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EU energy system transformation – Cost of Non-Europe


Written by Aleksandra Heflich and Jerôme Leon Saulnier.

The move towards more harmonised European Union (EU) energy policies has always been at the heart of the European project, as large savings from collective action could be expected in this area. As a result, a more integrated EU internal energy market has gradually emerged as a reality, although much more needs to be done to arrive at a more efficient organisation and to ensure further beneficial convergence. Facing and understanding the ongoing climate crisis, the EU has also been at the forefront of combining energy and climate policies to reduce greenhouse gas (GHG) emissions following its international commitments under the Kyoto Protocol. After over a decade of pursuing ambitious climate and energy policies, the EU has already achieved some progress such as producing 20 % of energy from renewable energy sources, improving its energy efficiency and effectively reducing GHG emissions from sectors under the EU emission trading system. In 2021, the EU stepped up its ambition with proposals for a new set of actions across all sectors to set the right trajectory for the EU economy to efficiently achieve climate neutrality by 2050. Most importantly, this objective is underpinned by a landmark, legally binding European Climate Law that makes the EU one of few main global emitters to have made such a strong binding commitment to achieving climate neutrality by mid-century.

There are many challenges ahead on the road to a zero net-emitting EU energy system by 2050 (see Chapter 2). How successful the EU is in decarbonising its energy industries, that are still responsible for 80 % of EU GHG emissions, will be key for the overall success of the European green transformation and the climate neutrality of the EU economy in a broader sense. Action taken on decarbonising the EU energy system in the coming years will determine not only the potential net monetary impacts and successes of achieving the final environmental target of net zero emissions in 2050 but also whether the transformation is just and fair to all and contributing to achieving a sustainable and prosperous society boasting a modern, resource-efficient and competitive economy.

More specifically, the present report, drafted at the request of the European Parliament’s Committee on Industry, Research and Energy (ITRE), looks at the EU objective of achieving the decarbonisation of its energy system by 2050 from a perspective of what would happen without ambitious and united EU action in this area. It aims to establish what the cost of non-Europe would be if the EU does not step up its efforts towards achieving energy transformation. It estimates the potential environmental, social and macro-economic consequences in a decade (2030), and three decades (2050), from now. At the same time, the report presents quantifications of the potential beneficial role that the EU could play if common budgetary, coordination and regulatory actions are stepped up until 2050. The report also reviews progress made over recent years as well as analysing future opportunities for boosting the energy industries’ effective actions in the context of the EU economic recovery, and the investments necessary to achieve net-zero emissions for the energy system in 2050.

The underpinning study in Annex II as well as the complementary quantitative estimations and analysis done in this report (see Chapter 3) indicate that many of the key challenges associated with the transformation of the EU energy systemcould be difficult to overcome efficiently and effectively if no further common and determined EU action is taken. Ensuring rapid development and deployment of the green technologies needed for decarbonising energy use in sectors that are difficult to decarbonise, while also reinforcing EU global competitiveness and leadership in some of these technologies, would also be achieved more rapidly and efficiently if done in a concerted way. Moreover, some society- and policy-related challenges, such as ensuring an appropriate non-distortive EU carbon price signal is sent to the internal market, are more effectively addressed at the EU level. At the same time, the distributional effects of this pricing could be addressed at the EU level so that the transformation ensures continued convergence and strengthens EU social and economic cohesion, while being fair and inclusive. Finally, given the constraints placed on public finances as a result of the coronavirus pandemic, the appropriate levels of financing dedicated to energy transformation could also be allocated at EU level, thus reinforcing the Member States’ national budgetary spending.

Read the complete study on ‘EU energy system transformation – Cost of Non-Europe‘ in the Think Tank pages of the European Parliament.

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