Stricter EU rules and technology bans could deliver net zero in 2046, €6.1tn GDP boost

2 months ago 8

A doubling down on decarbonisation policy efforts would boost economic growth across the EU, with stricter regulations delivering the greatest benefits, according to a new report from economic consultancy Oxera released today Thursday (18 July).

According to the report current policies do not put the EU on a trajectory to net zero emissions by 2050.

In an accompanying press release Giulio Federico, competition and energy economist at Oxera, said that an amplification of existing policies and measures “is realistically needed for countries to achieve their net greenhouse gas emissions targets.”

The report identifies four broad ‘levers’ for achieving carbon-neutral growth before 2050:

Tougher regulation, which includes stricter penalties on high-emitting sectors and phase-out dates for advanced fossil fuel-dependent technologies;

Large-scale deployment of new production capacity, based on green technologies and accelerated by support for innovation in the private sector;

A fairer tax policy, granting subsidies to low-carbon technologies and increases taxes on carbon-intensive industries;

A carbon pricing system that increases the price of carbon by an average of around 30% year-on-year in the 2020s, 8.6% in the 2030s and between 4% and 6% in the 2040s.

Although the authors call for a mix of instruments to be used simultaneously, the paper examines each policy separately, estimating when each one would deliver net zero emissions in the EU, and the corresponding impact on the bloc’s economy.

Stricter regulation was identified as having the greatest potential. The report estimates that measures such as a 2027 phase out of new fossil fuel cars and new gas boilers from 2028 could collectively allow the EU to reach net zero as early as 2046, while boosting the economy by €6.1trillion.

While the EU leadership has remained committed to climate action, in recent months the bloc has moved away from a ‘strict regulation’ approach.

In her successful re-election pitch to the European Parliament this morning, European Commission President Ursula von der Leyen emphasis was on support for decarbonised industries and the roll-out of new technologies.

During her speech, she said that the Green Deal should continue to follow a ‘technology neutral’ approach. Consistent with this, a document outlining her ‘policy orientations’, published before her speech, raised the possibility of giving more flexibility to the ban on the sale of internal combustion engines by 2035.

[Edited by Donagh Cagney/Rajnish Singh]