A Vision for the EU Net-Zero Transition

Next steps for climate action in the EU

The EU has shown climate leadership through the establishment of an ambitious goal for climate neutrality across the bloc by 2050. This commitment starts with reducing emissions by at least 55% before 2030, and by adopting legally binding climate targets covering key sectors of the economy. As the flagship initiative from the von der Leyen Commission, the Green Deal rolled out the first comprehensive attempt to decarbonise a region, with legislations adopted covering, among others, the energy, industry, transport, and building sectors. Historically, the EU has a track record of climate successes. For example, by developing innovative policies such as the Emissions Trading System (ETS), the first large-scale greenhouse gas emissions trading scheme in the world, the EU has had the opportunity to be a standard-setter globally.

However, ambition and early successes do not guarantee that the EU will achieve its climate neutrality goal on time. Moreover, the geopolitical and macroeconomic environment has undertaken major changes since the launch of the Green Deal. The invasion of Ukraine, the subsequent energy crisis, the shortage risks for raw materials, and the limits of the supply chains needed to deliver the clean technologies are key challenges to address to reach climate neutrality.

In addition, concerns about balancing social and just transition measures, rising inflation, and increased pressure for global competitiveness have been growing in Europe. While a majority of EU citizens considers climate change as a very serious problem and expect the EU and their governments to take action¹, the political impact of the rising opposition to the Green Deal should not be underestimated either.

As a new legislative term is about to start, the EU institutions will define the priorities and the future of EU climate policies for the next five years. This is an opportunity to reassess the current approach, identify remaining gaps, and lay down the next steps needed to achieve climate neutrality, ensure a fair transition, and support international competitiveness. Since the 2040 climate objectives will also be the object of discussions this year, 2024 should be a year of climate debate and planning.

As a science-based climate NGO, CATF is focusing on realistic and systems-centred solutions that will enable the EU to meet its climate ambition in a socially and economically viable way, and has identified key suggestions for the EU to develop efficient pathways towards decarbonisation and climate neutrality.

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SECTION 1

A new chapter for EU climate action

While significant progress has been achieved during this legislative term, the risks that could derail the decarbonisation pathway, along with the changing context, require a change in approach and a new vision for EU decarbonisation. The EU institutions should ensure climate remains at the top of the agenda during the next legislative term, but shift its focus to adopt an option-based and technologically open approach. This should be backed up by a sufficient budget and increased funding available for clean tech.

1.  Keep climate as a priority and plan efficiently

While this Commission achieved clear progress on climate and the Green Deal delivered across a broad range of topics, Europe is not on track to reach its climate objectives. Based on the Commission’s assessment of the draft updated National Energy and Climate Plans (NECPs), the EU will already fall short of its 55% objective for 2030. Looking beyond 2030, towards 2050, projections with the existing measures adopted demonstrate that the EU will not reach climate neutrality. The European Scientific Advisory Board on Climate Change recently highlighted that more efforts will be needed to achieve the EU climate objectives from 2030 to 2050, and that new measures and policies will be required to reach climate neutrality on time.²

The upcoming years have been identified by the IPCC as the crucial decade in the fight against climate change. Furthermore, according to Eurobarometer surveys, EU citizens believe climate change is a serious problem facing the world.³ As the consequences of climate change become increasingly visible in Europe and around the world, it is critical that climate remains at the top of the agenda of the EU institutions. It is also essential that the ambitious policies required to achieve the EU 2040 and 2050 goals are developed, adopted, and implemented. Institutions should therefore not rest on their laurels and limit their work to implementation only; on the contrary, it should continue to prioritise climate and develop the policies needed to close this gap.

Climate neutrality will require the availability and deployment of numerous technologies. However, many of these technologies require long development or deployment periods. While ambitious targets will be needed for 2040, the EU should keep in mind the 2050 climate neutrality goal. Having measures and targets for every decade is extremely useful to ensure that Europe is advancing at a pace matching its climate ambitions, but the EU also needs to plan pathways to guarantee that the technologies needed for climate neutrality in 2050 are all taken into consideration on time. This will require to start developing technologies now that may only play a role after 2040.

To plan the decarbonisation efficiently, the next Commission should also consider establishing a Climate and Energy Agency, as suggested by Bruegel.⁴ Planning for the climate and energy transition can only be achieved with accurate monitoring of the progresses made and regular updates to modelling tools. At the moment, the EU does not have access to consistent and granular publicly available data, which would allow the implementation of decarbonisation plans to be closely monitored and adapted as required, and improve planning for infrastructure deployment. The creation of a Climate and Energy Agency could support the Commission and the Member States in their transition by providing consistent, up-to-date and granular data, modelling tools, and assessment of policies’ implementation. It would support an informed debate on the transition and the measures needed to achieve our climate goals.

2. De-risk the decarbonisation process: Different technologies on the table

Renewable energy and improved energy efficiency will represent a large part of the emissions reduction towards net zero but cannot cover all the abatement needed. While everyone agrees on the need for Europe to increase its renewable energy production and imports as much as possible, this cannot be the sole technology the EU is placing all its bets on. Several reasons justify the need for optionality.

First, betting on a single pathway increases the risks of not reaching climate goals on time. Risks not yet taken into consideration (land use, supply chain, infrastructure, citizens’ support, energy efficiency, etc) could endanger the planned timeline for renewable deployment. The importance of diversification was highlighted following the invasion of Ukraine: over- reliance on a narrow set of technologies is risky as in case of major disruptions of the value chain or of lack of availability of certain materials, the energy transition could be significantly delayed. Therefore, the EU should ensure the development of different pathways and options, allowing to react with flexibility to any potential setback.

Second, not all emissions can be addressed with renewable energy or improved energy efficiency. Industrial process emissions or emissions from sectors such as agriculture, for example, cannot be fully avoided and will require technologies such as carbon capture and storage and carbon removal.⁵ Similarly, the deployment timeline of technologies is important. For example, Europe will not have enough renewable electricity at first to meet its projected hydrogen demand with only green hydrogen.⁶

Third, the EU is not a homogenous entity; it is composed of varied countries and regions, with different economies, energy mixes, industries, and challenges. A one-size-fits-all approach will consequently not work. To ensure that all Member States decarbonise on time, the next Commission will need to ensure that the different national and regional specificities are taken into consideration and that all regions have the necessary tools to decarbonise. The EU needs a technology-optionality driven approach that enables each country or region to attain decarbonisation and energy security with the resources best suited for its individual circumstances.

Fourth, in the context of an energy security crisis, the EU could expand and speed up its access to clean and affordable energy solutions by developing multiple options. Europe’s rapidly shifting geopolitical context over the past few years has underscored the need for an accelerated energy transition. The EU only produces around 45% of its own energy, while 55% is imported, and is still heavily dependent on fossil energy. Developing overlooked clean alternatives, such as geothermal energy, could support the EU on its path to energy security.

Finally, they European electric grid will likely need to be three to four times the size of today’s by 2050.⁷ Ensuring the continuous availability of the amount of clean electricity that Europe will need in the next decades will require a portfolio of options.

Scaling up a broad range of low- and zero-carbon technologies is vital to reach our 2050 carbon neutrality goal and to ensure energy security in Europe in a way that supports a well-functioning economy with well-designed social safeguards and industry competitiveness. The EU should embrace a diverse set of clean firm energy solutions and adopt an optionality- based approach that integrates the need for energy access and energy security, as well as the need to rapidly develop and deploy solutions to decarbonise hard-to-electrify sectors. The EU must recognise the need for a broad portfolio of technically viable zero- carbon technologies, for examples clean hydrogen and ammonia, carbon capture and storage, and newer innovations like superhot rock geothermal aenergy and fusion. The EU approach should assess technologies based on the emissions reduction they offer, their potential for scaling up, and their ability to provide affordable solutions.

3. Provide sufficient and comprehensive funding for EU decarbonisation efforts

The ability of the EU to decarbonise on time and to deploy clean technologies will largely depend on the availability of sufficient funding and its efficient use. This relates both to the amount available and how it is used and coordinated.

The EU should develop new and broader funding for climate. The EU institutions should ensure that sufficient EU budget is dedicated to climate measures, and defend a budget proposal that matches their climate ambitions.

At the moment, climate-dedicated grants from the Recovery and Resilience Facility (RRF), the Innovation Fund, the Modernisation Fund and the Just Transition Fund amount to around €50 billion per year. The RRF is the largest source of EU grants for the decarbonisation of the economy, with about 40% of it going to climate investment. However, this fund will end in 2026, creating a major gap in funding for the green transition. The gap due to the phase-out of the RRF was assessed to be about €180 billion between 2024 and 2030.⁸

Moreover, the European Court of Auditors also pointed to a gap in funding to reach the 2030 targets, highlighting that the uncertainty over whether sufficient funds are being invested in the low-carbon transition endangers the green transition.⁹ While the EU earmarked 30% of its budget until 2027 to fund its climate goals, this would represent only 10% of the funding needed. The rest should come from Member States and the private sectors, but measures outlined in the draft updated NECPs are currently too vague to assess the funding that will actually be available across the EU.

The EU should present, as successor to the RFF, a strong and ambitious climate fund. A level of climate funding at least equivalent to the one currently provided in the RFF should be ensured for climate action. It will be up to the next Commission to negotiate the delivery of a real climate fund. This fund is needed to ensure that countries with limited capacities to borrow money on financial markets can still support green industries financially, to ensure some cohesion across the EU, and to prevent the risk of socio-economic fragmentation.

This is important as larger Member States would be able to support their industries’ decarbonisation and address the eventual impact in ways that other countries could not match. This disparity could lead to a lack of cohesion in the internal market and result in some regions bearing a heavier social cost.

Besides the amount of funding available, how money is spent is also important. Research has shown that Europe spends just as much, if not more, on tech deployment as the United States with its latest policy packages.¹⁰ However, the funding is scattered across EU-level and Member States, and it is unclear whether or not it is suited to deliver deployment, and how different funds available could potentially be combined. Efforts should therefore be made to ensure coherence across fundings and to make sure they complement and strengthen each other.

The Commission should map out existing funding at the EU, national, and regional levels, the kind of projects they can support, and at which stage of the development or deployment they can be use. This information should be made available to support projects finding fundings, helping them identify what what financial support could be available for each step of their projects. Beside mapping these fundings, the Commission should assess the gaps in the existing funds, technology covered, amount needed for deployment, and stage of development. It also should take into account that the implementation of funding schemes can be slow and complicated, and is not creating the security of investment which is needed. The Commission should propose guidelines for Member States and regions on how to address the identified gaps.

Furthermore, EU projects are typically funded by grants, which are not efficient and leave entrepreneurs and businesses exposed to risks that they might not receive support after long bureaucratic processes. The Commission should look at adopting different kind of funding instruments (such as Carbon Contracts for Difference, loans, and others), which is crucial for reaping the benefits of innovation policy.

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SECTION 2

Thematic policy recommendations

Industrial decarbonisation

Climate policies have recently raised questions from industries, policymakers, and citizens, in a context of energy crisis, rising cost of living, and industrial competitiveness concerns. Since the 1970s, the EU has approached industrial policy by providing a supportive industrial environment through a triple focus: The Single Market, competition, and research and innovation.

The last decade has however seen a progressive shift of paradigm among the EU institutions due to several elements. First, the pandemic was a stark reminder of the existing risks of disruption of key global supply chains. Similarly, the invasion of Ukraine consolidates geopolitics, economic interdependence, and security as key factors to take into consideration for the EU and its industries.

Second, EU climate ambitions have a significant industrial impact. To achieve its 2030 goal, the EU will need ETS emissions to drop by a third and emissions from buildings and transport to be cut four times faster than in the past decade.¹¹ This effort will have a cost and require policy support to prevent putting EU firms at a competitive disadvantage, to ensure the success of the climate goals, and to maintain the EU’s socio-economic model. The EU economy relies heavily on carbon-intensive industries which now need to decarbonise. The strengthened ETS ambition and the progressive phase-out of free allowances will confront hard-to-abate industries with an increasing carbon price, meaning that the industries will either move towards cleaner technologies or pay a growing cost for their emissions. It is therefore crucial to ensure that the industries have the tools to decarbonise and preserve their competitiveness.

Third, as other regions of the world have adopted measures to support their industries’ transition, concerns about unfair competition have been growing in the EU. The wave of new industrial policies across the globe, intended to support decarbonisation and localise or, in some cases, re-shore clean energy and clean tech production, prompted the EU to reassess its view on state aid and industrial policies.

The industrial question is also importantly a social one. The steel sector supports 2.5 million jobs in the EU.¹² The cement sector alone represents about 36,000 jobs but can be linked to a further 13 million, since cement production is critical for various sectors.¹³ Industrial policy has therefore made a come-back at the forefront of the EU agenda. During this legislative term, the Commission had to deal with several emergencies.

The pandemic triggered a substantial revision of the new industrial strategy and the adoption of the European Chips Act. Following the crisis in Ukraine and the Inflation Reduction Act (IRA), legislations such as the Net-Zero Industry Act and the Critical Raw Materials Act demonstrated the commitment of the EU to de-risk their supply chains and to support their industries’ transition. However, more will need to be done to decarbonise EU industries.

1.  Develop and implement a comprehensive green industrial strategy

The next Commission will need to build on these initiatives and strengthen its focus on industrial decarbonisation. Research has shown that the biggest chunk of European Union’s greenhouse gases comes from transportation (28%), industry (26%) and power (23%).¹⁴ Industrial decarbonisation, competitiveness, and fair transition would require a significant amount of attention in the next legislative term. Hard-to-electrify sectors will need ambitious measures to be on the path to timely decarbonisation, and an updated industrial strategy is needed to support their transition and to ensure that the power of the internal market can fully contribute to the Union’s decarbonisation goals, competitiveness, and economic growth.

