IMMC.SWD%282024%2963%20final.ENG.xhtml.1_EN_impact_assessment_part3

EUROPEAN COMMISSION

Strasbourg, 6.2.2024

SWD(2024) 63 final

COMMISSION STAFF WORKING DOCUMENT

IMPACT ASSESSMENT REPORT

Part 3

Accompanying the document

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS

Securing our future

Europe's 2040 climate target and path to climate neutrality by 2050 building a sustainable, just and prosperous society

{COM(2024) 63 final} - {SEC(2024) 64 final} - {SWD(2024) 64 final}

Table of contents

Annex 8: Detailed quantitative analysis of GHG pathways

1 Key transformations to climate neutrality by 2050

1.1. GHG emissions

1.1.1. GHG budgets and net GHG emissions

1.1.2. GHG emissions and role of removals

1.1.3. Energy and Industry CO2 emissions

1.1.4. Non-CO2 GHG emissions

1.2. Energy sector transformation

1.2.1. Energy supply

1.2.2. Power generation sector

1.2.3. Gaseous fuels

1.2.4. Final Energy Consumption

1.2.5. Energy related CO2 emissions

1.2.6. Raw materials’ needs

1.3. Buildings

1.3.1. Buildings activity

1.3.2. Energy efficiency in buildings

1.3.3. Fuel mix in buildings

1.3.4. Appliances

1.3.5. CO2 emissions from buildings

1.4. Industry

1.4.1. Introduction

1.4.2. Activity

1.4.3. Final Energy Consumption

1.4.4. Final Non-Energy Consumption

1.4.5. CO2 emissions from industry

1.4.6. Complementary analysis

1.5. Transport

1.5.1. Introduction

1.5.2. Activity

1.5.3. Energy consumption and fuel mix

1.5.4. Technology developments per transport mode

1.5.5. CO2 emissions from transport

1.6. Non-CO2 GHG emissions in non-land-related sectors

1.6.1. Evolution of emissions without additional mitigation

1.6.2. Additional mitigation potential

1.6.3. Emissions projections

1.7. Agriculture

1.7.1. Introduction

1.7.2. Activity

1.7.3. Evolution of emissions without additional mitigation measures

1.7.4. Mitigation potential for non-CO2 GHG emissions

1.7.5. GHG emissions projections

1.8. LULUCF

1.8.1. Introduction

1.8.2. Activity

1.8.3. Options to increase the net LULUCF net removal

1.8.4. The LULUCF net removal

1.8.5. Analysis of climate change impacts and CO2 fertilisation

1.8.6. Impacts from simulated extreme events on the LULUCF net removal

1.9. Environmental and health impacts

1.9.1. Air quality

1.9.2. Biodiversity and ecosystems

1.9.3. Food security, animal welfare and health

1.9.4. Raw materials

2. Socio-economic impacts

2.1. Macro-economic impacts ()

2.1.1. GDP and employment

2.1.2. The impact of frictions in the economic transition

2.2. The investment agenda ()

2.2.1. Aggregate investment needs

2.2.2. Supply-side investment needs

2.2.3. Demand-side investment needs, industry,services and agriculture

2.2.4. Demand-side investment needs, households

2.2.5. Demand-side investment needs, transport

2.2.6. Sensitivity of investment needs to technology costs assumptions

2.2.7. Investment needs for net-zero technology manufacturing capacity

2.2.8. Technical feasibility

2.2.9. Other related investment needs

2.2.10. The role of the public sector and carbon pricing revenues

2.3. Competitiveness

2.3.1. Total energy system costs

2.3.2. Energy system costs and prices for industry

2.3.3. Energy system costs and prices for services

2.3.4. Energy system costs and prices for transport

2.3.5. Costs related to mitigation of GHG emissions in the LULUCF sector and non-CO2 GHG emissions

2.3.6. Sectoral output and international trade

2.4. Social impacts and just transition

2.4.1. Fuel expenses, energy and transport poverty, distributional impacts

2.4.2. Electricity prices

2.4.3. Sectoral employment, skills and occupation groups

2.4.4. Changes in relative prices and distributional impacts

2.4.5. The equity dimension

2.5. Regional impacts

2.5.1. Regional exposure to climate change

2.5.2. Regional exposure to the transition

2.6. Energy security

2.6.1. Strategic independence and fuel imports – energy security ()

2.6.2. Vulnerability to external shocks

Table of Figures

Table of Tables

Annex 8: Detailed quantitative analysis of GHG pathways

1Key transformations to climate neutrality by 2050

The impact assessment explores different GHG emission pathways in the 2030-2050 period, building on the Fit-for-55 and REPowerEU policy package for 2030 and beyond, and achieving climate neutrality by 2050. The first section below describes the evolution of GHG emissions in the various pathways explored, looking at their reduction and the contribution of carbon removals. The following sections provide details on the associated transformation in various sectors: the energy system, with dedicated analysis on the energy supply, buildings, industry, transport, as well as non-CO2 emissions, agriculture and LULUCF emissions.

The model-based analysis is a technical exercise based on a number of assumptions that are shared across scenarios. Its results do not prejudge the future design of the post-2030 policy framework.

1.1.GHG emissions

1.1.1.GHG budgets and net GHG emissions

1.1.1.1.GHG budgets

The target options provide different remaining GHG budgets for the period 2030-2050: 21 GtCO2-eq for the linear option, 18 GtCO2-eq for option 2 (at least 85% up to 90%) and 16 GtCO2-eq for option 3 (at least 90% up to 95%) (see section 5.2 in the main document).

