aim of financing their efforts towards climate adaptation, and more importantly the decarbonisation of their manufacturing industries to ensure trading can continue with the EU as a primary trade partner. While these revenues are expected to be modest relative to the EU, with CBAM estimated to contribute less than 1% to EU’s total revenue. Nevertheless, the annual revenues are expected to be around EUR 1.5 billion in 2028 and hence could be a significant source of financing for LDC’s transition to decarbonisation.

Similarly, The Global Gateway’s €300 billion also help fund the clean power that CBAM-exposed exporters need. As an example, the Mozambique aluminium industry exports over 90% to EU markets and is expected to be significantly affected by CBAM. Targeted European investments in Mozambique should aim to aid the North-South electricity transmission which would allow Mozambique to produce aluminium with power generated on clean domestic hydroelectric power from the north instead of relying on coal imports via South Africa. Global Gateway financing for this would let Mozambican aluminium run on lower-carbon energy qualifying for the reduced CBAM costs to enter the EU tariff-free.

Evolving EU climate policy

Since the Paris Agreement, the EU has taken significant advances in climate policy making, building on previous work including the 2008 Climate and Energy Package and the 2030 climate and energy framework agreed in 2014.

Most notably, The Green Deal promised to transform the EU into a resource efficient economy by cutting emissions by at least 55% by 2030 and being carbon neutral by 2050.

The European Green Deal stands out as a significant step in European Climate policy, especially while we are in a situation where economic security takes the forefront, and has delivered many promises since its adoption. Most notably, it aimed to set legally binding targets, addressing a persistent weakness in green transition policies adopted by economies worldwide where commitments have no accountability baked into the legislation. In this aspect the European Green Deal delivered as it was promptly followed by the European Climate Law, which established a legally binding objective of climate neutrality by 2050. This framework was then strengthened through the adoption of a target of 90% reduction in net greenhouse gas (GHG) emissions by 2040 compared to 1990 levels, alongside dedicated targets for EU-based carbon removal.

Despite all this the EU climate policy has been far from perfect. Climate change appears to be less prominent in the current EU agenda with the new Irish council presidency not making climate change one of their three stated priorities and instead focusing on competitiveness, values and security. Energy transition is mentioned but as a passing line and with little focus on the hows, while considerably more energy is planned to be devoted to the development of AI, an area that has a well-documented large carbon footprint. 

Furthermore, the Commission has also proposed to loosen carbon market rules by allowing industries to keep emitting GHGs for longer than was originally planned. This would mean allowing industry to continue emitting planet-warming gases well into the 2040s and have access to more free emissions permits for longer, by lowering the “linear reduction factor”, the rate at which pollution caps fall annually. EU companies will also be able to buy carbon credits outside the EU for the first time which will allow the potential for industries to pollute more than their EU carbon allowances would normally allow. The proposal must still go to member countries in the Council of the EU and to the European Parliament to be debated, amended and potentially legalised.

This is where a familiar pattern asserts itself. The EU’s seemingly reassuring promises look robust on paper but this summer’s weather has highlighted how far behind implementation of these are. The LULUCF regulation - an EU framework governing land-use change and forestry accounts towards EU’s emissions target- has only partially been put into effect and a good portion remains to be implemented.

This is a telling example of a trend of the EU making strong, promising targets yet failing to execute them and consistently failing to ensure these targets are implemented on schedule. The 2026 heatwaves and wildfires are not proof of the lack of EU’s climate ambition as the Green Deal, the 2040 target and CBAM all point to a block with high ambitions for this issue, however, when it comes to results on the ground there is still a real gap.

The gap is also likely to widen before it narrows. Far right groups are taking up more space in the European Parliament with the Parliament’s third biggest party Patriots for Europe, which includes France’s Bardella-led Rassemblement National and Hungary’s Fidesz and Europe of Sovereign Nations, led by Germany’s Alternative für Deutschland (AfD) now holding significant space in Parliament. These groups openly call for the Green Deal’s suspension and opposition for clean energy transition and are gaining power with the rise of the far-right across Europe. All these factors do not bode well for the years ahead and it suggests that Europe’s climate promises will only get tougher from here and need to be implemented more urgently. 

The Need to Clarify Ambitions as Urgency Increases

These struggles to re-balance climate ambitions with competitiveness have come during a distressing summer with human and economic tolls from the extreme weather being seen throughout Europe. The aforementioned 675,000 hectares of land highlight the sheer damage of the recent wildfires which are expected to cost Europe €3 billion. 

The human costs have been equally stark, with extreme heat contributing to thousands of deaths across Europe. Germany recorded an estimate of 10,000 deaths related to the heatwaves this summer and in June alone France recorded over 5,700 excess deaths during the heatwave. On top of this the wildfires displaced roughly 300,000 people across Spain and France. Heatwaves and wildfires of this extent are expected to increase in frequency, duration and intensity in the future which will make them start becoming Europe’s summer norm rather than an exception. Economies like that of Spain and France are likely to take hits on agriculture facing its climatic limits and on tourism, which relies heavily on summer numbers which are likely to decrease if and when these types of summers continue. 

 Moreover, this summer the effects of global warming were felt worldwide. Asia and Africa both experienced their warmest July on record. Both Asia and Africa have also experienced heavy floods and monsoons this year and due to the effects of El Niño, which has the potential to become one of the most extreme ones on record, weather effects across the globe are expected to continue and worsen in some areas with increased rainfall and flooding in parts of South America and East Africa and droughts in Indonesia, parts of southern Africa and South Asia.

At the same time, the economic and geopolitical pressures are real and will continue to affect the EU’s climate agenda. EU policymakers and leaders will have to continue to make the green transition a priority, as a step back into a “fossil-fuel-age” is not appropriate given the reality of climate change. However, efforts need to be increased to ensure that the green transition does not negatively affect competitiveness. Further, an honest conversation needs to be held on what we need to do now in order to adapt to a changing climate and what this may cost our economies. Adaptation efforts will certainly need to be increased. The new integrated framework expected at the end of this year (EU Adaption Strategy adopted in 2021) will hopefully help to put adaptation higher on the agenda and provide a way forward on how the tragedies of this summer can be avoided in the future. 

Author : Zacharie Friedlingstein