As the EU will finally phase-out the free allowances from the ETS, the climate benefits will only take place if industries have access to the technologies and necessary infrastructure to decarbonise. Without clean technology development and deployment, EU consumers will indefinitely be paying a carbon price, industries might move outside of Europe, emissions will not decrease at the necessary scale, and social costs will increase. Industrial decarbonisation has the potential to gather support among both citizens and companies, as it is closely related to jobs, prices, and competitiveness. This could therefore gather broad support in society

The EU institutions should build upon the existing efforts from the current legislative term and look at the hard-to-electrify sectors individually. For each sector, the gaps and challenges should be addressed, whereby necessary technologies and infrastructure to decarbonise, alongside required policy support, are identified and implemented.

Across sectors, industries will need a broad range of technologies to decarbonise, including, but not limited to, electrification, carbon capture, removal, and storage, clean hydrogen, and biomethane.

The deployment and commercialisation of the key technologies needed to decarbonise industries should be a priority for the EU. The EU institutions should ensure that relevant EU strategies outline a clear pathway and that the delivery of the identified actions is taking place on time. Progresses should be closely monitored, and any delays in achieving identified goals should promptly be addressed.

The common industrial policy should be assorted with a common European funding. As part of the aforementioned climate fund, the next Commission should seek to deliver a real Sovereignty Fund, with sufficient funding to support the transition of industries. An EU fund is needed because relying only on national funds could risk fragmenting the Single Market and endangering cohesion due to the difference of available funding and fiscal capacity among the Member States.

2.  Scale up carbon management

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Figure 1: A simplified illustration of carbon capture (left) and storage (right)

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What is carbon capture and storage?

Carbon capture and storage (CCS) is an essential technology for the EU to reach climate neutrality. CCS is a solution which can eliminate CO₂ emissions from processes where CO₂ is generated by fossil fuels, biomass or other carbon feedstocks, by separating CO₂ from other gases, before purifying, compressing and transporting it to geological storage sites. There, the CO₂ is stored deep underground (usually at least a kilometre deep) within porous rocks that are covered by an impermeable cap rock, ensuring the CO₂ is permanently stored.

Carbon capture technologies are not new and have been used safely and effectively for over 100 years, with many facilities capturing and using CO₂ in food and drink products. The storage of CO₂ has also been safely conducted for over 50 years. There are more than 20commercial-scale carbon capture facilities operating globally, permanently capturing and storing around 50 Mt of CO₂ annually.¹⁵

The overwhelming consensus among scientists is that geological storage of CO₂ is permanent, with the injected CO₂ staying trapped in the subsurface for millennia.¹⁶

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Figure 2: A map of all carbon capture and storage projects in development in Europe

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The risks of CO₂ leakage are extremely low, with recent analysis showing that even in a worst-case scenario over 99.92% of CO₂ will be contained in storage sites over a hundred years, retaining the climate value of the technology.¹⁸ Moreover, even in the case of leakage, direct effects on the environment are minimal,¹⁹particularly when storing CO₂ offshore.²⁰

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Figure 3: Volume of CO₂ captured for storage and utilisation in the EU in the Industrial Carbon Management Strategy¹⁷

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Carbon capture and storage works at scale but has not been deployed sufficiently due to a lack of adequate supportive policies or regulatory measures such as an effective carbon price.²¹ However, as greater steps are being taken to reduce global CO₂ emissions, there are now over 500 projects in planning globally, including dozens across Europe.^22,23

Why does the EU need to rapidly scale up carbon capture and storage?

• Climate benefits – The climate evidence shows we need a massive scale-up of carbon capture and storage if Europe is to reach its climate targets.
• Economic benefits – Carbon capture and storage is one of the most cost-effective means of decarbonising major industrial processes like cement and steel, ensuring those industries can remain competitive in the green transition and unlocking new investment in low-carbon manufacturing in the region.
• International context – The EU and several Member States have joined the Carbon Management Challenge, launched at COP 28, which aims to reach gigaton scale deployment globally by 2030.

Climate benefits: how much carbon capture and storage will the EU need for its climate goals?

CCS is essential to achieve climate neutrality by 2050, in accordance with the European Climate Law,²⁴ as shown by nearly all energy system modelling scenarios.²⁵ CCS is required both to rapidly reduce CO₂ emissions as well as to permanently remove CO₂ from the atmosphere. In all scenarios highlighted by the European Scientific Advisory Board on Climate Change (Advisory Board),²⁶ CO₂ storage provides permanent carbon removals and plays a significant role in reducing emissions from industrial processes and fossil fuels.

Their analysis finds that up to 490 million tonnes of CO₂ may need to be captured and stored by 2050, with 417 million tonnes captured and stored in the ‘Mixed Options’ Iconic Pathway, which yields the lowest cumulative emissions.²⁷ The European Commission’s own analysis²⁸ estimates that the EU could need to capture up to 450 million tonnes of CO₂ annually by 2040, which is in line with several other expert bodies. In sum, there is no path to climate neutrality in Europe without CCS.

As it stands, rates of CCS deployment are far below those in modelled pathways limiting global warming to 1.5°C or 2°C.²⁹ Crucially, there are no operational CO₂ storage sites in the EU.³⁰ Thus, there is an urgent need for tailored policy and financial incentives to accelerate the development of CCS technologies to a scale capable of significantly reducing emissions.³¹ This is particularly crucial in the decade from 2030 to 2040, when deployment should be at its most rapid, as delineated in the International Energy Agency’s pathway to net zero.³²

Economic benefits: a cost-effective solution for a climate neutral industry

Carbon capture and storage is vital to decarbonise hard-to-abate industrial sectors, such as chemicals, fertilisers, steel or cement, which require high- temperature heat or inherently produce carbon dioxide as part of a chemical process (known as ‘process emissions’).

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Figure 4: Estimates of levelised cost of producing low-carbon cement, iron and steel, and chemicals via different production routes. Note: NZE reflects the price of hydrogen in the IEA’s ‘Net Zero by 2050’ scenario.³³

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For example, about 60% of the emissions from cement are integral to the process chemistry and cannot be reduced by switching to low-carbon forms of energy. For some other heavy industries like steel, other pathways to decarbonise exist using alternative fuels, such as hydrogen – however, delivery of sufficient volumes of low-carbon hydrogen is likely to also require use of CCS. In general, decarbonisation pathways without CCS can face challenges associated with sourcing abundant, clean electricity and heat, particularly in the near term. Analysis by the International Energy Agency shows that CCS currently offers the lowest cost route to decarbonising cement, steel, and ammonia (Figure 4).

As free allowances are phased out from the EU ETS, and Europe’s industries are fully exposed to the carbon price, it will be critical to ensure that these industries have the tools necessary to decarbonise rapidly. Policymakers must take action to ensure the widespread availability of the required innovative technologies to decarbonise, which will include carbon capture and storage for many industries. If decarbonisation is not possible, industries will either have to pay the carbon price or risk to move their production elsewhere, with important social and economic consequences.

Moreover, while the additional cost increase of using CCS and other technologies to produce low carbon products may seem large, the additional cost to consumers is much less significant and therefore easier for consumers to absorb, when applied to end-use products such as cars or buildings.³⁴ For example, Figure 5 illustrates the additional cost of construction of a bridge using decarbonised cement and steel produced with CCS, resulting in an overall increase of just 1% to the total construction cost.

What should the EU do to accelerate CCS deployment?

As the IPCC outlined, one of the main reasons CCS is lagging behind pathways in line with climate targets is the lack of appropriate policy support.35 More must be done to design the financial and policy incentives and regulatory measures to advance carbon capture and storage technologies at the scale needed to make an impact on total emissions. In the next legislative term, the EU can accelerate CCS with the following actions:

A. Deliver on CO₂ injection targets while ensuring the integrity of the Single Market

What is the issue?

The Net Zero Industry Act (NZIA) and Industrial Carbon Management Strategy (ICMS) both include storage capacity targets for 2030 and 2040, respectively. The NZIA sets a target of 50 million tons of operational storage capacity in the EU by 2030 and the ICMS includes a goal of 250 million tons of storage capacity in the EEA by 2040. While the targets are ambitious, currently proposed CO₂ capture projects in the EU already amount to over 80 million tonnes per year by 2030. However, these plans are largely limited to emitters with potential links to storage, and demand is likely to grow as more storage plans are made. For example, the EU’s cement and lime industry together produce around 130 million tonnes of CO₂ per year.

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Figure 5: The added cost of a bridge construction using steel and cement produced with CCS which results in an additional cost of 1% and an emissions reduction of 51%.³⁷

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CATF’s assessment indicates ample potential for CO₂ geological storage across most EU Member States.³⁶ By 2033, Europe could reach over 200 Mt/year in storage capacity, with a forecast of 140 Mt/year by 2030 (Figure 6). However, most of this capacity is offshore in the UK and Norway, leaving EU Member States with only 66 Mt/year by 2030, primarily in Denmark and the Netherlands. This regional concentration poses challenges for industrial facilities in other regions, requiring long-distance, multi-modal CO₂ transport which could come at costs of over €100/t.³⁸

Figure 7 shows the geographical distribution of these projects around Europe, with the announced maximum annual capacity at each site indicated (in some cases, the maximum annual capacity is significantly greater than the level that could feasibly be reached by 2034, shown in Figure 6). In total, there is over 290 Mt/year of annual injection capacity across these sites, and 9.3 Gt of estimated total capacity.

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Figure 6: Growth in CO₂ storage capacity over time based on current announcements

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In theory, this announced capacity could be sufficient to meet Europe’s medium-term need for CO₂ storage, as well as achieving the NZIA’s stated target of 50 Mt/ year capacity within the EU. However, announced capacities likely represent a best-case scenario, given several constraints:

• CO₂ from the EU cannot currently be stored in UK storage sites due to regulatory barriers – primarily the legal separation of the Emissions Trading Systems.³⁹
• The scale-up of injection capacity announced by several projects is ambitious, and storage project development can take at least five years. Only two storage sites (associated with Northern Lights and Porthos) are under construction today.
• There is significant uncertainty in the actual injection capacities that can be realised at a given site until more detailed characterisation has taken place

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Figure 7: Storage projects scaled according to the maximum annual injection capacity they have announced (light blue areas show suitable storage geology as mapped by the CO₂StoP project).

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The EU is therefore faced with a double challenge in ensuring its storage targets are met:

1. Developing sufficient CO₂ storage capacity on time to meet the EU’s climate goals.
2. Ensuring the location of this storage is optimally located to ensure CCS deployment at the lowest possible cost to producers and consumers.

Failure to meet both of these challenges may result in additional costs to European industries and consumers, undermine the competitiveness of some European regions and potentially endanger the EU’s climate targets.

How can the EU solve it?

To address this double challenge, several measures would be needed at the EU level. First, a comprehensive overview of geological CO₂ storage resources and their status will be needed, requiring the implementation by 2026 of the CO₂ storage “investment atlas” proposed in the ICMS.

To maximise the potential of the atlas to accelerate the commercialisation of new storage sites, geological data should be realistic and ranked by confidence level, use a consistent methodology between Member States, be inclusive of new data acquisition campaigns where necessary, and as much as possible, include data held by private companies. Public funding should be allocated to national geological surveys to complete these assessments, and mandating data sharing by private companies may also be necessary.

Second, the Commission must ensure that the NZIA storage target and obligation fulfil their potential to promote development of storage sites in Southern, Central, and Eastern Europe, thereby optimising storage accessibility and easing the financial and administrative burdens on Member States that choose to decarbonise their industries with CCS. Ensuring compliance with obligations under the NZIA, acting on any shortfalls identified in storage site progress reports, and facilitating capacity exchange between obligated entities will help ensure an equitable distribution of responsibility and promote project deployment. Should regional imbalances persist among the proposed net zero strategic projects, the introduction of regional sub-targets for storage capacity may be necessary.

Third, the Commission should encourage Member States to hold regular tenders for exploration licences for companies seeking to develop storage sites. This can catalyse private sector investment and advance storage site development.

Finally, the Commission should explore how to remove regulatory barriers which prevent EU emitters from making use of extensive storage capacity in non-EEA countries, including the UK and North Africa. This will enable more rapid scale-up of CCS across the region and help give EU emitters ready access to a range of lower-cost, large-scale storage options.

B. Enabling a European CO₂ infrastructure network

What is the issue?

Depending on local factors such as geology, availability of clean energy, sources of emissions and political constraints, not all Member States will store CO₂ within their jurisdictions, and some Member States will have storage available earlier on. CO₂ will therefore need to circulate across borders in the EU and entities in different Member States will require access to the available storage. Moreover, many industries – particularly in inland areas – currently face prohibitive transport costs based on a costly combination of rail and shipping to storage sites.

A truly cross-border, single market for CO₂ will ultimately require the coordinated development of an extensive pipeline-based network and other transport modality infrastructure (shipping, rail, terminals) across the EU.⁴⁰ This will harness economies of scale, provide lower-cost access to storage for inland emitters, and allow all industries to access a wider range of storage sites.

How can the EU solve it?

The ICMS has laid out some important steps that can create the conditions for the development of such a network, including the initiation of preparatory work for a dedicated regulatory framework for CO₂ transport, the creation of minimum standards for CO₂ streams, and a proposal for an EU-wide CO₂ transport infrastructure planning mechanism.

To develop a cross-border CO₂ network, the EU should propose a regulatory framework for CO₂ transport as soon as possible. This framework would facilitate the establishment of cost-optimised, large-scale infrastructure for CO₂ transport while ensuring equitable distribution of costs among users. It should include principles of fair and open access and potentially tariff regulation for infrastructure that will have a temporary or long-term monopoly (such as onshore pipeline networks). For infrastructure to harness economies of scale while avoiding prohibitive costs for early users, regulations should enable an equitable distribution of costs between users and promote the connection of new users. However, as large-scale transport projects are already underway – including 14 Projects of Common Interest (PCIs) and Projects of Mutual Interest (PMIs) for CO₂ – a flexible approach will be required that avoids creating delays for these existing initiatives, while also allowing smaller-scale projects to develop external to the wider network (Figure 8).

Legislation will also be needed to develop CO₂ transport standards. Standardised transport regulations will ensure consistency and interoperability across different CO₂ transport projects, promoting efficiency and reliability in the network.

In addition, as planned in the ICMS, the Commission should rapidly establish an EU-wide mechanism for infrastructure planning and an aggregation platform for CO₂ capture and storage volumes. Swift implementation is crucial to expedite the development of cross-border CO₂ networks.

