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Enshrining a 2040 climate target in law is a priority for the incoming Commission. In February, the climate and energy services recommended pursuing an ambitious 90% emissions reduction from 1990 levels. If adopted, the 2040 target can become a North Star for climate and energy policy and investment, guiding the economy towards aggressive decarbonisation. The subsequent, daunting challenge will be devising the policy framework to achieve it. Teresa Ribera’s nomination as Executive VP overseeing the climate, energy and competition portfolios indicates the deep economic transformation ahead for Europe.

There are reasons for optimism: Europe’s power sector is decarbonising with cheap wind and solar, while clean technologies in the transport and heating sectors are becoming more affordable. Modelling by the Commission and academia demonstrates the technical feasibility of rapid decarbonisation in a few decades. Yet many real-world risks threaten Europe’s 2040 ambitions.  

Geoeconomic instability could affect access to clean technologies or raise inflation, while technologies like carbon capture may not become cost-efficient in time. Decarbonisation will create winners and losers, potentially exacerbating inequality. Pressure to unwind climate policy will test policymakers’ resolve, even when doing so will harm both ongoing and future green investments.

To manage such risks, resilience should be central to the EU’s 2040 climate and energy policy framework. Key risk factors for the green transition, such as costs of clean technologies and the inequality effects of climate policy vulnerable citizens’ incomes, should be monitored, and if said risks materialise, the policy framework should have a prepared response ready to go. A risk and resilience approach to climate and energy policy improves the EU's chances of charting a stable path to decarbonisation.

Find out more about the 2040 climate target by reading 'Europe’s 2040 climate target: four critical risks and how to manage them'.

The Why Axis is a weekly newsletter distributed by Bruegel, bringing you the latest research on European economic policy.