Fortum’s views on the EU 2040 target and policy framework

Following the adoption of the amended European Climate Law, which includes a binding target to reduce net greenhouse gas emissions by 90% by 2040, the EU is now entering the implementation phase. During 2026, the European Commission is expected to present several legislative proposals shaping the 2040 climate and energy framework. This framework will be developed through a comprehensive legislative package over the coming years including revisions to key instruments such as the EU Emissions Trading System (ETS), the Effort Sharing Regulation (ESR), the Land Use, Land-Use Change and Forestry Regulation (LULUCF) and sectoral policies (e.g. renewable energy and energy efficiency). The key question is how the 2040 target will be allocated across sectors and which policies will be used to meet the climate and energy targets.

Discussions on the 2040 framework are ongoing in the context of the review of the EU Governance Regulation. This initiative aims to align the EU's strategic planning with 2040 climate goals, focusing on decarbonization, competitiveness, energy security, and reducing administrative burdens. The legislative proposal is scheduled for publication in the last quarter of 2026.

In Fortum’s view, the 2040 target provides the long-term certainty that investors, utilities, and industrial actors need for the clean energy transition at scale. The task now is to design a policy framework to meet this ambition — one that is coherent, streamlined, and grounded in economic reality.

Fortum's view is that, after 2030, the EU should move forward with a simplified and technology neutral target framework, consisting of a single 2040 climate target, complemented by an indicative electrification target. Meeting the 2040 climate target will require a significant acceleration of electrification across industry, heating, and transport. Should a political decision be made to retain energy policy targets alongside the climate target, the second-best option would be to have a 2040 climate target complemented with an indicative clean energy target encompassing both renewables and nuclear, and an indicative electrification target.

A robust carbon price creates a technology-neutral investment case for all low-carbon energy sources. The ETS must remain the cornerstone of EU climate policy and its integrity must be preserved and strengthened in the 2040 framework.

In addition, we highlight several areas for further development in the Governance Regulation:

• Improving the transparency and comparability of National Energy and Climate Plans (NECPs), including through a standardised set of key performance indicators presented in an accessible and comparable format.
• Moving towards an architecture based on economic sectors, which could help demonstrate the progress already achieved in the power sector and underline the need for accelerated decarbonisation in other sectors such as industry and transport.
• Strengthening the role of NECPs as guiding documents for clean energy investments, with clear links to financing and funding instruments.