A dedicated fund for cross-border infrastructure through initiatives like the Connecting Europe Facility will also be needed to provide financial support for the development and expansion of cross-border CO₂ transport infrastructure, fostering collaboration and infrastructure integration among EU Member States.

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Figure 8. A map of current proposals for CO₂ infrastructure

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Figure 9: The levelised cost of CO₂ avoided via the application of CCS to various sectors⁴¹

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C. Creating a long-term business case for deployment of CCS

What is the issue?

The upwards trajectory of the carbon price under the ETS will increasingly drive investment in CO₂ capture at industrial sites, particularly as CO₂ transport and storage infrastructure becomes available. However, based on current projections for the ETS price to 2030 and analysis of full-chain CCS costs, many emitters will still face an economic shortfall in the investment case for CCS deployment, with total costs in excess of €100/tCO₂ (Figure 9).

The Industrial Carbon Management Strategy does not identify new EU funding for CCS, instead proposing greater use of Member State funds, through national CCfDs or use of an ‘auctions-as-a-service’ model provided under the Innovation Fund.

Another key barrier that impedes final investment decisions for early CCS projects is the exposure to challenging ‘cross-chain’ risks, such as the prospect of transport or storage being unavailable or delayed.

In the longer-term, there remains a risk that the ETS will not be sufficient alone to drive the scale of post-2030 deployment laid out in the EU’s 2040 climate target analysis, as the price signal it provides remains too volatile to create bankable large-scale projects.

How can the EU solve it?

Several measures should be implemented to address the funding issue. First, both EU and national funding could be beneficially directed towards a competitive, bid price-based tender specifically for CO₂ capture projects, potentially within sector-based categories such as cement. Creating a streamlined, more easily activated incentive would accelerate deployment of mature capture technologies and provide greater certainty in captured volumes to support new CO₂ infrastructure. CCS projects already compete on the basis of abatement cost alone within the Netherlands’ SDE++ funding scheme.

Second, to reduce exposure of early projects to cross- chain risks, the EU should ensure incentives at the EU and MS level include appropriate risk allocation along the value chain to mitigate uncertainties and prevent unnecessary delays and costs. Some CCS incentives – notably in the UK and Norway’s Longship project – have provisions for government to act as a backstop for some cross-chain risks, and this may also be necessary for the first phase of EU deployment.⁴²

Third, consistent principles for public procurement and end-use standards with strict embedded carbon requirements should be used to build market demand for low-carbon products and services, such as cement, steel, and waste disposal.⁴³ If appropriately designed, such incentives can catalyse early CCS projects, while also establishing long-term viability of decarbonised industries. Also, in the near term, these instruments are powerful in that they can be designed to promote production of a small but increasing volume of highly decarbonised products, rather than the incremental progress along the decarbonisation cost curve incentivised by the ETS. In other words, they can promote some deployment of higher abatement cost – but necessary – technologies today. Norway’s Brevik cement plant, which will have CCS operational from late 2024, is already marketing net-zero cement (evoZero®), that has been selected for Norway’s new Nobel Center.⁴⁴

Finally, another enduring policy driver could take the form of an extension of the CO₂ storage obligation on oil and gas producers, imposing a requirement to store a growing proportion of the carbon they ‘produce’.⁴⁵ This can also provide an incentive for a small but steadily growing amount of CCS deployment, while ensuring a pathway to net zero or net negative emissions.

D. Creating a long-term business case for industrial CDR

What is the issue?

Carbon dioxide removal (CDR) enables the ‘neutrality’ in the EU’s 2050 ‘climate neutrality’ target and is the only way to achieve net-negative emissions thereafter. While CDR is often viewed as a measure which will have to be relied upon in the future, achieving necessary deployment at the scales required will need appropriate CO₂ transport and storage infrastructure, consistent policy frameworks, support for research and development, and reliable incentive schemes to be created now to meet expected demand at net zero.

The lack of long-term policies for industrial carbon removals is a major barrier to the necessary deployment of industrial carbon removals in the EU. Industrial carbon removals face a range of barriers, including low TRL, high costs, lack of demand, and long lead times, among others. Policy interventions will be crucial to overcoming these barriers.

As these technologies transition from the pilot stage to commercial deployment, they could also experience a “valley of death” where securing capital becomes challenging. This is characterised by a funding gap that arises as projects lose access to innovation and research grants while not yet having access to permanent carbon pricing instruments or regulatory benefits.

How can the EU solve it?

Successful deployment of both industrial CDR methods, bioenergy with carbon capture and storage (BECCS) and direct air capture with carbon storage (DACCS), will require robust policy interventions and financial incentives to catalyse deployment and reduce costs.

It will be important to set out the role for these removal technologies in meeting climate targets at both the EU and Member State levels. The EU should set near-term targets for industrial CDR to set out the deployment trajectory for these technologies, and a mechanism to set up future targets. In support of these targets, a distinct pillar for permanent industrial carbon removal should be created, which stands alongside existing frameworks like the ETS, ESR, and LULUCF. Launching this separate industrial carbon removals pillar could lead to greater deployment in the EU, through mechanisms such as auctions for specific removal targets, with a view to possible integration of industrial carbon removals within the ETS. This pillar should be built around the primacy of emissions reductions and the avoidance of mitigation deterrence. It should be informed by comprehensive analysis of the likely quantities of removals required to achieve net-zero at the EU level, taking into account residual emissions at the sectoral and national levels.

As the industrial carbon removal sector is nascent, successful deployment will hinge on supporting research and development efforts. Before large- scale deployment, pilot projects and demonstration facilities can serve as tangible evidence of feasibility, effectiveness, and potential challenges for scale-up. Creating a supportive environment for innovation can help drive the development of emerging industrial carbon removal technologies and ensure a diverse range of solutions is available and ready on time for net zero.

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Figure 10. Estimated EU residual emissions and the role of LULUCF, BECCS and DACCS.⁴⁶

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Creating a separate track for industrial carbon removals within the Innovation Fund should be considered to support this. Currently these technologies are evaluated within the Fund under the category of “energy intensive industries”, masking any funding specifically dedicated to industrial CDR, which could create difficulties in tracking and optimising support for these removal technologies. Such funding could be awarded through a carbon contract for difference (CCfD) model, potentially supported by ETS revenues.

Supporting projects beyond pilot scale and first of a kind (FOAK) will be crucial for the EU to deliver the volumes of negative emissions required for climate neutrality. The EU should put in place commercial incentives, such as by promoting government procurement in order to provide revenue certainty for project developers, providing clear signals for private sector investment and de-risking the first set of commercial-scale industrial CDR projects.

Implementing policies such as CfDs and reverse auctions could stimulate the deployment of industrial carbon removal technologies and help to address the barriers facing the industry. Additionally, promoting government procurement of carbon removal services can create market demand and support industry growth. Any supportive policies should be underpinned by a robust framework of standards and monitoring reporting and verification (MRV), while ensuring value for money for the public.

3. Ensure sufficient volumes of clean hydrogen and its effective prioritisation to offtakers

Energy-intensive industries and segments of the heavy-transport sector will require clean⁴⁷ hydrogen to decarbonise their operations. These are sectors of the economy where no, or very limited, other energy- efficient or cost-effective decarbonisation options are available. Thus, a comprehensive framework and market tools must be in place to guarantee reliable and constant clean hydrogen supply to these industries.

Given the amount of clean hydrogen that will be needed to decarbonise these hard-to-abate sectors, the EU should move from an approach based on colours to an approach based on GHG emissions merits, ensuring the fastest possible decarbonisation.

A. Moving from colours to volumes

CATF advocates for the adoption of all forms of clean, low-carbon hydrogen production, so long as they are compatible with the European Commission’s “do no significant harm” principle. This means that hydrogen production technology incentives should not be based on colour-coding but on GHG reduction merits that would allow for faster decarbonisation. Only then would Europe meet its decarbonisation targets on time. While the EU Hydrogen Strategy includes low-carbon as a transition energy, only renewable hydrogen was included in key initiatives such as the Hydrogen Bank or the Mediterranean Hydrogen Partnership. To ensure that Europe has sufficient volumes of decarbonised hydrogen, all forms of clean hydrogen that are truly low carbon, including renewable and low-carbon pathways, should be included in these schemes and in the strategies developed and deployed by the EU to ensure the decarbonisation of the industries needing hydrogen.

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Figure 11: Clean hydrogen value chain

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The limits of relying exclusively on renewable hydrogen

The share of electricity in the final energy demand in Europe is expected to increase from 20% in 2019 to 39% in 2050. The European Commission anticipates up to 65% of share of electricity in the final energy consumption. While 100% renewable hydrogen production is the end goal in Europe’s Hydrogen Strategy and it is prioritised under the Green Deal, using scarce, renewable electricity to produce hydrogen while the grid is not fully decarbonised is a counterintuitive approach to resources deployment, particularly when the electricity consumption is expected to increase as electrification gains momentum to reduce emissions. Renewable electricity deployment should be prioritised to decarbonise the electricity grid, with the opportunities for green hydrogen increasing when renewable electricity production is abundant.

Moreover, renewable hydrogen scaling faces two major issues: (1) the limitations of the deploying renewables at scale and (2) the limitations of manufacturing the electrolysers at scale. If renewable hydrogen is not available in substantial quantities to fully support the forecasted European hydrogen demand, efficient deployment of hydrogen applications based on proven technologies (such as steam methane reforming or auto-thermal reforming with CCS) should be considered a key intermediary solution to rapidly ramp-up hydrogen production capacity at scale and bridge any existing gaps.

On importing renewable hydrogen, the EU needs to keep in mind that a net-zero Europe in a world that has not achieved significant emissions reduction will not be sufficient to address the global warming challenge. Therefore, importing renewable hydrogen into the EU should not take place at the expense of the decarbonisation of other parts of the world that face energy poverty and many need clean hydrogen for fertilisers’ production for their own agriculture industry.

Unavoidable low-carbon hydrogen

Certain energy-intensive industries, such as refineries, which produce feedstock for the petrochemical industry, will require low-carbon hydrogen produced with installed carbon capture facilities to decarbonise because of their technical configuration. Some of the hydrogen used in these industries cannot be replaced with exogenous renewable hydrogen because it is supplied as a by-product from internal industrial processes. In 2019, Europe’s hydrogen consumption was approximately 8.3 million tonnes per year, of which 4.1 million tonnes per year were used in the refining and petrochemical sectors.⁴⁸ By-product hydrogen is estimated at more than one million tonnes per year. Altering this supply would risk disruption to complex value chains. These industries also require a constant, reliable hydrogen supply and cannot accommodate intermittencies, which could result in significant financial losses and interruptions to operations.

Additionally, refineries produce off-gasses that are currently used to generate heat. These molecules can only be decarbonised through the production of low-carbon hydrogen. Off-gasses are mostly methane and ethane molecules that are directed to the facilities’ fuel gas system to generate high- process temperature heat. These molecules are mixed with natural gas to complete the refineries’ heat requirement and combusted in large ovens. To decarbonise these processes, industry can deploy carbon capture and/or convert the fuel gas into low- carbon hydrogen. Therefore, the decarbonisation of these industrial facilities’ fuel gas by means of converting it into low-carbon hydrogen is crucial for the refining and petrochemical industry. Although in early demonstration phases, this is currently being done in the UK in the Stanlow Refinery and planned in the Netherlands (H-vision project).

CATF has estimated that the volume of low-carbon hydrogen required to decarbonise the fuel gas of a high-complexity refinery of approximately 20,000 tonnes per annum of crude is in the range of 200,000 to 260,000 tonnes per year.

Decarbonisation timeline

Low-carbon hydrogen can be scaled faster and with high-capacity factor and utilisation rates when compared to renewable hydrogen because of its high Technical Readiness Level. H-vision estimates that before 2025, low-carbon hydrogen production facilities can be deployed and fully operable, assuming that the CO₂ infrastructure is available.⁴⁹

CATF has developed an example of low carbon hydrogen deployment to decarbonise refining assets in Europe’s largest port.⁵⁰ Projects to convert off-gases into low-carbon hydrogen will support the energy transition required to address the current emissions of these large industrial facilities. For this to materialise, the development and deployment of carbon dioxide transportation and storage infrastructure is needed, as well as strong policy mechanisms (such as contracts for difference) to create an environment suitable for investment in these technologies.

B. Prioritisation for deployment

Sectors of the economy without other energy-efficient or cost-effective decarbonisation pathways available will require hydrogen for their clean transition. Such industries include oil refining, steel and ammonia production, and petrochemical plants. The next Commission should develop a list of these priority sectors and ensure that the limited volumes of clean hydrogen which will be available over the coming years are directed to their decarbonisation first.

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Figure 13. CATF ranking of potential clean hydrogen end use sectors

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First-order priority sectors for hydrogen deployment include:

1. Crude oil refining: Almost 50% of all hydrogen produced today is consumed in petroleum refineries. Refineries produce a wide array of products critical to the functioning of today’s economy and hydrogen is a critical feedstock in their production. Many of these products are hard to replace quickly and economically, and they are likely to remain in our future economy as well. Hydrogen is used, for example, to remove sulphur, nitrogen, oxygen, olefins, and heavy metals in transportation fuels. Hydrogen also plays a role in increasing the product yields from hydrocracking operations and to produce a variety of non-fuel products such as lubricants and anode grade coke, a key component in the production of steel and aluminium. Using low-carbon hydrogen to replace unabated hydrogen production in refineries could reduce the industry’s emissions by 240-380 MT/year, equivalent to the total emissions of the UK.⁵¹

2. (Petro-)chemicals production: Hydrogen is used as an essential feedstock in the production of chemicals and products that are commonly used by households and businesses on a day-to-day basis. These include plastics, pharmaceuticals, detergents, pesticides, dyes, paint, fabrics, fibres, adhesives, construction materials, and more. Whilst some of these products may be phased out over time in favour of more sustainable alternatives, new products will take time to test, demonstrate and scale. Other products may lack sustainable alternatives; in these cases, decarbonising their production and operation is a priority to reduce associated GHG emissions as much as possible.

