Agreement on the EU's 2040 climate target – Another challenge for the region

A new mid-term climate target of a 90 percent reduction by 2040 compared to 1990 levels poses enormous new financial challenges for EU citizens and businesses, according to the Federation of Austrian Industries (IV) in an initial reaction to today’s decision by the EU Environment Council. The widely circulated view that the EU is thereby setting an example for international climate negotiations must unfortunately be classified as wishful thinking in light of the U.S.’s withdrawal from the Paris Agreement and the very cautious announcements from other key nations such as China and India.

Particular pressure on energy-intensive companies

Today’s decision is of particular significance for energy-intensive companies facing fierce international competition. These companies are already grappling with energy costs that are high by international standards and will come under further pressure as a result of the new climate target. In this regard, the Austrian position has been successfully enshrined in today’s resolution, calling on the European Commission to propose relief measures within the framework of the emissions trading system. This success of the federal government, led by Federal Minister Norbert Totschnig, is expressly acknowledged by IV. Building on this decision, the task in the coming months will be to seek alliances at the EU level to concretely implement these improvements in the interest of the business location.

Positive approaches evident 

It should at least be viewed as a further positive step toward achieving the more ambitious target that this goal is also to be met with the help of flexibilities, such as the use of international credits up to 5 percent. This makes sense insofar as climate protection measures can generally be implemented much more cost-effectively in other countries, while simultaneously creating an incentive for other countries to join a climate regime. Furthermore, the agreement on a review clause for the 2040 climate target is to be welcomed, as it allows for the -90 percent target to be reassessed in the event of unfavorable developments.

While today’s decision has not immediately improved the situation for the site, the IV concludes that the decision does contain important elements upon which to build in order to secure the site.