EU State of the Union 2026: From energy ambition to delivery
Every year, the State of the European Union (SOTEU) address serves as a political checkpoint for Europe: a moment to assess progress, reflect on emerging challenges, and chart a course for the future. In this year’s 2026 SOTEU speech, Commission President Ursula von der Leyen set out her vision for Europe – rich in rhetoric – but offered no groundbreaking solutions.
Yet the context in which this year’s speech was delivered is changing rapidly. Europe has awakened to a new geopolitical reality. Long-held assumptions about security, energy, trade, and global cooperation are being tested, exposing the risks of strategic dependencies and a model that too often relied on stability being taken for granted. It has now entered a period of both challenge and opportunity. Energy security remains a central concern, while the transition away from imported fossil fuels is creating an opportunity to strengthen Europe’s industrial base, reduce energy costs and build a more resilient electricity system.
Two years after Mario Draghi’s landmark competitiveness report, reducing strategic dependencies has become central to the EU’s economic and energy agenda. Von der Leyen’s answer was explicit: “So we need to double down on our affordable and homegrown clean energy.” With the 2040 climate target now set, the challenge is increasingly one of delivery. The next phase of Europe’s climate and energy policy will be judged by whether it creates the conditions for investment, infrastructure, and innovation to deliver its objectives.
That means implementing the 2040 target, upholding policies that are already delivering emissions reductions and legal certainty to businesses, and creating the framework for the technologies and infrastructure that Europe will need to decarbonise while maintaining a competitive industry and a secure energy system.
Clean firm power for an electrifying Europe
“For this independence, we need to electrify Europe.”
Low-carbon sources generated more electricity than fossil fuels in 2025. Overall, renewables accounted for 47% of EU electricity generation, while nuclear energy supplied a further 23%.1 This is important progress, but as Europe electrifies more of its economy, it must also build a power system that can deliver affordable, reliable electricity when and where it is needed.
The recently published EU Electrification Action Plan is an important step in that direction. Alongside measures to reduce electricity costs, it proposes increasing electrification to 46% of energy use by 2040, with the Commission estimating that this could save the EU €260 billion annually in fossil fuel imports.2 Meeting that indicative target will require a diverse mix of renewables, clean firm power, storage and the grids needed to connect them to consumers.
This is also where the upcoming review of the Governance Regulation matters. Europe needs a governance framework that provides clear, credible planning signals for the clean electricity system it needs to build. Clean firm power should be an explicit part of that discussion to complement variable renewables and help provide the reliable electricity needed for a highly electrified economy. Von der Leyen herself called for an approach that is “technologically neutral”, including different clean energy technologies.
The need for reliable clean power will become even more pressing as new sources of electricity demand emerge. President von der Leyen’s emphasis on AI has a direct energy dimension. AI factories, gigafactories and the wider investment agenda will require significant amounts of clean electricity. While there is some progress around tripartite agreements between data centre operators, energy stakeholders, and public authorities, a more structured and formal framework for tripartite clean-electricity contracts would also help industrial consumers secure the power they need to invest.
But building generation is only part of the challenge. The problem is no longer simply whether Europe can efficiently plan and build clean generation, but whether it can connect and use it. Von der Leyen highlighted the scale of the bottleneck today: “Last year we installed more than 80 gigawatts of renewable capacity. Good. But six times more capacity is still waiting to be connected. What a waste.”
This makes expanding Europe’s electricity infrastructure as important as expanding generation, a central challenge the Grids Package now needs to address. As negotiations continue, the EU should ensure that the final framework is sufficiently ambitious to accelerate permitting, cross-border infrastructure and investment in the transmission and distribution networks Europe will need. The objective should be clear: build the grid ahead of demand, connect new sources of clean power faster, and ensure that Europe’s growing electricity needs can be met with abundant, affordable and reliable clean energy.
Industrial decarbonisation: Turning policy into investment
The President’s focus on EU competitiveness is welcome and much needed. Europe’s industrial strategy should ultimately be judged by whether it creates the conditions for companies to invest in decarbonisation and meet our climate ambition, and whether announced projects reach final investment decisions and begin operating.
The July climate and energy package, including the proposal to revise the EU Emissions Trading System (ETS) and to set up the €100 billion Industrial Decarbonisation Bank provides important tools. The ETS remains fundamental. It provides the long-term investment signal that industry needs, and its revision should strengthen rather than weaken that signal.
Another challenge is closing the gap between decarbonisation projects that are announced and projects that are built. The Industrial Decarbonisation Bank should be designed to help projects reach final investment decision and operation, complementing demand-side measures such as those proposed under the Industrial Accelerator Act (IAA). Europe needs functioning lead markets for low-carbon products. CATF has been calling, together with industry, research organisations, and civil society peers, for progressively increasing low-carbon procurement quotas, credible definitions of what qualifies as low-carbon, and measures that create demand beyond public procurement.
Keeping the ambition
The EU Methane Regulation is one of the world’s strongest frameworks for tackling methane emissions from the energy sector. The priority now should be implementation. Weakening methane rules would undermine both the EU’s climate objectives and the credibility of its approach to imported fossil fuels.
Methane also belongs in the energy-security discussion. Methane mitigation can generate major economic and energy security gains by preventing precious gas from being wasted. Reducing methane emissions across imported fossil fuel supply chains should remain part of Europe’s energy security strategy.
Von der Leyen reaffirmed the Commission’s commitment to simplification and faster implementation, but simplification should not mean deregulation.
What needs to happen next
The EU has entered a different phase of its climate and energy transition. The broad direction is increasingly clear. The challenge now is implementation, deployment, and investments.
Europe has made significant progress since the last energy crisis. But today’s energy shock reminds us that dependence on imported fossil fuels remains a vulnerability and that diversification of both partners and technologies will be needed.
The next phase needs to be about building. Building the grids and clean power capacity Europe needs. Building the industrial facilities that will underpin its competitiveness. Building the infrastructure to support carbon management. And creating the market and regulatory conditions that let technologies such as SMRs, geothermal, and fusion move from promise to deployment.
1 Eurostat. 47% of EU’s electricity came from renewables in 2025. https://ec.europa.eu/eurostat/web/products-eurostat-news/w/ddn-20260319-2.
2 European Commission, 2026. From promise to progress: second year in office. https://commission.europa.eu/document/download/367af55c-0045-46f1-a7fc-98418e209ad3_en?filename=State%20of%20the%20Union%202026%20-%20From%20promise%20to%20progress%20second%20year%20in%20office.pdf.