3. Ammonia production: Ammonia is a critical ingredient in nitrogen fertilisers which play an essential role in providing a secure food supply for human populations worldwide. In fact, 70% of global ammonia supply goes to fertiliser production.⁵² Ammonia also has other important uses such as for explosives in the mining sector, synthetic fibres, and specialty applications. Hydrogen is an intermediate input in ammonia production, which involves reacting hydrogen with nitrogen from the atmosphere. Current ammonia production is estimated to generate almost 500 MT per year of global CO₂ emissions. Given the critical role ammonia plays in underpinning our modern agricultural system, decarbonising the carbon intensive hydrogen feedstock used in its production should rank high on the priority list for clean hydrogen deployment.

4. Methanol production: Methanol is a critical industrial chemical used to produce certain chemicals (e.g., formaldehyde, acetic acid) and plastics (methanol to olefins). Methanol and its derivatives are also used as fuel additives to improve combustion properties. Hydrogen is an intermediate input and is reacted with a carbon to produce methanol. Current production is estimated to emit over 100 MT per year of global CO₂ emissions. Given the importance of methanol in industrial sectors, decarbonising the hydrogen used to make methanol should rank high on the list of applications for clean hydrogen.

5. Steel and iron production: Hydrogen currently plays a role in steel manufacturing via the direct reduced iron-electric arc furnace (DRI-EAF) process, where hydrogen from a synthetic gas (mainly H2+CO) is used to remove oxygen from DR-grade iron ore. The idea of using clean hydrogen in existing DRI applications has been proposed as a pathway for reducing emissions from steel manufacturing.

Sectors classed as second order of priority for hydrogen deployment, due to their nascent status, include:

1. Aviation: Decarbonising the aviation sector will require clean hydrogen to produce renewable diesel and kerosene – known more commonly as sustainable aviation fuels (SAF) – by hydrotreating biomass feedstocks, oils, and fats of biogenic origin. This can be done by upgrading biomass-based sustainable aviation fuels (bio-SAF), synthesising jet fuel from hydrogen and captured carbon (synthetic SAF), and, potentially, powering aircraft that directly utilise hydrogen fuel. SAF draw interest because they have the advantage of compatibility with existing infrastructure and engines (for this reason, they are often called ‘drop- in’ fuels). Using clean hydrogen in the production of biomass-based transportation fuels could help reduce associated lifecycle emissions. However, as highlighted in a CATF report, land-use and supply chain constraints on biomass feedstocks mean that other fuel options will need to be developed, including synthetic fuels (or ‘e-fuels’) produced using a combination of hydrogen, electricity, and CO₂ sourced from non-biogenic feedstocks.⁵³ Synthetic fuel production, however, is currently technically and economically challenging. If all flights between JFK and Heathrow airports were to run on e-fuels, for example, a facility the size of the NEOM Green Hydrogen Complex⁵⁴ would be required just to supply the quantities of hydrogen needed to produce these fuels.

2. Marine shipping: Ammonia is a strong contender as an alternative marine fuel. Health, safety, and environmental concerns associated with bunkering, storing and combusting ammonia would also need to be thoroughly examined before any large-scale use of ammonia can be cleared as a potential pathway for decarbonising marine transport on open seas. Another potential low-carbon marine shipping fuel is methanol and many cargo ships being built today incorporate dual fuel capability to handle a future mix of marine oil and low-carbon methanol. However, unlike ammonia, methanol emits CO₂ at the point of combustion, so to produce a low-carbon fuel, ‘sustainable’ carbon atoms would need to be sourced for the methanol production process.

3. Long-haul transportation fuel: In road transport, long-haul hydrogen fuel cell vehicles may play an important role alongside battery electric vehicles in decarbonising the trucking sector. Implementation in Europe, however, will ultimately be determined by several factors, including cost, fuel and fuelling infrastructure availability and well-to-wheel lifecycle emissions.

Hydrogen is also being considered as a decarbonisation option for other sectors but in some of these cases it may not be the most suitable pathway. This is particularly true where other more energy- and/or cost-efficient options exist, such as electrification, CCS, and heat pump installation. Examples include:

1.Power generation: There has been increasing interest in using clean hydrogen as a replacement to natural gas for power production since it emits no CO₂ when burned. However, numerous technological, infrastructure, and system challenges would need to be addressed, for example the quantities of hydrogen needed would likely necessitate geologic storage and dedicated transmission and distribution pipelines. Associated costs make it important to focus on the carbon intensity of any hydrogen used. Two options present themselves – using hydrogen from natural gas with CCS and strict upstream methane emissions control or using hydrogen from electrolysis with clean electricity. For the former, combusting this low carbon hydrogen in a simple cycle power plant reduces lifecycle emissions from the power plant by roughly half compared to natural gas combustion. This combined with the cost of producing hydrogen using natural gas with CCS, however, results in CO₂ abatement costs significantly higher than that of most decarbonisation options available in the power sector. Using electrolytic hydrogen, powered by renewable electricity, is unlikely to be more appealing due to round-trip efficiency. 76% of the electricity used to make the renewable hydrogen is not recovered and in practical terms can be considered lost. Put another way, in a grid that is not already fully decarbonised, four units of clean electricity will be diverted from further grid decarbonisation to deliver one unit of clean electricity, effectively losing three units of clean electricity that could be used to serve other direct electricity end uses.

2. Long-duration energy storage: The role that renewable hydrogen might usefully play in a decarbonised power system is as a form of long- duration energy storage for grid balancing at times when renewable generation would otherwise exceed demand and would need to be curtailed. However, this role is likely to be relevant only in a fully decarbonised grid. Even then, an evidence-based analysis wouldbe needed to examine the entirety of the power system design, evaluate alternatives for long-duration energy storage, and optimise total system cost and decarbonisation pathways.

3. Natural gas blending and residential use: Blending clean hydrogen into the gas grid, such as for deployment in home heating, would dilute the environmental benefits of a scarce commodity. Over 50 independent studies⁵⁵ have concluded that decarbonisation alternatives for home heating, such as heat pumps, solar thermal systems, and district heating, are more economic and energy-efficient, and have a smaller environmental impact than hydrogen. Though routinely used in industrials applications, its use in residential settings present potentially serious safety hazards, both due to hydrogen’s susceptibility to leakage and its ignition rage, which is six times that of natural gas.

4. Light-duty vehicles: Hydrogen fuel cell vehicles require up to 2.5 times as much energy as electric vehicles and their cost per kilometre or mile travelled are multiple times higher. This is likely a key factor behind their limited sales and the small number of auto manufacturers with active efforts to develop a hydrogen passenger vehicle. The advantages that light- duty fuel cell electric vehicles currently offer relative to battery electric vehicles (longer range and shorter refuelling time) may be important to some users, but battery technology improvements will likely render these features less decisive in terms of favouring fuel cell vehicles.

C. Production and imports

The EU should aim to locate hydrogen production close to consumption areas and set up infrastructure to connect the entire value chain. Due to its physical properties, hydrogen is a difficult molecule to transport, so any hydrogen transport should (a) be limited to cases where hydrogen serves a very specific need and (b) use the most energy- and cost-efficient methods, such as via pipeline.

Where connecting hydrogen infrastructure across Member State borders is feasible and needs-driven, it should be pursued as a way to facilitate larger-scale collaborative projects and the creation of a common hydrogen market. If hydrogen must be transported over longer distances, new infrastructure for this purpose should be carefully planned and streamlined, utilising existing assets and the most efficient transportation methods.

Recognising limits to domestic production within the EU, REPowerEU established a target of 10 million tonnes per year of renewable hydrogen imports from third countries. Importing hydrogen and its derivates from distant suppliers and delivering it to demand centres will require significant infrastructure build- out. The EU and its Member States must approach this challenge carefully, considering the logistics and cost-effectiveness of large-scale hydrogen imports, and taking into account where and how hydrogen will be imported, and where it is needed for deployment.

Looking at the techno-economic pathways of importing hydrogen into Europe from global locations, including Norway, the U.S., the Middle East and North Africa (MENA), under all scenarios, importing large quantities of hydrogen over long distances will be an expensive and relatively energy inefficient endeavour due to the inherent properties of hydrogen, particularly its low volumetric density.⁵⁶ Of the options available, the most cost-effective method to transport hydrogen is by pipeline, ideally over the shortest distances possible, followed by maritime transport in the form of ammonia for direct use. However, if the ammonia is ‘cracked’ to liberate pure hydrogen, this incurs significant energy penalties making the process even less efficient and costly. Hence, imported ammonia should be prioritised for use in applications that specifically require it, such as agriculture and maritime shipping.

The EU will need to carefully assess expected hydrogen demand from different regions of Europe, identifying what share can be met with domestic production as well as the size of the remaining gap that needs to be covered by imports, preferably via pipeline from neighbouring countries. To avoid costly but ultimately unsuccessful ventures and stranded assets, the EU and Member States should carefully assess and select the most efficient pathways for importing hydrogen and ammonia and coordinate closely on international projects before any significant investments are made.

4. Strengthened focus on clean tech innovation

Clean-tech innovation and development can help create new business opportunities, jobs and growth in Europe. Green innovation has both social and economic benefits. It answers a growing demand from consumers for sustainable products, and allow industries to improve their competitiveness. Given the many benefits of clean tech and green innovation, the EU insitutions should make a priority to ensure that all levels of innovation, from research to deployment, are supported by sufficient and appropriate policies. Policymakers should consider the entire technology life cycle, understand costs, and design policies that target critical stages for the technology to become available at scale.

Research has shown that the steepest cost reductions are available during the demonstration and expansion phases¹, which means that multiple commercial demonstration projects play an outsized role in driving cost reductions. Support for these stages is therefore crucial.

Reports indicate that the EU excels at laboratory research and early deployment, however, commercialisation and mass deployment of EU technologies happen in other markets, meaning that Europe is missing out on the social and economic benefits. This is why bridging the gap between demonstration, deployment, and commercialisation is key for creating a business case for climate–beneficial technologies in Europe.

To lower cost and accelerate commercialisation, the EU should consider adopting policies on green innovation which:

• identify key priority technologies for green innovation, based on their potential to decarbonise hard-to-electrify sectors, improve energy security, or provide more cost-effective options to decarbonise large sectors of the EU economy.
• identify the development stage of these priority innovations and match each level with the appropriate policy and financial support, either at the EU level when possible, or coordinating and sharing best practices from the Member States when needed.
• provide multiple types of instruments beyond grants, such as contracts for difference and low-interest loans, flexible depending on the type of technology or project.
• seek to enable building not only first-of-a-kind but multiple simultaneous projects, particularly large industrial projects, to reduce rent-seeking, enable a rolling work force, and allow for the instant application of lessons learned to gain swift cost reductions.

Technologies like fusion or superhot rock energy are good examples of innovation with important potential benefits in assuring sufficient clean energy in Europe, but demonstration is lagging behind due to the lack of coordinated efforts to support these innovative technologies.

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Cut methane emissions

Why cutting methane emissions is critical

Methane emissions are often referred to as the lowest hanging fruit in the fight against climate change, simply because this potent greenhouse gas can be harnessed to heat homes and power industry, instead of wasted into the atmosphere. Anthropogenic methane emissions mainly come from the energy, waste and agriculture sectors, which each require unique strategies and technologies to mitigate. Cutting methane emissions from Europe should be a priority for the next legislative term for several reasons:

Climate benefits: Methane is the second greatest contributor to climate change and over 80 times more potent than CO₂ for global warming over a period of 20 years.⁵⁷ Methane mitigation is one of the most cost-effective methods to reduce the impact of global warming in our lifetimes, and avoid irreversible tipping points. As with other short-lived pollutants, mitigating methane emissions effectively “buys time” to decarbonise and reach net-zero targets, by preventing rapid near-term warming. The Sixth IPCC Assessment Report identified methane mitigation as a priority for policy action around the world.

Energy security benefits: In the context of the energy crisis, cutting methane emissions from the energy sector would ensure that all the gas in the pipeline arrives to the consumers. Indeed, methane saved from leaks could amount to 600 kt of methane per year. This wasted gas represents the annual consumption of gas in almost 1 million French homes.

Economic benefits: Cutting methane emissions from the energy sector is also economically beneficial, and repairing methane leaks from the oil and gas sectors can be done at low or no cost because the methane saved can be sold instead of wasted. According to the IEA’s Methane Tracker, 71% of the methane reduction in the energy sector could be mitigated at low cost, and 41% at no net cost before the energy crisis.

International context: The EU co-led the launch of the Global Methane Pledge at COP26, which saw signatories commit to collectively cut methane emissions by 30% by 2030. The pledge is at present endorsed by over 150 countries around the world; however concrete progress towards this goal has not moved fast enough. As a founder of the Pledge, and one of the world’s climate leaders on the path to climate neutrality, the European Commission’s leadership in driving the pledge’s success will be critical, and the EU should strive to meet at least a 30% reduction, requiring actions in the energy, waste, and agricultural sectors.

With these benefits at hand, the next set of European leaders must boldly support methane as a diplomatic, climate, economic, and political priority. In addition to ambitiously reducing emissions within its borders, the EU should continue to be an outspoken champion for methane in international and multinational fora, where additional ambition and financing is rapidly needed. While every country’s methane emissions profile is unique, and requires a tailored response, the European Commission can facilitate mitigation by encouraging international financial institutions, as well as multinational fora such as the G7 and G20, to prioritise methane.

In the next legislative term, as the EU institutions develop strategies to reduce emissions within the EU across all three key sectors, they should build synergies between domestic and international efforts, and take measures to ensure that trading partners are equally equipped to mitigate their emissions.

Oil and gas sector

According to the IEA, emissions in the energy sector are not only the easiest to abate, they are the sector where the most gains are possible with existing technology. Late last year, the EU adopted its Methane Regulation, the first rules in the EU on reducing in the energy sector, which include measures for domestic producers on leak detection and repair (LDAR), venting and flaring of methane, and annual monitoring and reporting of emissions. While many European companies have moved towards these common-sense rules for years, mainly through participation in the Oil and Gas Methane Partnership 2.0 (OGMP 2.0), the new Methane Regulation plays a crucial role in levelling the playing field and requiring all EU operators to abide by the same rules.

