REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL EU Climate Action Progress Report 2025
Date: 2025-11-06
Institutions: Directorate-General for Climate Action, European Commission
Subjects: EU Emissions Trading Scheme, EU environmental policy, adaptation to climate change, carbon neutrality, climate change, environmental cooperation, forestry policy, investment, land use, pollution control measures

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 6.11.2025  COM(2025) 668 final  REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL EU Climate Action Progress Report 2025 {SWD(2025) 347 final}  
 
 
Contents 

1.  Climate action: advances and challenges ............................................................ 4 

1.1 Climate change impacts and greenhouse gas emissions: recent trends .......... 4 

1.2 Towards the climate objectives ......................................................................... 9 

1.3 Progress on climate policies and legislation .................................................... 13 

1.4 Progress in the Member States ....................................................................... 15 

1.5 Public opinion on climate change .................................................................... 21 

2.  The EU Emission Trading System ..................................................................... 22 

2.1 Cap on emissions under the EU ETS ............................................................. 22 

2.2 Emission trends .............................................................................................. 23 

2.3 Auction revenues ............................................................................................ 24 

2.4 Aviation ........................................................................................................... 25 

2.5 Maritime transport ........................................................................................... 26 

2.6 Buildings, transport and small industry ........................................................... 27 

3.  Effort sharing emissions..................................................................................... 28 

3.1 Effort sharing targets ....................................................................................... 29 

3.2 Progress towards effort sharing targets .......................................................... 30 

3.3 Emission trends by type of gas ....................................................................... 32 

3.4 Road transport ................................................................................................ 34 

4.  Land use sector ................................................................................................. 38 

4.1 LULUCF target ................................................................................................ 39 

4.2 Assessment of the progress ............................................................................ 40 

4.3 Action to step up land monitoring .................................................................... 41 

4.4 Related initiatives relevant for agriculture and forestry ................................... 42 

4.5 Incentives for carbon removals and sustainable practices .............................. 42 

5. 

Industrial carbon management .......................................................................... 43 

6.  Climate resilience and adaptation ...................................................................... 45 

6.1 Climate hazards and economic losses ............................................................ 45 

6.2 EU action to boost climate resilience .............................................................. 48 

6.3 Progress in the Member States on climate resilience and adaptation policies 
and legislation ....................................................................................................... 49 

6.4 Regional and local action  ............................................................................... 52 

7. 

Investments in climate action ............................................................................. 53 

7.1 Investment needs ............................................................................................ 53 

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7.2 Mobilising private-sector investment ............................................................... 56 

7.3 Funding from the EU Emission Trading System .............................................. 59 

7.4 Climate expenditure in the EU budget ............................................................ 62 

8. 

International climate action ................................................................................ 68 

8.1 Multilateral engagement .................................................................................. 68 

8.2 Bilateral engagement ...................................................................................... 71 

8.3 Climate finance and international cooperation ................................................ 73 

2 

 
 
 
Why do we publish this report? 

The European Commission monitors and assesses progress in meeting 
climate targets, as required by EU legislation. Under Articles 29(1) and 29(5) of 
the Governance Regulation, it must assess and report on progress annually by 
the end of October, starting from 2021. This Climate Action Progress Report 
serves as this assessment. 

3 

 
1. Climate action: advances and challenges 

Key highlights 

• 

In 2024, Europe once again experienced the devastating effect of climate 
change, with record-breaking temperatures and extreme weather events, 
affecting thousands of lives, the economy and underscoring the urgent need 
for climate action. 

•  The EU made progress by cutting net greenhouse gas emissions by 2.5% 

from 2023. 

•  This means the EU is on track to achieve its 2030 emission reduction target 
of a 55% decrease compared to 1990 levels provided existing and planned 
policy measures are fully implemented by the EU and Member States. 
•  The EU and Member States are also stepping up their efforts on climate 

resilience and adaptation. 

•  Europeans continue to voice concerns about climate change, with 

continued strong support for EU climate goals and policies. 

•  Global greenhouse gas emissions continued to rise in 2024, reaching 

53.2 billion tonnes of CO2 equivalent. 

1.1 Climate change impacts and greenhouse gas emissions: recent 

trends 

2024 was globally the warmest year on record and the first in which the average 
temperature exceeded 1.5°C above the pre-industrial level 1. Europe continues to be 
the fastest-warming continent and 2024 was marked by a clear east-west contrast in 
weather patterns. Eastern Europe was mostly warm, with many record-breaking 
temperatures, while the temperatures in western Europe were more variable, with 
some months cooler or close to average. 

As climate change intensified, 2024 saw a surge in extreme weather events with 
severe and widespread impacts 2. South-eastern Europe faced its longest heatwave 
ever recorded. Wildfires affected over 40 000 people. In July, a large fire in eastern 
Attica, Greece, burned around 110 km² and in September, several large wildfires 
broke out in Portugal within a short period. Bulgaria and Romania experienced an 
above-average number of fires during the summer. It was also one of the ten wettest 
years in western Europe since 1950. Storms and flooding affected over 400 000 
people, resulting in at least 335 deaths. A series of storms in May caused 
widespread flooding across eastern France, western Germany, Belgium, and the 
Netherlands. In September, Storm Boris swept through central and eastern Europe, 
and record-breaking rainfall in south-eastern Spain triggered catastrophic flooding in 
October, causing numerous fatalities and severe economic losses. Glaciers across 

1 World Meteorological Organisation (WMO), State of the Global Climate 2024, 2025. https://wmo.int/publication-
series/state-of-global-climate-2024  
2 Copernicus Climate Change Service (C3S) and World Meteorological Organisation (WMO), 2025: European 
State of the Climate 2024. https://climate.copernicus.eu/esotc/2024  

4 

 
 
Europe continue to melt, with those in the Alps among the fastest shrinking in the 
world. 

These events and projections highlight the urgent need for continued, ambitious and 
coordinated climate action to reduce risks, protect people and the economy, and 
build resilience against the growing impacts of climate change. 

Unless strong mitigation and adaptation measures are taken, climate change is 
projected to result in more temperature-related deaths in Europe, especially in the 
Mediterranean and eastern Europe 3. Rising global temperatures are also projected 
to expose growing fractions of the population to unprecedented climate extremes in 
their lifetimes 4. 

Emissions trends in the EU 

Provisional data for 2024 show that, in the EU, total net greenhouse gas emissions, 
including international maritime and aviation emissions under the EU target scope, 
decreased by 2.5% compared to 2023. Emissions continue on the downward path 
observed following the exceptional drop achieved in 2023. Emissions were 37.2% 
lower than in 1990 (or 39% when only domestic net emissions are considered), while 
GDP was 71% higher, meaning that economic growth continues to decouple from 
emissions 5. 

3 Masselot et al., ‘Estimating future heat-related and cold-related mortality under climate change, demographic 
and adaptation scenarios in 854 European cities’, Nature Medicine, 2025, https://doi.org/10.1038/s41591-024-
03452-2 
4 Grant et al., Global emergence of unprecedented lifetime exposure to climate extremes, Nature, 2025, 
https://doi.org/10.1038/s41586-025-08907-1  
5 The figure for the overall change in emission relative to the 1990 baseline for 2024 emissions in this report 
appears very similar to the figure in last year’s CAPR, even though emissions fell by 2.5% between 2023 and 
2024. This is primarily due to the 2025 revision of the EU GHG inventory data, which lowered the 1990 net 
emission baseline (by about 15 MtCO2-eq) and increased net emissions for recent years (up to 60 MtCO2-eq) 
compared to the 2024 GHG inventory used in the Climate Action Progress Report 2024. This is due mainly to 
significant adjustments to the historical LULUCF data in the 2025 GHG inventory (for more details, see the box 
on the 2025 GHG inventory revisions in chapter 3 of the accompanying staff working document). Note that if the 
former, 2024 GHG inventory had been used as the basis (i.e. as for the CAPR of last year), the reduction 
between 2023 and 2024 would have resulted in a total net emissions reduction under the EU target scope of 
38.5% relative to 1990. 

5 

 
 
Figure 1: EU GHG net emissions (2018-2024) 

The EU continues to reduce 
emissions in 2024 

-1.3% 

2022 

-2.5% 
2024 

-8.5% 
2023 

Note: These figures are based on the latest GHG emissions inventory including approximated values for 2024, 
as reported by the EU Member States. Emissions from international aviation and maritime activities, as 
regulated in EU law, are estimated by the European Commission (see Chapter 2 of the accompanying staff 
working document). 

The most significant decrease in emissions was achieved in the energy sector, with 
emissions falling by 8.6% (equivalent to 66 MtCO2-eq) compared with 2023 (Figure 
2). A key factor in this decline was the power sector, where emissions from 
electricity production dropped by 10.7% compared with 2023 levels 6. This is largely 
due to an 8% increase in electricity generated from renewables and a 5% rise in 
nuclear power, coupled with a decrease in gas by 8% and coal by 12%. Within 
renewables solar power saw a remarkable growth of 19%, while hydropower 
increased by 12% 7. Wind-generated power increased more moderately by around 
2%. Overall, electricity production increased by 2% in 2024. 

Overall, total industrial emissions in 2024 remained broadly stable compared with 
2023. The industrial sector has two main sources of emissions: fuel-combustion 
emissions for on-site heat, steam, and power; and non-energy related industrial-
process emissions (e.g., cement clinker calcination, lime production, and metal or 
chemical manufacturing). While fuel-combustion emissions increased slightly by 
0.4%, non-energy related process emissions decreased by 0.5%. This reflects the 
interplay between annual sectoral trends, industrial output trends (a 2.6% decline 
compared to 2023 8) and energy efficiency gains. The emissions from energy-
intensive industries generally held steady, though with variations between sectors. 

6 Based on emissions from electricity and heat generation in the EU ETS (data extracted from the Union Registry 
on 30 September 2025). 2% of this decrease is also justified by data inconsistencies affecting the split between 
the power and the industrial emissions, not by market trends. See Carbon Market Report 2025 for details.  
7 Based on Eurostat dataset ‘Net electricity generation by type of fuel - monthly data’, [nrg_cb_pem]. 
8 Based on Eurostat dataset ‘Production in industry - annual data’ [sts_inpr_a]. 

6 

 
 
  
For instance, emissions from industrial process in the chemical sector rose by 8.2% 
whereas those in the mineral sector, including cement, decreased by 2.5%, largely 
reflecting changes in production volumes. 

The agriculture sector also contributed to the overall decline in emissions in 2024, 
showing a reduction of 1.2% (around 4 MtCO2-eq) compared to the previous year, 
while emissions from building and waste stayed broadly unchanged. In contrast, 
emissions from the transport sector continued to rise, with domestic transport 
increasing by 0.7% and international maritime and aviation by 3%. As a result, 
transport is now Europe’s largest sectoral source of emissions. 

Figure 2: Change in the EU greenhouse gas emissions in 2024 by sector 

Domestic and international 
transport increased its emissions 
in 2024 

Notes: (1) Energy sector refers to electricity and heat production and petroleum refining (1.A.1 GHG inventory 
code). It also includes indirect CO2 emissions, emissions from other sectors (1.A.5 GHG inventory code), and 
fugitive  emissions  (1.B  GHG  inventory  code)  (2)  Industry  includes  fuel  combustion  in  manufacturing  and 
construction  (1.A.2)  and  emissions  in  industrial  processes and  product use.  (3)  Buildings  include  emissions 
from energy use in residential and tertiary buildings, and energy use in agriculture and fishery sectors (1.A.4 
GHG inventory code). 

In 2024, the EU Emissions Trading System (EU ETS) achieved a further reduction 
in emissions from power and industry installations, with a 5.8% decrease compared 
to 2023 levels. This brings these emissions to around 50% below 2005 levels. 
Aviation emissions covered by the EU ETS rose compared to 2023 by around 15%, 
although around half of this increase was due to an enlarged geographical scope 9. 

In the Effort Sharing sectors, emissions remained at a similar level compared with 
2023. Provisional 2024 data for GHG emissions and removals from the land use, 
land-use change, and forestry (LULUCF) sector show an increase in net carbon 
sinks of around 7% (or 15 MtCO2-eq) compared to 2023, although approximated 
data remain subject to revisions. 

9 Re-inclusion of non-domestic flights to and from airports in outermost regions. 

7 

 
 
 
 
Global trends 

According to the Commission’s 2025 EDGAR report, global greenhouse gas 
emissions continued to rise in 2024, reaching 53.2 billion tonnes of CO2 
equivalent (Figure 3). This is 1.3% higher than in 2023 and 4.7% higher than in 
2019, before the pandemic. 

In 2024, the power sector was the main driver of global emissions (+1.5%, or 
235 MtCO2-eq), due to higher demand for cooling, rising energy consumption in 
industry, the shift to electric transport and the growth of data centres 10. The second 
biggest source of higher emissions was for fuel combustion in industry (+2.1%, or 
131 MtCO2-eq) and then for transport (+1.2%, or 99 MtCO2-eq). 

Figure 3: Global GHG emissions (1990-2024) 

EDGAR GHG’s estimates differs from the officially reported GHG emissions (i.e. GHG 
inventories submitted by the parties to the UNFCCC) for different reasons: 

•  The source of data; 
•  The estimation methodology. 

Of note, only the officially reported data submitted to the UNFCCC should be used to 
assess EU climate progress. 

For more detailed information see comparative analysis of EDGAR and UNFCCC GHG 
emissions inventories. 

10 IEA (2025), Global Energy Review 2025. 

8 

 
 
 
 
 
Table 1: Annual change of global emissions (%, 
2023-2024) 

Country 

  EU-27 
China 

United States 

India 

Russia 

Indonesia 

Brazil 

Japan 

Rest of world 

Global total 

GHG emissions  

% change (2023-2024) 

-1.8% 

+0.8% 

+0.4% 

+3.9% 

+2.5% 

+5.0% 

+0.2% 

-2.8% 

+1.8% 

+1.3% 

The largest emitters are China, with 
29% of global emissions, the United 
States (11%), India (8%), the EU (6%), 
Russia (5%) and Indonesia, Brazil and 
Japan (all with 2%). Together, they 
produced 66% of global emissions in 
2024. 

Among these emitters, only the EU and 
Japan reduced their GHG emissions 
while Indonesia and India saw the 
fastest growth of emissions. The 
emissions produced in China and in 
the United States also increased but at 
a slower pace than in recent years 
(Table 1). 

1.2 Towards the climate objectives 

As set out in the European Climate Law, the EU aims to become climate neutral by 
2050. This means that by then, the EU will not add any extra greenhouse gases into 
the atmosphere because emissions will either be reduced to zero or balanced out by 
removals. 

To achieve this, the EU has set an intermediate target to reduce its emissions by 
2030 and the Commission has proposed another target for 2040 to be enshrined in 
the Climate Law. The target for 2030 requires cutting total net greenhouse gas 
emissions in the EU by at least 55% below 1990 levels by 2030. The European 
Commission has proposed a target for 2040 that aims to at cutting net greenhouse 
gas emissions by 90% by 2040 (see Figure 4). The European Parliament and the 
Council are currently considering this proposal (the Council reached a General 
Approach on 5 November 2025). 

Three main policies ensure the EU meets its target of reducing emissions by 55% by 
2030: 

•  The EU Emissions Trading System (ETS) aims to cut emissions by 62% 

compared to 2005 levels (see Chapter 2). 

•  The Effort Sharing Regulation (ESR) sets a target of 40% reduction 

compared to 2005 levels (see Chapter 3). 

•  The Land Use, Land Use Change and Forestry (LULUCF) Regulation 

provides for an additional 42 MtCO2-eq land-based net removal compared to 
the 2016-2018 average. However, the European Climate Law sets a 

9 

 
 
 
 
 
 
 
 
 
 
maximum contribution to the EU economy-wide 2030 target of 225 MtCO2-eq 
for land-based removals (see Chapter 4). 

Other policies also support climate neutrality and intermediate targets: 

•  The emissions trading system for buildings and transport (ETS2) aims to 
cut emissions by 42% compared to 2005 levels (see Chapter 2), alongside 
other policies. 

•  Policies to cut emissions of hydrofluorocarbons (HFCs) by about 95% 

compared to 2015 levels (see Chapter 3). 

•  The CO2 geological injection and storage capacity target of at least 50 

million tonnes per year by 2030 (see Chapter 5). 

Figure 4: Main EU climate targets 

The EU aims to 
reduce total net GHG 
emissions by at least 
55% compared with 
1990 levels by 2030. 

-90% 

The EU aims to 
be climate 
neutral by 2050. 

0
3
0
2

0
4
0
2

0
5
0
2

-55% 

The European 
Commission proposed a 
target reduction of 90% 
compared with 1990 
levels by 2040. 

CLIMATE 
NEUTRALITY 

10 

 
 
 
 
 
 
Figure 5: EU 2030 targets 

2030 

-55% 

The EU decreases its total net GHG 
emissions by at least 55% compared to 
1990 by 2030. 

-62% 

Emissions under the Emission Trading System 
(ETS) decrease by 62% compared to 2005. 

-40% 

Emissions under the Effort Sharing Regulation 
(ESR) decrease by 40% compared to 2005. 

225 

The European Climate Law sets the maximum 
contribution of land-based removals by the land 
use, land use change and forestry (LULUCF) 
sector to 225 MtCO2eq. 

Towards the EU 2030 target 

Overall, the EU is on track to achieve the 2030 target. The latest Member State’s 
projections from March 2025 show a gap close to 1 percentage point to the EU 
target, in line with the recent assessment of national climate and energy plans. 

