4i-TRACTION (2024): Which policy mix should lead the EU to climate neutrality? Lessons from the integrated assessment of four policy avenues. 4i-TRACTION Policy Brief. Ecologic Institute, Berlin.

Which policy mix should lead the EU to climate neutrality?

Based on an assessment of four policy avenues, this policy brief draws lessons for EU climate policy in the next legislative cycle and beyond.

With the Green Deal, the EU has expressed its transformative ambition. However, the EU is not on track to climate neutrality by 2050 and several transformation gaps still exist.

  • Progress is lacking across the innovation chain, including limited and incoherent funding and lack of directionality.
  • There is an annual climate investment gap of approximately €406 billion, and the current frameworks are inadequate for mobilizing these funds.
  • Furthermore, the roll-out of infrastructure for a climate-neutral economy is too slow, especially for energy and transport infrastructure, also due to a lacking comprehensive strategy for transnational infrastructure.
  • Lastly, climate policy integration is still uneven across sectors and limited in agriculture and transport. The coordination of innovation, investment, and infrastructure is still deficient.

There are diverse and competing approaches to climate policy in the EU, based on different perceptions of the nature of the problem that climate policy needs to solve and the right policy instruments and governance frameworks to do so. In the 4i-TRACTION project we developed four “policy avenues” for the EU – different combinations of policy instruments that reflect such distinct approaches to the design of climate policy and  assessed how these policy avenues perform in addressing the transformation gaps of innovation, investment, infrastructure, and integration. This policy brief draws lessons from this assessment for EU climate policy in the next legislative cycle and beyond.

Main findings and recommendations

  1. To reach climate neutrality by 2050, the EU faces transformation gaps in the areas of innovation, investment, infrastructure, and integration. 4i-TRACTION analysed the ability of four different policy avenues to close the gaps. This policy brief summarises the main findings for EU policy.
  2. Robust and credible carbon pricing remains key to accelerate the market diffusion of cleaner alternatives and accelerate the market exit of fossil technologies. Yet to become future-proof, emissions trading in Europe needs stronger social guardrails.
  3. The EU must step up its industrial policy and address the investment gap, boost innovation support, and coordinate the deployment of the infrastructure that is needed for industry transformation. An important step is to scale up the Innovation Fund with carbon contracts for difference and increased funding.
  4. The EU should develop planning capacities and set-clear phase-out timelines for fossil value chains. An EU policy for integrated infrastructure planning is an important step to accelerate the energy transition.
  5. The EU should harness the potential of sufficiency, especially in areas where technology may be insufficient, such as mobility and food. More sustainable lifestyle choices must be enabled through inter alia public investments in infrastructure.

Download and read the policy brief here. Find the full assessment in our report "Integrated assessment of the policy avenues for transformative climate policies".