The regulation also includes the world’s first obligations on importers of fossil fuels, or a ‘methane import standard,’ that addresses methane emissions emitted abroad. According to the Commission, 75% to 90% of the methane emissions associated with the EU’s energy consumption are emitted outside of EU borders, making an import standard critical to addressing the full scope of Europe’s emissions. The chart below illustrates the varying estimated emissions intensities of imported gas to the EU, where Norway and the United Kingdom are currently the only suppliers below a recommended upstream intensity threshold of 1.6Gg/ Mtoe. The import standard will be implemented in a phased approach, starting with general data reporting obligations mid-2025, MRV obligations starting in 2027, reporting on methane intensity beginning in 2028, and limits on methane intensity beginning in 2031.

The agreement of the Methane Regulation is just the start, however, and leadership from the EU institutions will be essential in the coming months to ensure its effective implementation, and the development of complementary global initiatives. Leadership from the EU institutions will be needed in three key areas:

Development of technical delegated and implementing acts: As a follow-up, the Commission will need to develop the needed delegated and implementing acts, which will be key to determining the actual impact of the legislation and should follow accurate and science-based emissions accounting methodology, and ambitious but realistic objectives. These include the technical guidance and reporting templates for monitoring and reporting emissions, implementing acts to determine third-country MRV equivalence, the methodology for calculating, at the level of the producer, the methane intensity of oil, gas and coal placed on the EU market, and the methodology setting out the maximum methane intensity values.

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Figure 14: Gas exports and methane intensity of top export countries to the EU, 2022, Billion barrels of oil equivalent Methane intensity, (Gg/Mtoe), CATF-Rystad Impact Assessment of MIPS

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Ensuring adequate capacity building for competent authorities: Member States must appoint at least one competent authority that will be responsible for enforcing the regulation and executing inspections. As many authorities across the EU have little to no practical or technical experience regulating methane emissions, it will be essential to guarantee a consistent level of understanding, capacity and resources for each Member State. The European Commission can play an impactful role by facilitating knowledge transfer between jurisdictions outside the EU that have the necessary experience. Additionally, as mandated in the Methane Regulation, the Commission should rigorously leverage all available international data, including satellite observations, to check for major inconsistencies in data supplied to the Transparency Database.

Guiding new and renewed supply contracts: In parallel with the acts associated with the Methane Regulation, the Commission should explore and develop additional tools to address emissions from imports. The European Commission should actively guide the development and renewal of energy contracts with new providers and partner countries. Due to the war in Ukraine and resulting sanctions, many authorities will negotiate new contracts for energy supply with new providers.

As agreed in the Methane Regulation (Art. 27a), the Commission is empowered to encourage importers to take methane emissions into consideration, and even issue model clauses that can be used in contracts. This would be a rapid solution for Member States and EU energy companies to reduce their imported methane emissions by voluntarily selecting suppliers that meet best practices to reduce methane emissions, negotiating requirements on LDAR, venting and flaring in new contracts, and negotiating enhanced commitments to reduce methane emissions at non- operated assets run by joint venture companies or through other types of partnerships

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Figure 15: 2031 emissions attributable to production of natural gas and crude oil exported to the EU in various scenarios, CATF-Rystad Impact Assessment of MIPS⁵⁸

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In addition to guiding successful implementation of the Methane Regulation within the EU, the next European Commission should take proactive steps to guarantee uptake of the new obligations on exporters. This should come in the form of expanded diplomatic and external actions to foster methane emissions reduction around the globe, such as:

Building capacity and readiness to comply with the MRV obligations: The Methane Regulation requires all operators putting gas, oil and coal on the European Union market – including those outside the EU’s borders from 2027 – to measure and reconcile source and site level estimates of emissions, which supports the detection of missing emissions sources in an iterative way. This MRV framework mirrors the voluntary Oil Gas Methane Partnership 2.0 (OGMP 2.0) 5-level tiered system, and companies that reach Level 4 (L4) and 5th levels of reporting will automatically meet obligations under the Methane Regulation, so long as reports are independently verified. In preparation for the EU’s MRV obligations, the European Commission should expand its efforts to encourage companies to join OGMP 2.0, and begin taking the first steps towards reaching L4 and L5 reporting in 2027.

Building capacity in partner countries to comply with the intensity performance standard: The EU’s new methane import standard can play a key role in reducing methane emissions abroad, but only if partner countries are adequately prepared to implement abatement actions. CATF and Rystad’s impact assessment of an EU methane intensity standard found that for natural gas trading, African LMICs would have the least power to pass additional costs on in the form of higher prices, and the least opportunity to divert gas sales, therefore financial support for abatement could prove critical. The European Commission should support partner countries to plan for, and finance abatement measures, which could come in the form of implementing the “You Collect, We Buy” initiative. This plan, announced under RePowerEU, envisions purchasing captured gas that would have otherwise been wasted.

Global Buyers Club and broader international leadership: The EU climate diplomacy should build on the “Joint Declaration from Energy Importers and Exporters on Reducing Greenhouse Gas Emissions from Fossil Fuels” from November 2022, as well as the LNG-focused CLEAN initiative, and work towards the creation of a “Global Buyers Club” for coordinated standards to reduce methane emissions from imports. This club could include major importers such as Japan and Korea, and could create a real shift in markets and ensure that methane emissions are cut globally in the oil and gas sector.

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Figure 16: Cost of supply for gas exporters to EU, including incremental costs resulting from the implementation of MIPS, 2031, CATF-Rystad Impact Assessment of MIPS (EUR per million British thermal units)

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Waste sector

Methane emissions from the waste sector account for 20% of the global total, with the majority stemming from solid waste decaying in dumpsites and landfills. Waste methane emissions are tightly tied to growth and development in much of the world and are projected to increase significantly without fast action. Fortunately, cost-effective solutions are available to reduce emissions from the waste sector today, with up to 60% of mitigation measures having low or negative costs.

As methane emissions in the waste sector are largely due to mismanagement of organic and food waste, these emissions can be avoided by implementing the following waste management hierarchy:

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Figure 17: Waste Hierarchy for Methane Mitigation (Source RMI, 2022)

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• Food Waste Prevention involves reducing the amount of food that we consider to be “waste,” and diverting it for use. This could for example be supported through the revision of use-by dates, connecting large producers of food waste to food banks.
• Organic Waste Diversion is the next step in keeping this waste out of landfills. Organic waste should be separated at the source by requiring a separate bin for food waste, as some Member States already implemented.
• Landfill Design & Operation is critical to capturing methane generated from organics that are not diverted, as well as waste already in landfills. Landfills can include covers that oxidise methane as it is released and LFG capture, which are mandated in the current Landfill Directive.

As the EU will be reviewing its Landfill Directive during the next legislative term, the EU institutions should capitalise on opportunities to improve compliance and further reduce methane emissions in the waste sector. According to the European Commission and the European Environment Agency’s latest assessments, 18 EU Member States are at risk of missing the main targets for municipal waste and recycling waste for 2025.

While the execution of waste management is ultimately managed at the national, sub-national and municipal levels, the next set of European leaders must commit to playing a stronger oversight and enforcement role to ensure progress towards set targets are met.

Biomethane production: The revised RED III Directive requires countries to use at least 42,5% renewable energy by 2030, which will require sustainable increases in biomethane production by 2030. Biomethane production should be pursued based on careful feasibility analyses that ensure compatibility with food waste and livestock projections. The next European Commission should consider EU-wide legislation, or a revision of the Methane Regulation, that would ensure biomethane facilities are well- managed, and do not leak methane.

Agriculture sector

In agriculture, curbing methane emissions is crucial for reducing climate risks and boosting productivity. Key sources of greenhouse gas emissions in the agriculture sector are methane emissions from livestock – both from enteric fermentation and manure management – and nitrous oxide emissions due to agricultural soil management, the use of chemical fertilisers, and manure management.

Through the Common Agriculture Policy, the EU can incentivise measures to cut methane from agriculture by requiring methane to be taken into consideration in the Member States Common Agricultural Policy Strategic Plans (CSPs). The CAP should aim at improving measuring and reporting of livestock methane emissions and monitoring of the impact of the measures adopted. It should incentivise the implementation of good practices and technologies to reduce methane emissions from livestock such as:

• Management practices that reduce overall emissions and maximise productivity such as increased productive life, control of transition period diseases, improved calf rearing, reduced mortality.
• Breeding for low emissions livestock. The development of a breeding index for methane efficiency in livestock is an important technology to reduce emissions from livestock. Research intensity breeding index is cost-effective, permanent, and cumulative, and it can reduce methane intensity by 24% by 2050.⁵⁹
• Use of approved feed additives aimed at reducing enteric emissions of methane.
• Manure management practices that reduce the storage time of manure, improves solid liquid separation, and that captures methane from manure pits should be used. The use of biodigesters can be a good alternative to capture methane from manure, however, maximum manure capacity aligned with trends in livestock population reduction must be considered. The EU should develop strong guardrails to make sure the implementation and use of biodigesters do not result in methane leaked onto the atmosphere. A systematic evaluation of leaks and correct management and use of digestate must be secured and foreseen in the updated CAP.

Despite the availability of methane mitigation practices in the agricultural sector, there remains significant uncertainty amongst farmers and other key stakeholders about the impacts of new technologies and how they can obtain the necessary financing to cover costs. It is no secret that agricultural issues can quickly spark backlash – both in Brussels and in EU Member States. Therefore, making progress on reducing agricultural methane emissions will require the next EU institutions to develop an approach that embraces and responds to farmers concerns, breaks the political dead-lock, and charts a constructive path forward.

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Transport decarbonisation

The case for decarbonising transportation

The EU has managed to cut greenhouse gas emissions in every sector – except one. Transport emissions represent around a quarter of the EU’s total GHG emissions and they continue to grow.⁶⁰ While legislative and other initiatives set up this term under the banner of the European Green Deal are expected to make a dent in these emissions, further push is required to decarbonise transportation by midcentury, both on EU roads as well as in global sectors like shipping and aviation. The shift to more climate-neutral modes of propulsion will also lead to improved air quality and so reduced health risks for EU citizens.

How EU policy can contribute to tackling transport emissions

Decarbonising transportation hinges on a massive increase in the production and uptake of electricity and zero-carbon fuels (fuels that do not emit carbon when combusted). While great progress has been made in battery-based electrification, certain sectors, namely aviation, marine shipping, and partially long-haul trucking, will need alternative fuels to decarbonise. Between one quarter and one half of the transportation sector’s greenhouse gas emissions comes from vehicles that will be difficult or impossible to power with batteries.

To scale up climate-aligned production of zero-carbon fuels, EU policy has to provide compelling incentives that will entice both producers and off takers to switch from conventional to alternative fuels, including by helping them bridge the notable cost gap. As the U.S. Inflation Reduction Act has abruptly reminded us, we are not in a position where we could simply wait for clean technology markets to develop – it is up to the decision-makers to stimulate them.

In parallel, the shift to new types of fuels with distinct characteristics will only be enabled if a bespoke EU- wide infrastructure network of transmission pipelines, refuelling stations and storage sites is available for the relevant modes of transport. New transformers and more transmission lines are also needed to support battery-electric vehicles. EU institutions have a role to play in bringing about a robust cross-border infrastructure network that will serve the needs of a decarbonised transportation system. While legally binding minimums for refuelling stations required by the Alternative Fuels Infrastructure Regulation (AFIR) are a positive step forward, a comprehensive infrastructure network is needed to realise a rapid and effective transition.

Decarbonising shipping

In addition to previously mentioned incentives for hydrogen-based fuels like ammonia, the EU should also require a 100% GHG intensity reduction by 2050 in FuelEU Maritime, to be in line with the revised International Maritime Organization (IMO) GHG Strategy.

Moreover, leading ports and shipping nations need to ensure that supplies of zero-emission fuels are available and safely stored, handled and regulated. Binding minimum targets for bunkering infrastructure in the AFIR would aid in this respect. Furthermore, this fuelling capacity needs to be co-planned or coordinated along major shipping corridors and ports.

Decarbonising aviation

While “Sustainable Aviation Fuels (SAF)” are often touted as a key strategy for reducing the aviation sector’s greenhouse gas emissions, the bulk of fuels under this umbrella are in fact biofuels that can have serious negative consequences for environment and climate. Large-scale biofuel production drives up demand for commodity crops and motivates farmers to convert natural land into farmland, a process that transfers soil- and plant-carbon into the atmosphere. Demand for biofuels should therefore be further restricted to fuels made from waste matter and other environmentally sustainable feedstocks. Aviation, as the transportation sector that will be hardest to decarbonise, should be prioritised for their uptake. In addition, RD&D support should be provided to explore ways that would minimise negative effects of biofuel production.

However, even if the world’s entire supply of the types of biofuels that result in very low or no GHG emissions over their lifecycle was reserved for aviation, it would still not meet projected global energy demand for aviation on its own – which is expected to increase significantly in the decades to come. To meet this demand in a climate-aligned way, there is a need for significant (public) investment in and policy support for an expanded suite of clean energy solutions, including low-emissions hydrogen, synthetic fuels, and electricity. The EU should address potential supply chain constraints and high prices associated with scalable zero-emission fuels, and incentivise alternative fuels production, including by supporting Direct Air Capture technologies.

EU policy should also better address non-CO₂ emissions from aviation as they have a significant detrimental impact on climate. An effective Monitoring, Reporting and Verification system for the level of aromatics, naphthalene and sulphur in jet fuel would be useful in this respect, as would legislation on optimising the level of aromatics.

Decarbonising trucking

In addition to adopting more ambitious CO₂ emission performance standards for new heavy-duty vehicles, EU policymakers can speed up the transition of the road freight sector towards a full deployment of zero- emission vehicles (ZEV) in a number of crucial ways. Apart from supporting the development of new energy networks that would enable charging and/or fuelling of zero-emission vehicles, as discussed above, the EU should also boost RD&D of innovative technologies related to onsite or onboard ammonia-to-hydrogen conversion, onsite station-scale hydrogen production, advanced high-energy density battery chemistries, fast charging and advanced fuel cell types, among others.