Achieving the EU target requires the EU and Member States to implement both 
current and additional policies and measures in full. 

Projections based only on existing policies and measures continue to fall short by 
around 8 percentage points. Extrapolating the trend over the past five years to 2030 
points to a 6 percentage-points gap. With only five years left until the interim target to 
climate neutrality, these findings highlight the critical importance of close monitoring, 
sustained action and sufficient investment for the EU to meet the 2030 target (Figure 
6). 

11 

 
Figure 6: Projected emissions reduction in 1990–2030 and gap to target under the main policies 

Notes:  (1)  Gaps  to  target  are  based  on:  i)  Member  States’  2025  GHG 
projections, both ’with existing measures’ (WEM) and ‘with existing and 
additional measures’ (WAM) scenarios; and, ii) the linear extrapolation of 
past  5-years  observed  trend.  (2)  The  EU  2030  target  scope  includes 
LULUCF  net  removals  and  emissions  from  international  aviation  and 
maritime activities regulated under EU Law. The latter are included in the 
EU ETS projected emissions. (3) For LULUCF the gap refers here to the 
maximum contribution of 225 MtCO2-eq net removals as provided in the 
European Climate Law. Trend and WAM show higher sink than WEM. (4) 
Gaps to policy targets are presented as a range of projected values based 
both on GHG projections and on linear trends. 

There are differences across sectors and policies. With the contribution from the 
LULUCF sink limited to 225 MtCO2-eq by the European Climate Law 11, the projected 
gap to the EU 2030 target is mainly explained by the challenges and lack of ambition 
in reducing emissions in the sectors covered by the Effort Sharing Regulation (ESR), 
e.g. domestic transport, buildings, agriculture and waste. The projected gap ranges 
between 2 and 9 percentage points, considering the impact of existing and additional 
policies and measures and under current policies, respectively. The implementation 
of planned measures is crucial as the extrapolation of the past five years observed 
trend would point to even higher gap for ESR (12 ppt). The international aviation and 
maritime emissions covered under the EU ETS represent another acute challenge, 
as emissions from these sectors are rising and are hard to abate (see Chapter 3 of 
the Staff Working Document for more details). 

Towards the EU climate neutrality and resilience 

On 15 March 2025, EU Member States reported their progress toward the goals 
outlined in their national energy and climate plans (NECPR) 12. An increasing 
number of EU countries committed to achieve climate neutrality by 2050 or 
sooner 13. Member States have also set or updated national targets to reduce 

11 Article 4 of the European Climate Law (Regulation (EU) 2021/1119). 
12 For more details, see the staff working document on the Assessment of progress towards the objectives of the 
Energy Union and Climate Action accompanying the State of the Energy Union 2025. 
13 Bulgaria, Cyprus, Malta, the Netherlands, and Romania have formally reported, for the first time, a target year 
to achieve climate neutrality. Romania set an early target of 2045. 

12 

 
 
 
 
greenhouse gas emissions by 2050 14. When these national targets are aggregated 
for the entire EU 15, they are 6 percentage points short of the net-zero greenhouse 
gas emissions target set for 2050. 

In December 2023, the European Commission recommended that 10 Member 
States adjust their measures to make them more consistent with the climate-
neutrality objective. The Commission issues such recommendations if Member 
State’s measures are inconsistent with the climate-neutrality objective. 

The recommendations primarily urged Member States to step up action on climate 
mitigation and to align their policies with the climate-neutrality objective. Specific 
sectors like transport, agriculture, and land use (LULUCF) were highlighted for 
improvements in certain countries. In their following NECP progress reports, all 
Member States notified the Commission how they considered these 
recommendations. Some Member States introduced new measures, particularly 
focusing on renewable energy; others outlined a range of plans and strategies. 
Several Member States noted that they are in the process of revising their long-term 
strategies to align with EU objectives (more details in Chapter 3 of the accompanying 
staff working document). 

In addition to the climate-neutrality related recommendations, the Commission 
issued recommendations to 26 Member States on climate resilience and adaptation 
within the same package. These span the full spectrum of adaptation policy aspects, 
from legislation, risk and vulnerability assessments, and the use of nature-based 
solutions, to policy coordination, funding and transparency. 

Subsequently, most Member States confirmed that they will address these 
challenges as part of their ongoing efforts to upgrade their resilience and their 
adaptation policy planning and implementation. Many updated their risk 
assessments in 2023-2025 and an increasing number have prepared thematic and 
sectoral assessments. Better monitoring, reporting and evaluation frameworks are 
nevertheless needed at all levels to be able to more accurately assess the efficiency 
and effectiveness of resilience and adaptation policies and their implementation at 
Member State level (see Chapter 11 of the accompanying staff working document). 

1.3 Progress on climate policies and legislation 

With the adoption of the European Climate Law in 2021, the EU objective to reach 
net-zero emissions by 2050 became legally binding, as did the EU’s 2030 target to 
cut net greenhouse gas emissions by at least 55% compared to 1990 levels. The law 
also requires EU institutions and Member States to make continuous progress in 
adapting to climate change, strengthening resilience, and reducing vulnerability. 

14 As reported under Annex I, Table 1 of Commission Implementing Regulation (EU) 2022/2299 of 15 November 
2022. See SWD on the Assessment of progress towards the objectives of the Energy Union and Climate Action 
accompanying the State of the Energy Union 2025. 
15  Where  available,  missing  NECPR  values  were  replaced  by  national  GHG  targets  previously  submitted  by 
Member States to the Commission (e.g. for the 2023 NECPR or national long-term strategies). 

13 

 
 
The focus in 2024 and 2025 has been on action to meet the 2030 target at 
Member State level, on setting an EU-wide target for 2040 as the next step on the 
path to climate neutrality and on ensuring decarbonisation is a powerful driver for a 
more competitive and resilient Europe. 

In July 2025, the Commission adopted a proposal to amend the European Climate 
Law Regulation to set a 2040 target to reduce the EU’s net greenhouse gas (GHG) 
emissions by 90% by 2040 from 1990 levels, including the possible use of some 
international credits. This target will give people, businesses and investors greater 
predictability to plan ahead. The proposal is now being discussed by the co-
legislators. In November 2025, ministers at the Environment Council agreed to a 
legally binding intermediate 2040 target of 90%, with a domestic target of 85% and 
up to 5% of international carbon credits. 

Work began on a new integrated framework for climate resilience, with a public 
call for evidence issued at the end of July 2025. Implementation of the EU 
Adaptation Strategy progressed, reflecting the findings of the first European Climate 
Risk Assessment, and 2024 Communication on managing climate risks, supported 
by data and tools from Climate-ADAPT platform and the European Climate and 
Health Observatory. 

In January 2025, the Commission set out a Competitiveness Compass highlighting 
how it planned to support the transition towards a decarbonised competitive and 
resilient economy. Accordingly, in February 2025, the Commission presented the 
Clean Industrial Deal, a joint roadmap for competitiveness and decarbonisation and 
transformational business plan to support EU industry. It aims to accelerate the 
process of decarbonisation, while securing the future of manufacturing in Europe. 
The Deal focuses mainly on two closely linked sectors: energy-intensive industries 
and clean tech. One of the already completed action is the Clean Industrial Deal 
State Aid Framework published in June 2025. An important element of the Clean 
Industrial Deal is the Action Plan for Affordable Energy, which contains specific 
measures to reduce energy costs in the EU. This initiative will have a significant 
impact on both industrial competitiveness and the cost of living. Additionally, the 
Union of Skills launched in March reinforces the goals of the Clean Industrial Deal 
by promoting development and investment in skills to address skills shortages and to 
ensure that no one is left behind in the context of the clean transition. 

The Commission continued to prepare the implementing legislation stemming from 
the revision of the EU’s climate legislation as part of the ‘Fit for 55’ package. 

This includes acts to implement: 

• 
• 
• 
• 

the Effort Sharing Regulation; 
the regulation on land use, land-use change, and forestry (LULUCF); 
the regulation on CO2 emission standards for cars and vans; 
the EU ETS (including the revised rules for aviation) and to extend the 
scheme to cover the maritime sector, making the EU the first jurisdiction 
globally to put an explicit carbon price on emissions from the maritime sector; 

14 

 
• 
• 

the ETS 2 for buildings and road transport; and 
the Social Climate Fund. 

New regulations on fluorinated greenhouse gases and ozone-depleting 
substances entered into force in March 2024. They have put in place new measures 
that will eliminate an additional 500 MtCO2-eq of emissions by 2050 compared to 
previously adopted measures on these chemicals. In 2025 the European 
Commission adopted secondary legislation to implement new rules on these 
substances, which are even more ambitious than the commitments made under the 
Montreal Protocol. 

As part of its wider simplification agenda, in May 2025 the European Commission 
tabled a proposal to simplify, among others, the F-gas Regulation. The proposal will 
reduce the administrative burden on importers and exporters by limiting the 
registration requirements to importers of products and equipment containing F-gases 
above certain annual thresholds and to those exporters that export stationary 
equipment with relatively highly warming F-gases 16. 

On 1 April 2025, as part of the Commission’s industrial action plan for the European 
automotive sector and following the Strategic Dialogue on the Future of the 
Automotive Industry, the Commission proposed to amend the regulation setting CO2 
emission performance standards for new cars and vans. This amendment brings 
in one-off additional flexibility in reaching the CO2 targets in 2025-2027, while 
maintaining the overall level of ambition of the targets. In June, the amendment was 
adopted by the Parliament and Council and published. 

1.4 Progress in the Member States 

National energy and climate plans 

National energy and climate plans (NECPs) are 10-year strategic documents in 
which Member States set out national targets, contributions and policies and the 
measures needed to reach EU climate goals. In May 2025, the Commission 
published its EU-wide assessment of the NECPs, following their updates to take into 
account the 2030 targets. The assessment was accompanied by a staff working 
document providing an individual assessment of the first 23 plans submitted. 
Subsequently, the Commission published its assessment of the final NECPs from 
Estonia and Slovakia in October 2025. Belgium submitted its final NECP in October 
2025 and Poland is the last Member State that has not yet submitted its plan. 

The assessment of the plans shows that their full implementation would bring the EU 
close to reaching its objectives, demonstrating that the EU is well on track to 
achieving the 2030 target of reducing net GHG emissions by at least 55% compared 
to 1990 levels. Overall, Member States are encouraged to implement additional 
measures in the transport and building sectors to meet their ESR targets, and to 
continue stepping up action in reducing emissions from aviation, the maritime sector, 

16 The latter would normally be covered by an export prohibition, for which an exemption to that prohibition is 
applied. 

15 

 
 
and to increase removals, or reduce emissions, in the LULUCF sector. Further 
efforts are needed to ensure a just transition and address the social impacts. The 
plans often lack comprehensive strategies for mobilising public and private finance 
for the required investments. On climate adaptation, only some plans sufficiently 
cover preparedness and resilience to climate impacts. A few plans include measures 
on water resilience (see Chapter 6). 

European Semester 

In June 2025, the European Commission published its Spring Package under the 
European Semester, which includes country reports and recommendations for each 
Member State. The Commission called on countries to support lead markets for 
clean decarbonised products and put in place plans for net-zero infrastructure, 
especially in areas like energy networks, carbon capture and storage, and hydrogen. 
It also highlights the urgent need to decarbonise industry and transport and to make 
it cleaner, and to step up actions to phase out fossil fuel subsidies. Water 
management, as part of climate change adaptation, remains a key priority for many 
Member States. Table 2 summarises the recommendations for each country. 

Table 2: 2025 European Semester country specific recommendations by Member State 

Member State 

Renewables, 
energy 
networks 

Country-specific recommendations 

Fossil 
fuels 

Energy 
efficiency 

Transport 

Industry, clean 
technology 

Adaptation and 
water 

Agriculture 

Other 

  Belgium 
  Bulgaria 
  Czechia 
  Denmark 
  Germany 
Estonia 
Ireland 
  Greece 
  Spain 
France 
  Croatia 
Italy 
  Cyprus 
  Latvia 

Lithuania 
Luxembourg 

  Hungary 
  Malta 
  Netherlands 
  Austria 
Poland 
  Portugal 

16 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Romania 
  Slovenia 
  Slovakia 
Finland 
  Sweden 

Note: Category Other includes emergency support, circularity and waste, support to coal regions, social support, 
green skills, taxation and strategic planning. 

Technical support 

In 2024, the Commission supported Member States through the Technical Support 
Instrument, providing expert help to design and carry out reforms. Projects focused 
on climate change adaptation and mitigation solutions, faster renewable energy 
permitting, application of the do-no-significant-harm principle, and renovation of 
buildings. The Commission also helped Member States implement the revised EU 
Emissions Trading System and prepare national Social Climate Plans under the 
Social Climate Fund. 

In 2025, the Commission continues to support work on natural resource resilience, 
the Carbon Border Adjustment Mechanism, and modernising energy systems. The 
Commission is also helping to green and upskill public administrations, improve 
business sustainability reporting and advance carbon capture, utilisation and 
storage. The support also covers the implementation of the Net Zero Industry Act 
and the EU Nature Restoration Law. 

Country factsheets provide a summary of completed and ongoing reform 
projects in each Member State. 

Policies and measures 

To achieve the climate objectives, a sharper focus is needed, both on EU-wide 
and in national policies and measures. Understanding how these policies work 
individually and together is essential. In 2025, as part of the National Energy and 
Climate Progress Reporting, EU Member States have reported progress on over 3.5 
thousand individual policies and measures across the five dimensions of the Energy 
Union 17. This is a 16% increase compared to 2023, the last reporting year. The 
number of reported measures increased in most of the countries. The highest 
increases were reported by Austria, Bulgaria, Hungary and Lithuania. In some cases, 
this is due to the adoption of new measures between the two reporting years, but it 
can also be due to amendments, or design changes, of existing measures (Figure 7). 
Conversely, Malta, Spain and Denmark reported a significant lower number of 
measures, compared with 2023. However, the number of single policies and 
measures is not necessarily a good indicator of the past, current and future ambition 
of Member States. Belgium is the only country that has not made submission by the 

17 This figure includes 241 policy and measures submitted by Belgium in 2023, the previous reporting year.  

17 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
time of drafting this report. For this Member State, the report uses gap-filled 
information from the 2023 reporting year. 

Around a third of all reported policies and measures have been newly implemented 
or planned from 2023 onwards. This high number might reflect the EU’s increased 
climate ambitions and Member States’s efforts to meet their 2030 climate and energy 
objectives 18. Most of the reported policies and measures have a decarbonisation 
objective, meaning that they aim at reducing GHG emission, enhancing carbon 
removals, or increase the use of renewable energy sources. 

Figure 7: Total number of single policies and measures (all dimensions), 2025 and 2023 reporting years 

Note: data on policies and measures are based on a preliminary dataset of 2025 NECP progress reports 
(Annex IX). Due to a delay in the submission, the data for Belgium refer to the 2023 NECP progress reports. 

Of these decarbonisation-related measures, the most are in energy supply (23%), 
energy consumption (22%) and transport (21%) sectors, reflecting the fact that these 
sectors are significant challenges and priorities for action (Figure 8). There are also 
many measures in the agriculture, land and forest sectors (19%). The situation 
varies across the Member States. Cyprus, Italy, Bulgaria, Portugal and Poland report 
the highest share of policies and measures affecting the energy supply sector. 
Energy consumption is specifically targeted in Ireland and Germany, while in Spain 
and France, the focus is more on the transport sector. Other Member States reported 
a relatively high numbers of policies and measures for the agriculture and land 
sector (e.g. Latvia, Lithuania and Slovakia). 

18 For more details, see the staff working document on the Assessment of progress towards the objectives of the 
Energy Union and Climate Action accompanying the State of the Energy Union 2025. 

18 

 
 
 
 
Figure 8: Number of single policies and measures by affected sector (decarbonisation objective) 

Note: figures on policies and measures are based on a preliminary dataset of 2025 NECP progress reports 
(Annex IX). They include policies and measures submitted by Belgium in the 2023 NECP progress reports. 

In terms of policy instruments, over 34% of the policies and measures with a 
decarbonisation objective are economic (e.g. subsidies, feed-in tariffs, auctions, 
waste fees, congestion charges, etc), and 27% are regulatory (e.g. efficiency 
requirements, buildings regulations, eco-design standards, inspection procedures, 
etc). Relatively less measures are of planning (10%) (e.g. urban planning, etc), 
informative (9%) (e.g. labelling, awareness rising, etc) or fiscal (7%) type. However, 
there are notable differences between Member States. The Baltic countries, for 
example, have adopted a relatively high number of economic measures, while in 
Romania and Bulgaria, most measures are regulatory (Figure 9). 

Overall, the completeness of reported information on national policies and measures 
has improved compared to previous reporting exercises. This improvement is 
attributed to increased dialogue with Member States, training for lead reporters, and 
efforts to enhance the clarity of both the guidelines and reporting tables, including 
the upgrade of existing warning and error checks into blockers in the reporting tool 
(automated quality checks in the tool that require the resolution of the issue before 
the dataflow can be released). 

However, there is a clear need for improvement in the quantification of the impact of 
policies and measures. This includes both the achieved and expected effects on 
greenhouse gas emissions, as well as their costs and benefits. For example, as in 
2023, only a fifth of reported policies and measures specify the expected emission 
reductions by 2030. Moreover, only in very few instances (Croatia, Ireland, Poland, 
Latvia) there is a broad consistency between the expected emission reductions from 
the reported measures and the GHG projections (with additional measure scenario) 
submitted by Member States. This lack of data makes it challenging to assess the 
overall impact of the measures implemented, highlighting the need for more 
systematic evaluation of policy effectiveness both before and after implementation 
(for more details, see the staff working document on the Assessment of progress 

19 

 
 
towards the objectives of the Energy Union and Climate Action accompanying the 
State of the Energy Union 2025). 