The ESABCC analyses a (intra-EU) range of 11-16 GtCO2-eq for the EU to contribute to limiting global warming to 1.5°C with no or limited overshoot ( 1 ). The ESABCC report highlights that scaling-up of energy technologies beyond challenging levels is required to achieve the more ambitious end of this range: not overcoming such technological deployment challenge moves the range to 13-16 GtCO2-eq. ESABCC also recommends a range of 11-14 GtCO2-eq (9).

1.1.1.1.Net GHG emissions

The scenarios achieve net GHG reductions in line with the budgets associated to each target option.

Table 1 shows the 2040 and 2050 net GHG emissions in S1, S2, S3, and LIFE (see Annex 6 for their description), as well as the corresponding reductions compared to 1990. The values are provided for Union-wide GHG emissions and removals regulated in Union law, in accordance with the climate neutrality target scope ( 2 ). With the fit-for-55 package ( 3 ), this covers all domestic net emissions (in the sense of the UNFCCC inventories), international intra-EU aviation, international intra-EU maritime, and 50% of international extra-EU maritime from the Monitoring Reporting and Verification (MRV) scope ( 4 ). The table also provides a range to illustrate the uncertainties on the future evolution of LULUCF net removals, considering a lower level and an upper level depending on the effect of policies or other factors (See 1.8 of this Annex for more details).

Table 1: Net GHG emissions and reductions compared to 1990

	2040				2050
	S1	S2	S3	LIFE	S3	LIFE
Total Net GHG - MtCO2-eq	1051 [1051 to 893]	578 [681 to 520]	356 [458 to 298]	353 [469 to 302]	-38 [90 to -100]	-70 [85 to ‑117]
Reduction vs 1990 - %	-78% [-78% to -81%]	-88% [-86% to -89%]	-92% [-90% to -94%]	-93% [-90% to -94%]	-101% [-98% to -102%]	-101% [-98% to -102%]

Note: Main values reported correspond to the LULUCF net removals considered in the scenarios, with net GHG emissions with lower and upper level of LULUCF net removals are in brackets. S1 and S2 values for 2050 are similar to S3.

Source: PRIMES, GLOBIOM, GAINS.

While all scenarios achieve climate neutrality in 2050, in 2040, the net GHG emissions are clearly different across scenarios.

5 S1 leads to total net GHG emissions reaching about 1050 MtCO2-eq (ranging down to 890 MtCO2-eq depending on the behaviour of the LULUCF net removals), representing a reduction of 78% compared to 1990. This scenario focuses on strengthening the existing trends with limited contribution of more advanced mitigation options supported by novel technologies () by 2040 and fits a linear trajectory of net GHG emissions between 2030 and climate neutrality in 2050.

The S2 scenario deploys the full potential of existing decarbonisation solution, such as electrification and renewable and relies upon novel technologies such as carbon capture and a higher uptake of e-fuels using fossil free carbon (see sections 1.1.3 and 1.2 in this Annex), as well as further abatement in the agriculture sector (see 1.1.4 and 1.7 ). It reaches about 580 MtCO2-eq in 2040, or 88% reduction compared to 1990 (ranging between 86% and 89%).

The S3 scenario foresees early implementation of novel technologies to attain net GHG emissions levels of around 360 MtCO2-eq in 2040, and a reduction level of -92%, with a range between -90% and -94%.

LIFE implements additional circular economy and sufficiency actions in industry, transport and agriculture, achieving similar reduction as per S3, but with a different sectoral distribution of emission (see 1.1.2 in this Annex). This setting illustrates the important role of demand-side policies and measures to reduce GHG emissions, and to enhance the environmental performance of mitigation actions by limiting the consumption of natural resources, including raw materials and land or further improving some direct environmental benefits of climate action (see sections 1.4 , 1.7.5 and 1.9.1 ).

6 7 8 9 The levels of emission reductions achieved in the different scenarios are in line with ranges found in the literature, spanning from 84% to 89% (), from 87% to 91% (), around 89% () and from 88 to 95% by the ESABCC ().

The distribution of emissions between CO2, non-CO2 gases and GHGs coming from LULUCF sector is reported in Table 2 . A more detailed analysis of the sectoral reduction for S1, S2, S3 and LIFE is described in the following sections.

Table 2: CO2, non-CO2 and emissions from LULUCF sector.

	2040				2050
	S1	S2	S3	LIFE	S3	LIFE
Total Net GHG - MtCO2-eq	1051	578	356	353	-38	-70
CO2 (excl. LULUCF) * – MtCO2	815	521	331	432	5	83
Non-CO2 (excl. LULUCF) ** – MtCO2-eq	454	373	342	281	291	236
LULUCF*** – MtCO2-eq	-218	-316	-317	-360	-333	-389

Note: *includes CO2 from fossil fuel combustion (category 1 in inventories), industrial processes and product use (category 2) and agriculture under category 3. **Includes non-CO2 emissions under categories 1, 2, 3 and 5 of the inventories. ***Only main values are reported.

1.1.2.GHG emissions and role of removals

According to the IPCC, reductions in gross GHG emissions, nature-based and industrial carbon removals are all needed to reach net zero ( 10 ). While gross GHG emissions need to decrease significantly, the deployment of carbon removals is unavoidable to counterbalance hard-to-abate residual emissions and replace residual fossil fuels. However, relying primarily on carbon removals without intervening in gross GHG emissions may be unrealistic since the potential for removals is limited by land constraints, feasibility, cost-efficiency, public acceptance and technological consideration ( 11 ).