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Energy

1.  Decarbonisation of the electricity grid: 24/7 carbon-free energy (CFE)

The need for 24/7 carbon-free energy

The International Energy Agency finds that stronger EU policies than those currently in place will be needed to deliver on the EU ambitions and that the energy sector needs to be at the heart of those efforts, as it accounts for 75% of EU greenhouse gas emissions.⁶¹ Moreover, by 2050, Europe is expected to have a power grid three to four times as large as it has today.

However, renewable energy alone will not be enough to deliver a reliable and affordable decarbonised grid. Wind, solar, and battery storage will likely be a cornerstone of this future decarbonised electricity grid, but will not be sufficient since they are weather dependent.⁶² Their output varies depending on the hour, day, and season, and is not available on demand.

The EU will need to reframe its electricity decarbonisation strategy to aim for 24/7 carbon-free energy (CFE), meaning that every kilowatt-hour of electricity consumption would be met with carbon- free electricity sources, every hour of every day, everywhere.

The predominant body of analysis on decarbonisation of the electricity sector indicates that the fastest, most cost-effective, and reliable pathway to grid decarbonisation is through a diverse portfolio of carbon-free technologies, including wind and solar as a key cornerstone but not exclusively limited to it, along with clean firm power technologies, and advanced storage technologies. Clean firm power technologies are zero- or ultra-low carbon dispatchable power technologies to balance the weather-dependent renewables, and that can supply electricity on demand such as hydropower, geothermal, energy storage, or hydrogen.

At the moment, traditional unabated fuels are used as a backup when renewables fail to deliver, with the demand being met by expensive natural gas peaker plants. They should be replaced by carbon-free alternatives.

What should the EU do to ensure 24/7 carbon-free energy

A. A 24/7 carbon free energy strategy

As currently the different sources of CFE are scattered across different EU legislations, the Commission should ensure that all the needed technologies are working together to fully decarbonise the electricity grid at all times. A comprehensive vision on how this would be implemented would need to first be laid out in an EU Strategy.

B. Commercialisation of next generation clean technologies

To deliver 24/7 carbon-free energy, the EU will need to increase the number of clean technology options available. A clean, reliable, and resilient grid requires a diverse portfolio of clean firm power technologies. At the moment, the technologies that could fulfil this role include conventional and next-generation nuclear energy or carbon capture and storage on fossil power plants. However, potential technologies such as superhot rock geothermal and fusion energy could also play this role in the future, after demonstration and scaling-up. Long-duration, multi-week storage could also be useful to deliver 24/7 carbon-free energy.

The EU should both support the current clean- firm technologies available and ensure the commercialisation of promising innovative ones. Some early-stage clean firm technologies are still facing the proverbial “valley of death”, the moment between a technology’s demonstration stage and its widespread deployment when funding and policy support are crucial.

The EU should diversify its technology innovation, adopt an option-based approach with a diverse portfolio of clean technologies, ensure demonstration and deployment of new clean-firm energy technologies, and ensure the deployment of the enabling infrastructure needed with proactive planning and coordination.

C. Comprehensive electricity market design reform

The EU needs to develop an electricity market that supports 24/7 carbon-free energy. The electricity market design (EMD) reform from 2023 was aimed at addressing the high electricity prices driven by the Russian invasion of Ukraine, but did not address structural gaps related to competitively incentivising clean firm power and long-duration storage technologies. A reform of the EMD will be needed for the EU to ensure 24/7 carbon-free energy.

Given the limits of an energy-only market compensation based on short-term marginal cost pricing, the EU should consider exploring hybrid markets, containing short- and long-term markets, which recognise and provide certain compensation for the value of always- available clean power, which helped in the U.S. markets to de-risk investment for technologies needed to balance renewables.⁶³

The EU should draft guidance for the design of long-term capacity renumeration mechanisms. This design needs to ensure the capacity mechanisms are competitive, technology-neutral, and allow for long-term support for clean firm dispatchable generation and storage resources that will support investment.

D. Improve accounting

Voluntary corporate advance procurement and public procurement of clean energy have been useful in the EU to cover the “green premium” for power that is not provided by unabated fossil sources. However, the vast majority of procurements have consisted of buying “renewable energy credits” that equal total annual energy requirements of the buyer, but do not match the timing or location of the buyer’s

consumption and consequently does not reflect if those transactions actually changed the electricity that the buyer is using. For these tools to fully deliver on their goals, accounting will need to be improved. The Commission should thus introduce granular (hourly) Guarantees of Origin (GO) to ensure traceability of generated electricity and support hourly marching of consumption with generation. Proving the link between electricity production and consumption on hourly basis, would allow for a transparent process that enables buyers to certify they are meeting decarbonisation targets. With hourly Guarantees of Origin, 24/7 carbon-free energy procurement can be a powerful tool for creating a carbon free future.

2. Superhot rock geothermal energy

What is superhot rock energy? 

Superhot rock energy is an engineered geothermal system (EGS) that aims to produce power from deeper and hotter conditions than current EGS projects. Superhot rock energy technology takes advantage of the “supercritical” state of water (above 400°C) which has properties of both a liquid and a vapor at the same time. In superhot rock systems, water is injected to depths where the rock temperature exceeds 400°C and then is returned to the surface as supercritical or superheated water to power generators. This supercritical “state” is expected to produce 10 times the energy of a commercial geothermal well both because of the much greater amount of heat being carried by this fluid, but also its enhanced ability to penetrate rock. This projected high energy per well of 30-50 MW means superhot rock could eventually be competitive with fossil power.

The depth required to reach 400°C rock varies – in some parts of the Earth’s crust the heat is shallow (2-5 km), and in some parts it is deeper (10-20 km). Superhot rock systems can be demonstrated with today’s drilling capabilities where heat is relatively shallow (i.e.,4-7 km). Reaching the depth required for “geothermal everywhere” will require innovations in reservoir engineering and in drilling technologies.

Why does the EU need superhot rock energy?

Superhot rock energy could play a central role in the EU future energy systems given its multiple benefits:

Clean, always-on renewable power source: Superhot rock is a zero-carbon source of energy that exists everywhere; CO₂ or methane are not anticipated to be produced in the process of generating power in dry rock. It could have near unlimited energy supply potential as estimates indicate that just 0.1% of the heat beneath our feet can account for the planet’s total energy needs for the next 2 million years. Importantly, compared to other clean source of energy, this form of renewable energy will be dispatchable and would provide an always-on power energy source that might only be produces otherwise by fossil or nuclear power resources.

Energy security benefits: Successful superhot rock geothermal technology could access geothermal resources potentially almost everywhere. It has a small footprint and high energy density, and it could provide substantial amounts of local clean-firm, dispatchable (always-available) renewable energy, significantly contributing to the EU goal of ensuring energy security.

Hydrogen production potential: While conventional geothermal energy is mainly used for heating and cooling, superhot rock energy could be used for electricity and fuels production too. As superhot rock systems hold potential for low-cost electricity and high-quality heat, they could be valuable resources to produce zero-carbon fuels such as hydrogen and ammonia. 

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Figure 18: Superhot geothermal energy system. 

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Cost-competitiveness: Because of the far greater amounts of heat that can be delivered from one well, superhot rock could provide energy that is competitive with fossil power. Furthermore, drilling and reservoir development costs are expected to be higher for first-of-a-kind projects but to progressively decline through continuous improvement. Once it reaches commercial scale, superhot rock is expected to be competitive with both fossil and renewable energy resources.

Limited land use: Superhot rock systems will be high energy density and will have minimal land use requirements per unit energy produced. As the EU shifts towards a decarbonised energy system, land use constraints are going to be a challenge, as the EU is densely populated and must also manage land needs for agriculture and biodiversity protection. Superhot rock systems would require less land to meet the energy demand.

Just transition and job creation: Operations surrounding superhot rock energy systems could generate significant numbers of green jobs, which includes leveraging the skills of the existing energy workforce. To illustrate, the EAVORLOOP closed-loop geothermal project⁶⁴ funded by the EU Innovation Fund expects to generate around 4000 person-years of direct employment over its lifetime.

What is the state of superhot rock energy in the EU?

Europe is already a leader in engineered geothermal systems with projects in the upper Rhine valley and work investigating and drilling superhot geothermal systems in Italy, Iceland and elsewhere. Several projects funded by the Horizon 2020 programme have already reached supercritical conditions. Accessing superhot rock everywhere will require technological advancements, including in drilling technologies like the plasma torch drill being developed by an EU company. EU-funded projects have made significant advancements in identifying, testing, and demonstrating technologies that could enable superhot geothermal, but need to be followed up by further research efforts to demonstrate the promise of superhot rock energy and deploy this energy source at scale in the EU.

What does the EU need to do to support superhot rock energy?

A. An EU strategy for geothermal energy, including superhot rock energy

While the Green Deal initiatives covered several different technologies needed to decarbonise the EU, the geothermal energy potential was largely overlooked despite the opportunities it offers. Moreover, no attention was paid to innovations in geothermal energy with immense potential such as superhot rock. Heat from the Earth is abundant beneath our feet, waiting to be harnessed; the challenge is the development of tools and techniques to access it.

To make use of geothermal energy, the EU will need a comprehensive strategy looking at the current challenges and the policy framework needed to support demonstration, commercialisation, and scale-up of the technology. Given its potential to generate clean-firm energy and boost energy security, superhot rock energy should be a key component of this strategy. 

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Figure 19: Relative magnitude of surface area used for different energy sources to meet the total energy demand of Italy. 

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B. An ambitious and focused research, development and demonstration agenda, enabled by robust public funding

An ambitious research and innovation agenda for demonstration and de-risking of superhot rock energy in Europe is needed now for the technology to deliver on its potential to decarbonise Europe. First, successful pilot demonstrations are needed. Horizon Europe, unlike Horizon 2020, has so far not provided  support for specific superhot resource demonstration work.

Moreover, further research must be supported to move towards commercialisation of super-deep geothermal energy across Europe. The commercialisation of superhot rock energy will not require scientific breakthroughs, but instead will be the product of continual testing and iteration of the technology accompanied by progressive learning by-doing-and attendant engineering innovation. Horizon Europe should be used to drive engineering innovation and support the fast commercialisation of the technology in Europe. The next framework programme should also take into consideration geothermal and technologies such as superhot rock.

C. An EU platform for stakeholder collaboration

The demonstration and commercialisation of superhot rock energy in the EU will require cross-country and global coordination, knowledge-sharing and the creation of consortia gathering stakeholders from different Member States.

The Commission could facilitate the creation of consortia by creating a platform or a global alliance to develop an innovative, competitive and sustainable advanced geothermal value chain in Europe. This

platform might, for example, build on the Horizon 2020 Geothermica initiative, which has been successful in bringing stakeholders together. It should include a sub-group focusing on superhot geothermal to support demonstration as soon as possible, setting the stage for the full commercialisation and deployment of superhot rock systems by 2040.

D. A centralised, open-access EU data repository

Data is a valuable resource for advanced geothermal development, and access to subsurface geological and engineering data could prove critical for helping companies survey for heat and reduce the risk of well failure through well-informed drilling programs using the latest methods and tools for engineered system in dry crystalline rock. Though there are existing data repositories in different Member States and the Joint Research Centre, these are currently limited and fragmented. They need to be organised, centralised, uniformised, and more widely accessible.

3. Small Modular Reactors (SMRs) and Advanced Reactors 

Most analyses of European decarbonisation pathways point to the need to double or even triple the electrification rate at a competitive and affordable cost for both industry and citizens. Meeting this additional demand while simultaneously decarbonising the grid and maintaining reliability will be an enormous challenge, where SMR development could be a pathway for secure, zero carbon and firm dispatchable energy. Consequently, there has recently been an increased interest from some Member States in SMRs and advanced reactors.

Why Consider Small Modular Reactors (SMRs) and Advanced Reactors

SMRs and Advanced Reactors range from less than 5 MWe up to 300 MWe per unit, which is about one-third of the generating capacity of traditional nuclear power reactors. These designs span a range of technology options. Some use light water as a coolant while others, the Advanced Reactors, utilise a gas, liquid metal or molten salt to transfer heat to a secondary purpose. The light water reactors use similar fuel to existing reactors, while the Advanced Reactors use new and different types of fuels. 

Many of the benefits of SMRs are inherently linked to the nature of their design – small and modular.

Always-on clean firm power: Maintaining supply reliability and containing costs in a decarbonised electricity system will likely require substantial amounts of non-weather-dependent  clean firm power to complement wind, solar, and storage. Clean and firm energy sources can reduce the need for over-built capacity of renewable resources and decrease reliance on electricity imports. Furthermore, they can reduce the need for expensive, rarely called upon, long duration storage capacity in addition to reducing the demand for new transmission lines and transmission upgrades. 

Limited land use: With constraints from urbanisation, agriculture and other factors, SMRs are considerably more land efficient than other clean energy technologies. 

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Figure 20: Land Use by Energy Source (Acres per million megawatt-hours)

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Costs: Prefabricated units of SMRs can be manufactured, transported to site and installed quickly, making them more affordable and quicker to build. SMRs are envisioned to require limited on-site preparation and substantially reduce the lengthy construction times that are typical of the larger units. SMRs can reduce a nuclear plant owner’s capital investment due to the lower plant capital cost and shorter construction period. They can also be deployed incrementally to match increasing energy demand.

Grid decarbonisation: SMRs can provide energy and power for applications where large plants are too large for the demand or sites lack the infrastructure to support a large unit. This would include smaller electrical markets, isolated areas, smaller grids, sites with limited water and acreage, or industrial applications. One of the challenges to accelerating access to energy is infrastructure – limited grid coverage in rural areas – and the costs of grid connection for rural electrification. SMRs can play a role there and be installed into an existing lower voltage grid system or remotely off-grid, providing low-carbon power for distributed industry and populations. Moreover, denser generators such as SMRs will require less new grid connections. 

Hydrogen production: Advanced SMRs are also being actively proposed to provide the energy to produce clean hydrogen.

Replacing fossil fuels: In many countries, SMRs are being considered as potential replacements for fossil- fuelled power stations, such as coal-fired power plants. The nuclear project can take advantage of the existing infrastructure such as access to water supply, power grid connection, switchyard and other surrounding assets to its benefit.

