The European Commission is drafting a new 2050 climate and energy strategy that will set out a vision for net-zero emissions in Europe by 2050, to be unveiled before the next round of UN climate talks, in Katowice, Poland this December. Energy Post reports on the latest internal reflections on the new strategy, using the , jointly developed by Energy Post and Shell, to put the ideas in context.
More than half of the EU Commissioners in the early hours of 10 October to develop the foundations for a new EU 2050 climate and energy strategy. Their goal was clear: set out a vision for a net-zero greenhouse gas economy by 2050. In the wake of this political guidance, the Commission’s services are burning the midnight oil to finalise the strategy by the end of November.
The strategy is being prepared in response to a request from the European Council (ie Member States). Until now, EU governments were committed to an 80% emissions reduction by 2050, as set out in dating back to 2011. The new vision needs to be seen in the context of the 2015 Paris climate agreement, which commits the world to net-zero emissions in the second half of this century (ie 2050-99).
On the basis of the findings of the latest Intergovernmental Panel on Climate Change report and the urgency for action, the Commission has agreed internally that for Europe this should mean carbon neutrality or net zero by 2050.
To put these figures in context, the , jointly developed by Energy Post and Shell using Eurostat data, shows that the EU has reduced its emissions by 22% since 1990, but still emitted 159 million tonnes of CO2-equivalent (MtCO2e) in 2016 (the last year for which verified data is available).
The App also shows Europe has succeeded in decoupling economic growth from CO2 emissions: the EU has nearly halved CO2 emissions per unit of gross domestic product (GDP) since 1990, while GDP itself has almost doubled since 1995.
In some Eastern European countries, such as Hungary, Poland and Romania, the decoupling is particularly impressive, with GDP tripling or even quadrupling while CO2 efficiency increased by up to 60%. Sweden has been the EU’s most CO2-efficient economy since 1990.
On track to 2020, 2030, not 2050
In a discussion paper for the internal meeting, seen by Energy Post, the team headed by the Vice-President for the Energy Union, Maroš Šefčovič, says that the new 2050 strategy “should pave the way for a modern, technologically advanced and competitive economy, based on a largely carbon-free energy system, which in turn would contribute to improving the quality of life, addressing the social challenges across Europe and minimising the negative impacts of climate change.”
This is about societal transformation, not reducing emissions by X% over Y years. Unlike the EU’s 2011 roadmap, it will explore how to modernise all sectors of the European economy, rather than number-crunch tonnes of CO2, billions of cubic metres or megawatts.
At the 10 October meeting, the Commissioners were asked to outline the main short-to-medium-term policy challenges they see in their respective areas, to put the EU on track to net-zero emissions. The Commission is thinking about the ‘how’ as well as the ‘what’. The discussion paper zips through the Energy Union, EU climate legislation, energy security rules, the Clean Energy Package, the Clean Mobility Packages and the Juncker Investment Plan to conclude that the EU is “on a solid path to meet the ambitious 2030 climate and energy objectives.”
“The new 2050 strategy “should pave the way for a modern, technologically advanced and competitive economy, based on a largely carbon-free energy system.”
Problem is, those objectives “will not be sufficient to meet the objectives for 2050 set by the Paris agreement,” the Commission acknowledges. The point of the new long-term strategy is to “shed light on strategic choices that need to be taken” to rectify that.
The shows the EU has already met its 20% greenhouse gas emissions reduction target for 2020, thanks to a combination of policy and economic circumstance. EU policies such as the 20% renewable energy and energy efficiency targets for 2020, plus introducing a price for carbon, have helped drive down emissions, although the biggest drops were due to the economic recession in 2008 and the end of the Soviet era in Central and Eastern Europe in the 1990s. Germany is by far the largest emitter in Europe in absolute terms.
After years of leadership on emission reductions, Germany’s progress has slowed since 2010 however, as it struggles to reduce lignite use. To get on track for 2050, the EU will need to do more in a decade than it has done over the past three decades.
Five priority areas
The Commission is exploring a series of transition pathways for “energy (with its central role), transport, industry, housing [and] agriculture.”
It is taking into account globalisation, digitisation, the importance of social and regional policies, research and innovation needs, and the use of natural resources, land and forestry. The project team suggests that the opportunities and challenges of a net-zero emissions economy fall into five areas: economy, society, innovation, natural resources and global leadership.
Economy, finance, taxation
Competition, labour markets and other structural policies need to be aligned with climate action and energy policies, the team says.
External costs need to be internalised into energy along the life cycle.
Fiscal instruments could be used to influence investment and consumption.
Notably, “fuel taxation could be identified as an area for qualified majority voting.”
And financial market incentives need to be re-aligned to long-term societal infrastructure needs (ie modernise the energy system, avoid stranded assets).
The surprise in the above batch is fuel taxation: all tax decisions at EU level currently need the unanimous support of Member States to go ahead.
This is virtually impossible to achieve, which is why the EU has an EU Emission Trading Scheme (ETS) rather than carbon tax and why past attempts to reform energy (or fuel) taxation have gone nowhere.
However, if the EU changed its rules to allow qualified majority voting on fuel taxation, it would open up a whole new policy toolkit to reduce greenhouse gas emissions from the transport sector.
The EU’s transport emissions have almost caught up with those from industry and power, historically Europe’s largest emitters. Transport accounted for close to a quarter of emissions in 2016, up from just 15% in 1990.