The increasing role of carbon removals is also highlighted in the public consultation questionnaire, where majority of respondents (around 65%, including all categories) calls for 2040 carbon removal targets separate from net emission, and experts from the academic, economic and public sectors are in favour of an important role of the carbon removals. 61% of the papers analysed also comment on carbon removals, with most of them indicating removals instrumental to reach climate neutrality, if complementary to GHG emission reduction at source. There is no clear preferred pathway indicating the contribution of nature-based vs industrial removals. In position papers, the emphasis of forests as carbon sink is underlined, while carbon capture for industrial removals plays an important role for energy-intensive industries to reduce hard-to-abate emissions within the sector. The public consultation indicates a general slight inclination for relying on nature-based removals (around 30% of respondents) or a balanced approach between nature-based and industrial removals (around 27% of respondents). This preference is confirmed also when looking individually at the different stakeholder groups, except for large businesses and SMEs, who expressed by majority a preference for either a balance between nature-based and industrial removals or a stronger reliance on industrial removals.

1.1.2.1.Gross GHG Emissions

The “gross GHG” emissions are defined as the actual GHG emissions excluding the contribution of industrial removals and net LULUCF removals that are part of the computation of “net GHG” emissions meeting EU’s climate objectives for 2030 and 2050.

Figure 1 shows the evolution of EU gross GHG emissions over 1990-2050. In 2021, EU gross emissions achieved around 3570 MtCO2-eq, with a reduction of around 28% compared to 1990 ( 12 ). The trajectory until 2030 is consistent with the Fit-for-55 policy package, where emissions reach around 2300 MtCO2-eq. Post-2030, these emissions keep decreasing in all scenarios, albeit at difference pace by 2040 and beyond. They reach about 400 MtCO2-eq in 2050, when they are compensated by industrial and LULUCF net carbon removals to converge to climate neutrality.

Figure 1: Domestic Gross GHG emissions

Note: Gross GHG emissions represented here include only domestic emissions and excludes industrial carbon removals and the LULUCF net removals.

Source: PRIMES, GAINS.

Table 3 summarises the gross GHG emission by sector. In S1 gross GHG emissions decrease following a linear profile over 2031-2050, reaching around 1270 MtCO2-eq in 2040, which correspond to a decrease of around 75% compared to 1990 levels. Most sectors undergo significant emissions reductions already over 2031-2040, with emissions ranging from around -70% in the domestic transport sectors to about -10% in agriculture. The S2 scenario achieves further reductions of gross GHG emissions by 2040, reaching around 940 MtCO2-eq or 80% reduction compared to 1990. Significant additional reductions with respect to S1 take place notably in power and heat, industry and agriculture. The S3 scenario achieves a reduction of around 85% in 2040, driven by extra reductions to S2 in all sectors, including the industry sector, where they are triggered by higher recourse to carbon capture and storage of fossil fuels (see section 1.1.3.2 ), the power system, buildings and transport. LIFE, which aims at the same overall reduction as S3, redistributes gross emissions across the different sectors. While energy and industry sectors reduce to a level intermediate between S2 and S3, mostly due to a lower use of e-fuels and DACC, agriculture emissions reduce more than in S3.

Table 3: Gross GHG emissions

MtCO2-eq		2005	2015	2030	2040				2050
					S1	S2	S3	LIFE	S1	S2	S3	LIFE
Total Gross GHG Emissions		4641	3914	2301	1273	943	748	740	416	413	411	360
Power and district heating		1300	1012	339	123	42	23	34	21	22	19	15
Other Energy sectors*		277	237	133	71	59	53	57	39	39	38	36
Industry (Energy)		469	360	232	126	94	75	86	6	6	9	11
Domestic Transport		822	772	583	190	143	120	134	10	8	7	9
Residential and Services**		648	514	221	119	92	75	92	20	19	19	29
Industry (Non-Energy)		343	233	157	139	88	14	13	7	7	7	7
Other Non-Energy sectors***		101	130	56	33	26	25	25	23	22	22	22
International transport (target scope)	Intra-EU aviation	35	38	43	31	29	28	14	14	12	11	10
	Intra-EU navigation	31	27	25	7	6	4	0	0	0	0	0
	50% extra-EU maritime MRV	50	42	44	14	11	9	0	0	0	0	0
Agriculture****		390	385	361	351	302	271	209	249	249	249	194
Waste		155	118	87	68	55	55	55	32	32	32	.32
CO2 calibration		15	43	24	3	-1	-1	-1	0	0	0	0
Non-CO2 calibration		5	2	-3	-3	-3	-3	-3	-3	-3	-3	-3
Memo Items
International aviation (Intra-EU and Extra-EU)		96	103	117	83	80	78	73	38	34	31	27
International maritime (Intra-EU and Extra EU)		152	129	134	41	33	25	33	0	0	0	0

Note: Calibration of total to inventory 2023. *Includes emissions from energy branch and other non-CO2 emissions from the energy sector; **Includes fossil fuel combustion in the agriculture/fishery/forestry sector; ***Includes CO2 fugitive emissions and non-CO2 emissions from direct use or specific products (e.g., aerosols, foams, etc). **** Excludes fossil fuel combustion in the sector, but includes “category 3” CO2 emissions, assumed constant at 10 MtCO2.

Source: PRIMES, GAINS.

Sectors that reduce little in 2031-2040 accelerate their decarbonisation in the 2041-2050 decade, while sectors that have already reached low emissions levels by 2040, maintain or slow down the reduction rate by 2050, leading to a balanced contribution to climate neutrality for all sectors across 2030-2050. Overall, gross GHG emissions in 2050 reduce to -92% vs 1990 across all scenarios.

1.1.2.2.Nature-based carbon removals

Table 4 shows the LULUCF net removals in the different scenarios. The central level for 2040 is close to -320 MtCO2-eq in all scenarios by 2040, slightly above the target for 2030 (-310 MtCO2-eq). The differences between S1, S2 and S3 are driven by the different bioenergy needs in the energy systems underpinning the scenarios (see section 1.8 in this Annex). LIFE is characterised by a different food system that frees up land for carbon farming activities such as afforestation.

