Net zero goal lays the foundation for a sustainable future. This is the ground on which the EU’s net zero policies are created, with the aim to keep global warming under control and carbon emissions levels within the net zero target. To prevent serious climate consequences, global greenhouse gas emissions must be reduced. Climate change is among the most pressing challenges of our time, driven by industrialization, rapid urbanization, and modern global lifestyles. To mitigate its harmful effects, the EU recognises it is essential to minimize environmental pollution and lower the release of greenhouse gases into the atmosphere and controlling these emissions can be achieved through both individual and institutional actions.1
The European Commission in a bid to simplify its approach to combating economic decline while also maintaining its commitment to its net zero targets and its competitiveness in the global economic scene has on 29th January published a paper with a title reflective of its content- A Competitiveness Compass for the EU. The paper highlights policy direction of the EU in innovation, trade and economic security, defence, and provides a comprehensive “joint road map for decarbonisation and competitiveness” for 2025. To strengthen global competitiveness and innovation, the EU is prioritizing key sectors such as artificial intelligence, biotechnology, and cost-effective clean energy. The document, outlines 29 proposed measures over the next two years aimed at streamlining business regulations and enhancing productivity while advancing the decarbonization of manufacturing. This initiative highlights the EU’s approach to easing regulatory burdens on businesses while maintaining its ambitious climate goals.2
Key highlights of its 2025 net zero policy direction are-
1. Amendment to the EU Climate Law:
The European Climate Law enshrines the objective of the European Green Deal to achieve climate neutrality across Europe’s economy and society by 2050. It also establishes an interim goal of cutting net greenhouse gas emissions by at least 55% by 2030, relative to 1990 levels.3
In 2025, the EU Climate Law is expected to be revised to include a 2040 emissions reduction target, as mandated by the law itself, to ensure progress toward climate neutrality by 2050. The proposed goal is a net 90% reduction in emissions by 2040 compared to 1990 levels, when emissions stood at 5 billion tonnes of CO2 equivalent. In addition to this target, the European Commission has developed an initial EU greenhouse gas (GHG) budget for the period from 2040 to 2050 to support the interim reduction goal. It stipulates that the EU’s net cumulative GHG emissions between 2030 and 2050 should not surpass a maximum of 16 GtCO2e.4
2. The Clean Industrial Deal:
The Commission plans to introduce its Clean Industrial Deal by the end of February 2025, A long-term strategy to strengthen the EU’s conventional energy-intensive industries and accelerate the growth of emerging clean technology sectors5 within the first 100 days of the President of the European Commission’s new term. Aiming to reduce corporate sustainability reporting requirements by 25% and lower energy costs, which can ordinarily be up to three times higher than in the United States.6
When effectively aligned with industrial, competition, economic, and trade policies, decarbonisation strategies can significantly drive economic growth. This principle will guide the Clean Industrial Deal initiative, which seeks to establish the EU as a competitive hub for manufacturing, particularly in energy-intensive sectors while fostering clean technologies and circular business models to achieve its decarbonisation targets.7
3. Action Plans
a. Affordable Energy Action Plan– The EU recognises the necessity of addressing the challenge of high and fluctuating energy prices for European businesses and households proactively. Energy prices are much higher than in competitor regions and vary significantly across the EU, making it harder for companies in the bloc to compete globally.
Some of the factors driving high energy prices in Europe are structural. The Affordable Energy Action Plan aims to address these challenges through various measures, ensuring that both households and industrial consumers have greater direct access to affordable energy. The plan seeks to maximize the benefits of lower energy costs by enhancing market integration, expanding the use of guarantees and risk-reduction tools to facilitate long-term power purchase agreements, encouraging industrial consumers to offer demand flexibility services, and promoting a fair distribution of energy system costs through improved tariff structures.
A key component of this plan is increased investment in Europe’s energy grids to support the transition to a net-zero energy system, minimise the risk of renewable energy curtailment, and fully utilise the advantages of the Single Energy Market. To achieve this, Europe must accelerate the modernisation and expansion of its energy transmission and distribution networks, including electricity, hydrogen, and carbon dioxide transport infrastructure, as well as storage systems.8
b. Steel and Metals Action Plan- Energy-intensive industries, such as steel, metals, and chemicals, are among the most vulnerable during this phase of the transition. These sectors form the backbone of European manufacturing, providing essential inputs for entire value chains. To support their transition, customised action plans will be developed for certain industries as part of the Clean Industrial Deal, based on close dialogue and consultation with stakeholders. For example, in Spring 2025, the Steel and Metals Action Plan will outline specific measures to address investment needs, ensure access to primary and secondary materials, and enhance the use of trade defense instruments. Additionally, it will propose a long-term solution to replace existing safeguard measures in response to global non-market overcapacity.9
c. The Chemicals industry package- at the end of 2025 will be crucial for maintaining the competitiveness of the chemicals industry, while also safeguarding human health and the environment, with a focus on the supply of critical chemicals.10
d. Industrial Action Plan- Achieving the 2035 climate neutrality goal for cars will necessitate a technology-neutral approach, where e-fuels will play a role through a specific amendment to the regulation during the upcoming review. This dialogue will contribute to an EU industrial action plan for the automotive sector, featuring bold supply- and demand-side initiatives, such as a proposal for greening corporate fleets.11
e. Sustainable Transport Investment Plan- Alongside the Action Plan, the Commission will present a Sustainable Transport Investment Plan, introducing further measures to mitigate the risks associated with investments required to rapidly expand charging infrastructure and the production and distribution of renewable and low-carbon transport fuels.12
The European Commission’s “Competitive Compass” outlines a net zero policy calendar nicknamed the “Flagship Actions Pillar 2” with a proposed timeline running from first quarter of 2025 into the second quarter of 2026-13
• Clean Industrial Deal and an Action Plan on Affordable Energy [Q1 2025] •
• Industrial Decarbonisation Accelerator Act [Q4 2025]
• Electrification Action Plan and European Grids Package [Q1 2026]
• New State Aid Framework [Q2 2025]
• Steel and metals action plan [2025] ( 14) World Bank, 2022 12
• Chemicals industry package [Q4 2025]
• Strategic dialogue on the future of the European automotive industry and Industrial Action Plan [Q1 2025].
• Sustainable Transport Investment Plan [Q3 2025] • European Port Strategy and Industrial Maritime Strategy [2025]
• High Speed Rail Plan [2025]
• Carbon Border Adjustment Mechanism Review [2025] Circular Economy Act [Q4 2026]
• Vision for Agriculture and Food [Q1 2025]
• Oceans Pact [Q2 2025]
• Amendment of the Climate Law [2025]
As the EU advances toward its 2050 net-zero goal, it continues to refine its policies and strategies to ensure a sustainable and competitive future. The focus remains on accelerating the adoption of renewable energy, fostering innovation in key sectors, and implementing supportive policy frameworks. By addressing challenges and leveraging opportunities, the EU aims to lead the global transition to a climate-neutral economy. As of January 2025, the European Union (EU) is steadfast in its commitment to achieving net-zero greenhouse gas emissions by 2050, a goal enshrined in the European Climate Law. This ambitious target is central to the European Green Deal, which outlines a comprehensive strategy for a sustainable and climate-neutral Europe.
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