Climate & Energy

Climate & Energy

Last updated: 25 May 2026

European Green Deal — Implementation Status

The Green Deal remains formally intact but has been depoliticised and partially deprioritised relative to industrial competitiveness and defence.

Delivered:

• European Climate Law (net-zero by 2050, 55% reduction by 2030)
• Fit for 55 package — largely adopted by 2024
• EU ETS Phase 4 operational
• Renewable Energy Directive (RED III) — 42.5% target (aspiration for 45%)
• CBAM in transitional phase
• Deforestation-free products regulation

Stalled/Watered Down:

• Nature Restoration Law — facing significant member state pushback
• 2035 combustion-engine car ban softened — changed to a 90% CO2 reduction target with e-fuel/biofuel loopholes
• The "Industrial Accelerator Act" (originally "Industrial Decarbonisation Accelerator Act") had the word "decarbonisation" dropped from its title by von der Leyen in Sept 2025 amid internal disputes
• Agricultural emissions — CAP reforms watered down after farmer protests

Fit for 55 Package

13 legislative proposals covering:

• Tightened EU ETS (more ambitious cap, faster reduction)
• Parallel ETS for buildings and transport (ETS2) — launched 2024, politically contentious
• CBAM — transitional phase active, full implementation from 2026
• 2035 ICE phase-out — amended to 90% CO2 reduction target
• Higher renewables and energy efficiency targets
• Social Climate Fund — to cushion impact of carbon pricing on vulnerable households

CBAM implementation snags:

• Complexity of calculating embedded emissions for imports
• Administrative burden on importers
• Developing countries have complained to the WTO
• Free allowance phase-out alignment with CBAM ramp-up still disputed
• UK has introduced its own CBAM — alignment/mutual recognition talks ongoing

EU ETS (Phase 4)

• Carbon price trajectory: Fell from peaks of ~€100/t in early 2023 to around €65-75/t through 2024-2025 due to reduced industrial output and faster renewables deployment
• Market Stability Reserve continues absorbing surplus allowances
• ETS2 (buildings/transport) launched in 2024 — has been highly politically contentious, with member states fearing public backlash over heating costs
• EU's carbon price is still the world's highest, but the gap with other jurisdictions is narrowing

Renewable Energy Directive (RED III)

• Target: 42.5% renewables share of energy consumption by 2030 (aspiration for 45%)
• Legally binding since late 2023
• EU's solar/wind growth pushed fossil-fuel power to its lowest level in 40 years (Jan 2025)
• Solar capacity additions hit records in 2024-25
• Wind: offshore wind expansion accelerating but facing permitting bottlenecks and supply chain constraints

Energy Crisis Fallout (Ukraine War / REPowerEU)

REPowerEU Outcomes

• Russian pipeline gas imports fell from ~40% of EU gas in 2021 to under 8% by 2023
• LNG imports from US and Norway soared
• European renewable capacity additions hit records
• New LNG terminals built at pace in Germany, Netherlands, Greece

Russian Gas via Ukraine Transit

• The 5-year transit deal expired on 31 December 2024
• Hungary and Slovakia continued receiving some Russian gas via TurkStream
• Zelensky refused to renegotiate transit
• As of May 2026, no Russian gas flows through Ukraine

LNG Dependency

• EU became the world's largest LNG importer in 2023
• Critics warn of LNG lock-in and stranded assets — long-term contracts lock Europe into fossil fuel infrastructure
• Germany's new LNG terminals are controversial with climate groups

New Iran War (Feb 2026) — Second Energy Crisis

• The US-Israeli attack on Iran triggered a second energy shock
• Cost the EU an additional €24bn for oil/gas imports
• Oil spiked over $100/barrel
• Commission launched "AccelerateEU" (23 April 2026) — 44 actions including:
  • Electrification target
  • Gas storage fill requirements
  • Tax changes favouring electricity over gas
  • Accelerated renewable permitting

Green Deal Industrial Plan / NZIA / CRMA

Net-Zero Industry Act (NZIA)

• Adopted Spring 2024
• Targets 40% of net-zero tech manufacturing needs met domestically by 2030
• Covers solar, wind, batteries, heat pumps, electrolysers, grid technologies
• Simplified permitting for strategic projects

Critical Raw Materials Act (CRMA)

• Adopted 2024
• Targets: 10% extraction, 40% processing, 25% recycling of strategic raw materials within EU
• Diversification away from Chinese dominance in rare earths, lithium, cobalt
• Strategic partnerships with resource-rich countries (Chile, Australia, Namibia)

Industrial Accelerator Act (March 2026)

• Proposed "Made in Europe" procurement rules for low-carbon steel, cement, and EV parts
• Controversial — some environmentalists call it "climate law in disguise", others fear climate focus being sidelined for competitiveness
• Von der Leyen dropped "decarbonisation" from the title
• Germany opposed restrictive "made in Europe" rules

Member State Pushback

Farmer Protests

• Major protests across France, Germany, Netherlands, Poland, Belgium in 2023-24
• Directed against: fertiliser restrictions, CAP reforms, nitrogen rules, pesticide bans
• Commission watered down several agricultural proposals
• The far right successfully channelled this anger — Politico: "Dutch farmers back Wilders as centrist nightmares come true"

Centre-Right Turn

• Germany's CDU won Feb 2025 election — climate ambition downgraded relative to competitiveness
• France's RN expected to do well in 2027 presidential race
• European Parliament shifted right in 2024 elections — Greens lost seats
• AfD/RN climate denialism: AfD platform includes leaving EU climate policy, reopening coal plants

2040 Target Debate

• Commission proposed 90% net reduction by 2040 (July 2025 amendment to Climate Law)
• Key controversy: includes international carbon credits from 2036, wider use of carbon removals in EU ETS
• Climate NGOs called it a "watered down" target
• EU missed the Feb 2025 UN deadline for new NDCs — now faces Sept 2026 deadline
• Member states (led by Germany, Poland, Italy) pushed for flexibilities

Heat Pump and EV Market

EV Sales

• EVs outsold petrol cars in EU for the first time in December 2025 (217,898 EVs vs 216,492 petrol, up 51% YoY)
• Full-year 2025: 17.4% market share (up from 13.6% in 2024)
• Chinese EV maker BYD tripled market share to 1.9%
• Tesla's market share dropped 37.9% in 2025 amid Musk controversy
• Automotive sector pushed back hard — Stellantis claimed "no natural demand" for EVs
• EU responded by softening the 2035 ban to a 90% CO2 target with e-fuel loopholes

Heat Pump Slowdown

• Heat pump sales in Europe fell in 2024 after a boom in 2022-2023
• Partly due to policy uncertainty in Germany and reduced gas/electricity price differential
• AccelerateEU plan includes tax changes to favour electricity over gas

Sources

• Carbon Brief — EU solar/wind pushed fossil fuel to lowest level in 40 years (Jan 2025)
• Carbon Brief — EU 2040 target: 90% net reduction proposed (July 2025)
• Carbon Brief — Nature Restoration Law pushback
• Politico Europe — "Industrial Decarbonisation Accelerator Act" renamed (Sept 2025)
• Politico Europe — "AccelerateEU: 44 actions for second energy crisis" (Apr 2026)
• Politico Europe — "Commission's stealth migration drop" — broader policy shift context
• BBC News — Farmer protests across Europe (2024)
• BBC News — Germany's Zeitenwende climate implications
• Wikipedia — Fit for 55, RED III, NZIA, CRMA, EU ETS Phase 4
• European Commission — REPowerEU outcomes report
• Politico Europe — "Dutch farmers back Wilders as centrist nightmares come true" (Feb 2024)