The table also provides a range (from lower level to upper level) to illustrate the uncertainties on the future evolution of LULUCF net removals, depending on the effect of policies or other factors (see section 1.8 in this Annex).

Table 4: LULUCF net removals by scenarios in 2040 and 2050

MtCO2-eq	2040				2050
	S1	S2	S3	LIFE	S1	S2	S3	LIFE
Lower level	-218	-213	-215	-243	-213	-202	-206	-234
Central level	-319	-316	-317	-360	-341	-332	-333	-389
Upper level	-376	-374	-376	-410	-403	-394	-396	-436

Note: The ‘Central level’ is derived from applying in the modelling the same policy intensity as the one necessary to meet the 2030 target, except for S1 in 2040. The ‘Lower level’ is derived from assuming no additional cost as the lower boundary of the LULUCF net removals level. The ‘Upper level’ is derived from the maximum mitigation potential as the upper boundary of the LULUCF net removals level. The numbers in bold are used to compute the overall net GHGs for the different scenarios.

Source: GLOBIOM

The expected contribution of LULUCF to the 2040 climate target stays within the boundaries of the ESABCC, which discusses an upper bound of 400 MtCO2-eq in 2040 ( 13 ) and describes three iconic scenarios that display a larger range from 323 MtCO2-eq to 601 MtCO2-eq in 2040 and from 312 MtCO2-eq to 669 MtCO2-eq in 2050 ( 14 ).

Section 1.8 in this Annex provides more details on the LULUCF sector and the related GHG emissions and removals.

1.1.2.3.Industrial carbon removals

15 16 Industrial carbon removals, together with nature-based removals, are projected to play an increasing role in the EU economy in the next decades (), in the view of balancing EU GHG emissions by 2050, and achieving negative emissions thereafter ().

17 18 Industrial removals can contribute to compensate residual GHG emissions from hard-to-abate sectors. They can also progressively replace fossil carbon feedstock in processes like the production of plastics or e-fuels (), () and become the main source of (fossil-free) carbon in sectors where carbon will still be needed in the long-term.

Figure 2 shows the industrial removals projected by PRIMES and differentiated by their source. The total amount of carbon removed until 2040, whether captured from the atmosphere, from biomass combustion or from biogas upgrading, varies across scenarios. Removals are projected to remain marginal in the S1 scenario by 2040, to reach 50 MtCO2 in S2 and up to 75 MtCO2 in S3. Removals deploy progressively from S1 to S3 and allow for higher reductions of net GHG emissions (see also Figure 7 ). LIFE models lower carbon removals: demand-side actions and enhanced LULUCF net removals can reduce the need for industrial removals, and, in this projection, eliminate the recourse to DACC in 2040.

Figure 2: Carbon removals by source and use

Source: PRIMES.

The amount of carbon removed by industrial means in 2050 is similar across scenarios and reaches around 120 MtCO2/y, suggesting the need for significant carbon removals to achieve climate neutrality. While most of the storage takes place in underground sites, limited storage in permanent materials also appears in the last decade. The slightly higher values for S1 are required to compensate for delayed climate action in 2031-2040.

19 20 21 22 23 24 While the modelling shows a similar share of BECCS and DACCS by 2040 in S3 and beyond by 2050, their actual relative deployment will depend on a number of factors, e.g.: high costs and technological uncertainty (DACCS () ()), cost and competition on biomass resource and possible negative impact on LULUCF (BECCS ()()(), see section 1.8 in this Annex), creation of the transport and storage infrastructure, public acceptance and equitable and sustainable technology scale up ().

25 26 Both technologies add requirements on the ambitious and challenging industrial sectors’ decarbonisation plans, and these needs to be coupled effectively with feasibility analysis and supporting measures as appropriate. While the scenarios filtered by the ESABCC attribute a minor role to carbon captured from the atmosphere (), the IEA indicates that more efforts are needed to fully develop DACCS (). The demand side, with the amount of e-fuels required by other sectors and the need to compensate residual emissions, will also influence the deployment of each technology.

Given the lack of predictability for the uptake of one removal technology over another by 2040, a comparison between different deployment pathways is performed.

Figure 3 compares the industrial carbon removals obtained in 2040 with the PRIMES model, with deployment pathways projected by the POTEnCIA model. In PRIMES ( Figure 3 , left) BECCS tends to come first, and considerations of sustainable biomass availability limits its expansion. The remaining needs for removals are fulfilled by DACCS, which appears as complementary to BECCS. The POTEnCIA model ( Figure 3 , right), where the cap on the amount of sustainable biomass supply for bioenergy is relaxed (see also Annex 6), illustrates a stronger deployment of BECCS, reaching up to around 80 MtCO2 in 2040 in S3, complemented by storage of biogenic carbon from biogas upgrade and very limited development of DACCS. Higher recourse to BECCS leads to an increase of bioenergy demand, with a possible negative impact on the LULUCF net removals (see 1.8.2 ).

27 28 29 30 31 Both pathways modelled provide an amount of total industrial removals in 2040 lower than the estimated maximum in the scenarios considered by the ESABCC, corresponding to 214 MtCO2 (), and consistent with ranges of 10-220 MtCO2 that can be found in the literature (), (), (), ().

Figure 3: Industrial carbon removals in PRIMES and POTEnCIA in 2040

Source: PRIMES, POTEnCIA.

1.1.2.4.Balancing emissions and removals

32 ‑‑In Figure 4 , gross GHG emissions (excluding all removals) only reduce between 75% and 85% in 2040 and around 92% in 2050 (vs 1990 ()). In comparison, net GHG emissions (including all removals) reduce more and achieve net-zero in 2050. This suggests that removals complete other mitigation options and are needed to achieve climate neutrality. In 2040, the PRIMES modelling analysis shows that total (industrial and LULUCF net) removals range from around 220 MtCO2-eq in S1 to around 390 MtCO2eq in S3 (with upper level of LULUCF net removals). Around 360 MtCO2eq are needed to achieve net reductions of 90% and beyond in 2040 (considering the lowest level of gross emissions projected in S3), with this value increasing in the range of 430-460 MtCO2-eq in 2050 to attain net-zero.

