The EU’s Green Agenda: Challenges and Opportunities in a Changing Political Landscape

This year’s European Union (EU) elections have ushered in a new political landscape with a significant shift in voting patterns. Parties on the right, many of which are sceptical of climate action, have gained greater influence. Their stance on climate policy raises concerns about the potential to undermine hard-won progress on the EU’s green agenda.

This shift comes at a pivotal time for Europe. The EU has made commendable strides in its energy transition by setting global benchmarks in areas like early renewable energy deployment, emissions reductions, and climate regulation. Yet challenges remain. The European industry is under increasing pressure to remain competitive in a fast-changing global economy. Other regions are advancing rapidly in clean energy innovation, manufacturing, and supply chains, posing a risk to Europe’s industrial leadership in the green economy.

Simultaneously, concerns around energy security and affordability persist. The energy crisis sparked by geopolitical tensions has left a lasting impression on policymakers and citizens alike. Striking the right balance between accelerating the energy transition and ensuring secure, affordable energy for all Europeans has never been more critical.

The combination of these factors—political shifts, industrial competitiveness, and the enduring energy security challenge—underscores the importance of maintaining and strengthening the EU’s climate leadership. With a new European Commission about to embark on its five-year term, in our new whitepaper Solidifying the EU’s leadership in the global energy transition, we explain why now is crucial moment to reaffirm Europe’s commitment to net-zero, while addressing the evolving concerns of its citizens and industries.

The EU made early progress in the energy transition: can it sustain this momentum?

The EU has made significant progress in its energy transition, achieving major milestones in emissions reduction, renewable energy deployment, and energy diversification. Fossil fuels now account for just 23% of power generation, while initiatives like REPowerEU have cut gas imports from Russia by two-thirds since 2021. Emissions in 2023 were 43% below 1990 levels, even with modest economic growth. Key policies such as the Emissions Trading System (ETS) and the Carbon Border Adjustment Mechanism (CBAM) are driving decarbonisation, but challenges persist in lagging sectors like buildings and transport.

Globally, the energy transition is accelerating, fuelled by sharp cost declines in solar, wind, and batteries. Clean electricity and transport are now cost-competitive with fossil fuels, with solar prices dropping 92% since 2011 and EVs achieving price parity in markets like China. While the EU was an early leader, other regions have advanced rapidly in their own transitions. To maintain its competitiveness and leadership, Europe must accelerate electrification, address policy bottlenecks, and ensure fair pricing and resilient supply chains. Without decisive action, the EU risks falling behind in the global race to the clean energy transition.

Shaping the EU’s five-year agenda

The next EU legislative term will take us to 2030. Now is the time for Member State implementation and to focus on policy areas that are lagging behind due to political or technical complexity. While policies like the EU ETS, REPowerEU, and Nationally Determined Contributions (NDCs) have driven significant progress, challenges remain in securing necessary funding, managing supply chains, and phasing out fossil fuels. The ETC therefore offers 3 recommendations to shape the next five-year agenda of the European Commission (Exhibit 1):

1. Hold the ground: Avoid reversing previously agreed policies to send clear market signals that will encourage investment and maintain momentum around the energy transition.
2. Complete the picture: Expand policy focus to accelerate deployment in sectors where the transition is already well underway (e.g., phasing out internal combustion engine vehicles in the transport sector) and ensure emissions reductions is achieved across all sectors (e.g., providing rules for new industries like Carbon Capture Utilisation and Storage (CCUS); or ensuring affordability for upgrades and renovations of the building sector).
3. Realise competitive advantage: Align industrial policy with environmental goals to ensure European companies can compete in the global marketplace.

This whitepaper has been drafted in consultation with a subset of ETC members including (but not limited to) Iberdrola, Octopus Energy, European Climate Foundation (ECF), Impax Asset Management, and Rothschild & Co. We hope to engage with relevant DG members in February, within the first 100 days of the new commission, to offer our insights and expertise in shaping the next five-year agenda of the European Commission. We encourage you to read the brief here, share with your network, and urge EU leadership to continue progressing along the energy transition.