Figure 9: Total number of policies and measures by policy instrument type (decarbonisation dimension) 

Note: data on policies and measures are based on a preliminary dataset of 2025 NECP progress reports 
(Annex IX). Data for Belgium refer to policies and measures reported in the 2023 NECP progress reports. The 
countries are listed in order of the share of policies and measures based on an economic instrument. 

20 

 
 
 
 
1.5 Public opinion on climate change 

People across Europe have voiced strong concern about climate change and 
widespread support for climate action, following to the latest 2025 Eurobarometer 
survey. A significant majority (85%) of EU citizens believe climate change is a 
serious problem, indicating high levels of awareness and a clear sense of urgency. 
The concern is particularly pronounced among women and younger people (aged 
15-24). 

The survey also revealed that 84% of Europeans attribute climate change primarily 
to human activities, showing a shared understanding of the root causes of the issue. 

Support for decisive climate policies remains strong. Overall, 81% of respondents 
back the EU’s objective of achieving climate neutrality by 2050. However, the 
level of support varies across countries, with Estonia standing out as the only 
Member State with less than half (46%) of citizens supporting this target. 

The survey revealed resounding agreement (88%) that the EU should actively 
promote renewable energy and improve energy efficiency and that better preparation 
for climate impacts will improve daily life (83%). 

21 

 
 
 
2. The EU Emission Trading System 

Key highlights 

•  By the end of 2024, the EU ETS had helped drive down emissions from the 

electricity and heat generation and industrial manufacturing by 50% 
compared to 2005 levels. 

•  Emissions from electricity and heat generation in 2024 continued to 

decrease year on year, largely due to a substantial increase in the share of 
renewables and nuclear in the electricity mix, mirrored by a reduced 
reliance of major fossil fuels such as natural gas and coal. 

•  The ETS has raised over EUR 245 billion in revenues with nearly EUR 39 

billion in 2024 alone. These revenues primarily financed climate and energy 
measures through national budgets, but also via the Innovation Fund, the 
Modernisation Fund and the Recovery and Resilience Facility, in line with 
the RepowerEU Plan. 
In 2024, maritime transport emissions were included in the EU ETS for the 
first time. Compared to 2023, reported emissions increased by 13%, notably 
due to the impacts of the Red Sea crisis and subsequent re-routing. 

• 

•  Urgent action is required to decarbonise the aviation sector. To support this, 
a dedicated system has been in place since 2024 to accelerate the adoption 
of sustainable aviation fuels. 

•  Compliance in the EU ETS has been very high, including for maritime 

sector in its first compliance cycle. 

The EU Emissions Trading System (ETS) is a cornerstone of the EU’s climate action. 
It puts a cap on emissions from the electricity and heat generation, industrial 
manufacturing, aviation in Europe and maritime transport sectors, resulting in a price 
on emissions in line with the ‘polluter pays’ principle. The price creates an incentive 
for companies in these sectors to deploy solutions and invest in reducing emissions 
over time. The EU ETS also raises revenue to help fund these actions. 

2.1 Cap on emissions under the EU ETS 

The EU ETS is a market-based instrument. It sets a cap on emissions from the 
sectors covered by the scheme and every year the cap is lower, with a target of 62% 
reduction by 2030 compared with 2005 levels of emissions. The cap is expressed in 
allowances, which companies must surrender each year to cover their emissions. 
Companies primarily purchase allowances in auctions, which raise revenues for 
Member States to fund further climate action and energy transition. With the price of 
allowances set by the market, the EU ETS incentivises emission reductions where it 
costs the least to do so, in a technologically neutral way. 

While auctioning is the primary method for distributing allowances in the EU ETS, 
a significant volume of allowances is allocated to installations for free to address the 

22 

 
risk of carbon leakage 19. In certain EU ETS-covered industry sectors (cement, 
aluminium, fertilisers, hydrogen, iron and steel), the Carbon Border Adjustment 
Mechanism (CBAM) will gradually replace free allocation from 2026 onwards. These 
sectors represent approximately 54% of total free allocation in 2021-2025. 

More information on the functioning of the EU ETS in the 2025 Carbon 
Market Report. 

2.2 Emission trends 

By the end of 2024, the EU ETS had helped drive down emissions from the 
electricity and heat generation and industrial manufacturing by 50% compared to 
2005 levels. With this progress, the system is on track to achieve the 2030 target of 
62% reduction. 

In 2024, emissions from the power and industry sectors continued to decrease 
following a record annual drop in 2023. Emissions from electricity and heat 
generation dropped by 10.7% 20, largely due to a substantial increase in the share of 
renewables and nuclear in the electricity mix, coupled with a reduced reliance of 
major fossil fuels such as natural gas and coal. In 2024, renewables and biofuels 
were the leading source of electricity in the EU, capturing 47.2% of the share, with 
the overall renewable electricity output having increased by 7.6% in 2024. The drop 
in the power emissions in 2024 marks 30% reduction since 2021. 

Emissions from industrial installations in 2024 decreased by 0.8% compared to 
2023 21. Several trends were noted to have been at play (in addition to the 
decarbonisation of the power supply) – reduction of output in industrial production in 
some sectors, recovery of output in energy-intensive sectors such as steel, fertilisers 
and chemicals and improvements in energy efficiency. 

19 Over the 2021-2030 period, up to 57% of the general allowances will be auctioned, while the remaining 
allowances will be allocated for free.   
20 Based on emissions from electricity and heat generation in the EU ETS (data extracted from the Union 
Registry on 30 September 2025). 2% of this decrease is also justified by data inconsistencies affecting the split 
between the power and the industrial emissions, not by market trends. See Carbon Market Report 2025 for 
details. 
21 Based on emissions from industrial manufacturing in the EU ETS (data extracted from the Union Registry on 
30 September 2025). See Carbon Market Report 2025 for details. 

23 

 
 
 
Figure 10: Emissions under the EU ETS in the EU by sector 

Source: EEA 

2.3 Auction revenues 

By mid-2025, the EU ETS had raised over EUR 245 billion through the sale of 
emission allowances. In 2024, ETS revenue reached nearly EUR 39 billion. This 
went primarily to national budgets (EUR 24.4 billion) but also funded the ETS 
programmes for a clean transition (i.e. the Innovation Fund and the Modernisation 
Fund) as well as part of the Recovery and Resilience Facility in line with RepowerEU 
Plan. In 2025, a portion of allowances from the EU ETS also started being auctioned 
to finance the Social Climate Fund (see Chapter 6). 

Figure 11: Member States’ use of ETS revenues by different purposes as reported for 2024 (considering 
revenues disbursed) 

24 

 
 
 
Member States must use all their ETS revenues (or an equivalent amount) to fund 
climate action and energy transformation, including measures to address social 
aspects. The only exception from this rule is the possibility for Member States to use 
ETS revenue to provide aid to for electricity-intensive industries for indirect carbon 
costs. In 2024, 15 Member States used their revenues for this purpose. Of EUR 24.4 
collected in 2024, Member States used EUR 3.2 billion for indirect-cost 
compensation for energy-intensive industries. The remaining EUR 21.2 billion must 
be used for climate action and energy transformation but it does not need to be 
spent in one year 22. 

Every year, Member States report to the Commission on how they used their ETS 
revenues. Member States directed most of their 2024 ETS revenues to projects in 
the deployment of renewable energy sources, grids and storage (20%), the 
improvement of energy efficiency in industries and buildings (20%) and the 
development of clean public transport and mobility (22%). Examples include grants 
for offshore wind and biogas upgrading in Denmark, deep-retrofit projects with at 
least 40% reduction in heat consumption in residential buildings in Lithuania and 
investments in rail transport and cycle paths in Slovenia. 

For more information on how each Member State used their 2024 ETS revenue, see 
Chapter 8 in the accompanying staff working document. For the EU27 analysis, see 
the Carbon Market Report 2025. 

2.4 Aviation 

In 2024, aviation emissions under the ETS continued to rise, reaching 62.6 million 
tonnes CO₂23. This is about 15% higher than in 2023 24. 

Decarbonising the aviation sector is therefore urgently needed. The ETS carbon 
price already gives an incentive of around EUR 200 per tonne 25 of sustainable 
aviation fuel used, compared to fossil kerosene. However, in 2024 the Commission 
brought in an additional support mechanism under the EU ETS to promote the use of 
sustainable aviation fuels, the impact of which is not yet reflected in this report. A 
total of 20 million allowances (worth around EUR 1.5 billion) are reserved for this 
support and airlines can claim support of around EUR 500 up to EUR 7 000 for each 
tonne of eligible sustainable fuel used on an ETS route 26. In 2025, Commission 
distributed around EUR 100 million between 53 aircraft operators from EU Member 
States and two operators from Norway. 

22 For 2024, EUR 16.4 billion was reported as disbursed. 
23 This includes flights within the European Economic Area (EEA) (domestic and between EEA countries) and 
departing flights from the EEA to Switzerland and the UK. It includes non-domestic flights from an EEA country to 
and from an outermost region (e.g. Finland – Canary Islands). 
24 In 2023, the sector generated emissions totalling 54.4 million tonnes CO2. Data extracted from the Union 
Registry and Swiss Registry on 30 September 2025. 
25 The ETS ‘zero-rates’ these fuels, meaning that they pay no carbon price. By contrast, kerosene has an 
emissions factor of 3.16 tCO2/tonne: ETS price x 3.16 = price incentive, so for an ETS carbon price of EUR 70, 
this is a EUR 221 price incentive per tonne of fuel used. 
26 This support system covers all or part of the remaining price difference between fossil kerosene and the 
eligible aviation fuels used by individual commercial aircraft operators on their flights covered by effective carbon 
pricing through the EU ETS, encouraging these aircraft operators to use cleaner fuel options. 

25 

 
 
The Commission adopted new rules to monitor, report and verify emissions for flights 
of EU airlines which fall outside the scope of the EU ETS 27. Adoption of these rules 
underscores the EU’s commitment to apply the Carbon Offsetting and Reduction 
Scheme for International Aviation (CORSIA). The EU is one of the first jurisdictions in 
the world to put CORSIA into law. The purpose of CORSIA is to offset aviation 
emissions from international flights above a certain level 28. It is widely expected that 
this level was reached in 2024, so airlines expect to incur offsetting obligations under 
CORSIA for the first time for the share of 2024 emissions above the baseline. 

Although the EU ETS currently covers only CO2 emissions, the overall climate 
impact of aviation is currently estimated to be two to four times higher because of 
non-CO₂ emissions including nitrogen oxides (NOx) and sulphur oxides (SOx) 29. 
The EU is the first jurisdiction to introduce a monitoring, reporting and verification 
(MRV) framework for non-CO2 effects in aviation. Since 1 January 2025, aircraft 
operators are required to monitor and report the impacts of non-CO₂ emissions per 
flight annually 30. By 31 December 2027, based on the results under the non-CO₂ 
monitoring framework, the Commission will submit a report and, where appropriate, 
a legislative proposal to mitigate the non-CO₂ effects in aviation. 

2.5 Maritime transport 

Maritime transport generates around 3-4% of the EU’s CO₂ emissions. 2024 was the 
first year that maritime transport was included in the EU ETS system. Total maritime 
emissions were 148,7 MtCO2-eq under the MRV system 31 considering all emissions 
from voyages involving ports in the EU, Iceland and Norway. Out of these, 89.8 
MtCO2 were covered by the ETS considering only 50% of emissions from voyages 
starting or ending outside the EU, Iceland and Norway 32. 

Methane and nitrous oxide emissions were reported for the first year in 2024 under 
MRV scope, amounting to 1,6 MtCO2-eq (for methane) and 2,2 MtCO2-eq (for nitrous 
oxide) respectively 33. 

When looking only at carbon dioxide, MRV emissions for 2024 are 13% higher than 
in 2023, mainly due to the increase in vessel activity, following rerouting prompted by 
the Red Sea crisis throughout 2024. 

27 The EU ETS covers flights within the EEA (EU27, Norway, Iceland), and departing flights to Switzerland and 
the UK. This means the new rules cover EU airlines flights from the EEA to countries outside the EEA, and their 
flights between two countries outside the EEA. 
28 The level above which airlines should start to offset emissions is set as 85% of 2019 CO2 emissions for the 
years 2024-2035 (where 2019 was the year with the highest ever international aviation emissions).  
29 Aviation and the Global Atmosphere, IPCC, 1999, https://www.ipcc.ch/site/assets/uploads/2018/03/av-en-
1.pdf   
30 The MRV system covers flights to, from and within Europe. To facilitate the start, reporting is mandatory only 
for flights within Europe. In 2025 and 2026 voluntary reporting on all routes is however encouraged. From 2027, 
the reporting obligation automatically applies to all flights. Implementing legislation: Emissions trading system 
(ETS) Monitoring and Reporting Regulation amendment in response to the ETS revision (europa.eu). 
31 Total maritime emissions are covered by Regulation (EU) 2015/757. 
32 The EU ETS scope for maritime has several other exemptions and differences from the maritime MRV scope. 
For more information about the relevant scope definition see Section 2.3 of the General guidance document for 
shipping companies: https://climate.ec.europa.eu/document/download/31875b4f-39b9-4cde-a4e2-
fbb8f65ee703_en?filename=policy_transport_shipping_gd1_maritime_en.pdf 
33 Nitrous oxide and methane emissions will be included in the EU ETS scope for maritime starting in 2026. 

26 

 
 
Compliance following the first year of application of ETS to maritime transport was 
high, as shipping companies surrendered allowances for more than 99% their 
emissions within the scope. 

At international level, in April 2025, the EU welcomed the approval of the Net-Zero 
Framework to reduce greenhouse gas emissions from international shipping at the 
International Maritime Organization (IMO), which includes a global standard for 
gradually reducing the GHG intensity of marine fuels and a pricing element for GHG 
emissions from international shipping. The agreement, pending its adoption, is a 
meaningful step towards the goal of net-zero emissions from maritime transport by or 
around, i.e. close to, 2050 as set in the 2023 IMO GHG strategy. Discussions on the 
adoption of the agreement have been postponed to October 2026. 

2.6 Buildings, transport and small industry 

In 2023, a new emission trading system (ETS2) was agreed to cover emissions from 
fuel combustion in buildings, transport and small industry, which were not covered by 
the current EU ETS. While it is also a ‘cap and trade’ system, it is separate from the 
current EU ETS. It will help Member States achieve their emission reduction targets 
under the Effort Sharing Regulation (see Chapter 3). 

Working in conjunction with other measures for these sectors, the cap in ETS2 is set 
to bring emissions down by 42% by 2030 compared to 2005 levels. All allowances 
will be sold in auctions with revenues going to national budgets and the Social 
Climate Fund. The carbon price will provide an incentive to invest in energy 
efficiency solutions, in building renovations and in zero-emission mobility, including 
public transport. The Social Climate Fund will support vulnerable households, 
transport users and micro-enterprises, with a focus to help them to finance those 
investments. 

The ETS2 will cover emissions upstream. This means that fuel suppliers, not 
consumers, must track the emissions from the fuels they place on the market and 
buy allowances to cover them. The monitoring and reporting of emissions started in 
2025, and the system will become fully operational in the coming years. 

27 

 
3. Effort sharing emissions 

Key highlights 

• 

In line with the assessment of the National Energy and Climate Plans, 
aggregated projected ESR emissions based on planned measures are 
expected to fall by around 38% in 2030 compared with 2005 levels, still 
short of the EU-wide 40% ESR emissions reduction target. 

•  Yet, the ESR was designed to provide flexibility to ensure that the target can 

be met cost effectively. 

•  Over 2021-2030, some Member States with planned policies expect to 

generate a surplus of around 125 to 175 MtCO2-eq emission allocations, 
which would allow all Member States to comply using the available 
flexibilities. It is now essential that Member States implement these 
measures fully. 
In 2024, provisional emissions from the effort sharing sectors remained 
relatively stable compared to 2023 and were around 20% lower than in 
2005.  

• 

•  Emissions increased by 1% in transport, the largest effort sharing sector. 
Emissions stayed at around the same level in buildings and waste, and 
declined by 1% in agriculture and small industry. 

•  One third of effort sharing emissions are non-CO₂ emissions, which have 

• 

• 

reduced by 23% between 2005 and 2023. 
In 2024, average CO2 emissions of new cars and vans slightly increased, 
but were still 28% and 8% below 2019 levels, for cars and vans 
respectively, mainly due to the uptake of zero-emission vehicles.  
In reporting period 2023, average CO2 emissions of new heavy-duty 
vehicles continued to decrease, with emissions at 11.4% below 2019 levels. 
The fuel quality directive requirements ensured that high-quality fuels were 
sold in the EU. 

The Effort Sharing Regulation (ESR) covers greenhouse gas emissions from 
domestic transport, buildings, agriculture, small industry, and waste. Together, these 
emissions account for 66% of the EU’s domestic emissions. 

In 2024, based on approximated data, emissions from these sectors remain at a 
similar level compared to 2023, which is 20% lower than in 2005 34. 2024 is the first 
year where EU level emissions are above the aggregated EU emissions limit, 
exceeding it by 1.6%. 

