‘State of the Energy Union’ Report

October 25, 2023

The ‘State of the Energy Union’ report provides a comprehensive overview of Europe’s energy and climate landscape, encompassing various aspects of energy and climate policy. This report highlights key findings and challenges identified in the annual Climate Action Progress Report, the Fuel Quality Report, the Carbon Capture & Storage Directive Implementation Report, the EU Adaptation Strategy Implementation Report, and the upcoming Carbon Market Report.

Steady Decline in Greenhouse Gas Emissions

Europe continues to make progress in reducing its greenhouse gas emissions, with a net decrease of approximately 3% in 2022. This decline represents the continuation of a 30-year downward trend in emissions, cumulatively amounting to -32.5% since 1990. Although the COVID-19 lockdown measures in 2020 led to a significant emission reduction, followed by a rebound in 2021, 2022 emissions remained below the 2019 level.

Additionally, Europe saw an increase in the volume of carbon removed from the atmosphere in 2022 compared to the previous year. However, based on Member States’ projections, the EU is not currently on track to achieve its 2030 goal of removing 310 million tonnes of CO2 from the atmosphere annually.

Accelerating Emissions Reduction

To meet the ambitious targets of a -55% net greenhouse gas reduction by 2030 and climate neutrality by 2050, the EU and its Member States must intensify their efforts to accelerate emissions reduction and enhance implementation.

Challenges in Power Generation and Heavy Industry

Emissions from factories and power plants within the EU Emissions Trading System (EU ETS) decreased by 1.8% in 2022, primarily due to the impact of the energy crisis in Europe. However, emissions in the energy sector slightly increased for a second consecutive year, mainly attributed to increased coal use in electricity generation. Emissions from industrial production decreased due to inflation and reduced industrial demand.

Supporting Climate and Energy Projects

The EU ETS, with a robust carbon price, generated approximately EUR 38.8 billion in auction revenue in 2022. Member States allocated an average of 76% of this revenue to support climate and energy projects, including social measures to address the energy crisis.

Mixed Trends in Different Sectors

Outside the EU ETS, emissions from buildings, agriculture, small industry, waste, and transport collectively decreased by 3% in 2021. Notable reductions were observed in the buildings and small industry sectors, with emissions falling by more than 9% and nearly 6%, respectively. Conversely, the transport sector recorded a 2% increase in emissions in the same year.

Adaptation to Climate Change

Efforts to implement the 2021 EU Adaptation Strategy require comprehensive engagement from all sectors of society and government. While some areas have made progress, such as health policy through the European Climate and Health Observatory, significant vulnerabilities persist in sectors like agriculture, water management, and the energy sector. Enhanced evaluation of national adaptation policies and their effectiveness is essential.

Decarbonizing Transport Fuels

The latest Fuel Quality Report reveals that the average greenhouse gas intensity of fuels in the EU remained 5.5% lower in 2021 than in 2010. Despite progress in electric vehicles, the majority of road transport in the EU relies on petrol and diesel, contributing to air pollution and climate change. Thirteen Member States have achieved the goal of reducing the GHG intensity of transport fuels by at least 6% since 2010, as set out in the Fuel Quality Directive.

While biofuels saw a slight increase in 2021, fossil fuels continued to dominate the fuel supply in most EU countries, with diesel being the primary choice. To transition towards zero-emission mobility, more action is needed to decarbonize transport fuels and promote the use of high-quality fuels in non-electrified vehicles.

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