Figure 4: Net and Gross GHG Emissions and % reductions vs 1990

Note: “Net GHG” includes domestic emissions, international intra-EU aviation and maritime transport and 50% of extra-EU maritime transport (as per MRV). “Excl. LULUCF” subtracts the LULUCF net removals from net GHG. “Excl. all removals” subtracts industrial removals and LULUCF net removals from net GHG, resulting in gross GHG emissions.

Source: PRIMES, GAINS.

Table 5 summarises the model projections on different type of removals and show that nature-based and industrial removals play different roles. While LULUCF net removals contribute significantly in 2030 and along until 2050, the role of industrial removals becomes more relevant from 2040 in pathways with the lowest carbon budget (S3) and by 2050 in all cases. LIFE always shows a relative higher contribution of LULUCF net removals compared to industrial removals, and a slightly more moderate recourse to overall removals in 2050. This means that all pathways need a strong LULUCF net removals, which needs to be complemented by industrial solutions.

Table 5: LULUCF net removals and industrial carbon removals

	2030	2040				2050
		S1	S2	S3	LIFE	S1	S2	S3	LIFE
Total Removals (MtCO2-eq)	-314	-222 [‑222 to ‑380]	-365 [‑262 to ‑423]	-391 [‑290 to ‑450]	-387 [‑270 to‑437]	-462 [‑334 to ‑525]	-447 [‑318 to ‑510]	-447 [‑319 to ‑509]	-428 [‑274 to ‑476]
Net LULUCF sink (MtCO2-eq)	-310	-218 [‑218 to ‑376]	-316 [‑213 to ‑374]	-317 [‑215 to ‑376]	-360 [‑243 to ‑410]	-341 [‑213 to ‑403]	-332 [‑202 to -‑394]	-333 [‑206 to ‑396]	-389 [‑234 to -‑436]
Industrial Removals (MtCO2)	-4	-4	-49	-75	-27	-121	-115	-114	-40
BECCS	-4	-4	-34	-33	-27	-58	-59	-56	-37
DACCS	0	0	-15	-42	0	-63	-56	-57	-3

Source: PRIMES, GLOBIOM.

33 34 ‑ 35 The 36 scenarios selected by the ESABCC () offer an overview of the possible balances between removals and emission reductions: for 2040, the level of gross emission lies between 1596 and 697 MtCO2-eq () and the contribution of removals is split into land-based removals (range between -100 and -400 MtCO2-eq, with majority between -300 and -400 MtCO2-eq) and industrial removals (BECCS and DACCS ranging between -46 and 214 MtCO2, with majority around -200 MtCO2) ().

In the modelling analysis, the amount of projected gross GHG emissions in 2040 and the contribution of nature-based removals lies within the range of the 36 ESABCC scenarios studied by the ESABCC. Instead, while the industrial removals in the main scenarios lie in the lower end of the range of the 36 scenarios analysed, achieving reductions up to 90% and beyond in 2040 cannot rely only on LULUCF net removals and needs to be complemented by development of industrial removals.

1.1.2.5.GHG pathways

Figure 5 summarises the analysis of the previous sections and shows the net economy-wide GHG emission pathways. While all scenarios follow the same pathway until 2030, they diverge after that year, leading to distinct trajectories for the 2030-2050 decade before converging to net-zero by 2050.

Figure 5: Economy-wide GHG emission pathways

Source: PRIMES, GAINS, GLOBIOM.

1.1.3.Energy and Industry CO2 emissions

1.1.3.1.Net CO2 emissions

Figure 6 shows the trajectories for the energy and industry net CO2 emissions ( 36 ) in the different scenarios.

Figure 6: Energy and Industry net CO2 emissions

Note: Power and District Heating (DH) include BECCS. Other energy includes energy branch and DACCS. Residual and services includes fossil fuel combustion in the agriculture/fishery/forestry sector. Non-Energy includes industrial processes and fugitive emissions.

Source: PRIMES.

In line with current policies, CO2 emissions from the energy sector are projected to more than halve already in 2030 with respect to 2015. Achieving net-zero in 2050 projects net CO2 emissions in 2040 to be in the range of 330-800 MtCO2 across scenarios, meaning a reduction between 80% and 92% compared to 1990. S3 reduces emissions by an additional 500 MtCO2 with respect to S1: this amount corresponds to around 20% of 2030 total net GHG emissions, indicating the important contribution of the energy and industry sectors to decarbonise the EU economy already by 2040. In 2050, the sum of emissions coming from all sectors analysed achieves slightly negative levels in all scenarios, with industrial carbon removals compensating for the residual hard-to-abate emissions. LIFE shows a level of energy and industry CO2 emissions intermediate between S2 and S3 in 2040, and slightly higher emissions of around 70 MtCO2 in 2050. These additional emissions are compensated by lower emissions in agriculture (see 1.7 ) and enhanced land-based removals (see 1.8 ), highlighting a redistribution of emission reductions across sectors: total net GHG emissions levels comparable to S3 are achieved in LIFE mostly with a reduced need for industrial carbon capture.

