The European Green Deal set the target to make Europe the first climate-neutral continent by 2050, and to build resilience against increasing climate impacts, improve energy security, and transition to a competitive, resource-friendly and equitable net zero economy that creates opportunities for citizens.

The EU Climate Law makes the climate neutrality objective legally binding for 2050. It also specifies a climate target of -55% emission reductions by 2030, and requires setting a science-based climate target for 2040. On 6 February 2024, the Commission proposed a -90% emission reduction target by 2040 based on its own impact assessment.

This brief summarises PRI recommendations for an EU 2040 climate target and a strong policy framework to implement a competitive net zero economy, accelerate finance for the transition, and create a prosperous and fair European Green Deal for all.

Financing the transition

The EU faces an investment gap of an additional €620 billion each year until 2030 to achieve the Green Deal objectives, and needs to scale private sector funding for the net zero transition.

Investments at this scale require policy predictability and public support for de-risking on a long-term planning horizon. To attract this capital and de-risk the investment decisions, investors need to be able to rely on mandatory climate targets and have more detailed information relating to technologies, processes, investment needs and resource allocation, and timelines. It will also require consistent policy incentives that price in negative externalities and/or stimulate positive outcomes. Robust 2040 climate targets need to be backed by both EU and national transition plans, including strong policy and pricing signals.

Key recommendations

  1. Set a science-based climate target and EU transition pathways for 2040
    • Set a legally binding climate target of at least -90% GHG emissions reductions by 2040.
    • Provide EU-wide sectoral roadmaps to clarify transition needs and priorities.
    • Include investment needs, plans and related data in national climate and energy plans.
  2. Swiftly implement the Fit for 55 package and make it ready for 2040
    • Strengthen carbon pricing to boost innovation and a just transition.
    • Implement policies that reduce demand for energy and raw materials.
    • Accelerate electrification by increasing deployment of renewable energies and expanding transmission infrastructure.
    • Enhance nature-based solutions for mitigation and biodiversity co-benefits.
  3. Create an enabling environment for transition finance
    • Provide transparency for post-2026 climate-related EU funding.
    • Mobilise private sector investments through de-risking instruments, financial incentives, and increasing availability of bankable green projects.
    • Leverage public funding instruments to simplify access to pooled resources and tailored financial instruments for transition investments.
  4. Empower stakeholders to co-create a just transition
    • Foster public support and engagement for a just and fair transition.
    • Strengthen stakeholder collaboration for climate and social policies.

To stay updated and participate in PRI engagement on the EU 2040 climate target, join our collaboration platform group.