The European Union's (EU) greenhouse gas emissions fell by 1.6% in 2025 compared with the previous year, while renewable energy capacity and clean technology deployment continued to expand, according to the European Commission's 2026 EU Climate Action Progress Report and Carbon Market Report.

The findings show that the EU's net greenhouse gas emissions are now 39% below 1990 levels, despite the bloc's economy growing by 74% over the same period, highlighting the continued decoupling of economic growth from emissions.

Emissions covered by the EU Emissions Trading System (EU ETS) declined by around 2% in 2025, while those covered by the Effort Sharing Regulation (ESR), including transport, buildings, agriculture and waste, remained broadly stable. Provisional data also indicated an improvement in the EU's land carbon sink.

The reports highlight the contribution of clean energy technologies to emissions reductions, energy security and industrial competitiveness, while warning that faster action will be needed to meet the bloc's 2030 climate targets.

Progress Towards 2030 Emissions Targets

The EU remains committed to reducing net greenhouse gas emissions by at least 55% by 2030 compared with 1990 levels. However, the slower pace of reductions in 2025 means additional efforts will be required across several sectors during the remainder of the decade.

Emissions covered by the Effort Sharing Regulation are currently projected to decline by approximately 38.5% by 2030 compared with 2005, falling short of the EU-wide target of 40%.

The European Commission identified nine member states that are not making sufficient progress towards their national 2030 targets: Austria, Croatia, Cyprus, Germany, Italy, Ireland, Lithuania, Malta and Sweden. These countries will be asked to submit corrective action plans outlining additional emissions reduction measures and investments.

The land-use sector also faces challenges despite improvements in 2025. Net carbon removals increased by approximately 11% compared with 2024, but projections indicate a remaining gap of 40–55 million tonnes of CO₂ equivalent towards the EU's 2030 land-use target.

Renewable Energy and Clean Technology Expansion

The expansion of renewable energy and low-carbon technologies continued to support the EU's energy transition in 2025, helping reduce dependence on imported fossil fuels and exposure to volatile energy prices.

EU wind and solar capacity reached 611 GW, representing approximately 49% of the bloc's total electricity generation capacity.

Battery-electric vehicle registrations also increased to 1.9 million in 2025, accounting for roughly one in six new car registrations across the EU.

Meanwhile, heat pump deployment accelerated, with an estimated 41 GW of additional capacity installed during the year, compared with 26 GW in 2024.

The Commission noted that the expansion of clean technologies is creating opportunities for European manufacturing and investment, although further growth in the sector will be needed to capture its full economic potential.

EU Carbon Market Generates €43.2 Billion

The EU Emissions Trading System generated €43.2 billion in revenues in 2025, an 11% increase compared with 2024, according to the Carbon Market Report.

Of the total, €23.9 billion went directly to EU member states to support decarbonisation investments targeting households and industry.

Emissions from industrial installations covered by the system declined by 3.3% compared with 2024, largely driven by reductions in the iron and steel, cement and chemical sectors.

Maritime transport emissions fell by 4%, while aviation emissions increased by 0.2%, highlighting the continued challenges facing the aviation sector in reducing its environmental impact.

Although overall emissions under the EU ETS remained below the system's cap, the Commission noted that the pace of reductions had slowed compared with previous years.

The EU is targeting a 62% reduction in emissions covered by the trading system by 2030 compared with 2005 levels. The Commission said maintaining the system's integrity and directing a greater share of revenues towards decarbonisation investments would be important to achieving this objective.

In July 2026, the Commission proposed reforms to the EU ETS covering the 2030–2040 period.

EU Sets Legally Binding 2040 Climate Target

The EU also strengthened its longer-term climate framework in 2026, with the amended European Climate Law entering into force in April and establishing a legally binding target to reduce net greenhouse gas emissions by 90% by 2040 compared with 1990 levels.

The target provides a longer-term framework for emissions reductions as the bloc continues its transition towards climate neutrality.

Climate Risks Drive Need for Greater Investment

The reports also highlighted the growing economic costs of climate-related extreme weather events across Europe.

Climate-related disasters have caused an estimated €822 billion in economic losses across the EU since 1980, while approximately €70 billion in annual investment will be required for climate adaptation through 2050.

In response, the Commission presented a new EU Climate Resilience Framework in October 2026, aimed at strengthening the bloc's ability to anticipate, prepare for and manage climate risks. The framework includes a proposed Climate Resilience Law supported by a common reference trajectory for global warming.

Overall, the Commission's findings show continued progress in reducing emissions and expanding clean energy, but underline the need to accelerate investment and implementation across transport, industry, buildings and land use to meet the EU's climate objectives. -OGN/TradeArabia News Service