While EU level effort sharing emissions were broadly unchanged between 2023 and 
2024, at sectoral level transport emissions increased by 1% and emissions from 
agriculture and small industry fell by 1%. Emissions from buildings and waste were 

34 The 2024 ESR emissions are approximated and are 19.9% lower than 2005 levels. The 2023 ESR emissions 
were established in 2025 after a comprehensive review and are 19.8% lower than 2005 levels. In the Climate 
Action Progress Report 2024, the 2023 ESR emissions were approximated and showed a smaller reduction of 
19.2% compared to 2005 levels. 

28 

 
 
relatively stable. In 2024, transport was the largest effort sharing sector, accounting 
for 39% of the EU’s ESR emissions, followed by buildings (22%), agriculture (18%), 
small industry (16%), and waste (5%). 

Figure 12: Emissions in sectors covered by effort sharing legislation 2005-2030 and annual emission 
allocations, EU-27 

Note: the emissions data split between the Effort Sharing Regulation (ESR) sectors for 2021-2023 comes from 
the 2025 GHG inventory, for 2024 from approximated inventories, and 2025-2030 from projections reported by 
Member States in 2025 under Article 18 of the Governance Regulation. The annual emission allocations (AEAs) 
are the annual emission limits as set in the ESR and the ESR’s precursor the Effort Sharing Decision (ESD). The 
figure shows how the EU’s historic and projected effort sharing emissions are split between sectors and how they 
compare to the annual emission limits. 

3.1 Effort sharing targets 

The ESR sets the EU target to reduce emissions in the effort sharing sectors by 40% 
by 2030 compared with 2005 levels. This overall target translates into national 
targets for 2030 ranging from 10% to 50% reductions and GHG emissions limits from 
2021 to 2030 expressed in annual emission allocations. The Commission will check 
whether Member States met their emission limits in two rounds – first in 2027 (for the 
years 2021-2025) and then in 2032 (for the years 2026-2030). 

Member States can use, to a limited extent, flexibilities to stay within their annual 
emission limits and meet their 2030 targets. These flexibilities entail banking, 
borrowing, buying and selling emission allocations, using surplus (credits) from the 
land use, land use change and forestry (LULUCF) sector and for some Member 
States the option to cancel allowances from the EU ETS for ESR emission 
allocations (for more details see Chapter 9 of the accompanying staff working 
document). 

Iceland and Norway have agreed to apply, with a few adaptations, the ESR, as 
adopted in 2018 35. Their progress and developments are reflected in the annual 
Climate Progress Report prepared by the EFTA Surveillance Authority. 

35 Iceland and Norway have not yet incorporated the changes following the revision of ESR in 2023. 

29 

 
 
 
 
3.2 Progress towards effort sharing targets 

Emission reduction targets for 2030 

The ESR sets an emission reduction target for 2030 for the EU and each Member 
State (compared to 2005 levels). The Commission’s assessment of the final updated 
national energy and climate plans (NECPs) published in May 2025 shows that effort 
sharing emissions are expected to decrease by around 38% in 2030 compared to 
2005, about 2 percentage points short of the EU target. This marks a substantial 
improvement compared to the EU wide gap of more than 6 percentage points shown 
in Commission’s assessment of the draft updated NECPs. It is crucial that the 
ambitious policies laid out in the NECPs are implemented in full and that Member 
States maintain their momentum and action to reach the ESR targets. In its 
assessment, the Commission provided targeted guidance to Member States to 
facilitate the swift implementation of the plans. 

The above findings are confirmed by Member States’ latest projections of March 
2025 (see Figure 13). Prior to any use of ESR flexibilities by Member States to meet 
their targets, Germany, Ireland and Malta show the largest projected gaps in 2030 
whereas Bulgaria, Greece and Portugal show the largest overachievement of their 
2030 targets. 

To close those gaps, Member States have to step up action in addition to fully 
implementing all current and planned climate policies or use the scope for flexibilities 
available.  

Figure 13: Projected change of ESR emissions and gap to target in 2030 (%) 

Note: Malta’s gap to target is 49 and 61 percentage points, exceeding its 19% reduction target. This means Malta 
is projected to emit more in 2030 than in 2005. 

30 

 
 
Emission reductions in 2021-2030 

The ESR also sets for Member States emission limits for each year in the period 
2021 to 2030, with flexibilities to meet these emission limits. The Commission has 
assessed Member States’ progress towards their ESR obligations by comparing 
emissions and allocations for each year in the period 2021-2030 based on the latest 
information and the potential use of some of the flexibilities available under the ESR. 

The Commission assumes that Member States will implement their additional 
measures as included in their projections ‘with additional measures’ (WAM). 
Regarding the use of flexibilities, the Commission assumes that Member States will 
use emission allocations saved in one year for compliance in future years (banking) 
and use emission allocations from a future year if needed in the previous year 
(borrowing). It also assumes that the Member States that notified their intention to 
use ETS flexibility will do so when needed. 

The Commission finds that 10 Member States would still exceed their limits in at 
least one year over the period 2021-2030. Cyprus, Croatia, Italy and Romania would 
already have excess emissions in the first compliance period (2021-2025), while 
Austria, Estonia, Germany, Malta, Ireland and Sweden are projected to have excess 
emissions in the second compliance period (2026-2030). The 17 Member States with 
no gap over the total period 2021-2030 generate more surplus than the 10 Member 
States would need to cover their gaps. Even if all Member States acquire emission 
allocations from others when needed, at EU level, a surplus of around 125 to 175 
MtCO2-eq allocations is expected over the 2021-2030 period. 

The projected surplus of emission allocations in ESR from some Member States is 
sufficient to close the gaps from other Member States. The transfers of emission 
allocations between Member States enhances the cost-effective achievement of the 
EU objective in line with the architecture of the ESR. Given the size of the projected 
ESR surplus and the possibilities to trade surpluses under both the ESR and 
LULUCF Regulation, the Commission cannot, at this stage, conclude that Member 
States are not making sufficient progress to meet their ESR obligations. 

In addition, another flexible arrangement to help Member States comply with the 
ESR involves transferring an overachievement in the LULUCF sector to cover a 
limited number of emissions in the effort sharing sectors 36. Some Member States 
have already reported their intention to use these flexibilities 37. However, the limited 
and preliminary data available on land use sector trends so far suggest that some 
Member States will have difficulties in reaching their LULUCF targets (see Chapter 
4). These Member States could compensate the gap in LULUCF by using ESR 
emission allocations (Article 12 LULUCF Regulation), which will be automatic for the 
period 2021-2025 (Article 9 ESR). 

36 For more details on the flexibilities available under the ESR see the Chapter 9 of the accompanying staff 
working document.  
37 Denmark, Lithuania and Poland reported the intention to use LULUCF flexibility and Croatia reported an 
intention to trade emission allocations. Finland also reported that it may use ESR flexibilities as appropriate, 
including to trade emission allocations. These are intentions and do not bind Member States. 

31 

 
 
3.3  Emission trends by type of gas 

Two thirds of all emissions from the effort sharing sectors are CO₂ emissions, the 
remaining third are non-CO₂ emissions (Figure 14). Between 2005 and 2023, non-
CO₂ emissions from the effort sharing sectors have reduced by 23%. Non-CO₂ 
greenhouse gases include methane (CH₄), nitrous oxide (N₂O), and fluorinated 
gases (NF₃, HFCs, PFCs, SF₆). While most of the emissions in the energy sector are 
covered by the EU ETS, methane emissions in this sector fall under the ESR. 

Figure 14: Emissions under the ESR in 2005 and 2023 by gas type 

These non-CO₂ gases are emitted from a range of sectors and processes, and they 
all have much higher global warming potentials than CO₂ by degrees of tens to tens 
of thousands depending on the gas. As a result, non-CO₂ emissions have an 
important impact on climate change and are key sources of potential emission 
reductions in several sectors. Reducing non-CO₂ emissions is also crucial to achieve 
our targets under the ESR. 

Over half of the non-CO₂ emissions come from the agriculture sector. All sectors 
have reduced non-CO₂ emissions from 2005 to 2023 but the most significant 
reductions were made in the non-ETS energy (‘other energy’), small industry and the 
waste sector. Over the same period, non-CO₂ emissions from agriculture, transport 
and buildings decreased only slightly. Most reductions were nitrous oxide emissions 
from non-ETS industry, and reductions in methane in the waste sector and non-ETS 
energy. The level of F-gas emissions has fallen but to a lesser extent (Figure 15). 

The EU methane strategy aims to reduce methane emissions in the energy sector, 
agriculture and waste sectors, and thereby to support the achievement of the ESR 
targets. 

32 

 
 
Figure 15: Non-CO2 emissions under the ESR in 2005 and 2023 by sector 

Fluorinated gases 

Fluorinated greenhouse gases (F-gases) have the highest global warming potential 
of all greenhouse gases, meaning they cause the most harm to the climate. Among 
them, hydrofluorocarbons (HFCs) play a key role. HFCs are used in everyday 
products, equipment and processes, such as refrigeration, air conditioning, heat 
pumps, insulation, fire protection, power lines or industrial processes and they 
account for around 90% of all F-gas emissions. 

Since 2015, total EU emissions from F-gases have been falling, mainly because 
new rules to phase down HFCs came into effect that year. By 2030, the amount of 
HFCs must be cut by about 95% compared to 2015, with a phase-out planned by 
2050. 

Between 2015 and 2023, in the EU total F-gas emissions fell by 32.8%, and HFCs 
emissions by 31.4%. From 2022 to 2023 alone, emissions fell by 7.4% for all F-
gases and by 5.5% for HFCs. These reductions help Member States to meet their 
targets under the Effort Sharing Regulation. 

3.4 Road transport 

Transport emissions account for a quarter of all EU greenhouse gas (GHG) 
emissions and 39% of ESR emissions. Transport is the only major sector in the EU 
economy where emissions are still higher than they were in 1990 (+18%) and have 
only fallen marginally since 2005 (see Chapter 4 of the staff working document for 
more details). The decarbonisation of the transport sector must accelerate to 
achieve the EU’s climate goals for 2030 and 2050. 

33 

 
 
Road transport is the primary contributor to GHG emissions in this sector, generating 
about 95% of emissions, or 73% when including international aviation and maritime 
emissions. Over 70% of road transport emissions come from passenger cars and 
light commercial vehicles (vans). From 2005 to 2023, road transport emissions fell by 
less than 5%. This indicates that the gains in vehicle efficiency and the increase in 
zero-emission vehicles registered have been almost entirely offset by the ongoing 
increase in road transport activity. 

The EU’s CO₂ emission standards for new cars, vans, and heavy-duty vehicles 
(i.e. lorries, buses, coaches and trailers) are key policies for gradually reducing 
road transport CO2 emissions. They set EU fleet-wide emission reduction targets, 
from which annual specific emission targets are calculated for each individual 
manufacturer or pool. Compliance with the specific targets is assessed at the level of 
the fleet of vehicles registered in a given calendar year by a manufacturer or pool 
(not at individual vehicle level). 

According to provisional monitoring data, the average CO₂ emissions from new cars 
and new vans registered in the EU, Iceland, and Norway slightly increased in 2024, 
for cars to 106.8 gCO₂/km, up from 106.4 gCO₂/km in 2023, and for vans to 185.4 
gCO₂/km, up from 180.8 gCO₂/km in 2023. 

The slight year-on-year increase in emissions is a small setback to the steep 
downward trend in CO₂ emissions of new cars and vans observed since 2020, when 
stricter CO₂ emission reduction targets came in. This increase occurred in the final 
calendar year before the stricter 2025 targets start applying. A similar increase in 
emissions was also recorded in the years before the stricter 2020 targets came into 
effect. 

In 2024, average CO2 emissions were below the EU targets (see Figure 16), marking 
a drop of 28% for cars and 8% for vans compared to 2019. This progress is mainly 
due to the rising number of zero-emission vehicles. In 2024, 14.5% of new cars and 
7.2% of new vans had no tailpipe emissions – a sharp increase from just 2.2% and 
1.4% in 2019. However, the rate of uptake of zero-emission vehicles varies widely 
across Member States (see Figure 17). In Denmark, nearly 52% of new passenger 
cars were zero-emission in 2024. By contrast, the share remained very low in 
several countries, for example only 2.3% in Slovakia, 2.8% in Croatia, and 3% in 
Poland. 

34 

 
Figure 16: Average CO₂ emissions (dots) and EU fleet-wide targets (lines) for cars and vans 

Figure 17: Share of zero-emission passenger cars in new passenger car registrations (%, 2024) 

Source: Alternative Fuels Observatory 

Despite the considerable progress made in recent years, further emission reductions 
are necessary for the EU to meet future targets. By 2030, average emissions must 
fall by 55% compared to the 2021 baseline for new cars (to 49.5 gCO2/km) and by 
50% for new vans (to 90.6 gCO2/km). 

Heavy-duty vehicles, such as lorries, buses, coaches and trailers, generate almost 
30% of all CO₂ emissions from road transport. In 2024, the EU adopted revised CO₂ 
standards for new heavy-duty vehicles to further tighten existing standards and 
extend the scope to medium lorries, city buses, coaches, and trailers. The revised 
Regulation requires CO₂ emissions reductions of 15% by 2025 (unchanged by the 
revision), 45% from 2030, 65% from 2035, and 90% from 2040 onwards compared 

35 

 
 
 
to the 2019 baseline. It also sets a 100% zero-emission target for new city buses 
from 2035. 

In reporting period 2023, actually covering the period from June 2023 to July 2024, 
the average specific CO2 emissions of new heavy-duty vehicles 38 registered in 
the EU fell by 4.3%. This suggests that the trend of a more pronounced decline, 
which began in reporting period 2022 (-6.6%) after the only marginal reductions of 
the previous two reporting periods, is continuing (Figure 18) 39. 

Overall, in reporting period 2023, emissions were 11.4% below 2019 levels. 
While this means that the fleet-wide 15% reduction target for 2025 is already within 
reach, further emissions reductions will be needed in the coming reporting periods, in 
particular in view of the more ambitious targets from 2030 onwards. 

The number of new zero-emission lorries registered in reporting period 2023 
has almost doubled with respect to the previous reporting period, however their 
share in the initially regulated vehicle groups remains still low, at 1.1%. 

Figure  18: Average  specific  CO₂  emissions  (dots)  and  EU  fleet-wide  targets  (lines)  for  new  heavy-duty 
vehicles of the initially regulated vehicle groups 

The Fuel Quality Directive contributes to reducing transport emissions by setting 
quality requirements for road transport fuels. Compliance with fuel quality limits is 
high in the EU. Almost all key fuel parameters in the samples taken in 2023 were 
reported to be within the tolerance limits (including the maximum sulphur content), 
and Member States reported the actions taken when non-compliant samples were 
identified. This confirms that the fuel quality monitoring system currently in place 

38 The vehicle groups 4, 5, 9 and 10 within the scope of the initial CO₂ standards before the abovementioned 
revision comprise certain types of heavy lorries. The following analysis refers to these currently regulated vehicle 
groups. 
39 Due to a change in the simulation method to determine the emissions of new heavy-duty vehicles, the decline 
in reporting period 2022 is somewhat overestimated, with the real decline estimated to be around 4%. This effect 
is much less relevant for reporting period 2023. 

36 

 
 
 
ensures that high-quality fuels are sold in the EU and that they meet the 
requirements of the Fuel Quality Directive. 

Until 2023, Member States were also required to report on the 6% life cycle GHG 
emission intensity target for road transport fuels (measured against 2010 levels). 
Since 2023, the decarbonisation targets have been incorporated in the revised 
Renewable Energy Directive. The average GHG intensity of fuels supplied in 2023 
was 6.3% lower than in 2010. 

For more information on fuel quality, see Chapter 6 of the accompanying staff 
working document. 

Fuel combustion in road transport will also be subject to a new emissions trading 
system (ETS2). The aim of this change is to bring emissions down by 42% by 2030 
compared to 2005 levels (see Chapter 2 for more details). 

37 

 
4. Land use sector 

Key highlights 

•  Carbon removals from the land use sector have been on the decline, with a 
slight improvement recently, resulting in a net carbon sink of −198 MtCO2-
eq in 2023. 

•  Latest available Member State projections still show a gap at the EU level of 

40-55 MtCO2-eq from the EU 2030 target. 

•  More investment in the land use sector and a better monitoring system is 

needed to enable reaching the land use sector’s climate target and ensure 
resilient bioeconomy value chains.  

In the EU, the land use, land-use change, and forestry (LULUCF) sector absorbs 
more greenhouse gases than it emits, removing significant volumes of carbon from 
the atmosphere. The sector therefore plays a major role in achieving the EU’s 
climate policy goals, helping to enhance removals and boosting the resilience of 
agriculture and forestry sectors. 

As a key pillar for the EU’s bioeconomy, the sector plays an equally important role for 
the transition to a climate-neutral and resilient economy, for instance in providing 
food and materials that replace fossil or carbon-intensive materials. 

Net removals increased by 15 Mt in 2023 compared to 2022, resulting in a total net 
sink of −198 MtCO2-eq in 2023. Despite this improvement, however, the carbon 
removal sink has been declining at a worrying speed over the last decade. This trend 
is mainly driven by increased harvesting and slower forest growth. This is in turn due 
to climate change which has had an increasing impact. More frequent and severe 
forest fires, wind damages, droughts, and insect and fungus outbreaks are reducing 
forest’s ability to absorb carbon. In some cases, ageing forests are also a factor. The 
future capacity of EU forests to remove carbon is therefore uncertain, and the EU 
may be at risk of losing its ability to balance carbon emissions from other sources. 

Currently, land used for settlements, cropland, wetlands and grassland are the main 
sources of LULUCF emissions (See Figure 19). 

