EU targets 46% electrification by 2040 to cut €260bn fossil imports
The European Commission has proposed doubling electricity's share of final energy consumption to 46% by 2040, a structural shift that could eliminate €260 billion in annual fossil fuel imports but faces significant regulatory pricing hurdles.
The European Commission has introduced the Electrification Action Plan, setting a target for electricity to supply 46% of the bloc’s final energy consumption by 2040. This would effectively double the current share of roughly 23%, a figure that has remained stagnant for a decade. The policy shift is framed by Brussels as an urgent economic and security response to global market turbulence tied to the Middle East conflict.
For market participants, the plan represents a deliberate effort to restructure the EU’s trade balance and reduce its exposure to volatile commodity cycles. The bloc remains highly vulnerable to external supply shocks, currently importing more than 80% of its natural gas and over 90% of its oil. Hitting the 46% target could reduce these fossil fuel import bills by as much as €260 billion annually by 2040.
The strategy hinges on aggressively transitioning sectors like transportation and domestic heating away from imported hydrocarbons. Instead, the EU intends to pivot these sectors toward renewable-powered electric grids and heat pumps. Beyond cutting import reliance, the Commission expects inherent efficiency gains, noting that electric motors and heat pumps fundamentally outperform traditional combustion engines and fossil fuel boilers.
Capital deployment toward this goal, however, faces significant structural price distortions within the internal energy market. The primary barrier to widespread consumer and industrial adoption is the electricity-to-gas price ratio, which currently exceeds 3.0x.
This ratio sits well above the Commission’s targets of 2.5x for households and 2.0x for industrial users. The persistent premium is largely driven by non-energy charges, legacy subsidies, social tariffs, and various levies rather than underlying wholesale power generation costs.
Resolving this pricing disconnect will require regulatory intervention, yet the Commission faces political headwinds. Several member states have already signaled resistance to the new carbon pricing levies that would typically be used to rebalance these energy costs and drive the transition forward.