The domestic CO2 emissions ( Table 6 ) decrease significantly already in the decade 2031-2040 and reach slight negative levels in the main scenarios in 2050. Energy related emissions ( 37 ) in 2040 are between 40% and 20% the level of 2030, with the power generation, district heating and transport sectors reducing the most, driven by the decarbonisation of the power system, the energy efficiency measures and the implementation of renewables in final energy sectors. Residual energy emissions are then reduced gradually in the decade 2041-2050 and reach cumulative negative values of around ‑40 MtCO2 in 2050, as result of the contribution of industrial removals. Non-energy related CO2 emissions decrease only by around 35% in 2030 vs 2015, and additional reductions between 20% and 80% (compared to 2030) are achieved in 2031-2040, driven by the decrease of industrial processes emissions: the large variation across scenarios is justified by the late (in S1) and early (in S3) entry into market of low-carbon innovative manufacturing technologies, including carbon capture, utilisation and storage. In 2050, emissions from industrial processes reduce to negligible values and the non-energy emissions stagnate. International emissions within the scope decrease by around half in the period 2031-2040 and range around 10-15 MtCO2 in 2050. Further details on sectoral CO2 emissions, including transport, are discussed in sections 1.2 - 1.5 .

Table 6: Energy and Industry net CO2 emissions

	2005	2015	2030	2040				2050
	-	-	-	S1	S2	S3	LIFE	S3	LIFE
Total Energy and Industry CO2 emissions	3837	3197	1759	805	511	321	422	-5	73
Net Domestic CO2 Emissions: Energy Related	3381	2787	1448	594	357	247	351	-40	41
Power and district heating*	1300	1012	334	119	8	-10	7	-38	-22
Other Energy sectors**	152	136	84	43	23	-11	35	-37	15
Industry (Energy)	469	360	232	126	94	75	86	9	11
Transport	812	764	577	187	141	117	132	6	8
Residential and Services***	648	514	221	119	92	75	92	19	29
Net Domestic CO2 Emissions: Non-Energy Related	325	260	176	156	109	34	33	23	22
Industry (Non-Energy)	288	226	150	133	86	12	11	4	2
Other non-energy*****	37	35	26	23	23	22	22	20	19
International intra-EU and 50% extra-EU	116	107	112	52	46	41	39	11	10
international intra-EU aviation	35	38	43	31	29	28	26	11	10
international intra-EU navigation	31	27	25	7	6	4	4	0	0
50% extra-EU MRV maritime MRV	50	42	44	14	11	9	8	0	0
Residual CO2 for calibration	15	43	24	3	-1	-1	-1	0	0

Note: *Includes BECCS. **Includes emissions from energy branch and DACCS; ***Includes fossil fuel combustion in the agriculture/fishery/forestry sector; ****Includes fugitive emissions. S1 and S2 values in 2050 are similar to S3 and described in more details in sectoral sections 1.2 , 1.3 , 1.4 and 1.5 of this Annex.

Source: PRIMES.

1.1.3.2.Role of carbon capture

To investigate the role of carbon capture and understand better the uncertainties associated to the deployment of this technology, a cross-model analysis comparing PRIMES projections with the ones provided by POTEnCIA, AMADEUS-METIS, POLES and EU-TIMES (see Annex 6) is performed ( Figure 7 ). Results show how the level of climate ambition achievable in 2040 in the energy and industry sectors strongly depends on the amount of carbon captured and, as discussed in section 1.1.2.3 , of carbon removals. The level of domestic energy and industry CO2 emissions before capture (i.e., gross emissions) spans from 580 to 850 MtCO2, with most of the models projecting in the 650-750 MtCO2 range. Limited differences exist across modelling runs (reductions between -78% and -85% compared to 1990) and even in scenarios with the highest uptake of novel technologies (excluding carbon capture) the energy and industry CO2 can reduce at most by around 85%, meaning that the 2040 potential for the implementation of mitigation solutions other than carbon capture modelled in the scenarios is mostly attained. The picture of emissions after capture (i.e., net emissions) is different. Limited carbon capture allows for a marginal further decrease in emissions (see S1 and POTEnCIA-S1 (POT-S1) on the left of Figure 7 ), while a more substantial deployment of the technology achieves emission levels of around 470-520 MtCO2 in S2, POTEnCIA-S2 (POT-S2), AMADEUS-METIS (AM-METIS), POLES and EU-TIMES, and down to around 250-350 MtCO2 in S3 and POTEnCIA-S3 (POT-S3). Carbon capture allows to reach additional reductions of between 2-3% (corresponding to around 80-130 MtCO2 captured in S1) and 4-6% (corresponding to around 150-240 MtCO2 captured in S3) of 1990 levels and represents a key mitigation solution to reach deeper net GHG emission reductions. The models show that above 150 MtCO2 (including removals) need to be captured in 2040 to achieve a total reduction of energy and industry CO2 emissions of at least 88% and above 250 MtCO2 to reach above 90%.

Figure 7: Energy and Industry CO2 emissions in 2040

Note: Emissions (left) and relative reductions vs 1990 (right).

Sources: AMADEUS-METIS, EU-TIMES, POLES, POTEnCIA, PRIMES.

Figure 8 shows the evolution of the carbon captured yearly (left), and corresponding additional carbon captured at the end of each decade until 2050 (right) projected by PRIMES. A yearly capture level of around 50 MtCO2 is projected in 2030 across all scenarios, in line with the Net Zero Industry Act ( 38 ), which then increases in 2040 to around 90 MtCO2 in S1, above 200 MtCO2 in S2 and to 350 MtCO2 in S3 and converges in 2050 to around 450 MtCO2 in S1, S2 and S3. LIFE projects a level of carbon capture intermediate between S2 and S3 in 2040, and more moderate in 2050., showing that sustainable lifestyle and circular economy actions leads to a more extensive use of nature-based removals and lower the need for carbon capture in industry (see 1.4 and 1.8 ).

Figure 8: Total (left) and additional (right) carbon captured yearly in selected years

Source: PRIMES.