Safety: In comparison to traditional reactors, SMR designs are generally simpler, and the safety concept for them often relies more on passive systems and inherent safety characteristics. This means that no human intervention or external electrical power is required to safely shut down the reactor, making these plants walk-away safe. These increased safety attributes eliminate or significantly lower the potential for unsafe releases of radioactivity to the environment and the public in case of an accident.

The role of the EU in SMR deployment

While the decision on the national energy mixes is purely on the Member States, the EU should ensure the right conditions and coordination for the Member States that decide to deploy SMRs.

A. An EU SMR Strategy

What is the issue?

While several Member States have announced their intention to develop and deploy SMRs, several challenges are remaining and could hamper the development, demonstration, and deployment of the first SMRs projects in Europe in the early 2030s, including the identification of the most promising design, identifying and addressing challenges in the supply chain, investments challenges, R&D needs, licensing issues, human resources, and spent fuel management strategy. However, the EU is lacking a clear vision and pathway to ensure SMRs are deployed on time to match the decarbonisation plans of the Member States that decide to use them, and to ensure European ownership across the whole value chain of the technology deployed.

How can the EU solve it: an EU SMR Strategy

The EU should develop a comprehensive strategy for the development and deployment of SMRs in Europe, as asked by the European Parliament in December 2023⁶⁵. This strategy should build upon the work of the EU SMR Industrial Alliance, and ensure that all identified challenges to SMR deployment in Europe are being addressed and that the regulatory environment is fit for this technology. A clear pathway, with an appropriate timeline, should be established. Among others, the strategy should cover issues such as licensing, design standardisation, public acceptance, the strengthening of the supply chain, and funding.

B. Creation of a Joint Procurement Platform for SMRs

What is the issue?

Currently, the nuclear industry faces complexities stemming from fragmented demand, limited economies of scale, and the lack of standardised manufacturing procedures for components. There is a critical need for coordinated demand, harmonised requirements, and collaboration. Member States already have elements of a nuclear supply chain distributed amongst them, but these manufacturers compete globally for the few contracts that are being taken forward. Additionally, without strong policy signals or clear orderbooks, the supply chain is not pursuing the necessary investments to up-scale their capabilities and likely will not be ready to meet demand for SMRs at scale sufficient to achieve the Member States climate targets leading to supply chain bottlenecks.

How can the EU solve it: Joint Procurement Platform for SMRs

One pivotal step for scale and repeatability involves the establishment of a Joint Procurement Platform for SMRs. This platform, tailored for the Member States interested in SMRs, would centralise and coordinate demand and connect it with supply. It could be organised around specific regions and coalitions of countries, industry clusters, or public-private consortia, and combine their buying power to commission dozens of units of the same design under umbrella contracts. They could also participate as off-takers through PPAs.

This approach would not only enhance economies of scale but also streamline procurement processes, thereby contributing to cost reductions and faster project delivery. Such a unified order would create the necessary scale of demand that can drive the industry into a commoditised product supply chain, by standardising designs, processes and learning through doing. The manufacturing supply chains of participating countries could reap the benefits of producing standardised, commercially available, and “commercial of the shelf (COTS)” SMR components.

This will support the creation of regional production for modular designs, factory-based manufacturing with standardised processes that can lead to standardisation and commoditisation of the industry.

This approach is likely not only to decrease costs for the Member States but also build confidence in procurement process enabling more effective adoption of this technology by Member States. Countries which are looking to deploy nuclear power for the first time could take advantage of the experience embedded in the network run at the EU level by reducing some of the complexity associated with individual technology selection and procurement.

C. Licensing

What is the issue?

Each EU Member State with nuclear energy currently oversees its own unique licensing framework and most are time-consuming, complicated, and expensive. Under the current regulatory model, building a reactor design in more than one country requires multiple design reviews and increasing costs. This licensing system was also not designed for SMRs, which are less dependent on safety systems, operational measures, and human intervention. Moreover, the existence of disparate licensing regimes undermines the potential economic advantages of SMRs. A fundamental design objective of modular reactors is that they are standardised and easily replicable. The existence of different certification and licensing regimes often means each has different design and safety requirements, undermining modularity and efficiency. New regulatory approaches for SMRs licensing should be considered. This would make even more sense economically in the EU if several Member States decide to pursue a single design.

Moreover, while licensing remains a challenge even in countries with decades of experience licensing and deploying nuclear reactors, this is even more challenging for newcomer countries because they need to create the capacity for nuclear licensing and regulation, which requires a robust, technically skilled licensing agency with significant resources to assist in the review of license applications. There are several challenges with this model including: lack of human resources and financial resources in embarking countries, as well as lack of human resources globally. This current paradigm also presumes that a country building a nuclear power plant is pursuing a full- scope nuclear program, but a newcomer country may only be interested in or have demand for an SMR or microreactor.

How can the EU solve it?

Support improved cooperation between regulators on licensing matters

The EU should create guidelines or best practices for SMRs as well as joint regulatory or pre-licensing reviews amongst interested Member State regulators on a single advanced reactor design, serving as a case study for broader coordinated multi-national licensing. The former is what is happening between the French, Czech, and Finnish nuclear regulators on the Nuward SMR. Depending on the level of assessment conducted, the outcome could then be used in many national licensing processes.

Support the formation of an International Technical Support Organisation (ITSO)

The EU should support the establishment of an International Technical Support Organisation (ITSO) to provide a variety of services, including:

• Conducting and reviewing license applications for the construction and operation of SMRs.
• Assisting with inspections during construction and operation of SMRs; and
• Providing training services to national regulatory bodies to support and accelerate their ability to perform their regulatory functions without significant support from the ITSO.

The ITSO would not only assist Member States to realise their nuclear programs faster than they would otherwise be able to, but would also help those nations to more quickly develop the human capital necessary for long-term operations.

There is significant precedent for the use of TSOs by other countries’ nuclear regulatory bodies. Traditionally, TSOs have been established at the national level and comprised of private consulting firms and national organisations. However, the use of a traditional TSO in newcomer countries faces three main obstacles.

First, external technical support provided by a traditional TSO would likely be prohibitively expensive. Second, establishing a dedicated TSO in each country would be time consuming and inefficient. Third, EU and global expertise in SMRs and nuclear energy is limited.

An ITSO would save time and resources, and improve efficiency. The ITSO would also help to begin the streamlining and harmonisation of the licensing process as a condition of receiving services require the newcomer countries to accept the design certification from the technology vendor’s home country.

Establish a license-by-testing – “sandbox”

Under the current paradigm, reactor designs are licensed without full-scale testing. Instead, regulators require layers of redundant safety systems and rely on statistical models to determine accident probabilities and safety margins. Data from limited laboratory testing or historic reactor experiments are also utilised. This model contributes to design and licensing complexity. It also increases the time and cost of licensing while still leaving some uncertainty as to a reactor’s capabilities.

An alternative approach would be to designate an area, with sufficient oversight, for reactor designers to conduct full-scale testing—ensuring designs behave as predicted under normal and failure conditions— through which designs could achieve full design licenses. This could reduce licensing uncertainty for applicants and investors, particularly for advanced reactors, at the same time as reducing uncertainty for regulators and the public.

D. Focus on Nuclear Research & Development

What is the issue?

Over the last few decades, Member States needs for nuclear Research and Development (R&D) has been in decline. As only a few new nuclear power plants have been ordered in the EU or globally, there has been a reducing demand for R&D. The closure of many nuclear reactors in the EU has also enacted a change in the available R&D resources to focus more on decommissioning and end of life radioactive waste management. The combination of these factors means that the EU nuclear R&D capability and capacity to support new nuclear build has significantly decreased.

R&D has a significant role to play for SMRs and Advanced Nuclear Technologies, where for example advances in reactor materials and fuel technologies are required. These advancements could stimulate the diversification of nuclear energy from electrical power generation into the de-carbonisation of primary industries such as steel, cement and glass. To support the announced SMR plans from Member States, increased investment and learnings for nuclear R&D are needed.

How can the EU solve it: Centres of Excellence for Advanced Manufacturing on Nuclear Research

Currently, the nuclear industry in the EU faces significant hurdles due to fragmented demand, lack of economies of scale, and absence of standardised manufacturing processes. By establishing Centres of Excellence, the EU can address these issues strategically. These centres would serve as hubs for developing new capabilities and leveraging existing expertise, enabling modular and standardised manufacturing processes to supply multiple nuclear power projects across the bloc, based out of specific regional expertise and opportunities. Furthermore, the coordination of the nuclear supply chain across Member States, rather than competition for market share, would encourage inward investment, strengthen capabilities, and ultimately contribute to Europe’s nuclear energy landscape, technological innovation, and clean energy objectives.

4. Fusion energy

Fusion is an advanced energy source with the potential to produce abundant, zero-emissions power around the world. Paving the way for fusion commercialisation could allow us to integrate this carbon-free, firm source into the energy mix, and potentially revolutionise how we power the global economy.

What is fusion energy?

Nuclear fusion occurs when one or more lighter atomic nuclei combine to form a heavier nucleus, while releasing energy. Fusion brings small nuclei so close together that they fuse. Nuclei must be near enough that they can feel each other’s nuclear force. For fusion to occur, reacting nuclei must be very close to each other, within 10-10– 10-15 (a thousand trillionth) meter of one another. This reaction happens in nature: it is the same process that powers stars, like the Sun. The stars exploit their own gravity to create plasma conditions in their central regions that net fusion energy is generated.

Why does the EU need fusion energy?

Fusion is garnering significant interest due to technology breakthroughs and the need for more clean and firm decarbonisation options. Once commercialised, fusion energy has the potential to become one of Europe’s safe, abundant, zero-carbon sources of reliable electricity, supporting the goal to climate neutrality by 2050, and increasing energy security. Fusion energy could be an important contributor to the EU aim of developing a decarbonised and independent energy system in Europe and has several key benefits:

Zero Carbon Emissions: Fusion energy emits no greenhouse gases during the fusion process, and could contribute to significantly reduce our emissions.

Abundant Fuel Supply: Fusion fuel sources, such as deuterium and tritium, can be extracted from seawater and are virtually inexhaustible. With an ample supply of fuel, fusion energy offers long-term energy security and relief from concerns over resource scarcity.

Safety and Waste Reduction: Fusion is self-limiting, meaning the machine generating it turns off as soon as it is not in control – making it inherently safe. This characteristic results from the dependable physics of magnetically confined plasma. Additionally, it is designed in a way that does not produce highly radioactive, long-lived nuclear waste.

Minimal Land Requirements: Fusion offers higher energy output per land used with no significant space requirements for fuel or waste, which is likely to be an important criteria for Europe as the EU has to balance different uses for limited land available.

Always-on clean firm power: Europe will need clean and non weather-dependent energy to complement wind and solar energy, and fusion could play a role to develop clean energy not reliant on sun or wind to complement renewable energy.

What is the state of fusion energy in the EU?

Europe had been leading on fusion plasma science and technology in the last 25 years, but is now at risk of lagging behind, as the UK and the U.S. are taking the lead in building fusion prototype machines. The EU is the largest contributor to the ITER project, where 35 countries are currently working together to prove the scientific and technological feasibility of fusion as a future energy source. ITER is however not going to produce electricity and is designed to experiment feasibility.

The next step within the current European Fusion Roadmap will be a Demonstration Power Plant (DEMO) machine aiming to put power on the grid. This device would be much closer to a commercial fusion power plant and would provide the support to start the commercialisation process for fusion technologies, with the aim of connecting commercial fusion electricity to the grid by 2050. The EU has the most advance design for a DEMO. Leading fusion machines like JET (in decommissioning phase right now), Wendelstein 7-X, WEST, ASDEX – Upgrade have been at the forefront of the research on fusion worldwide. Nevertheless, new findings and progress in technology and their direct application to the construction of new fusion machines with a commercial approach is not happening in the EU, but is mainly happening in the U.S. and the UK.

What does the EU need to do on fusion energy?

A. A fusion strategy, focusing on commercialisation

So far, the European programme has been focused on R&D for fusion, building experimental machines as final goal, and not on the set up of a fusion industry that can benefit of the last 25 years of R&D. The current programme is focusing on the construction of ITER and EU DEMO, but not in the actual supply of fusion based electricity to the grid.

To ensure that fusion energy will be developed and commercialised in the EU on time, the next Commission should develop a fusion strategy, identifying the challenges and steps necessary to build a fusion industry and how to incorporate the private sector in this endeavour. The ultimate goal of an EU strategic roadmap should be the set-up of an industry in Europe able to produce and operate fusion power plants by 2050. A key milestone for the EU should be the construction and operation of commercially viable prototypes of fusion power plants.

B. Bringing in the private sector

Currently there are a lack of mechanisms that allows the cooperation between a nascent private sector and the public one. Setting up and operating Public Private Partnership schemes (PPP), managing Intellectual Property issues, and the integration of private industry with their own machine designs aspects than need to be developed and implemented. The establishment of a mechanism for compensation to the public sector by the private sector for the use of the knowledge generated also needs to be defined to be able to use the existing knowledge in an efficient and fair manner.

C. A new research programme

A new research and demonstration roadmap where ITER, a public funding DEMO, and eventual support machines like DTT, DONES, a Volumetric Neutron Source needs to be developed. Key facilities and programmes to set up a technology-based programme where industry is integrated is also of paramount importance and needs to be included. Data and knowledge management systems need to be developed and make the accessible to the fusion sector. There is a high risk of loss of valuable and expensive data generated over years into the public sector. Talent/ knowledge retention and creation strategies need to be incorporated into this effort.

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Develop and implement a comprehensive infrastructure agenda

Infrastructure like power lines for transmitting clean electricity, pipelines for moving clean fuels and carbon dioxide, renewable energy power plants, battery facilities, and more are critical enablers to build a decarbonised economy in Europe. All of this infrastructure must be placed somewhere, but land in Europe is some of the most intensively used and limited in the world, posing a barrier to building and connecting infrastructure. Moreover, the process of deploying infrastructure can be long, which must therefore be planned and started with plenty of time to spare to avoid delay in Europe’s climate objectives.

