EC proposes to increase 2030 target for GHG emissions cut to at least 55%
The European Commission president, Ursula von der Leyen, on Wednesday announced a new 2030 greenhouse gas emissions reduction target for Europe. The EU institution has jumped on the call of the Institutional Investors Group on Climate Change (IIGCC) which had put pressure on von der Leyen for an ‘ambitious’ EU 2030 target. The €37trn investor coalition on Tuesday had called on the EC and EU member states for a target that would ensure ‘at least’ a 55% drop in EU greenhouse gas emissions by 2030 compared to 1990 levels.
This objective has been proposed by von der Leyen on Wednesday. To achieve it, the EU body intends to revise all climate and energy legislation by next summer, spend 37% of the €750bn NextGenerationEU plan on the EU green deal and 30% of it will be poured into green bonds. Besides, the creation of new hydrogen valleys in Europe is considered. David Czupryna, head of ESG development at Belgian asset manager Candriam, said that last measure could mean that hydrogen energy could eventually take off. “The main challenge was hitherto having enough renewable energy stocks to produce green hydrogen,” he added.
IIGCC said in a report that the 55% reduction threshold remains the minimum requirement to reach thereafter a net zero carbon European Union in 2050. Its recommendation relies on estimations reported by the Intergovernmental Panel on Climate Change (IPCC). In short, as global CO2 emissions need a 45% trim by 2030 compared to 2010 levels to limit global warming to 1.5 °C, this requires a 54% cut in all EU greenhouse gases by 2030 compared to 1990 levels. The coalition believes that a minimum of €1trn in sustainable investments mobilised by 2030 would help to achieve the target. “A 55% reduction in emissions by 2030 would be possible by upscaling mature technologies and accelerating the market development of others; further reductions above 55% are possible with additional technology-based efforts and/or combining these with lifestyle changes (e.g. modes of travel, fleets of sharing vehicles, dietary changes, consumption and production patterns),” said the investors.
In order for Europe to reach net zero carbon emissions in 2050, the coalition also made the case for a more than 40% EU renewables target in final energy consumption by 2030 (vs. 32% currently) as well as for a 40% energy efficiency target (vs. 32.5% currently).
Sectorial pathways and dialogue needed
The European investor coalition expressed a couple of other recommendations in its report. The first requiring clarity from policymakers on pathways to achieving net zero emissions across specific sectors of the economy. The IIGCC suggested that could be done through roadmaps enshrining timetables for transition milestones (like fossil fuel phase out) and key technology and infrastructure changes. The last recommendation deals with supporting policymaker and investor dialogue to ensure investment needs for the European Green Deal are met.
Ian Simm, CEO of Impax Asset Management, said his firm particularly supports the call for more collaboration and dialogue between policy makers and the investment community. “Although most of the required capital will need to come from the private sector, the pipeline of investment opportunities is still restricted by insufficiently detailed policy goals, inadequate market design and unacceptable levels of risk,” he said.
“2020 looks set to be yet another year of physical climate change records of all the wrong sorts,” added Ingrid Holmes, head of policy and advocacy at the international business of Federated Hermes. “As climate change impacts accelerate, the need for highly ambitious EU 2030 targets in line with net zero emissions by 2050, policy measures to enable the private sector to step up to deliver those goals and a focus on social factors to enable an inclusive transition of the sort envisaged by the European Green Deal has never been more important. We urge the EU to act.”
But as Alexander Burr, ESG policy lead on investment stewardship at LGIM, said, “achieving net zero isn’t going to be easy and the clock has already started ticking.”