38 

 
Figure 19: Land sector emissions and removals in 1990-2023 by main land use category (EU-27) 

4.1 LULUCF target 

The LULUCF target is to increase land-based net removals in the EU by an 
additional −42 MtCO₂-eq by 2030 compared to reference period 2016-2018 40. 

For the period 2021-2025, specific accounting rules apply for different land 
accounting categories, which consider historical benchmarks (such as the forest 
reference level). Member States are to follow the ‘no-debit’ rule, meaning that 
‘accounted’ emissions must not exceed ‘accounted’ removals. 

For the period 2026-2030, reporting is simplified, with the accounting rules and 
corresponding benchmarks abolished. The additional −42 MtCO₂-eq target covers all 
LULUCF reporting categories and is distributed among Member States through 
individual targets, based on their share of total managed land area. The national 
2030 targets require each Member State to increase its climate ambition and 
implement additional agriculture and forestry policies. For more details, see Chapter 
10 of the accompanying staff working document. 

40 The average yearly net removals for the years 2016, 2017 and 2018, as reported in the 2020 greenhouse gas 
inventory submission, plus the additional −42 MtCO2-eq net removals result in total net removals of −310 MtCO₂-
eq at the EU level. Any methodological adjustments due to improvements in the inventory data reporting will be 
considered in the compliance check against the 2030 target. 

39 

 
 
 
4.2 Assessment of the progress 

The negative trend of shrinking net removals observed in recent years persists. Both 
the preliminary numbers for the compliance period 2021-2025 as well as Member 
States’ projections for the compliance period 2026-2030 indicate a gap to target. 

Based on the 2025 GHG inventory submissions, the provisional ‘accounted’ balance 
for the period 2021 to 2023 shows an EU total debit of 52 MtCO₂-eq. The ‘no-debit’ 
commitment is therefore projected not to be met at the EU level, according to 
currently available figures. These, however, are subject to changes in the next years 
due to expected methodological improvements of the greenhouse gas inventories. 
These changes, and any flexibilities available to Member States, will then be taken 
into account before the compliance check for 2021-2025 that will be carried out in 
2027 41. 

Based upon data for three years within the compliance period (2021-2023) and 
excluding flexibilities, 11 Member States showed accounting debits. They may 
therefore face challenges meeting the commitment in 2025, with Germany, Finland 
and Portugal showing the biggest net debit 42. On the other hand, 16 Member States 
are in line with the ‘no-debit’ commitment, as accounted removals are higher than 
accounted emissions. Italy, Romania and Spain show the largest net credit 43. Again, 
it is important to note that these figures are subject to change due to expected 
methodological improvements. 

The latest projections provided by Member States show that the EU as a whole is 
not on track to meet its target of generating additional 42 MtCO₂-eq net removals by 
2030, leaving a gap of around 40-55 MtCO₂-eq. Sweden, Finland and Spain project 
the biggest gap to their national 2030 targets, while France, Slovenia and Portugal 
project to have the biggest surplus compared to their respective 2030 targets (Figure 
20). 

41 Member States continuously improve their methodologies for greenhouse gas inventory reporting in terms of 
accuracy of data. Recalculations based on better data are reflected in the inventories over time. Consequently, 
some historic benchmarks used for accounting, such as the forest reference levels, will need to be updated 
accordingly. In addition, there are specific flexibilities available in the LULUCF Regulation, such as for natural 
disturbances, that may be used by Member States. These aspects will have to be taken into account before the 
compliance check against the ‘no-debit’ commitment for the compliance period 2021-2025. The Commission has 
set up a process to assist Member States and facilitate the preparation of these updates in the coming months. 
42 Member States with debits in decreasing order of magnitude: Germany, Finland, Portugal, France, Czechia, 
Austria, Sweden, Estonia, Latvia, Belgium, Cyprus. 
43 Member States with credits in increasing order of magnitude: Malta, Luxembourg, Slovenia, Lithuania, 
Netherlands, Greece, Croatia, Slovakia, Bulgaria, Ireland, Poland, Hungary, Denmark, Spain, Romania, Italy. 

40 

 
 
Figure 20: Projected gap to the national 2030 targets with additional measures, based on Member States’ 
projections for 2030 (MtCO2-eq) 

Note: The gaps to the 2030 LULUCF target have been calculated taking into account the latest Member States’ 

GHG inventories data and projections (both submitted in 2025), including a re-adjustment to take into account 
possible discrepancies between the inventory data and projections. As Member States continuously improve their 
methodologies for GHG inventory data and projections in terms of accuracy, the gap calculations are susceptible 
to changes in the future. 

It is paramount that Member States swiftly design and implement adequate policies 
to put them firmly on track to reaching their climate targets. This should include 
measures to assist farmers, foresters and other groups concerned in building 
sustainable business models in line with these targets. 

4.3 Action to step up land monitoring 

The LULUCF Regulation requires that all Member States set up systems to monitor 
soil and biomass carbon stocks, among other things. 

Member States’ GHG inventories underpin climate action and are subject to 
continuous development. More accurate and timely data on land, soil and forests will 
help identify measures that unlock the highest climate benefits. Comprehensive and 
comparable monitoring systems for land, reaping the benefits of advanced 
technologies such as modelling and satellites, are key for cost-efficient decision-
making and investment into the land sector, both in the Member States and along the 
bioeconomy value chains. The Commission is assisting Member States in these 
efforts, such as through Horizon Europe programme and the Copernicus satellite 
programme. 

41 

 
 
 
 
4.4 Related initiatives relevant for agriculture and forestry 

The EU Carbon Removals and Carbon Farming Regulation adopted in 2024 is 
designed to facilitate and speed up the deployment of high-quality carbon 
removals and emission reductions. It includes three distinct types of activities: 

•  permanent removals; 
•  carbon farming; and 
•  carbon storage in long-lasting products. 

By certifying carbon storage products, such as wood-based construction, the 
regulation will also provide land managers with new business opportunities and 
support the growth of the sustainable circular bioeconomy. This will support Member 
States in meeting their LULUCF targets. 

4.5 Incentives for carbon removals and sustainable practices 

Many funding mechanisms and incentives are available or are being developed to 
encourage carbon removals, through public or private sources. 

The EU provides funding under the common agricultural policy, cohesion policy 
funds, and other EU programmes such as LIFE or Horizon Europe (in particular the 
Soil Mission). In 2023, the Commission adopted guidance on EU funding 
opportunities for healthy soils. 

Member States can also support the uptake of sustainable management practices 
under State aid rules, which have been revised and allow to support forest 
ecosystem services such as climate regulation and biodiversity restoration. The 
Commission guidance on payment schemes for forest ecosystem services provides 
further information for interested groups. The common agricultural policy and State 
aid also cover funding for investments and measures such as training, advice or 
cooperation, which help maximise effects. 

Private-sector initiatives linked to voluntary carbon markets, or a combination of 
different funding options can supplement and further promote the large-scale 
deployment of carbon farming. 

42 

 
5. Industrial carbon management 

Key highlights 

•  Capturing and storing CO2 emissions permanently is necessary to achieve 

climate neutrality by 2050. 

• 

In 2024, the European Commission drawn up a strategy to enable industrial 
carbon management. 

•  The EU has a CO2 injection capacity target for 2030 and obligates oil and 

gas companies to achieve this target. 

The 2040 climate target impact assessment shows that up to 300 million tonnes of 
CO2 would need to be captured and approximately 200 million tonnes of CO2 stored 
by 2040 to meet the proposed 2040 target to reduce greenhouse gas emissions by 
90%. Approximately 450 million tonnes of CO2 would need to be captured and 
roughly 250 million tonnes of CO2 stored by mid-century. The Industrial Carbon 
Management strategy sets out a vision and proposes a list of actions to reach these 
targets. 

CO2 can be captured to prevent it from being released into the atmosphere, and then 
either stored or used. These practices are known as carbon capture and storage 
(CCS) and carbon capture and utilisation (CCU). Most of the CO2 expected to be 
captured should come from industrial processes (e.g. waste incineration or clinker 
plants) feedstocks. 

Captured CO2 can also be of a biogenic or atmospheric origin. Biogenic CO2 is 
produced through biological processes and can be captured from biomass power 
plants or waste-to-energy plants, for instance. Atmospheric CO2 is found naturally in 
the atmosphere. Capturing and permanently storing CO2 of biogenic or atmospheric 
origin is a practice known as permanent carbon removals. 

Figure 21: Scheme of carbon capture, utilisation and storage 

Capture 

Capturing CO2 from an 
industrial facility 

Transport 

The compressed CO2 is moved by ship, truck or 
pipeline from the point of capture to the point 
of utilisation or storage. 

Utilisation 
Captured CO2 is used as a 
resource or feedstock to create 
products and services. 

Storage 
Storing CO2 permanently in 
onshore and offshore geological 
formations. 

43 

 
 
 
The Industrial Carbon Management strategy is an important step towards a more 
homogenous deployment of carbon capture and storage (CCS), carbon capture and 
utilisation (CCU) and permanent carbon removals in Europe. The strategy supports 
the creation of a single market for CO2 transport and storage services throughout 
Europe by 2030. 

Adopted in late 2024, the Carbon Removal Certification Framework sets EU rules to 
measure and verify high-quality carbon removal activities. It is intended to support 
the voluntary market and could provide a basis for the future integration of domestic 
permanent removals into the EU ETS. The 2025 Clean Industrial Deal ties climate 
goals to industrial competitiveness, prioritising carbon capture, utilisation and storage 
for hard-to-abate sectors and signalling a possible EU ETS change to reward 
permanent CO₂ storage. 

Since December 2024, Member States must submit an annual progress report on 
carbon capture, transport and storage needs. This report contains: 

•  ongoing CO2 capture, storage and transport projects, 
•  corresponding needs for injection and storage capacities, 
•  national support measures, strategies, and targets on the CO2 capture. 

All Member States annual reports are available on the carbon storage target 
website. 

The EU aims to create an EU market for CO2 storage services. To achieve that, the 
Net-Zero Industry Act sets an EU CO2 injection capacity target of at least 50 million 
tonnes per year by 2030 and obligates 44 EU oil and gas producers to achieve this 
target. These producers must develop annual CO2 injection capacity in the EU by 
2030 44. From 2025, the European Commission will publish an annual report on 
progress towards reaching the target. 

By 30 June 2025, producers had to submit a detailed plan to the Commission 
explaining how they are preparing to contribute to the EU’s 2030 CO2 injection 
capacity target. These plans should confirm the volume of new CO2 storage and 
injection capacity they aim to have ready by 2030 and specify the methods and 
intermediate targets they will use to achieve this. As of 30 June 2026, oil and gas 
producers must report annually to the Commission, detailing their progress towards 
the target. The Commission will make these reports publicly available. 

44 Commission Decision (EU) 2025/1479 of 22 May 2025 specifying the pro rata contributions to the EU CO2 
injection capacity objective by 2030 from entities holding an authorisation as defined in Article 1, point 3, of 
Directive 94/22/EC of the European Parliament and of the Council. 

44 

 
 
 
6. Climate resilience and adaptation 

Key highlights 

•  Climate hazards are undermining Europe’s competitiveness, security and 

prosperity. Climate resilience should urgently become an integral part of all 
European policies. 

•  Work is ongoing to create an integrated EU framework for climate resilience 

to be proposed in 2026. 

•  Resilience by design is a central principle. It means all investment 

vulnerable or exposed to climate impacts must be designed to face and 
withstand climate risks that could materialise in their lifetime, without 
unacceptable loss of their value or utility. 

•  EU Member States made significant progress in developing resilience and 
adaptation policy over the last year, albeit not yet measuring up to the 
required transformational changes. 

•  Significant further attention is needed to prepare and implement adaptation 

actions in all sectors. 

The impacts of climate change are here. Storms, heatwaves, droughts, wildfires and 
floods are damaging homes, roads, nature, finances and the wider economy across 
all the EU countries. EU law requires the EU and its Member States to make 
progress on: 

•  building capacity to adapt: learn what’s coming and plan accordingly; 
•  strengthening resilience: help people, places, and systems to withstand 

disruptions and recover quickly; and 

•  reducing vulnerability: cut the exposure of communities and assets to 

climate harm. 

Although progress has been made, EU and national measures are still falling short of 
what is needed at this stage. 

6.1 Climate hazards and economic losses 

In 2024, the EEA published the first European Climate Risk Assessment. This 
assessment revealed that 34 of 36 major climate risks across five risk clusters 
(ecosystems, health, infrastructure, food and economy and finance) could reach 
critical or even catastrophic levels during this century under high warming scenarios. 
The results of the 2024 European State of the Climate report 45 also found that those 
risks are threating the lives, livelihoods and wellbeing of many Europeans. 

Since the 1980s, Europe has been warming twice as fast as the global average, 
making it the fastest‑warming continent. 2024 was the warmest year on record in 
Europe, as tracked in all datasets, with record‑high annual temperatures in nearly 
half (around 48%) of the continent. The annual average sea and lake surface 

45 Unless stated otherwise, all data in this section are based on this report. 

45 

 
 
temperature for Europe in 2024 also reached the highest level on record, slightly 
above the previous record set in 2023. The glaciers in Scandinavia experienced their 
highest recorded mass loss and the largest globally. 

In Europe, extreme heat causes about 95% of all climate-related deaths 46. Over 
the past 20 years, heat deaths have risen by about 30%, hitting people living in 
dense cities the hardest due to the urban heat island effect 47. 

Wildfires burnt over 400 000 hectares (4 000 km2) in 2024 in 21 of 27 EU 
countries and affecting 42 000 people. This is slightly above the average over the 
period 2006-2023, but less than during the previous three years 48. However, serious 
wildfires broke out early in the main season, in July, on several Greek islands and in 
Madeira, Portugal. In only in one week, Portugal’s wildfires burnt over 100 000 
hectares of land, some 32% of all burnt surface in Europe 49. In Bulgaria, the total 
recorded burnt area was the highest for more than a decade, with 256 fires burning 
45 000 hectares of land. By the end of August 2025, almost one million hectares had 
burnt since the beginning of the year, more than three times the average rate of 
293 000 hectares during 2006-2024 50. 

Alongside warmer than average temperatures, the prolonged lack of rainfall 
across most of south-eastern Europe affected river flows and impacted agriculture, 
ecosystems and energy production. As an example, information from several 
sources show that in Sicily reservoirs were below alert levels in early July 2024, with 
volumes 45% lower than the previous year 51. Many municipalities issued water-
saving regulations as drought caused losses to agricultural production. This severely 
affected crops of citrus fruits, wheat and vineyards, with economic damages 
estimated at EUR 2.7 billion 52. 

In 2024, while south-eastern Europe experienced the most severe dry conditions and 
had its driest summer for 12 years, September saw the wettest conditions in central 
Europe since 1979, due to extreme precipitation from Storm Boris falling over eight 
Member States. The resulting widespread severe flooding affected an estimated 
413 000 people in 2024, resulting in the loss of 335 lives or more. 

Damage from storms and flooding across Europe in 2024 is estimated to have 
cost at least EUR 18 billion and the insured losses due to flooding in 2024 were the 
second highest ever 53. Of all the natural disasters that hit Europe in 2024, the 
three costliest were caused by floods. Ranked by overall losses, Spain’s flash 
flood caused EUR 10 billion in losses, with less than half of the assets insured. The 
flash floods in Germany, Poland, Italy, Austria and Czechia caused overall losses of 

46 Economic losses from weather- and climate-related extremes in Europe | European Environment Agency's 
home page 
47 Extreme weather and human health | Copernicus 
48 This numbers represent around 80% of the amount recorded in 2023 and only half of 2022’s total. Advance 
report on forest fires in Europe, Middle East and North Africa 2024 - Publications Office of the EU (p.10) 
49 Wildfires | Copernicus 
50 EFFIS - Statistics Portal 
51 Persistent droughts: critical water shortages and crops threatened - European Commission 
52 Persistent droughts: critical water shortages and crops threatened - European Commission 
53 Hurricanes, severe thunderstorms and floods drive insured losses above USD 100 billion for 5th consecutive 
year, says Swiss Re Institute | Swiss Re 

46 

 
 
EUR 5 billion, with only 2 billion insured. The floods caused by Storm Boris in 
Czechia, Austria, Poland, Italy, Slovakia, Romania, Hungary caused losses of EUR 4 
billion, half of which was insured 54. Climate change has been the cause of over third 
of all weather-related insurance losses over the last 20 years 55. In 2023, only 
about a quarter of economic losses in the EU were insured and the share was below 
5% in some EU countries 56. 

The increase in the frequency and intensity of many of these extreme weather 
events also poses heightened risks to the built environment and infrastructure in 
Europe, and to the services they provide. A Commission’s study shows that climate 
change will accelerate corrosion in older reinforced concrete buildings, with repair 
costs projected at EUR 76 billion to 883 billion by 2100. 

Extreme heatwaves and fires, heavy rainfall and flooding, heavy snowfall and 
thunderstorms severely test the resilience of the transport system, impacting 
operational and economic functionality and resulting in accidents, incidents and rail 
transport service delays or cancellation57. Marine heatwaves also have significant 
socio‑economic consequences, particularly for industries such as fisheries, 
aquaculture and tourism. Climate change is having an impact on specific groups of 
people and cultures in Europe too. For example, in northern Europe, climate change 
is having profound impacts on the livelihoods of the Saami people, threatening the 
culture and wellbeing of the Indigenous communities in Europe. 

