The report details a pathway for Europe (comprising the EU, UK, Norway and Switzerland) to reach net zero emissions by 2050, using the lowest cost technology solutions to decarbonise each sector of the economy – dubbed the net zero scenario.

Europe invested $227bn in the low-carbon energy transition in 2022. According to BNEF, to stay on track, average annual investments into clean energy supply, electric vehicles (EVs), heat pumps and sustainable materials in Europe need to run at ‘more than three times’ this level for the rest of this decade, and more than four times in the 2030s.

More than two thirds of the investment needed to deliver a net zero energy economy in Europe sits on the demand side. Meaning that a successful transition will rely on consumers adopting clean technologies faster this decade, the report notes. The biggest single slice of spending is on EVs, which totals $21tn over 2022–2050 under this scenario, while heat pumps see $1.4tn in investment.

Road transport and heating for buildings are the two biggest challenges facing policymakers to meet targets. Together, these sectors contribute almost half of all energy-related CO₂ emissions in Europe today. Both can rapidly displace their fossil fuel consumption and reduce emissions economically, largely through a switch to electric alternatives, the report says.

Deploying wind and solar power at scale and investing in a fleet of clean back-up generating capacity is the cheapest way for Europe to reduce emissions and lower energy system costs, while diversifying away from imported fuels, according to BNEF.

Investment into new clean power assets in Europe is forecast to total more than $3.8tn by 2050. This investment will be heavily front-loaded, with almost 40% of it occurring before 2030. Solar and wind technologies alone supply 83% of generation by 2050, according to the analysis. In the net zero scenario, onshore and offshore wind capacity across Europe reaches 675 GW by 2030, up from 234 GW in 2022. Solar capacity meanwhile looks set to grow to 774 GW by 2030, up from 226 GW today.

The report says that clean power and electrification could transform how final energy is used in Europe. By 2050, Europe will need 30% less energy for consumer end uses due to a phase-out of inefficient fossil-fuel processes in favour of electrification and other efficiency gains. Electricity is forecast to rise from just 20% of final energy use today, to become the single biggest contributor at 46% in the 2050s.

However, in addition to deploying clean power and electrification, the region will also need to invest in low-carbon fuels and clean industrial production capacity to decarbonise hard-to-abate sectors.

The report shows that the least-cost approach could be using carbon capture as a bridge on the way to more deployment of green hydrogen. The net zero scenario sees a quick ramp-up of carbon capture and storage (CCS) capacity that peaks and stabilises at around 150mn t/y by the mid-2030s.

The report notes that hydrogen emerges later, in applications where it is unfeasible or uneconomic to electrify. Production of low-carbon hydrogen rises from a low base to around 50mn tonnes by 2050 – around four times the total use of hydrogen today. By 2050, Europe is forecast to invest more than $904bn into hydrogen and CCS to deliver on a net zero energy system. BNEF recognises that whether these investments can be delivered and how much European industry can benefit will depend on the right set of policy designs and measures.

Climate remains a priority despite energy crisis
Meanwhile, in its updated G-20 Zero-Carbon Policy Scoreboard, BNEF has found that despite the global energy crisis prompting governments to take unprecedented steps to bolster energy security and affordability, this hasn’t come at the expense of addressing climate change. On balance, most G20 countries actually enhanced their low-carbon policy regimes in 2022.

In the light of last year’s challenges in particular, the results represent a net positive. Overall, developed countries scored better on average for their low-carbon policies: G20 countries in the OECD had an average score of 64% in this year’s assessment compared with 36% for non-OECD nations. However, the gap between the two groups expanded another two percentage points relative to the 2022 report.

Many governments have prioritised decarbonising their electric power sectors, according to the report. As a result, the G20 averaged a 61% for this sector in 2023 – 1.3% above the 2022 report. The nearest contender, transport, averaged 54%.

The analysis shows that G20 policymakers are starting to pay closer attention to harder-to-abate sectors. As a result, the average score for buildings, circular economy and industry rose 1.7–2.7% compared with last year. Nonetheless, more policy support is needed especially outside power and transport, as these sectors average 47%.

The EU member states and the UK top this year’s G20 Scoreboard. The report shows that France came close to taking the overall crown thanks to a strong performance across the board, especially in buildings and industry. Germany retained the top spot again. Italy shot up to third, leaving the UK in fourth position. The US achieved by far the biggest increase in score, climbing four places to fifth thanks in large part to the Inflation Reduction Act.

Victoria Cuming, Head of Global Policy, BNEF, warns: ‘It’s good news that the energy crisis hasn’t resulted in widespread backtracking on climate policy. But this isn’t a reason to take a vacation: no G20 country has enough low-carbon policy to achieve the goals of the Paris Agreement.’