Europe is retreating from Carbon Neutrality.

The Swedish government announced on the 3rd that it will abolish the "aviation tax" starting from July 2025. The aviation tax is a tax imposed on all commercial passenger flights with more than 10 seats departing from Swedish airports, aimed at addressing climate change. It has been levied on airlines, which are high carbon emitters, since 2018.

However, this tax has been criticized for "diminishing the competitiveness of Swedish airports and domestic airlines."

According to IATA (International Air Transport Association), the global aviation industry has begun to recover after the end of the COVID-19 pandemic, but the recovery of flight routes at Swedish airports has been slow. In this regard, the Swedish government has changed its previous stance.

A government official stated, "This measure will enable investment in Swedish aviation and make Sweden more competitive."

Following the phase-out of nuclear power, Europe, which has been at the forefront of advocating for carbon neutrality by promoting a 'net zero greenhouse gas emissions' policy (the amount of carbon dioxide emissions minus removals), is quietly stepping back from both nuclear phase-out and carbon neutrality policies.

It involves lowering achievement targets, easing existing regulations, or increasing the use of fossil fuels again. The recent surge in AI (artificial intelligence) and data centers is analyzed as the key reason for the increase in electricity demand.

Europe has set several interim goals to achieve carbon neutrality by at least 2050 and has been implementing them. The European Union (EU) has decided to introduce the 'Euro 7' regulations, which will strengthen exhaust emission standards starting in July 2025, and the 'ReFuelEU' legislation, which mandates the use of SAF (sustainable aviation fuel made from eco-friendly raw materials), has also come into effect from 2025.

The UK has also announced that it will ban the sale of new diesel and petrol cars by 2030, and Sweden has legislated to achieve 'carbon neutrality' by 2045, among other countries that have set detailed greenhouse gas reduction targets. At the same time, they practically 'forced' the international community to take such actions.

However, Europe is currently in a situation where it is difficult to achieve not only the 'carbon neutrality by 2050' goal but also the various interim targets set in the process.

After experiencing an 'energy crisis' before and after Russia's invasion of Ukraine in 2022, there has been a significant awareness of the importance of energy security, and the development and commercialization of carbon reduction technologies such as hydrogen power and CCUS (Carbon Capture, Utilization, and Storage) have been delayed.

In this situation, energy imports are increasing, but the economic recession is prolonged, and energy price volatility has grown. Europe is hastily trying to secure energy through a 'nuclear phase-out,' but the reality is that building large nuclear power plants takes at least nearly 10 years, and even that is unlikely to proceed as planned.

Key Takeaways: Europe's Retreat from Carbon Neutrality

• Sweden's reversal on aviation tax: This move, motivated by concerns over competitiveness, signals a shift away from climate-focused policies.
• Europe's quiet retreat from carbon neutrality: The continent is gradually easing regulations, lowering targets, and even increasing fossil fuel use.
• Energy crisis and AI driving the change: The need for energy security and increased electricity demand from AI and data centers are major factors.
• Challenges to meeting ambitious goals: Europe is facing difficulty achieving its carbon neutrality targets and interim goals.
• Nuclear phase-out's impact: The decision to phase out nuclear power has contributed to the current energy crisis and is hindering progress towards carbon neutrality.
• Trade-off between climate action and economic security: The push for immediate energy security may come at the expense of long-term climate goals.
• Ongoing debate and uncertainty: Europe faces a challenging situation, navigating the complex interplay between climate ambition, economic stability, and technological advancements.