The extent of future economic losses will depend both on the action taken to 
mitigate climate impacts, to implement climate adaptation actions and to 
increase the resilience of exposed assets. Across all scenarios, EU’s annual 
losses could reach 2.2% of GDP by 2070, and a quarter of EU regions could 
experience GDP losses greater than 5% 58. If global warming stays more 
permanently above the 1.5 degrees threshold set under the Paris Agreement, the 
cumulative additional loss in GDP for the EU could amount to EUR 2.4 trillion from 
2031 to 2050 59. 

The European Commission recently carried out a study on labour productivity losses 
caused by rising heat stress in EU regions. The study shows that heat stress from 
climate change will reduce labour productivity and GDP across Europe, with 
southern and south-eastern regions being the most affected. By 2050, productivity 
losses may reach around 0.9%, and GDP losses up to 0.7% in the most affected 
regions, relative to a future without heat stress impacts. These losses are projected 
to deepen by 2080, with a loss in productivity reaching 2.5% and GDP losses 
exceeding 1.5%. If adaptation action is not taken, and the worst-case climate 

54 Munich Reinsurance Company 2024 Factsheet 
55 Climate change accounts for over a third of insured weather losses this century and rising - Insure Our Future 
Global 
56 EIOPA and ECB joint paper: Towards a European system for natural catastrophe risk management - EIOPA 
57 2024 Rail Environmental Report | European Union Agency for Railways (p. 76) 
58 World Bank Group, 2024. Climate Adaptation Costing in a Changing World. Economics for Disaster Prevention 
and Preparedness 
59 EC. 2024. Europe’s 2040 climate target and path to climate neutrality by 2050 building a sustainable, just and 
prosperous society 

47 

 
 
scenarios materialise, labour productivity losses could exceed 6% in a few regions, 
and GDP losses could exceed 4%. 

6.2 EU action to boost climate resilience 

Given the wide range of climate hazards, it is essential to boost climate resilience 
across our economy, society and infrastructure to maintain core societal functions 
and ensure wellbeing of people. Climate resilience and risk management are vital for 
a competitive, secure, and prosperous EU. 

The Preparedness Union strategy aims to enhance the EU’s civilian and military 
preparedness and readiness for future crises so that everyone is ready and capable 
of responding quickly and effectively if needed. The strategy will help national 
preparedness action by stepping up coordination and efficiency under existing 
strategies and by fostering a culture of resilience to all types of future crises. 

The strategy recognises that climate risks are part of the key crisis landscape. It 
stresses the importance of anticipation and prevention, and the need to tackle risks 
and threats in a comprehensive manner, considering how they interact and produce 
cascading effects. With this main aim, the strategy commits to develop a 
comprehensive cross-sectoral EU-level risk and threat assessment. The strategy 
also explicitly sets out to embed ‘climate resilience by design’ and ‘preparedness 
by design’ into all EU policies and actions. Using common climate reference 
scenarios, this would ensure better climate-proofing of policies so as to head off 
future crises and strengthen proactive climate, environment and water risk 
management across the EU. 

In 2024, the focus has been on launching work on an integrated framework for 
climate resilience, including a public call for evidence. The European Environment 
Agency has led the preparation of a second European Climate Risk Assessment. 
The integrated framework will seek to ensure that all investments vulnerable to the 
impacts of climate change are designed to tackle the climate risks that could 
materialise in their lifetime (‘resilience by design’). 

Fully aligned with the above policies, the Competitiveness Compass asks the EU 
and Member States to regularly update climate risk assessments and improve critical 
infrastructure based on the resilience by design principle. The Competitiveness 
Compass sets out options to avoid supply chains and production sites getting 
compromised by hazardous events, including action to integrate climate resilience in 
urban planning, deploying nature-based solutions, and developing nature credits and 
adaptation in agriculture while preserving food security. 

The Vision for EU Agriculture and Food depicts the impacts of extreme weather 
events and changing precipitation patterns for farmers. To reduce their vulnerability 
and exposure to risks, incentives will be increased to fund adaptation at farm level 
and for risk sharing via producer organisations or cooperatives. Under the strategy, 
the future common agriculture policy will provide more targeted for measures and 
investments that make the agricultural sector more resilient to the changing 
conditions. More ambitious transformational changes will be needed in places where 

48 

 
current production is not sustainable over the longer term, involving for example new 
local strategies, research and innovation. 

As highlighted in the water resilience strategy, another important aspect of 
strengthening the EU’s resilience is support for public authorities, businesses and 
the public in preparing for future climate risks. This may include support for the use 
of digital tools for EU real-time early warning and monitoring systems. The strategy 
calls for action to empower people and communities to adapt and protect themselves 
from risks. A first step towards building societal resilience is to make sure information 
is widely available on the specific risks that people, businesses, land and, 
infrastructure face. Although, there may already be many tools to protect the 
population from climate-related disasters or mitigate the impact, they are not always 
sufficiently known or used. The EU and Member States must therefore strengthen 
the links between existing risk management tools at European level (such as the 
early warning tools of the Copernicus Emergency Management Service) and the 
tools available at national and local levels. 

Embedding climate-related risks in fiscal policy is also key to strengthening 
resilience. As the economic and fiscal costs of climate change are rising and 
transition efforts accelerate, it becomes essential to assess the macro-fiscal impacts 
of climate change and integrate them into national budgetary frameworks. Significant 
progress was made in 2024 with amendments to the directive on requirements for 
budgetary frameworks of the Member States, adopted as part of the revised EU 
Economic Governance Framework. From 2026, all EU Member States are required 
to assess and report in their budget documents, to the extent possible, on how the 
macro-fiscal risks from climate change may affect the medium- and long-term 
sustainability of public finances, on disaster- and climate-related contingent liabilities 
and on the fiscal costs incurred due to disasters and climate-related shocks. These 
provisions aim to strengthen the understanding and management of climate-related 
fiscal impacts, foster more proactive and risk-informed budgeting practices, and 
support evidence-based policy and investment decisions. 

6.3 Progress in the Member States on climate resilience and adaptation 

policies and legislation 

The overall climate resilience and adaptation policy landscape and frameworks 
are well established across Europe 60. The Member States use a range of policies 
to tackle climate risks and aim to boost climate resilience and adaptation action, 
such as: 

•  dedicated climate adaptation laws; 
•  national climate laws and other legislative acts with adaptation rules; 
•  national adaptation strategies and plans; and 
•  sector-specific and regional adaptation plans. 

Germany has adopted a specific, standalone climate adaptation law, and 
Lithuania is currently preparing one. A growing number of countries are putting 

60 From adaptation to action: insights into progress and challenges across Europe. EEA 2025. 

49 

 
 
adaptation rules into their national climate laws to give greater legal force to 
adaptation action. 13 Member States give adaptation full legal force this way. 

National adaptation planning and up-to-date climate risk assessments are a 
prerequisite for policy implementation. EU law requires the Member States to adopt 
and implement national adaptation strategies and plans. Progress has been made 
on this front. In 2025, all EU countries have an adaptation strategy or plan in 
place (see Figure 22). Between 2023-2025, 11 Member States adopted or updated 
their strategy or plan. 

EU countries are making progress in developing their national climate risk 
assessments. They are taking action to generate and update knowledge about 
climate-related hazards, vulnerabilities, impacts and risks, strengthening efforts for 
evidence-based policy making on adaptation. Nearly all Member States tackle 
climate risks in some form, ranging from thematic or sector-specific analyses to 
multi-risk and multi-sectoral, comprehensive climate risk assessments. 

Six Member States have reported having completed their new or updated national 
climate risk assessment from 2023-2025. The number of Member States with a 
comprehensive and national assessment available has increased to 21. 13 Member 
States report new national, comprehensive assessments as planned or in progress. 

At least one third of Member States have completed new thematic or sectoral 
climate risk assessments. Most Member States have at least some form of 
sectoral or thematic climate risk or vulnerability assessment available. 

Even if the level of policy preparedness of the Member States has steadily risen at 
national level, more coherent policy and monitoring, reporting and evaluation 
frameworks are needed at all levels. Currently, there is no coherent data available 
on the implementation of adaptation policies in all Member States, but recent 
evaluations show that implementation and methods to evaluate adaptation efficiency 
and effectiveness are lagging. It is crucial to mainstream adaptation into sectoral 
policy. Despite the growing trend of sectoral and thematic adaptation policies at 
national level, more action is needed on sectoral policies, e.g. in the health sector. 

National, regional and local governments are increasingly incorporating justice into 
their adaptation policymaking and planning. Similarly, at regional and local level, 
justice has increasingly been taken into consideration in urban adaptation planning. 
With many examples around Europe, participatory processes are being used to 
inform policy. Nevertheless, inclusion of vulnerable groups and justice still need 
attention (see Chapter 11 of the accompanying staff working document for further 
details). 

The development described above is aligned with the Commission recommendations 
and the responses given to them by the Member States. In its assessment, In 
September 2023, the Commission found that Member States’ measures were often 
in need for improvements to become more consistent with the EU’s and the 
international agreements’ objectives to ensure continuous progress in enhancing 
adaptive capacity, strengthening resilience and reducing vulnerability to climate 

50 

 
change. Following the assessment, the Commission issued tailored 
recommendations to 26 Member States, addressing a broad range of aspects across 
the policy cycle (see Chapter 11 of the accompanying staff working document for 
further details). 

You can find more information about climate resilience and adaptation 
including country profiles, case studies, guidance, data and publications on 
Climate-ADAPT portal. 

Figure 22: Adaptation strategies, plans and climate laws with adaptation provisions rules in the EU 

Legend: 

National adaptation 
strategy 

  National adaptation plan 

National or federal climate law 
with adaptation rules 

6.4 Regional and local action 61 

Across the EU, regions and cities are stepping up climate resilience and adaptation 
work. They are making progress on two tracks: 

61 Preliminary assessment of the 2025 Governance Regulation dataset / subnational adaptation 

51 

 
 
 
 
 
 
•  Legal requirements. An increasing number of Member States now oblige 
regional and local authorities to prepare and implement climate adaptation 
plans. Countries that have these legal requirements often have strategies in 
place or are integrating resilience and adaptation into sector programmes, 
policies and regulations and are rolling out measures through multilevel 
coordination. 

•  Voluntary action. In countries without legal requirements, regions and cities 
are increasingly taking voluntary action, often under national adaptation plans 
or EU cross-border programmes. Governments often support this with 
incentives, guidance and joint initiatives. 

Multilevel institutionalised networks are becoming more commonplace, supporting 
local, regional and national bodies in sharing knowledge and aligning policies. EU 
funds are helping regions and municipalities finance climate resilience and 
adaptation projects. (For more information, see Chapter 7). 

The Covenant of Mayors initiative, created in 2008 and supported by the 
European Commission, brings together thousands of local governments seeking to 
secure a better future for their citizens. By joining the initiative, the local governments 
voluntarily commit to implementing EU climate and energy objectives. The initiative 
is a key enabler of local adaptation planning across Europe by providing tools, 
networks and peer-to-peer support. Over 10 000 local governments have committed 
to action under the three pillars of the covenant, including strengthening resilience 
and alleviating energy poverty. 

52 

 
 
 
7. Investments in climate action 

Key highlights 

• 

Investing now means saving tomorrow. Between 1980 and 2023, climate-
related extreme events caused economic losses of EUR 738 billion in the 
EU, with EUR 162 billion in just 2021–2023. Accelerating green investment 
reduces future costs, creates jobs and strengthens Europe’s resilience and 
energy security. 

•  Significant investments are needed to meet EU climate and energy targets. 
Annual investment in the EU’s energy system must more than double to 
around EUR 565 billion per year in 2021–2030 compared with 2011–2020. 
•  Private capital is essential for the transition. The EU’s Sustainable Finance 
Framework is mobilising significant private investment for sustainable 
activities, with green bond issuance in the EU reaching a record EUR 314 
billion in 2024. 

•  The EU budget mainstreams climate action across programmes. About 

EUR 662 billion (34% of the 2021–2027 budget) is earmarked for climate 
objectives through programmes such as the Recovery and Resilience 
Facility, cohesion policy, InvestEU and Horizon Europe. 

7.1 Investment needs 

Between 1980 and 2023, climate-related extreme events caused an estimated 
EUR 738 billion in economic losses across the EU. Strikingly, EUR 162 billion (22% 
of all losses) occurred between 2021 and 2023 alone 62. These rising costs show the 
urgency and importance of taking action to tackle climate change, to reduce GHG 
emissions and to prepare for increasing climate impacts. As well as reducing climate 
impacts, climate action brings wider economic and social benefits. These benefits 
include cleaner air, better public health, and lower healthcare costs. This is also an 
investment in the EU’s strategic independence – it not only saves money, but also 
reduces the EU’s dependency on imported energy and exposure to shocks. By 
switching to renewable energy, the EU could reduce the cost spent on importing 
fossil fuels by EUR 2.8 trillion between 2031 and 2050, compared with the 2011-
2020 average 63. 

Future needs 

It is important to invest both in action to mitigate greenhouse gas emissions and in 
building our resilience to manage the growing climate impacts. 

To limit climate change and meet the EU’s 2030 climate and energy targets, 
investment in the EU’s energy system must increase significantly to reach around 
EUR 565 billion a year between 2021 and 2030, up from the EUR 250 billion 

62 European Environment Agency (2024). Economic losses from weather- and climate-related extremes in 
Europe. 
63 2040 target impact assessment (SWD(2024) 63 final) 

53 

 
 
invested per year in the previous decade 64. It does not include investments to 
decarbonise the transport sector. 

Shifting away from fossil fuels and meeting rising demand for electricity will require 
major investments in strengthened and modernised low-emission electricity systems. 
Investment in new power generation, mainly wind and solar, and upgrading existing 
power plants will need to more than double, from about EUR 45 billion to EUR 90 
billion annually. 

The largest required increase on the supply side is in power grids. Investment in 
transmission and distribution infrastructure must triple to ensure reliable and efficient 
delivery of electricity. 

On the demand side, investments must also more than double. The residential 
sector has the highest absolute needs, with an estimated needs of EUR 215 billion a 
year to renovate buildings and replace heating systems and appliances. This is 
nearly twice the average investment made in 2011-2020. 

The sharpest relative increase is needed in industry. Although annual needs are 
lower in absolute terms, estimated at about EUR 40 billion, they represent a sixfold 
increase compared to the previous decade. Investments are especially needed to 
modernise and decarbonise energy-intensive sectors such as steel, cement, and 
chemicals. 

Estimating the investment gap in climate adaptation requires more work. Currently, 
many investments assume that historic climatic conditions will continue in the future. 
An approach is needed that properly factors in expected future climatic 
developments for all investments exposed to physical risks (the principle of climate 
resilience by design, as explained in Section 6.2). 

Table 3: Average annual investment needs in the energy system (EUR 2023, billion) 

Sector 

2011-2020 

2021-30 

Energy supply side 

Power grid 

Power plants 

Other 

Energy demand side 

Industrial sector 

Residential 

Services 

Agriculture 

Total 

80 

20 

45 

20 

170 

5 

115 

30 

15 

250 

200 

60 

90 

45 

365 

40 

215 

80 

30 

565 

64 All numbers are based on 2040 target impact assessment (SWD(2024) 63 final) and Net Zero Industry Act 
impact assessment (SWD(2023) 68 final). 

54 

 
 
Progress made 

Recent trends show encouraging signs that investment in the climate and 
energy transition is picking up. The total installed capacity of wind and solar 
power generation increased by almost fivefold between 2010 and 2024 and by 70% 
between 2020 and 2024. The rapidly falling cost of solar panels has led to an annual 
increase in installed capacity in excess of 20% in 2022-2024, and a 15% annual 
increase in wind power over the same period. In 2024, the combined installed 
capacity of solar and wind power generation amounted to 535 gigawatt, around 47% 
of total installed capacity. 

Figure 23: Wind and solar power generation capacity 

Source: Eurostat (IRENA for 2024) 

New registrations of battery-electric cars and plug-in hybrids have also picked 
up significantly in recent years, to reach 1.5 million and 0.8 million, respectively, in 
2024. Investment in heat pumps has also gathered momentum over the past few 
years, although not as rapid an increase as for solar and wind power generation as 
hurdles remains in terms of consumer acceptance and installation capacity, among 
others. 

55 

 
 
Figure 24: New car registrations (battery electric cars and plug-in hybrids) 

Source: Eurostat 

Figure 25: Heat pump installed capacity 

Source: Eurostat 

7.2 Mobilising private-sector investment 

Given the scale of investment needs, private-sector contributions to financing both 
climate resilience and climate mitigation need to be substantial. This is why the EU 
put together a policy framework that aims to facilitate private-sector 
investments in sustainable activities. The Sustainable Finance Framework 
provides investors with robust definitions of sustainable activities (the EU Taxonomy) 
and requires companies and banks to disclose their impact on the environment and 
climate (Corporate Sustainability Reporting Directive, Sustainable Finance 
Disclosure Regulation). The rules governing sustainable finance are currently 

56 

 
 
 
being simplified to reduce their administrative burden on companies, while making 
the framework more workable and impactful. In February 2025, the Commission put 
forward legislative proposals to reduce the volume of sustainability reports and the 
number of companies that need to report this information. The Commission is also 
considering other simplification measures. 

Over the past years, the corporate and financial sectors have channelled significant 
resources towards green objectives in the EU. For instance, according to the latest 
report from the Platform on Sustainable Finance, Taxonomy-aligned capital 
expenditure from large listed European companies reached EUR 250 billion in 
2023 65. 