The projections for carbon capture are in line with ranges found in the literature: in 2040, the ENGAGE project depicts a yearly amount of carbon captured around 300 MtCO2 ( 39 ), the ECEMF ( 40 ) provides a range of 215-376 MtCO2, Rodrigues at al. ( 41 ) describe a range of 120-330 MtCO2 and Ecologic indicates a range between 46 and 160 MtCO2 (with a stronger reliance on land-based removals) ( 42 ). For 2050, ESABCC ( 43 ) and other literature ( 44 ) show the maximum threshold for feasibility of this technology at around 500 MtCO2.

As a result of different amount of carbon captured in 2031-2040 and 2041-2050 in the main scenarios, the additional minimum capacity ( 45 ) per decade necessary to capture carbon varies significantly: in S1, delayed climate action results in additional installations capable of capturing up to 35 million tonnes of CO2 extra in 2040, but this number multiplies by around 7.5 times by 2050. S2 shows a minimum additional capacity able to capture around 180-190 MtCO2/y extra at the end of each decade. S3 suggests a large deployment of extra 300 MtCO2/y captured by 2040, and only additional 75 MtCO2/y by 2050. LIFE shows an intermediate level of additional capacity needed in 2040 between S2 and S3 and a minimal increase in the 2041-2050 related to the overall lower need of industrial capture in these settings.

Achievement of the required level of carbon capture capacity by 2040 is not trivial, especially in the S3 scenario. Several barriers to a large deployment of the technology exist today: the transition from R&I stage to the full-scale, replicable, commercial deployment for certain steps of the technology, the need to establish a new (cross-border) carbon value chain, including storage sites ( 46 ) ( 47 ), and a lack of market coordination for fast deployment of the technology. A large development of carbon capture means foreseeing the build up of commercially ready carbon capture infrastructure on existing or new-build industrial capacity, often in sectors characterized by long investment cycles. Hence, sound regulatory predisposition and long-term financial planning taking into account the impact on industrial competitivess become necessary to provide certainty to industrial investors. Downstream of the carbon capture value chain, storage operators face high upfront costs to identify, develop and appraise storage sites before they can apply for a regulatory permit that is necessary to operate, while their future customers are willing to invest in carbon capture only if access to operating storage site is secured. Subsequently, market players have little templates for commercial contracting or risk sharing and depend on each other’s plans and project progress to de-risk their own investment decisions. Regulatory uncertainty and inexperience also represent a challenge, for instance in terms of supplementing the CCS directive ( 48 ) and clarifying future link between industrial removals and ETS or cross-border transport of captured CO2. To overcome these challenges, several Member States have CO2 value chain strategies in place or are developing them (NL, DK, FR, DE) ( 49 ) and consolidated effort is needed to stimulate and guide a market development that can deliver the scale needed, as described in the Communication on Industrial Carbon Management ( 50 ).

When looking at the different sources of carbon captured in 2040, and only considering this specific pathway modelled by PRIMES, a veritable “merit order” emerges ( Figure 9 ). S1 shows that carbon is first captured in industrial processes and power generation (emitting from fossil fuels) in order to reduce emissions in those sectors, with very little coming from BECCS, the upgrade of biogas to biomethane (biogenic carbon) and DACC. A larger uptake of the technology in S2 leads first to the increase of the level of fossil carbon coming from industrial processes and power generation, and then taps into industrial removals, mostly BECCS. Being the potential for BECCS limited by sustainability constraints on biomass availability, and possible negative impact on the LULUCF net removals, an increase in demand for the production of e-fuels opens the doors to deployment of DACC in 2040: this happens already in S2 and becomes even more evident when moving from S2 to S3, where the additional carbon is captured almost exclusively through DACC. In 2050, the share of the different technologies is similar across S1-S2-S3. Proportionally, LIFE also shows a similar distribution, with less DACC than S3 in 2040 and an overall capture level in 2050 lower than the other scenarios.

Figure 9: Carbon captured by source

Note: Biogenic carbon indicates the carbon resulting from the upgrade of biogas to biomethane.

Source: PRIMES

The order in which carbon capture technologies are deployed to satisfy increasing demand reflects the results of the public consultation questionnaire for the 2040 target, where respondents would prioritise deployment of carbon capture from industrials process (highest priority given by 36% of respondents), followed by combustion of biomass (23%) and fossil fuel (20%). The strong preference for carbon capture from industrial process is also confirmed when looking at different stakeholders’ group, indicating a general agreement on the development of this technology. The picture is less technology-specific when analysing positions papers collected during the consultation: about half of them, published by business associations, public authorities and academia, encourages the uptake of carbon capture and storage technologies, without assigning priority to one specific technology type.

The modelling shows that capture of carbon in 2040 is mainly driven by the demand for e-fuels required in other sectors and by the need to reduce net emissions within the sector through underground storage ( Figure 10 ). In the 2041-2050 decade, where e-fuels are to be produced using fossil-free carbon and all residual emissions needs to be compensated, the action of these drivers continue, increasing the amount of carbon captured for these two applications. The increasing demand for industrial feedstock also creates a new market for storage in materials, where CO2 is chemically bound in products, balancing industrial CO2 needs, making local CO2 networks an attractive option.

Figure 10: Carbon Captured by end application

Source: PRIMES.

