In December 2019, the European Commission introduced an ambitious proposal to make the bloc climate-neutral by 2050. Although the proposal set specific 2030 and 2050 emission-reduction goals, it did not explain how much each sector and member state should contribute to the desired emissions reductions or what achieving those reductions would cost. Much work remains to chart the European Union’s course toward a climate-neutral future in which prosperity would also increase for every socioeconomic group.

To help inform the planning efforts of policy makers and business leaders and explore the implications of the required changes, McKinsey has attempted to find a societally cost-optimal pathway to achieving the emissions targets established by the European Green Deal plan.1

We defined more than 600 emissions-reduction initiatives covering 75 economic sectors and ten geographic regions. Then we selected initiatives and combined them to form different decarbonization pathways, any of which would enable the European Union to achieve its targets for 2030 and 2050. Countless possible pathways exist, covering a wide range of costs and economic impacts. This report describes the least costly pathway among the many we identified.

This cost-optimal pathway, we believe, illustrates the technical feasibility of achieving the European Union’s emissions-reductions targets. It also shows that decarbonizing Europe can have broad economic benefits, including GDP growth, cost-of-living reductions, and job creation. The effort involved in delivering these benefits would be just as broad, requiring a continent-wide effort to make significant changes to every sector

of Europe’s economy.