In the financial sector, certain instruments have emerged as a fundamental tool to 
mobilise private capital. Figure 26 presents the annual amounts of ESG 
(environmental, social or corporate governance) bonds in the EU, until the first 
half of June 2025. Green bonds (i.e. bonds financing green projects) continue to 
dominate the ESG market. The volume of new green bond issuance amounted to 
EUR 314 billion in 2024, its highest level since the first issuance of a green bond in 
2007. In contrast, sustainability-linked bonds (i.e. bonds for which issuers pay a 
higher interest if they do not meet their pre-defined ‘sustainability’ objectives) 
continue to decrease, amounting only to EUR 26 billion in 2024, compared to 
EUR 66 billion in 2021 and EUR 45 billion in 2022. This decrease reflects the more 
rigorous approach to sustainability taken by investors. Similarly social bonds (i.e. 
bonds financing social projects) and sustainability bonds (i.e. bonds financing a 
combination of green and social projects) both saw a decrease, reinforcing the 
prevalence of green bonds. 

Figure 26: Annual issued volumes in the EU – ESG bonds 

Source: LSEG, JRC calculations. Data as at15 June 2025. 

65 Platform on Sustainable Finance report: Monitoring capital flows to sustainable investments 

57 

 
 
 
The EU is a global leader in the green bonds market (see Figure 27). In every year 
between 2021 and 2024 they accounted for over 3% of all bond issuances (touching 
2.7% in mid-2025), remarkably higher than the non-EU share of green bonds at less 
than 0.5%. 

To bring greater transparency and credibility to these financial instruments, the EU 
adopted as of December 2024 the European Green Bond Regulation, a voluntary 
framework for issuers who wish to label their bonds as European Green Bonds. This 
standard is based on the detailed criteria of the EU taxonomy to define green 
economic activities, ensuring transparency levels that align with market best 
practices. It also brings in supervision for companies conducting pre- and post-
issuance reviews at European level. 

Figure 27: Annual issued volumes and green bond share – all bond types 

Source: LSEG, JRC calculations. Data as at 15 June 2025. 

The market for ESG loans (defined as a club deal, a syndication or a bilateral 
transaction) is traditionally less well defined than the ESG bond market, with no EU 
regulation. Green loan issuances have steadily increased since 2016, reaching 
EUR 71 billion in 2024, up from EUR 53 billion in 2023 (see Figure 28). 

58 

 
 
Figure 28: Annual issuance of ESG loans in the EU 

Source: LSEG, JRC calculations. Data as at 16 June 2025 

To facilitate and accelerate the corporate transition to net zero, the Commission will 
also develop sector-specific transition pathways, with the direct involvement of key 
industries. These pathways should enable more informed investment decisions and 
help mobilise more capital for the transition. 

The upcoming integrated framework for climate resilience will include action to 
mobilise climate resilience financing to ensure that all investments vulnerable to the 
impacts of climate change are designed to face climate risks that could materialise in 
their lifetime (‘resilience by design’). 

7.3 Funding from the EU Emission Trading System 

Three funds use revenues from the EU Emission Trading System to support clean 
technologies, renewable energy and energy efficiency: 

Innovation Fund; 

• 
•  Modernisation Fund; and 
•  Social Climate Fund. 

Moreover, the Recovery and Resilience Facility is partially financed by ETS 
revenues. 

Innovation Fund 

The Innovation Fund is one of the world’s largest funding programmes for the 
deployment of low-carbon technologies. The goal is to bring to market new clean 
energy and industrial technologies so the EU can reduce emissions, reach climate 
neutrality and stay competitive. The fund has an estimated budget of EUR 40 billion 
between 2020 and 2030 (based on a carbon price of EUR 75 per tonne). Projects 
from the EU, Iceland, Liechtenstein and Norway can apply for support from the fund. 

59 

 
 
 
Since 2020, the Commission has launched 11 calls for proposals, including two 
auctions under the European Hydrogen Bank. The Innovation Fund now backs about 
190 large- and small-scale ongoing projects with funding totalling around EUR 10.8 
billion. 

Calls for proposals in 2024 

The Commission opened three calls for proposals in December 2024 with a budget 
of EUR 4.6 billion. 

•  Net-zero technologies. This call for proposals had a budget of EUR 2.4 

billion and received 359 proposals from 28 countries when it closed in April 
2025. The Commission has just published the results of the evaluation and 
the list of projects pre-selected for grant agreement preparation. 
•  Batteries. For the first time, this call for proposals will support the 

manufacturing of electric vehicle battery cells. The call had a budget of EUR 1 
billion and received 14 proposals from 8 countries in April 2025. In July 2025, 
it was announced that six projects were awarded funding: two from 
France and Germany and one from Sweden and Poland receiving a 
combined EUR 852 million of support. These projects will have a combined 
battery manufacturing capacity of around 56 gigawatt-hours (GWh) of EV 
battery cells per year. 

•  Hydrogen auction. This call for proposals was for the second round of the 

European Hydrogen Bank auction for the production of renewable hydrogen. 
The budget was EUR 1.2 billion, including a new allocation of EUR 200 million 
specifically earmarked for projects in the maritime sector. The auction closed 
in February 2025 with 66 bids from 11 countries and 15 projects in 5 different 
countries receiving support. These projects are expected to produce nearly 
2.2 million tonnes of renewable hydrogen over 10 years, avoiding more 
than 15 million tonnes of CO₂ emissions. 

As announced in the Clean Industrial Deal communication, the Innovation Fund will 
launch new call for proposals to support clean technology, battery manufacturing and 
renewable hydrogen at the end of 2025. It will also launch a new auction for 
decarbonising heat in industrial processes. 

All projects, country fiches and interactive dashboards are available in 
Innovation Fund Project Portfolio. 

60 

 
 
 
 
Innovation Fund services 

The Innovation Fund provides several services that let additional projects receive 
financing even after the initial budget of a call for proposals has been allocated. 

Germany, Austria and Spain have all made contributions under the ‘auctions-as-a-
service’ mechanism, deploying up to EUR 836 million to support promising projects 
that did not receive funding in the last hydrogen auction. 

The Commission is working to set up a similar feature for the regular calls for 
proposals, called ‘grants-as-a-service’. 

Both features enable Member States to use the Innovation Fund evaluation 
procedures and avoid unnecessary administrative and financial burdens to develop 
and run new support schemes for the same technologies. 

Support from the Innovation Fund goes beyond public financing. In particular, small-
scale projects or projects from lower-income countries can receive Project 
Development Assistance. The European Investment Bank offers tailored technical 
and financial advisory to improve the maturity of innovative projects and ensure 
balanced spread of Innovation Fund support across regions and sectors. 

Modernisation Fund 

The Modernisation Fund uses revenue from the EU ETS to help lower-income 
Member States meet their 2030 climate and energy targets. 13 Member States: 
Bulgaria, Croatia, Czechia, Estonia, Greece, Hungary, Latvia, Lithuania, Poland, 
Portugal, Romania, Slovakia and Slovenia can benefit from this support. 

The Fund finances renewable energy sources, modernisation of energy networks, 
and energy efficiency in buildings and industry. These investments speed up the 
clean transition and keep the whole EU competitive. 

The Modernisation Fund has an estimated budget of EUR 57 billion from 2021 to 
2030, assuming an average carbon price of EUR 75 /tCO2. Since 2021, EUR 19.1 
billion has already been disbursed to 12 beneficiary Member States. 

The latest disbursements include EUR 2.7 billion in December 2024 and EUR 3.7 
billion in June 2025. The latter is the largest disbursement since the Fund was 
created. These recent disbursements saw the first ever funds invested in Slovenia 
(December 2024) and Greece (June 2025). 

Social Climate Fund 

The Social Climate Fund was set up together with the ETS2 (see Chapter 2), the 
EU’s emissions trading system for fuel used in buildings, road transport, and small 
industry. Its main goal is to help reduce the social and economic impact of this new 
system by providing help to the most affected people, especially households and 
microenterprises struggling with higher costs of energy and transport. Together with 
a mandatory contribution from Member States it should provide at least EUR 87 

61 

 
billion in public support from 2026 to 2032, ensuring no one is left behind as we shift 
to a cleaner economy. 

A description of how the funding from the Social Climate Fund will be spent is 
contained within Social Climate Plans to be adopted by Member States and that 
need to be positively assessed by the Commission. These plans must identify the 
most vulnerable groups in relation to energy and transport poverty as well as ETS2 
impacts, and describe the measures and investments to support them. In designing 
their plans, Member States must conduct public consultation, involving a range of 
stakeholders broadly defined: regional and local authorities, representatives of 
economic and social partners, relevant civil society organisations, youth 
organisations, etc. A summary of the consultation as well as an explanation of how 
input has been integrated should also be included in the plan. The involvement of 
regional and local actors continues in the implementation of investments on the 
ground and throughout the duration of the fund, so to ensure tailored and effective 
action. 

So far Sweden and Latvia have submitted their draft Social Climate Plans to the 
Commission. The European Commission has started reviewing the plans and a final 
decision is expected within the five-month legal deadline following their submission. 
The Commission is also in close contact with remaining Member States to help 
finalise and submit all plans. 

If a Member State’s plan is positively assessed, funding can begin on 1 January 
2026. However, only countries that fully convert the ETS2 into their national law will 
be able to access the fund. 

7.4 Climate expenditure in the EU budget 

The EU budget – both the EU’s ‘multiannual financial framework’ covering the 2021-
2027 period and the post-Covid recovery instrument NextGenerationEU – is a key 
driver of the green transition. 

Current budget commitments suggest that in 2021-2027 the EU will spend around 
EUR 662 billion on climate action. This is 34% of the whole EU budget and above 
the 30% target. 

With 78 % of its budget going to climate, the Connecting Europe Facility (CEF) has 
one of the highest shares of spending on climate of any EU programme. The LIFE 
programme and the Recovery and Resilience Facility (RRF) also spend a large 
share of their budgets on climate projects (see Figure 29). 

62 

 
Figure 29: Expected share of the EU budget and of selected funds and policies spent on climate 
(%, 2021-2027) 

Source: Budget commitments on climate. Climate mainstreaming - European Commission 

All these funds deliver tangible results. For example: 

•  45 gigawatt-hours of estimated energy efficiency savings per year from private 

and public buildings; 

•  98 million tonnes of carbon dioxide equivalent avoided per year, of which 
more than half was through Next Generation EU green bond investment. 
Additionally, 452 million tonnes of carbon dioxide reduction are expected from 
the Innovation Fund over the first 10 years of operation. 

•  543 additional gigawatt-hours of renewable energy capacity installed. 

The Commission’s July 2025 proposals for the multiannual financial framework 
2028-2034 include a 35% spending target on climate and environment objectives. 
This would mobilise over EUR 700 billion to support green investments. The 
proposal also envisages applying the ‘do no significant harm’ principle across the 
entire budget to ensure that EU funding does not run counter to EU climate and 
environmental objectives. The proposal also includes a ‘climate resilience by design’ 
principle, which would be applied for the first time to EU funding. 

Connecting Europe Facility 

The Connecting Europe Facility (CEF) is the EU’s funding scheme for transport, 
energy and digital infrastructure. The facility has total budget of EUR 33 billion, of 
which 60% is earmarked for climate action. It comfortably exceeds that target, with 
78 % of the budget, almost EUR 26 billion, going to climate related investments such 
as electricity transmission upgrades, alternative fuel supply points and new or 
improved railway lines. 

Recovery and Resilience Facility 

The Recovery and Resilience Facility is a temporary fund and the main part of 
NextGenerationEU, the EU’s plan to recover after the recent crises: the COVID-19 
pandemic and the energy crisis triggered by Russia’s invasion of Ukraine. It has a 

63 

 
budget of up to EUR 650 billion and enables Member States to significantly increase 
climate-related investments 66. 

All Member States committed to spend more than required 37% on climate, with 
some Member States projected to spend well over half of their allocation on climate 
action. Collectively Member States plan to spend 42.5% of their allocations on 
climate (EUR 276 billion). By September 2025, climate-related disbursements had 
reached EUR 62 billion. 

Substantial progress has been made and several success stories have materialised 
on the ground. However, since the RRF sets deadlines for spending this temporary 
fund (all payments to be made by end 2026), it will be essential to accelerate and 
finalise implementation over the coming year. 

InvestEU 

The InvestEU uses an EU budget guarantee to help international and national 
promotional banks finance sustainable investment, innovation and job creation. One 
of the four priority ‘windows’ is sustainable infrastructure, which supports clean 
transport, renewable energy, energy efficiency and other clean technologies. 

The programme aims to trigger EUR 372 billion in investment, with at least 30% 
going to climate action. By the end of 2024, it had already mobilised EUR 300 billion, 
38% of which was climate related. For 2021-2027, it expects to invest EUR 110 
billion into climate projects, roughly 35% of all investments. 

Horizon Europe programme 

The Horizon Europe framework programme is the EU’s key funding programme for 
research and innovation. It tackles climate change, helps to achieve the UN’s 
Sustainable Development Goals and boosts the EU’s competitiveness and growth. 

The Horizon Europe programme has a total budget of EUR 95.5 billion for the whole 
2021-2027 timeframe. The programme must contribute at least 35% of expenditure 
to climate objectives – this is equivalent to EUR 34.8 billion in funding over the 2021-
2027 timeframe. 

Given the budget allocated to climate for the years 2021-2024, and the estimates for 
2025-2027, the programme is on track to meet the overall commitment of 35%. By 
end of 2024, nearly EUR 20 billion have already been earmarked to research and 
innovation activities supporting climate action 67. This demonstrates the programme’s 
commitment to tackling climate change and advancing sustainability goals. 

Horizon Europe supports climate research and innovation activities in areas such as 
climate science and climate adaptation, renewable energy and energy storage, 

66 In 2023 and 2024, Member States complemented their recovery and resilience plans with new chapters on 
REPowerEU in response to the energy crisis caused by Russia’s invasion of Ukraine. New or scaled-up reforms 
and investments in Members States to help phase out the EU’s dependence on Russian fossil fuels and 
accelerate the clean energy transition are supported by additional financial power (EUR 19 billion of new grants, 
transfers from other funds and use of remaining Next Generation EU loans). 
67 Preliminary figures 

64 

 
 
industry decarbonisation, circularity, sustainable mobility, buildings upgrades and bio-
based solutions. 

Horizon Europe includes several timebound ‘missions’ that target major challenges 
such as adapting to climate change, improving soil health and creating climate 
neutral cities. One such mission, adaptation to climate change, aims to make at least 
150 European regions and communities climate resilient by 2030. So far it has 
awarded EUR 517 million to 61 projects. By handing resources and decisions to 
local and regional bodies, the mission speeds up action and stimulates innovation 
and nature-based, digital and other systemic solutions. The mission on climate-
neutral cities supported 92 cities through contracts that include a commitment as well 
as an action and investment plan. 

LIFE programme 

The LIFE programme is the EU fund for environment, energy and climate. LIFE 
projects focus on innovative industrial solutions to reduce GHG emissions, carbon 
removals in agricultural and forests, climate adaptation in urban and rural areas and 
greater preparedness for extreme weather events. With an overall budget of EUR 
5.4 billion for the 2021-2027 period, the LIFE programme has a specific 
subprogramme on climate change mitigation and adaptation. 

61% of the total budget should be spent on climate action. The programme is slightly 
below this target at 59%. 

Since the beginning of the programming cycle in 2021, the climate subprogramme 
has financed 117 projects providing EUR 367 million. Under the 2024 calls for 
proposals, the subprogramme awarded 23 projects including two strategic integrated 
projects, for a total EUR 25 million. 

Cohesion policy 

Cohesion policy is the cornerstone of balanced and fair development across EU 
regions. Its main goal is to ensure that everyone, no matter where they live, gets the 
same chance to succeed. This is important because it helps create fair opportunities 
and reduces inequalities across the EU. 

Cohesion policy also drives climate action. It finances projects that reduce energy 
consumption, boost renewable energy, improve public transport, protect nature and 
strengthen local and regional resilience to extreme weather. By linking regional 
growth with clean and green solutions, cohesion policy helps the EU reach its 
climate goals while ensuring no region is left behind. 

In September 2025, based on the Commission’s mid-term review, new rules were 
adopted to make it easier for Member States to support the EU’s strategic priorities. 
For example, new rules would allow the European Regional Development Fund to 
fund large businesses in key areas such as decarbonisation or strategic 
technologies. 

65 

 
Figure 30: Share of cohesion policy funds allocated to climate action by thematic area 

All data, interactive charts and illustrative stories on cohesion policy are 
available on the Cohesion Open Data Platform. 

European Regional Development Fund, Cohesion Fund and Interreg 

Member States’ have allocated about 57% (EUR 22.29 billion) of their Cohesion 
Fund and 33% (EUR 70.63 billion) of their European Regional Development Fund 
allocations to climate action. Additionally, about 24.5% of the EUR 10.7 billion of 
programmes focused on European regional cooperation (Interreg funds) financed by 
the EU are expected to support climate-relevant measures. Combined, these 
investments will not only significantly reduce GHG emissions and boost adaptation to 
climate change, but they will also create jobs, increase competitiveness, enhance 
mobility and maintain balanced regional development across the EU. Figure 30 
shows the funding allocated to climate relevant policy areas as a share of total 

66 

 
 
 
spending from the European Regional Development Fund, the Cohesion Fund and 
Interreg on climate action. 

By 30 June 2025, some 45% of the European Regional Development Fund and 61% 
of Cohesion Fund for the 2021-2027 period had been allocated to specific projects. 

Just Transition Fund 

The Just Transition Fund provides EUR 19.7 billion to help people and regions the 
most affected by the transition to climate neutrality, such as areas where coal mines 
are closing or heavy industry is transforming. Currently, it supports 96 coal and 
carbon-intensive regions with tailored just transition plans, for example by supporting 
diversification of the local economy, and helping people acquire new skills. Up to 120 
000 unemployed people will benefit from the measure and almost 200 000 people 
will gain new skills. 

