The European Climate Neutrality Observatory (ECNO) has published its fourth annual, independent assessment of how the EU is progressing towards its 2050 climate neutrality target – tracking real-world data and policy across the sectors and cross-cutting conditions that shape the transition. 

Five years after the EU’s climate neutrality target was adopted into law, the transition is underway but vulnerabilities are testing its resilience. Recent energy crises linked to the wars in Ukraine and Iran have exposed the costs of fossil fuel dependence, with the EU spending hundreds of billions of euros on fossil fuel imports. At the same time, new dependencies are emerging: on fertiliser imports for European agriculture, and on China for critical raw materials, battery components and other clean technology inputs. High and volatile electricity prices continue to hold back the electrification needed across industry, transport and buildings.

This report has tracked 146 indicators across 13 building blocks of the transition – from electricity and mobility to finance and clean technologies – classifying each as on track, too slow, far too slow or heading in the wrong direction. The assessment combines real-world data trends with an evaluation of whether EU and national policy is set up to drive further progress.

Building on this evidence base, the report identifies six priority actions where faster progress would strengthen both Europe's climate action and its economic resilience: accelerating renewable electricity and grid integration; electrifying transport, buildings and industry; redirecting fossil fuel subsidies towards a fair transition; supporting cleantech and industrial transformation; strengthening circularity; and reducing exposure in the food system.

Key takeaways:

The transition is accelerating overall: nearly a quarter of indicators are now on track, up from 11% in 2023, but none of the 13 building blocks is progressing at the pace required.

Highlights where the transition is heading the right way

In some areas, we see positive developments to support the move to a resilient, climate neutral future. These include the following ones worth noting:

• Transport and buildings are showing signs of acceleration. Zero-emission vehicle (ZEV) registrations reached a record high in 2025, with the trend increasing further in the first half of 2026, while the share of rail passenger transport has seen a moderate increase. Heat pump sales partly recovered in 2025 and demand for heating and cooling is falling faster than in last year’s assessment. The share of energy subsidies for energy efficiency purposes doubled between 2021 and 2024.

• Citizens are increasingly shaping the transition, while regional poverty is declining. Cattle meat consumption continues to decline beyond official expectations, and for the first time this year, so does dairy consumption – despite few or no policy incentives in place. Poverty reduction across EU regions most vulnerable to the energy transition is now on track to reach the EU’s overall target of reducing poverty by at least 15 million by 2030.

• The EU expanded its international climate finance contributions. Public finance for international clean energy projects by the EIB and climate-related official development assistance both increased, strengthening our assessment on the EU’s external climate action.

Areas that require increased attention

At the same time, overall progress remains uneven and the outlook has stalled or worsened in several critical areas. For the first time since ECNO’s tracking began in 2023, none of the 13 building blocks of the transition are on track. Several areas have seen a worsening outlook:

• Weak cleantech investment is undermining industrial resilience. After briefly reaching an “on track” classification last year, the EU’s cleantech ecosystem is once again developing too slowly, with sustained declines in public energy and environmental R&D spending and cleantech scale-up investment.

• Finance is heading the wrong way, failing to support the transition. Financial flows remain vastly misaligned with climate goals due to a lack of investment in critical areas for the transition, while fossil fuel subsidies remain high.

• Nature-based resilience continues to deteriorate. The overall state of carbon dioxide removal has worsened and is again moving in the wrong direction, driven by slowing growth in EU forest area and declining carbon stocks.

The EU policy landscape to support the transition is still robust but increasingly uncertain

The EU’s policy landscape remains broadly supportive of climate neutrality, with a conducive policy mix in place for 85% of the overall objectives ECNO tracks and 70% for their underlying enablers. However, several key policies have been weakened. The 2035 zero emissions target for new cars and vans has been watered down, weakening investment signals for car manufacturers, and corporate sustainability reporting requirements have been significantly rolled back. Policies that actively hinder progress are rare, but the agrifood sector is a notable exception, where Common Agricultural Policy subsidies continue to favour emissions-intensive livestock farming over more sustainable models. 

Amidst this backdrop, safeguarding some of the EU’s flagship policies, such as the EU ETS and using the current energy security challenges as a catalyst for faster climate action become essential. Strengthening resilience and accelerating the transition must increasingly be seen as complementary objectives.

This report was funded by the European Climate Foundation.