The EU needs realistic, future-proof, and actionable infrastructure plans to support the deployment of net- zero energy technologies to achieve climate neutrality by 2050. Three decades is a very short time to permit, renew, upgrade, install, and secure key European infrastructure needed within and across Member State borders. Workforce shortages, social resistance, slow permitting processes, bureaucratic red tape, and unclear processes cause project delays and costs that Europe cannot afford.

To succeed in ambitious clean technologies deployment and avoid redundant projects, the next Commission should develop an infrastructure plan that delivers the next generation of infrastructure governance, design, planning, and operation and that promotes system efficiency, accessibility, and synergies. An infrastructure plan that also accounts for climate proofing existing infrastructure. The Commission should present a comprehensive infrastructure deployment agenda that includes:

Incorporating clean energy infrastructure into regional, national, and local mapping and planning: Spatial planning to understand existing resources and visualise where new assets fit best is critical to efficient industrial and infrastructure placement that minimises land use and environmental impacts. Mapping is key to building a coherent infrastructure network and to identifying the most suited areas for cleantech deployment on land and at sea.

Zoning, spatial, and land use plans at regional, national, and local levels should include provisions not only for the development of net-zero technology manufacturing projects, as set up in the NZIA, but also for all clean energy infrastructure. Planners, policymakers, and communities should proactively consider where these projects go and how they will integrate with existing infrastructure.

To aid quicker and more efficient planning across the economy, the European Commission should update its digital mapping tools,⁶⁶ resolve data limitations,⁶⁷ and encourage Member States to select clean technology “go-to areas” that extend beyond manufacturing and renewables to include all form of clean energy, carbon capture infrastructure, and hydrogen infrastructure. Identifying areas best suited for each part of the net-zero technology value chain can also facilitate identification of collaboration opportunities and the establishment of strategic infrastructure partnerships. Taking an EU-wide approach to identify the areas most suited for the cleantech value chain to flourish can facilitate identification of collaboration opportunities and the establishment of strategic infrastructure partnerships.

Improving permitting processes with a one-stop- shop: Permitting timelines and processes are critical barriers to infrastructure deployment within and across Member States. The EU is addressing these barriers – it called upon Member States to require permit approvals within two years of an application, and the new Renewable Energy Directive recommends fast- track permitting procedures for renewables.⁶⁸ Similarly, the NZIA had a major focus on permitting, but it did not include all relevant infrastructure.

Adopting a single agency responsible for managing permitting requests, a “one-stop-shop”, at the Member State and EU levels could speed up the deployment of the needed infrastructure. One point of contact for permit applications would streamline a process that typically involves multiple agencies, reducing uncertainty and redundancies for both project developers and government workers, and could thereby significantly reduce the time it takes to permit and build net-zero infrastructure. Countries like Denmark are already implementing the clean energy infrastructure “one-stop-shop” for best practices.⁶⁹ At the EU level, for regional net-zero energy infrastructure, it could streamline the buildout of cross-border electricity transmission and pipeline infrastructure critical to the net-zero industrial transition, as well as integrate new hubs and industrial facilities onto that infrastructure.

A repowering and repurposing plan for EU infrastructure: As more cleantech is deployed, an emphasis on repowering and repurposing infrastructure will ensure that existing infrastructure and rights-of- way are well-maintained, utilised, climate-proof, and modernised with the most up-to-date technology and scientific data. A strategy from the Commission should ensure repowering and repurposing fossil and/or decommissioned infrastructure for cleantech deployment where possible reduces land use impacts of the energy transition. Such a Strategy should also ensure that climate risks and climate-proofing measures are addressed within EU and Member State- level funded infrastructure projects in their design, planning, and monitoring phase.

Evaluating the 10-year network development plan (TYNDP) process to ensure grid planning is fit to meet Europe’s climate goals: The Advisory Board found that the entire TYNDP process, particularly the scenario development process, system needs assessment and cost-benefit analysis (CBA), and the subsequent selection of Projects of Common Interest (PCI) and Projects of Mutual Interest (PMI), does not consider the transformational changes that lie ahead to meet the 2030 and 2050 objectives.⁷⁰ The next Commission should urgently update the TYNDP process to help address this concern. Also, transmission planning should incorporate updated modelling, fully integrating benefits and risks of energy infrastructure deployment.

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SECTION 3

The EU green transition and international cooperation

The Green Deal may be an EU initiative to decarbonise the EU economy, but it will also reframe the relations between the EU and its partners, impact countries outside of the EU, and redefine Europe’s global policy priorities. The EU’s decarbonisation should be developed and conceptualised in a global framework: a clean Europe in a dirty world will not help address global warming, and the EU decarbonisation process will have consequences beyond its borders. The next Commission should assess its decarbonisation plans not only on the reduction of emissions for Europe, but also on the climate impact in other regions and on global emissions reductions. Imports of clean energy to Europe should not be at the expense of the decarbonisation of other regions and their economic development.

Europe’s global role has been strongly impacted by the changing geopolitics of energy and climate action and by rising inflation. The war in Ukraine, and the energy crisis following it, led to a race to secure oil and gas resources and highlight the complicated challenge that the EU needs to address in its external policies: match geopolitical and economic security with climate ambitions. Climate concerns should not be eclipsed by or compete with security objectives, but should on the contrary go hand in hand; in fact, the crisis has demonstrated that climate action can play a key role in enhancing energy security. Geopolitical fragmentation has also challenged consensus-based international agreements and fora, making Europe’s international partnerships on energy and climate even more important and impactful. The EU has different tools available in its external policies that should be used to promote and support global decarbonisation.

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1.  Mobilise EU climate diplomacy and advocate for climate measures in international fora

The EU prides itself on its global climate leadership and should therefore be at the forefront of global climate action, mobilising its climate diplomacy to foster decarbonisation around the world. The EU has an extensive diplomatic network which it has used in the past to support collaboration on climate with international partners and climate initiatives, and which should continue to support global climate ambition and partnerships. The EU should be a strong advocate for climate internationally at the different levels possible and with its different trade and energy partners.

In international fora such as the G7, G20, or the UNFCCC Conference of the Parties (COP), the EU should be a strong voice to support ambitious and coordinated climate actions. The next Commission should continue to champion initiatives like the Global Methane Pledge, and put forward concrete steps towards its realisation, such as the development of a buyers alliance to set methane standards for imported oil and gas. Similarly, the EU should take a leading role on the Carbon Management Challenge, ensuring it comes with targets, a plan to reach them, and measures for accountability. The EU should take an active role in developing a global coalition for carbon management technologies. As one of the largest markets for clean products in the world, at the forefront of deploying decarbonising technologies, the EU should leverage its experience and markets in international fora to support the development of clean industries and share best practices for decarbonisation policies and strategies.

2.  Develop mutually beneficial partnerships

Major geopolitical shifts, triggered first by value chain disruptions caused by the Covid 19 pandemic, and further exacerbated by Russia’s war in Ukraine, mean that the EU is recalibrating its energy partnerships and developing new ones to diversify its imports. In an increasingly fragmented world, Europe’s relationships are becoming critical routes through which to support decarbonisation on the continent and decarbonisation abroad. This is an opportunity to fully include climate considerations and to build mutually beneficial partnerships.

Developing and emerging economies

While most of the energy growth and new energy infrastructure development will be happening in the global south, developing and emerging countries will only embrace clean techs if they are cheap and help them do the same or more than they would otherwise do with conventional counterparts.

The EU should support wide adoption of clean technology which will bring significant mitigation benefits and avoid energy system path dependencies, and focus on cost-reduction. In its relations with developing and emerging economies, the EU should ensure that all relevant policy tools take into consideration the fact that economic security Through decarbonisation should bring mutual benefits, by developing a strong financing and innovation component in the partnerships.

The EU leads in sectors such as wind power and power transmission, but Africa for example has its own emerging green tech industry. The region is also becoming an important producer of the critical minerals that are so essential for the technologies that will drive the energy transition. Rather than replicating former patterns of resource extraction, the EU must work with African governments on value addition that can create jobs and other opportunities for Africans. Better cooperation on clean tech, about research, development, and commercialisation, could accelerate the uptake of these technologies in both regions and drive critical innovation and cost reductions. Each country needs to see an economic benefit from the transition and should be a contributor to the value chain. Otherwise, if countries are only expected to import clean technologies, the costs would become too high and decarbonisation goals will not be met.

Strengthened cooperation across the Mediterranean Sea on clean energy, especially low-carbon and renewable hydrogen, would also be needed. The EU should adopt a pragmatic approach, and not exclusively focus on green hydrogen: all form of clean hydrogen will be needed in the transition towards climate neutrality and should be included in the cross- Mediterranean cooperation.

The focus of the cooperation should also go beyond energy and include industrial decarbonisation and mobility. The EU has several agreements to promote green hydrogen and developed the Africa-EU green energy initiative, but so far Europe has not worked enough on innovation cooperation and investments for industrial decarbonisation. The current Team Europe projects are mainly focusing on energy transitions, but the EU should consider building on this initiative and expanding its work towards innovative industrial solutions such as the best use of hydrogen, or carbon capture and storage.

The Global Gateway could be a good initiative to build upon to foster trust in the spirit of mutually beneficial partnerships, and would need the EU to give clear indications of the concrete initiatives and financing schemes that will be supported, while also being explicit about how to access such support.

United Kingdom

The UK left the EU in 2020, after nearly 50 years in the Union, with relations now mainly taking place within the framework of the Trade and Cooperation Agreement (TCA). Following Russia’s invasion of Ukraine, the UK and the EU have increased their coordination on energy. Both the EU and the UK are also moving ahead on climate actions and targets. Closer cooperation between the two should be explored to ensure synergies and coordination in their green transition processes. The agreement on the UK’s participation in Horizon Europe is a positive step to strengthen relationships, but a closer dialogue with the UK is needed to look for further opportunities to collaborate on climate and advance clean energy technologies.

First, as both sides’ industrial decarbonisation will require carbon capture and storage, collaboration on carbon management should be explored. The UK has an estimated 78 Gt of theoretical capacity offshore, but access to storage capacity in the UK is currently facing barriers, primarily as a result of the legal separation of the Emissions Trading Systems. The Commission should open a dialogue with the UK on the transport and storage of CO₂.

On hydrogen, as both sides are aiming to develop their production and imports with their respective hydrogen strategies, coordination would be helpful on the regulatory and LCA methodology approaches, as differing regulatory approaches will result in discrepancies that could hamper trade between the EU and the UK, and could create confusion for international partners. A collaboration on aligned standards would be useful.

Nuclear energy relations between the two blocs are currently managed by a separate agreement between Euratom and the UK, focusing on cooperation on safe and peaceful uses of nuclear energy as well as including provisions for research and development. However, as the EU and the UK are both increasingly looking at nuclear energy, a dialogue on licensing and sharing best practices could help to speed up the deployment of nuclear energy.

The upcoming TCA revision in 2026 should be considered an opportunity to strengthen EU-UK collaboration on climate and energy, and to remove any barriers to successful cooperation. A joint statement by the European Commission and the UK Government on furthering climate action and clean energy cooperation ahead of COP29 would provide a strong signal globally and help to re-establish the EU and UK’s international leadership on climate following the European and UK elections.

United States

With clean technologies at the centre of their green transition, the EU and the U.S. have the unique opportunity to leverage their joint market power to increase the number of clean technology options on the table, thus driving the costs down globally. As a result of pre-existing policies, the EU and the U.S. have developed different approaches to supporting industrial decarbonisation and clean technology roll-out. The EU has emphasised the role of patents, is highly successful in the early research stages, and has brought offshore wind and solar to scale, while the U.S. has extensive experience commercialising and scaling up next generation technologies. To be able to lead the global green transition, they need to exchange best practices.

The EU and the U.S. can also contribute to driving global decarbonisation by working on standardisation of projects and manufacturing. The greater the standardisation and factory production, the more rapidly new energy technologies will be deployed.

Standardised engineering design plans can significantly reduce engineering costs and accelerate project construction times, while also improving skill transferability and flexibility. For technologies that do not require intricate “industrial complex-level” work at individual locations, it is going to be crucial to increase the fraction of the final zero-carbon product that is standardised and manufactured off site. By addressing the need to have joint standards, the EU and the U.S. will set the stage for more effective roll-out of clean tech and will create a blueprint for like-minded countries to adopt similar project and production standards which will reduce risks of supply chain disruptions and boost production of clean tech.

Finally, the EU and the U.S. should collaborate on the international stage, to support international initiatives and cooperation for climate. Together, they can build international coalitions around key topics such as methane or carbon management, and coordinate to promote global climate ambition and the implementation of international commitments. Transatlantic alignment on market standards, technology innovation and development, and international finance will all be critical to achieving global climate targets. An increasingly complex geopolitical environment makes cooperation between the U.S. and EU more important than ever to continue momentum behind the development of clean industries and climate action globally.

3.  Mobilise EU market power to influence global standards

The EU should aim to not only cut its own emissions but also support global emissions reduction by using its ability to set standards to foster decarbonisation across the globe, while ensuring that these standards are fair and providing support for developing countries to meet them. The EU internal market, with its 450 million consumers, represents a key opportunity for the EU to influence global decarbonisation. Setting up environmental standards and requiring that imports comply with them in order to access the EU market is a strong incentive for exporting countries to decarbonise their production. The EU can therefore play a major role in setting up standard for the climate transition.

With demand for industrial products rising across emerging economies over the next several decades, the EU should work with partners on the development of standards to create a more unified, equitable global market that drives decarbonisation across regions. The impact of strong standards applied to the European market — already significant — can be multiplied if developed in partnership with other major markets and with producers at the table.

The EU has, for example, the opportunity to define low-carbon hydrogen criteria and ensure their global diffusion. By quickly developing a benchmark for hydrogen traded in and with the EU, Europe could create the basis for an international hydrogen market based on EU standards on clean hydrogen definition and methodology to assess and account for emissions. Similarly, with its Methane Regulation and the Carbon Certification Framework, the EU could lead on global standards for methane emissions reduction and on carbon removal certification and accounting.