The Just Transition Fund is moving forward: 47% of the fund had already been 
assigned to projects by June 2025, up from 22% a year before. There are notable 
differences in progress. Estonia and Malta have selected all projects and 
Luxembourg, Sweden and the Netherlands have selected almost all projects to be 
financed. On the other hand, Belgium, Hungary and Bulgaria have assigned less 
than 10% of the total budget. 

European Social Fund 

In the 2021-2027 programming period, the European Social Fund Plus is investing 
EUR 5.7 billion in green skills and jobs and in measures and reforms supporting the 
green economy. This includes upskilling and reskilling of workers, support to 
displaced workers or workers working for enterprises affected by the green transition 
or training of employed and unemployed people in green skills. 

67 

 
8. International climate action 

Key highlights 

•  The EU played an important role at COP29 in Azerbaijan to reach an 
agreement on the new post-2025 collective quantified goal on climate 
finance and on finalising the Paris agreement rules for international carbon 
markets. 

•  The EU submitted its first biennial transparency report in November 2024, 
providing a leading example under the Paris Agreement’s Enhanced 
Transparency Framework and on implementation of ambitious climate 
action. 

•  The EU climate ministers agreed on an EU nationally determined 

contribution ahead of COP30, with an indicative 2035 target of reduction in 
net GHG emissions of between 66.25% and 72.5% compared to 1990 
levels. 

•  The EU strengthened its climate dialogue with key countries around the 

world including China, Brazil, India, South Africa and Canada. 

• 

In 2024, the Commission committed to provide EUR 4.6 billion in climate 
finance. Of this amount, 27% were committed to adaptation, 46% to 
mitigation, and 27% to cross-cutting actions addressing both mitigation and 
adaptation priorities. 

The EU plays a significant role in advancing global action to achieve the Paris 
Agreement goals by working both at international and bilateral level. Its impact 
encompasses financial support, negotiations under the United Nations Framework 
Convention on Climate Change (UNFCCC) and the Paris Agreement, diplomatic 
engagement, capacity building, and regulatory leadership. 

8.1 Multilateral engagement 

The past year has seen the EU engaging in several high-level and technical 
international meetings to push for a higher level of ambition at global level in 
climate negotiations, to increase transparency, mobilise resources and to share 
knowledge on climate action amid an increasingly volatile geopolitical context. 

In October 2025, the Commission and the High Representative presented 
an international strategy for securing Europe's place in global markets. The new EU 
global climate and energy vision presents the EU's offer to the world: using 
diplomacy to protect our core interests, promoting standards for a fair transition by 
assisting our partners to develop theirs, and addressing the new security threats and 
challenges that endanger both European interests and those of our partners. 

Implementing the Paris Agreement 

The EU engaged constructively at COP29 in Azerbaijan to achieve the main 
mandates set for the conference. Parties agreed on a new post-2025 collective 
quantified goal on climate finance, which outlines that developed will take the lead 

68 

 
in providing and mobilising at least USD 300 billion per year by 2035 for developing 
countries for climate action, from a wide variety of sources, with developing countries 
encouraged to make contributions on a voluntary basis. The new goal is 
complemented by a call to all actors to work together to enable the scaling up of 
finance for developing countries from all public and private sources, to at least 
USD 1.3 trillion annually. 

Another key outcome was the finalisation of the rulebook for carbon markets 
(under Article 6 of the Paris Agreement). In promoting transparent and high-integrity 
cooperations, these rules will help countries raise and achieve their climate targets. 

On 21 November 2024, the EU submitted its first biennial transparency report. 
The report details the progress made to reach the 2030 target and progress in 
assessing the effects of EU climate policies and measures in reducing greenhouse 
gas emissions and building resilience to climate change. It also details the 
contributions made to international capacity building and climate finance. See 
Chapter 5 of accompanying staff working document for more details. 

The Biennial Transparency Report is available on the UNFCCC website. 

Under the UNFCCC mitigation work programme, the EU shared best practices 
and mitigation solutions for buildings and urban systems (4th Global Dialogue and 
Investment Focused Events in October 2024) and for the forest sector (5th Global 
Dialogue and Investment Focused Events in May 2025). As part of the Just 
Transition Work programme, the EU participated in two Just Transition Dialogues 
to share experiences and good practices on just climate resilience and just energy 
transition pathways. 

On climate adaptation, the EU actively engaged with other countries to make 
progress under the UAE-Belém work programme on adaptation indicators. This is 
needed to implement the ‘UAE Framework for Global Climate Resilience’ adopted 
at COP28 in 2023 and to achieve the Global Goal on Adaptation. 

To prepare for the 30th Conference of Parties (COP30) in Belém in November 2025, 
the EU constructively advocates in the negotiations for successful decisions on the 
outcomes described in the mandates. These include delivering on the indicators to 
track progress towards the Global Goal on Adaptation, reaching an agreement on 
the gender action plan and actively participating in the discussions on the Baku to 
Belém Roadmap to USD 1.3 trillion, which aims to scale up climate finance flows to 
developing countries. The EU also continues to participate in the constituted bodies 
set up to support the parties and the intergovernmental process under the UNFCCC, 
with a view to achieve the outcomes stated in the mandates. 

Implementation of the first Global Stocktake Outcomes and the EU’s nationally 
determined contribution 

Building on the outcomes of the first global stocktake, and to keep the momentum of 
the milestone collective agreement on the energy transition, the EU led the launch of 

69 

 
 
the Global Energy Transitions Forum in January 2025. The forum unites leaders, 
ministers and stakeholder groups and aims to ensure that the commitments to 
accelerate the clean energy transition by tripling renewable energy capacity and 
doubling energy efficiency are integrated into the next round of nationally determined 
contribution. 

The EU has also agreed to submit its nationally determined contribution, ahead of 
COP30, with an indicative 2035 target between 66.25% and 72.5% reduction in net 
GHG emissions compared to 1990 levels. 

Engaging in other multilateral and plurilateral fora 

The EU’s work with the United Nations and its agencies continues to promote a 
clean transition and high climate ambition. The adoption of the Pact for the Future 
at the 79th session of the Unites Nations General Assembly reaffirmed the need for 
stronger action against climate change. At the 80th session of the United Nations 
General Assembly, the EU highlighted its climate commitments and ambition at 
leaders’ high-level event on Climate Action and shared its vision on the deployment 
of renewable energy in the Global Renewables Summit. 

The EU remains leading participant in the G7 and G20, with a view to further climate 
action. Despite geopolitical pressures progress was made in these fora over the past 
year. The G7 called for fast, deep emission cuts by major economies, including 
through the phase out of unabated coal power in the first half 2030, while the G20 
endorsed a “enhanced ambition agenda” to keep 1.5c within reach. The EU has 
encouraged both fora to agree on concrete steps to carry out the Paris Agreement 
and the Global Stocktake. 

The EU remains active in the Climate Club, a high-level forum for industry 
decarbonisation. The Club’s activities focus mainly on decarbonising steel and 
cement production. In 2024, the club launched a Global Matching Platform designed 
to fast-track the decarbonisation of heavy-emitting industries in emerging and 
developing economies by connecting to technical and financial solutions. 

The EU has also worked with the OECD to further climate action in member and 
candidate countries. It has participated in the climate change work of multiple bodies 
such as the Environment Policy Committee and the Working Parties on Climate 
Change and on Finance and Investment for Environmental Goals. It has also 
engaged in the Inclusive Forum on Carbon Mitigation Approaches and in the Carbon 
Market Platform, launched by under the OECD as a fora to discuss mitigation 
policies and carbon pricing and markets policies freely. 

As part of the Clean Energy Ministerial, the Commission has launched a campaign 
promoting sustainable lifestyles and fairness to reduce emissions, which includes a 
high-level declaration endorsed by several countries, such as China, India, and 
Brazil. 

The EU continues to invest in initiatives to tackle the effects of climate change and 
environmental degradation that accentuate threats to peace, stability, security and 

70 

 
risks undermining European defence. In 2025, the EU published a progress report 
on implementation of the joint communication on climate and security. The report 
highlights how, among others, the impact of environmental degradation and climate 
change on peace and security and defence now features prominently in exchanges 
with non-EU countries, regional organisations and organisations such as NATO – 
and how this new focus is leading to tangible initiatives. 

8.2 Bilateral engagement 

Bilateral engagement creates opportunities to exchange with third countries on how 
we collectively meet the Paris Agreement goals, to share knowledge and 
experiences on mitigation and adaptation, to provide technical insight drawn from the 
EU’s extensive experience with climate policy, including carbon pricing. Climate-
security concerns are also part of the EU’s bilateral engagement and regular 
contacts with regional and civil-society partners. 

In 2024 and 2025, bilateral engagement with non-EU countries focused on the 
delivery of ambitious new nationally determined contributions by COP30, which 
took place in November 2025. Several events were organised in Latin America, Asia 
and Africa to exchange with countries’ stakeholders and governments on modelling 
and NDC ambition. 

Carbon pricing is a cornerstone of EU climate policy and at the heart of the EU’s 
climate diplomacy. Building on its experience, the EU works with partners to enhance 
carbon pricing policies such as emissions trading systems or carbon taxes. 

Following the finalisation of the rulebook for carbon markets at COP29, the EU 
also aims to work closely with partner countries to harness the benefits of high 
integrity international carbon markets. 

The EU has initiated cooperation with countries such as Brazil which adopted its 
carbon market legislation in December 2024, India, countries in the Association of 
Southeast Asian Nations, etc. It complements the existing engagement with 
countries such as China and Canada where carbon pricing schemes are already 
established. 

The EU is also engaging with the countries that are candidates to join the EU to 
ensure they swiftly align with the EU’s climate legislation. Particular emphasis is on 
making progress on carbon pricing and the alignment with the rules of EU emission 
trading system. The enlargement process is moving faster than at any point in the 
last 15 years. In September 2025, the EU formally opened accession negotiations 
with Albania on green and sustainable connectivity policies, including environment 
and climate. During the reporting period, the EU also screened Moldova’s and 
Ukraine’s legislations to check how ready they are to follow EU climate laws. 

Progress was also made in implementing existing Green Alliances (Japan, Norway 
and Canada) and Green Partnerships (Morocco and South Korea) with 
strengthened dialogue and cooperation in areas of relevance to the green transition. 
In January 2024, a four-year EU-Korea Green Partnership Programme was launched 
in South Korea. The aim of the programme is to step up the EU’s green diplomacy, 

71 

 
promote bilateral cooperation while supporting the implementation of the Green 
Partnership. A similar programme, the Green Alliance facility, is also running in Japan 
since July 2024. 

In the context of the EU-China High Environment and Climate Dialogue, the EU has 
exchanged with China on various policies to accelerate the green transition, 
including on China’s emissions trading system (inspired by the EU’s system), on 
modelling of emissions and the impact of climate change, measuring and controlling 
methane emissions and stimulating finance for resilience. Through its climate 
diplomacy, from top political levels to technical levels, the EU has encouraged China 
to contribute its share to supporting global climate action. A Joint declaration on 
climate was published following the EU-China Summit in July 2025. 

The EU boosted relations with India by a College visit in spring 2025. This led to the 
publication of a new EU-India strategic agenda in September 2025 which, among 
other things, focuses on the green transition, clean technologies and climate 
resilience. Technical cooperation on carbon pricing and climate modelling is also 
growing. 

In September 2025, the first ministerial dialogue on climate and environment 
between the EU and the Association of Southeast Asian Nations took place. The 
dialogue confirmed joint commitment to the multilateral climate agenda and strong 
political engagement to cooperate for ambitious climate action. 

A financing cooperation mechanism, the Just Energy Transition Partnerships, is 
gaining positive momentum in Indonesia. The partnership takes the form of a USD 
20 billion agreement to decarbonise Indonesia’s coal-powered economy. So far, 
some USD 1.2 billion has already been approved in loans and grants, including 
support for a 60 MW floating solar power plant in West Java. 

The EU has the same partnership with Senegal, South Africa and Vietnam. Under its 
USD 15 billion partnership, Vietnam is also making progress on climate action and 
major renewable projects are close to the approval stage. 

Under the EU’s Global Gateway strategy, climate and energy are key priorities in 
Africa. The EU’s approach is already delivering concrete results. In March 2025, the 
EU launched a EUR 4.4 billion investment package to support clean energy projects 
in South Africa. The EU also opened negotiations on a new type of trade and climate 
deal with South Africa - the clean trade and investment partnership. These 
initiatives will help EU companies diversify their green supply chains, strengthen 
EU’s competitiveness and support South Africa in reducing its emissions. 

In September 2025, the second Africa Climate Summit showcased the EU’s 
commitment to work with African partners to pursue objectives of the Paris 
Agreement and EU’s support to Africa’s green transition and climate resilience. It 
also paved the way to the EU-African Union summit, which will take place in 
November 2025 in Angola. 

72 

 
Calls for more cooperation to increase climate action feature at the agenda and 
outcomes of all EU bilateral Summits with third countries, such as the EU-Canada, 
EU-Japan, EU-Central Asia Summits in 2025. 

The EU Climate Dialogues programme is a key instrument to drive policy dialogue 
and cooperation on climate policy between the EU and representatives from 
governments, business, academia, and social and economic organisations in non-
EU countries, with the ultimate goal to implement commitments under the Paris 
Agreement the Paris Agreement. A new EUR 30 million phase started in 
January 2025 and will run until mid-2029, supporting climate policy talks in 26 priority 
countries. 

8.3 Climate finance and international cooperation 

Together with climate finance from private sources, international public climate 
finance plays an important role in helping developing countries to implement the 
Paris Agreement. 

Overall, the EU, its Member States and financial institutions, are the leading 
contributor of development assistance and the world’s biggest climate finance 
contributor, accounting for about a third of global public climate finance. In 2024, the 
EU and its Member States contributed EUR 31.7 billion in climate finance from public 
sources and mobilised an additional  EUR 11.0 billion of private finance to support 
developing countries to reduce their greenhouse gas emissions and adapt to the 
impacts of climate change (with a 50/50 share between mitigation and adaptation). 
Two-thirds of the financial support the EU provided directly to other countries came 
with special, more favourable terms, with nearly one-quarter supporting least 
developed countries. 

In 2024, the Commission committed to provide EUR 4.6 billion in climate finance. Of 
this amount, 27% were committed to adaptation, 46% to mitigation, and 27% to 
cross-cutting actions addressing both mitigation and adaptation priorities (see Table 
4). 

Table 4: Committed climate finance (2024) 

Sum of committed 
(EUR million) 

% of committed total 

Adaptation 

Cross-cutting 

Mitigation 

Total 

1 221 

1 252 

2 087 

4 560 

27% 

27% 

46 % 

100% 

The Commission continues to support partner countries through its financing 
instruments. For instance, at least 30% of the Neighbourhood, Development and 
International Cooperation Instrument (NDICI – Global Europe) is dedicated to climate 

73 

 
 
action. This includes actions in fragile, and conflict affected settings in recognition of 
the complex interdependencies between climate change, environmental degradation, 
fragility and conflict. 

The Global Gateway is a EUR 300 billion strategy to boost smart, clean, and secure 
infrastructure in partner countries, focusing on digital, climate, energy, and transport. 
It also invests in people, education, research, and health. One concrete example is 
EUROCLIMA, part of the Global Gateway, which builds partnerships between the EU 
and Latin America and the Caribbean to drive a green and just transition. 

The Instrument for Pre-Accession Assistance (IPA III) also sets a climate change 
spending target of 18%, rising to 20% by 2027. This is an unprecedented investment 
of EUR 4 billion in reducing emissions and in helping EU candidate countries build 
resilience to the effects of climate change. 

To address concerns of Small Island Developing States and Least Developed 
Countries about climate finance, the European Commission, together with the UK, 
France, Ireland and Spain, held a ministerial dialogue during the Fourth Finance for 
Development Conference in Seville (30 June – 4 July 2025). Ministers, senior officials 
and key partners identified the foundations of a long-term partnership to improve 
both the volume and accessibility of climate finance for these vulnerable countries. 

The EU and its Member States also remain active on loss and damage support, 
pledging more than USD 400 million to the Fund for responding to Loss and 
Damage, with over USD 25 million coming from the European Commission. The EU 
also actively participates in the operationalisation of the fund, as a member of the 
board. 

Efforts are also ongoing to promote the involvement of the private sector in climate 
action through the European Fund for Sustainable Development Plus (EFSD+). The 
EFSD+ provides a comprehensive set of tools, including guarantees, grants and 
technical assistance, to mobilise private sector investments for sustainable 
development in partner countries. It contributes, among others, to climate change 
mitigation, adaptation and environmental protection and management. Offering a 
variety of risk-sharing instruments of up to EUR 40 billion, the EFSD+ has the 
potential to mobilise more than half a trillion euros in investments for 2021-2027, 
largely from the private sector. 

The Commission continues cooperation on sustainable aviation through dedicated 
support to feasibility and business implementation studies for sustainable aviation 
fuels in several African countries and India. Furthermore, the Commission continues 
supporting many countries in Africa and Latin America on advance clean urban 
mobility, including the promotion of clean and efficient transport technologies (rail 
and buses). The EU also backs the capacity building in shipping under Net-Zero 
Framework of the International Maritime Organisation and supports the 
establishment of green maritime corridors and exploring opportunities on the 
production and use of renewable and low carbon fuels in the sector. 

74