EU, UK and Canada pare back climate goals amid energy costs

Oil majors Shell, BP and Equinor dial back renewable investments

The European Union has proposed relaxing its carbon-pricing system and extending the timeline for automakers to sell gasoline-burning cars, the Wall Street Journal reported Sunday. The U.K. is reviewing electric-vehicle sales targets and weighing fresh drilling in the North Sea. Canada under Prime Minister Mark Carney has dismantled its consumer carbon tax and is backing new oil and gas infrastructure.

The EU proposal would ease the bloc’s carbon-pricing system, known as the Emissions Trading System, by keeping more emissions allowances on the market over the next 15 years to reduce the cost burden on industry. Last year, the bloc already proposed allowing automakers to keep selling gasoline-burning cars past 2035, after initially planning to effectively ban new combustion-engine vehicles from that date. German Chancellor Friedrich Merz had urged the European Commission to ease the ban.

“The Green Deal had been a central focus of Europe,” said Daniel Yergin, a veteran energy historian and vice chairman of S&P Global. “Now, for Europe, the focus is obviously on security and on being economically competitive.”

Europe’s pivot is significant because the continent has long been at the vanguard of climate action. Wind and solar now account for 34% of the EU’s power generation, compared with 20% in 2021, according to the Journal. The EU maintains that it can curb greenhouse gas emissions by at least 55% by 2030 from 1990 levels and reach net-zero emissions by 2050. Yet an April report by the European Environment Agency said achieving the bloc’s minimum target of 42.5% renewable energy by 2030 will require roughly doubling its average renewable project deployment rate over the past decade.

The economic pain is concentrated in Germany, Europe’s largest economy, where growth has stalled and households and businesses pay some of the highest electricity bills in the world. Authorities have cut taxes and fees used to subsidize renewables, and lawmakers rolled back a mandate that would have required most Germans to install costly renewable heating systems, allowing them to continue burning oil and gas.

European industry has been hit hard by a sharp increase in power and natural-gas prices following Russia’s cutoff of fuel supplies after its 2022 invasion of Ukraine. The EU’s tightening of emissions allowances — designed to drive up the cost of carbon — has also contributed. Emissions allowances now account for a quarter to a third of the EU’s wholesale electricity price, according to the Journal. Cement makers, steel producers and other energy-intensive industries are only partially compensated by government rebates.

“Europe is committing industrial suicide,” Stephen Dossett, chief executive of Ineos Inovyn, said last year, when British chemical maker Ineos announced plans to shut two German plants after closing facilities in the U.K., Belgium, France and Spain.

Major oil companies have followed Europe’s policy turn with their own retreats. Shell called off a biofuels plant in the Netherlands. BP said it would reduce spending on projects to transition to a greener energy future by more than 70% a year and invest only in “top-tier” offshore wind and solar projects in a “capital light” way. Equinor recently abandoned its target to install 10 to 12 gigawatts of renewable power by 2030.

“What’s not happening is a deeper acceleration of the energy mix to really get carbon out of the atmosphere,” said Lord John Browne, BP’s former chief executive who resigned in 2007 and has called for more climate action. “That’s not on the agenda at the moment.”

Beyond the EU, the U.K. under Prime Minister Andy Burnham said earlier this month it would review electric-vehicle sales targets to ensure they remain “pro-business and grounded in the real world,” according to the Journal. The review covers a mandate to increase the share of EVs sold annually and the U.K.’s goal of ensuring all new cars and vans are zero-emission by 2035. The auto industry has said regulation is running ahead of consumer demand.

Burnham said he told President Trump in a phone call that he would take a “pragmatic” approach to developing North Sea oil resources. The U.K. had banned exploratory drilling last year. “When people are struggling, you can’t ignore that,” Burnham told reporters last month.

In Canada, Prime Minister Mark Carney — once the public face of the global fight against climate change — has dismantled several pillars of predecessor Justin Trudeau’s energy policy, including the consumer carbon tax. His government is supporting more oil and gas drilling and has backed several new projects to chill and export natural gas from British Columbia’s coast, drawing criticism from climate activists. The Canadian Climate Institute, a policy research organization, said earlier this year that Canada is not on track to meet its climate goals, including a 2035 target and net-zero emissions by 2050.

The Trump administration has repeatedly cited the EU as an example of green policies “gone haywire” to justify its own rollback of climate policies. U.S. Energy Secretary Chris Wright earlier this year said the “climate cult” had weakened Europe and resulted in jobs lost to Asia and reduced economic opportunities for Europeans, according to the Journal.

The reluctance to bear the costs of cutting fossil fuels comes as scientists warn that climate change is intensifying extreme weather events, including the wildfires scorching European forests and the heat and drought drying its rivers this summer, according to the Journal. The EU maintains that it can still curb greenhouse gas emissions by at least 55% by 2030 from 1990 levels and reach net-zero by 2050.