In the 2030-2050 period, the model shows that carbon capture does not only reduce emissions in hard-to-abate sectors, but above all generates carbon feedstock for e-fuels or fossil-free products as well as industrial removals (in terms of BECCS and DACCS). A real carbon management industry is to be created, connecting different carbon technologies and sources to final end-user applications through industrial feedstocks, balancing carbon flows in the EU economy. Figure 11 shows the carbon flows between sources and uses in 2040 in the different scenarios. These carbon flows can be also affected by the projected levels of emission reduction. For instance, while e-fuels can be produced by carbon captured from fossil fuels in power generation and industrial processes in scenarios with higher 2040 emissions (S1 and S2), the higher ambition of S3 makes necessary the permanent storage of these fossil fuel emissions. In S3, the production of e-fuels in 2040 relies mostly on fossil-free sources of carbon derived from biomass (either captured from bioenergy combusting application or of biogenic origin from the upgrade of biogas to biomethane) and, given the limited sustainable biomass resources, from DACC. Beyond 2040, when fossil fuels are excluded ( 51 ) from possible source of carbon for production of RFNBOs across all scenarios, and e-fuels demand increases even further, they are produced mostly using carbon derived from DACC and in part from biomass. All remaining fossil carbon is then permanently stored (either underground or in products).

Figure 11: Flow of captured carbon in 2040

Note: “Ind. P.” stands for Industrial processes and include fossil carbon from industrial processes as well as carbon of biogenic origin coming from the upgrade of biogas to biomethane. “FF” stands for “fossil fuels”. “PG” stands for “power generation”. “Bio” refers to CO2 produced by the combustion of biomass in power generation and produced during the upgrade of biogas into biomethane. “DACC” stands for “Direct Air Capture of CO2”, for underground storage (DACCS) or use in efuels.

Source: PRIMES.

1.1.4.Non-CO2 GHG emissions

Non-CO2 GHG emissions declined considerably over the past decades in the EU. Currently, however, significant amounts of non-CO2 greenhouse gases are still being emitted every year, representing around 20% of total GHG emissions. In 2015, the EU’s total non-CO2 GHG emissions added up to more than 700 MtCO2-eq. As shown in Figure 13 , most of these were CH4 emissions (61%), whereas the rest were N2O and F-gas emissions (25% and 14%, respectively). Agriculture was the largest emitting sector, representing roughly 53% of the EU’s total non-CO2 GHG emissions (mostly CH4 and N2O emissions associated to enteric fermentation, manure management and fertiliser application), followed by waste treatment (17%, mostly CH4 emissions stemming from uncaptured emissions caused by anaerobic digestion of solid waste and wastewater streams), energy and transport (16%, mostly methane leakage and emissions related to fuel combustion), and heating/cooling installations (11%, mostly F-gas emissions), as shown in Figure 12 .

In the S1 scenario, which considers mitigation due to current policies (but no more), non-CO2 GHG emissions drop to around 457 MtCO2-eq in 2040 (i.e., 35% less than in 2015). Note that the degree of reduction by 2040 varies considerably across sectors (see Figure 12 ). Agriculture is the sector showing the smallest decrease in relative terms (9% reduction between 2015 and 2040). Non-CO2 GHG emissions from the waste management sector decline by 42% over the same period (driven by the implementation of existing legislation on landfilling and additional legislative proposals, such as the proposal on a revised Urban Wastewater Treatment Directive, see Section 1.6.1 and Annex 6), while the energy and transport sector shows a deep reduction (-71%) driven by the phase down of fossil fuel use in the energy system. The heating and cooling sector shows the largest decrease in relative terms (97% relative to 2015), driven mostly by the assumed implementation of the F-gas regulation proposal (see Annex 6). Looking at the disaggregation per gas, total N2O emissions across all sectors decrease by 14% between 2015 and 2040, CH4 emissions decline by 32% over the same period, and F-gas emissions decrease by more than 90%, as shown in Figure 13 .

The S2 and S3 scenarios show a more ambitious reduction of net GHG emissions by 2040 than the S1 scenario, and this requires stronger non-CO2 emission reductions than those delivered by current policies. In the S2 scenario, total non-CO2 GHG emissions go down to 376 MtCO2-eq in 2040 (i.e., 81 MtCO2-eq less than in the S1 scenario), that is to say, they decrease by 47% compared to 2015. In the S3 scenario, total non-CO2 GHG emissions drop to 345 MtCO2-eq in 2040 (i.e., 112 MtCO2-eq less than in the S1 scenario), which translates into a 51% reduction compared to 2015 (i.e., more than three-quarters of the emissions reduction trajectory between 2030 and 2050). As shown in Figure 12 , the main difference compared to the S1 scenario are additional reductions in emissions in the agriculture sector (22% reduction between 2015 and 2040 in S2, 13 percentage points more than in S1, and 30% reduction between 2015 and 2040 in S3, 21 pp more than in S1). Most of this additional reduction corresponds to N2O emissions from agricultural soils and CH4 emissions from enteric fermentation and manure management (see Figure 13 and Section 1.7.5 ). In the S3 scenario, all sectors (including agriculture) are close to reaching their maximum mitigation potential both in 2040 and in 2050.

In LIFE, total non-CO2 GHG emissions go down to 284 MtCO2-eq in 2040 (which means a 60% reduction relative to 2015, and 61 MtCO2-eq less than in S3) and 238 MtCO2-eq in 2050 (i.e., 55 MtCO2-eq less than in S3). As shown in Figure 12 , the only significant difference compared to the S3 scenario is an additional decrease in emissions in the agriculture sector (47% reduction between 2015 and 2040, 17 percentage points more than in the S3 scenario), which is mainly due to the smaller amount of livestock and lower use of mineral fertilisers assumed in LIFE. All sectors (including agriculture) are close to reaching their maximum mitigation potential both in 2040 and in 2050.

A more detailed analysis of the non-CO2 GHG emission trajectories in all scenarios can be found in Sections 1.6 and 1.7 .

Table 7 shows the emission residuals related to the calibration of the GAINS and PRIMES models to the UNFCCC inventory, which have not been considered in the discussion above. These residuals are small and not assigned to any particular sector. The table also shows the CO2 emissions produced by the agriculture sector (including only “category 3” emissions).

Figure 12: Evolution of non-CO2 greenhouse gas emissions by sector