Luxembourg is the EU’s biggest per-capita emitter, consistently emitting up to three times more than the EU average, due to its transport sector and more specifically its fuel export business. Transport emissions only started to decrease in 2007 and they are still higher than 1990 levels.
In 2016, the EU reported 7.1% renewables in transport (almost all biofuels), which finally starts bringing it within reach of its 10% by 2020 target.
Sweden, Finland, Austria, France, Portugal and Slovakia lead the pack; 10 Member States are still less than halfway to the target.
Social and local aspects
The team recognises there will be losers as well as winners in the energy transition. It suggests jobs may be lost in gas as well as coal and oil production and distribution. There will be huge demand for new skills. The transition needs to be affordable for all energy end-users, ie households as well as industry, the team emphasises. The unit cost of energy “may” increase, “notably if public support to inefficient and polluting technologies is reflected in final energy prices.”
Consumer choice, energy efficiency and EU solidarity can help create a “fair” transition.
On average, households pay 1.5 times more for their electricity than industry. The lower prices for industry stem from the higher volumes it consumes and special exemptions from certain levies (eg to support renewables) to protect international competitiveness. A rising share of the total electricity price is made up of taxes and levies. In Denmark and Germany, taxes and levies actually outweigh the wholesale price.
Overall, consumers in the most expensive Member States pay over three times more for their power than those in the cheapest. Energy intensive industries have managed to keep up exports thanks in part to energy efficiency improvements.
Innovation, technology and infrastructure
EU industry today is already one of the world’s most efficient. Circular economy thinking, such as re-using waste, extending product lifetimes and offering services rather than products, can help European industries withstand rising global competition. In the meantime, research and innovation needs to identify and deploy “breakthrough” solutions.
This requires investment in a long-term infrastructure that is flexible enough to accommodate new solutions, avoids stranded assets, and recognises “the different life cycles of the technologies and beneficial interlinkages between various sectors.”
The final reference sounds like a call to recognise the role of gas in the energy transition, in particular as a complement to electricity (which it can help store, for example). The future of gas out to 2050, and in particular the possibility of decarbonising it, for example through power-to-gas and hydrogen, is a hot topic in Brussels right now. Decarbonising gas could be one way of decarbonising energy-intensive industries (EIIs).
Decarbonising Europe’s electricity supply is going to be a big challenge.
The Institute of European Studies at the Vrije Universiteit Brussel (VUB) prepared a this summer on behalf of 11 European EIIs that analyses how they might decarbonise by 2050. It concludes that their contribution strongly depends on access to competitively priced, abundant and reliable low-CO2 electricity. “EIIs will become electro-intensive industries,” the study’s lead author, Tomas Wyns, told Energy Post.
Decarbonising Europe’s electricity supply is going to be a big challenge. Eurelectric, representing the European power sector, plans to present a study suggesting how it could decarbonise “well before 2050” by the end of the year. In the meantime, the shows renewables have more than doubled their market share over the last 25 years, to account for close to a third of power generation in 2016. But coal still made up a fifth. Nuclear accounted for a quarter.
Apart from renewables, gas is the only other source to show overall growth since 1990: it has more than doubled its market share while coal’s has halved. Total electricity generation has grown, even as total energy consumption has barely budged, reflecting the system’s increasing electrification.
Land is central to delivering net-zero emissions because “the natural carbon sink of forests and agricultural land allows the offsetting of residual emissions from sectors where decarbonisation is the most challenging, including agriculture itself.”
At the same time, there is growing demand for biomass, as a substitute for fossil fuels in energy and chemical production, which will have to be “managed carefully” to avoid reducing natural carbon sinks. Access to certain raw materials is essential too for the development of strategic technologies such as batteries, the team adds.
So far biofuels have contributed nearly 90% to the 10% renewables in transport target for 2020, but a new EU renewable energy directive limits the use of first-generation biofuels to 7% after 2021. It also foresees the phase-out of biofuels made from palm oil and soy. There are big question marks over whether advanced biofuels (made from waste) will be ready in time to take over, and what the role will be of alternatives such as battery electric vehicles or green hydrogen.
European companies should continue to lead on new technologies, business models and regulatory standards setting, the team says. “Climate principles should be built into trade rules.”
Earlier this year, the Commission that it would look to trade rules to create a market for European-produced batteries for electric vehicles. This could mean making importers pay an eco-tax for batteries produced less sustainably elsewhere.
The Commission plans to present its new 2050 climate and energy strategy at the end of November, just before the next round of UN climate talks in Katowice, Poland. This is confirmed in the Commission’s , which was adopted on 23 October.
On 25 October, MEPs called for the EU to pursue a 1.5°C rise in global temperatures and a 55% emission reduction by 2030. The Commission is unlikely to propose an increase to the EU’s 40% emission reduction target for 2030 at this stage. Instead, the new long-term strategy will be its contribution, and the current Commission’s climate and energy legacy, to the climate talks. It will be for the next Commission, due to take over next November, to translate its tough implications into hard legislation. Assuming, of course, it is endorsed by the European Council.
The new 2050 strategy will be submitted to European heads of state and government for approval, probably at a special Sibiu Summit on 9 May 2019, six weeks after Brexit and two weeks before European Parliament elections, as part of the forging of a new identity for the EU-27.