Renewable Energy Directive 2040: towards the EU’s new RED IV
With the future of the Green Deal looking increasingly uncertain, charting Europe’s decarbonisation pathway beyond 2030 is becoming more difficult. Yet the EU rules underpinning the bloc’s current energy strategy are approaching their horizon, leaving the European Commission with the sensitive task of defining the Union’s 2040 energy targets. These objectives will feed into the next Renewable Energy Directive 2040, RED IV, which is expected to be published by the end of 2026.
The legislation will need to align the EU’s energy ambitions with its target of cutting CO2 emissions by 90% compared with 1990 levels by 2040, while navigating a more challenging political and energy landscape than in previous revision cycles.
Member States push for greater flexibility in the Renewable Energy Directive 2040
Why is the challenge greater this time? Because 15 Member States, including Italy and members of the Nuclear Alliance led by France, have been pressing for greater flexibility in the framework that has shaped successive revisions of the original 2009 Renewable Energy Directive.
Their main request is for “a flexible energy framework […] that promotes the use of all low-carbon energy sources”. In practical terms, this would give individual countries greater autonomy over their energy choices, without a large number of binding sector-specific sub-targets.
Such an approach would represent a shift away from the philosophy underpinning successive EU energy and climate packages since 2020, although the Commission has already introduced several elements of greater flexibility over the years.
In the current political climate, however, it appears increasingly difficult for the Commission to maintain the existing architecture of binding EU-level targets for renewable energy and energy efficiency, supported by national contributions calculated according to specific formulas. The emerging approach appears instead to point towards an “enabling framework” for EU energy policy, combined with key performance indicators (KPIs) rather than a series of rigid requirements.
Renewable energy development scenarios to 2040
Further indications come from a document leaked in Brussels concerning the impact of the next renewable energy directive. The text examines the European Commission’s strategy and outlines what it considers the most technically and economically efficient pathway towards meeting the EU’s 2040 climate target.
While the current RED III aims for renewables to account for 42.5% of energy consumption by 2030, the following decade could require the renewable share of final energy consumption to rise to around 65-70% under the central scenario, allowing decarbonisation to progress in line with the EU’s objectives.
This would mean increasing the Union’s installed renewable electricity capacity to between 2,000 and 2,400 GW by the end of 2040, compared with around 680 GW in 2024. Such an expansion could reduce the EU’s dependence on imported fossil fuels to as little as 25%, compared with the current 57%.
The strategy would also involve introducing KPIs under the forthcoming Governance Regulation to monitor critical areas including permitting times, curtailment and the deployment of specific clean technologies, such as heat pumps, solar thermal and geothermal energy. Brussels is also proposing an EU-wide harmonised methodology for measuring and monitoring renewable electricity curtailment, with the aim of improving transparency and comparability.
At the same time, the document proposes a cap for domestic heating, preventing primary solid biomass from being counted above 2024 levels.
Renewable Energy Directive 2040: revised hydrogen targets
For hydrogen, the working document proposes replacing RED III’s current binding national mandates with an indicative EU-level target of 8 million tonnes of renewable hydrogen consumption in industry and refineries.
The proposal would also envisage credits and downstream demand incentives implemented through other legislation. Rystad Energy analysts, however, see potential drawbacks in this approach.
“For the European hydrogen market, the prospect of replacing binding national obligations adds a further element of policy uncertainty at a time when projects still depend heavily on long-term demand visibility to secure offtake and reach final investment decisions,” explains Frederick Andre Wessel, Product Manager, Hydrogen Research at Rystad Energy. “If long-term demand signals remain strong in only a few Member States, the market risks developing in isolated pockets rather than as an integrated European market.”
Hydrogen demand could, of course, also receive an additional boost from the effects of the current conflict in the Middle East, which have made Europe’s need to reduce its dependence on external supplies of the energy carrier and its derivatives increasingly apparent.
A possible change of direction for sustainable biofuels
A step backwards could instead be envisaged for “sustainable” biofuels. The Commission is reportedly considering removing the RED III restriction limiting biofuels produced from food and feed crops to a maximum increase of one percentage point above 2020 levels, replacing it with a harmonised 7% cap across all Member States.
The proposal would, however, introduce a national mechanism allowing blending obligations to be suspended or reduced in the event of sharp increases or crises in global food prices.
And what about advanced biofuels? The text assumes that the current combined minimum requirement for advanced biofuels and renewable fuels of non-biological origin (RFNBOs) in transport would expire after 2030. Demand would therefore become more dependent on national policies, potentially making the achievement of a common European trajectory more complex.