Analysts: EU target changes are not a softening of the Green Deal, just short-term relief

Analysts say changes to the EU’s climate targets will bring short-term relief, but in the long run they do not amount to a softening of the bloc’s existing policies. If anything, the opposite is true. In their view, delaying the ETS2 system will only make allowances more expensive in the years ahead. Analysts also point out that setting a new climate target for 2040 is, in fact, a reinforcement of the Green Deal. This follows from comments by analysts to the Czech News Agency (ČTK).

EU member states today approved a new climate target for the European Union for 2040. The aim remains to reduce emissions by 90 percent by 2040 compared with 1990, as proposed by the European Commission, although some countries, including the Czech Republic, negotiated certain concessions. One of them is that the new ETS 2 emissions allowance system, which will also cover road transport and heating, will be delayed by one year and launched in 2028. Environment Minister Petr Hladík (KDU-ČSL) identified another major concession: the 2040 target will be reduced to 85 percent for the EU as a whole, without binding shares for individual countries, and up to five percent of emissions reductions may be achieved using international credits from third countries.

According to XTB analyst Jiří Tyleček, the changes will bring short-term relief, but from a long-term perspective they amount more to a clarification and reinforcement of existing commitments. He said the delay to the ETS2 system will help ease pressure on households and businesses in the short term by giving member states more time to prepare compensation measures and invest in modernisation. In the long run, however, he said the change cannot be interpreted as a genuine softening of the Green Deal. In this context, he noted that the EU’s overall targets have not changed, meaning countries will have to achieve emissions reductions in a shorter period.

“Economically, this could mean that allowance prices will rise faster once the system is launched than they would have if it had started earlier. The market will have to make up for the lost year by decarbonising at a more intensive pace, which will have a negative impact on energy and fuel prices,” he explained.

At first glance, Tyleček said, the adjustment to the climate target looks like a softening compared with the original proposals. However, since no target for 2040 had existed until now, it is in fact a tightening of the existing rules.

Trinity Bank economist Lukáš Kovanda views the outcome of the ministers’ talks as a tightening. “Delaying the allowances by a year means they will have to be even more expensive,” he said. The reason is that there will be less time to meet the EU’s 2050 climate targets, which remain unchanged.

“A genuine change of course would be, for example, to postpone the completion of the entire Green Deal from 2050 to 2075. That would make it possible to spread the necessary decarbonisation over a much longer period, so the upward pressure on allowance prices could also be weaker—and their expected average price lower,” Kovanda noted.

Ruben Marada of Electree sees the modest adjustment to the 2040 climate target as a step intended to reflect the actual pace of technological and economic change in Europe’s energy sector. “It is natural that some member states are seeking a balance between ambition and feasibility. However, we consider it crucial that even adjusted targets do not lead to concrete steps being postponed, particularly the modernisation of grids, the development of storage and the management of flexibility,” Marada said.

According to Bidli analyst Petr Špirit, the outcome of the talks is a compromise between ambition and the realities facing European industry. “The delay to the ETS2 system and the option to offset part of emissions with carbon credits show that EU member states have taken concerns about the economic impact into account,” Špirit said. In his view, the overall outcome reflects the Czech Republic’s longstanding call for a more moderate approach.