The EU remains a leader in the fight against climate change, but faces increasing challenges to deliver tangible results

Gaps in implementation are widening as economic pressures, geopolitical tensions, and concerns about industrial competitiveness reshape priorities, according to Wood Mackenzie.

The European Union maintains its position as a global leader on climate issues, but faces increasing challenges in translating ambitious targets into tangible results. The bloc’s comprehensive policy framework, underpinned by the Green Deal and the Fit for 55 package, sets the world’s strictest decarbonisation pathway. However, gaps in implementation are widening as economic pressures, geopolitical tensions and concerns about industrial competitiveness reshape priorities, according to an updated Energy Transition (ETO) report from Wood Mackenzie. The war in Ukraine has fundamentally altered Europe’s energy landscape, accelerating the shift away from Russian fossil fuels and highlighting vulnerabilities in critical supply chains. Defense spending commitments compete with climate investments for fiscal resources.

However, energy security and climate goals are increasingly aligned, with domestic renewable capacity seen as essential for strategic autonomy. Despite having abundant renewable resources, the EU will rely heavily on imports to meet its decarbonisation targets. Materials critical to clean technologies remain dominated by Chinese supply chains, and fossil fuels continue to be essential for dispatchable electricity generation, industry, and transportation. The Carbon Border Adjustment Mechanism (CBAM), operational since 2026, seeks to protect domestic industry while driving global decarbonisation, but its full impact remains to be seen. Consumer adoption of key transition technologies faces hurdles. The proposal to reverse the ban on internal combustion cars by 2035 weakens the deployment of electric vehicles. Heat pump installations lag behind targets in most Member States, constrained by high upfront costs and complex installation requirements. Infrastructure gaps, especially in EV charging, compound adoption challenges.

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