2050 EU Energy Strategy

1. How has EU energy matrix evolved in the past decades?

The European Union(EU) is a political and economic union of 28 member states and has
developed an internal single market through a standardised system of laws that apply in all
member states in those matters, and only those matters, where members have agreed to
act as one.
 Average annual growth rates for different fuels
1990-2005

-2.31%
-1.88%
5.82%
-1.43%
-2.90%

-4.00% -3.00% -2.00% -1.00% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00%
Total petroleum products Solid fuels Renewable energies Nuclear heat Gas

Average annual growth rates for different fuels

2005-2014

-2.31%
-1.88%
5.82%
-1.43%
-2.90%

-4.00% -3.00% -2.00% -1.00% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00%
Total petroleum products Solid fuels Renewable energies Nuclear heat Gas

Average annual growth rates for different fuels

2013-2016

-0.94%
-6.21%
1.71%
-0.07%
-11.71%

-14.00% -12.00% -10.00% -8.00% -6.00% -4.00% -2.00% 0.00% 2.00% 4.00%
Total petroleum products Solid fuels Renewable energies Nuclear heat Gas

 Primary energy consumption in the EU-28 increased by 9.1 % from

1 569 Mtoe in 1990 to 1 713 Mtoe in 2005. Between 2005 and 2014,
 primary energy consumption in the EU-28 countries decreased by
12.0 %, reaching 1 507 Mtoe in 2014. Various factors contributed to
this decrease in primary energy consumption, in particular energy
efficiency improvements, the increase of the proportion of energy
from hydro, wind and solar photovoltaics, the economic recession
and changing climate conditions [1]. Under the Energy Efficiency
Directive, the EU has set a target of limiting primary energy consumption to
no more than 1 483 Mtoe by 2020. In 2014, the EU was below the linear
pathway between 2005 levels and the 2020 target. The sum of all 2020
targets for primary energy consumption by the EU-28 (updated target as
notified in the NEEAPs 2014 or in a separate notification to the European
Commission in 2015; status October 2015) was equal to 1 527 Mtoe. This is
44 Mtoe (3 %) higher than the EU target for primary energy consumption of
1 483 Mtoe.
 Based on preliminary EEA estimates, in 2015, primary energy consumption
in the EU-28 was1525 Mtoe, 1.2 % higher than in 2014 but still below the
linear pathway towards the 2020 target.
 The proportion of coal and lignite in EU-28 primary energy consumption has
remained relatively stable since 2005, and was 18.5 % in 2005 and 17.7 %
in 2014. Since 2005, the absolute consumption of coal in the EU has
decreased by 16 % (1.9 % per year). Coal is mostly used for electricity
generation and the low coal price compared with gas and the low carbon
price in the EU-ETS mean that coal-based electricity production has low
marginal costs such that it is still competitive compared with gas-based
production for existing installations (see below).
 The proportion of natural gas in EU-28 primary energy consumption
decreased from 25.1 % in 2005 to 21.9 % in 2014. Since 2005, the
absolute consumption of gas in the EU decreased by 23 % (2.9 % per year).
This is partly the result of the increase in renewable energy. The increase of
renewable electricity has had a significant impact on the operations of gas-
fired power plants, which ran continuously (base-load) in the past, but
which now tend to operate during peak-load only, thereby reducing yearly
operation hours. The consumption of natural gas for heating in the
residential and service sectors was influenced by weather conditions
(relatively warm years) and income levels.
 The proportion of oil (crude oil and petroleum products) in EU-28 primary
energy consumption decreased from 33.8 % in 2005 to 31.1 % in 2014.
Since 2005, the absolute consumption of fossil oil in the EU decreased by 19
 % (2.3 % per year). Several factors contributed to this decline: the increase
in the use of biofuels in the transport sector, high oil prices for some periods
within the 2005-2014 observation period, the economic downturn and
energy efficiency improvements in cars, partly driven by EU regulations
on CO2 emissions from cars and vans.
 The proportion of nuclear energy in EU-28 primary energy consumption
remained stable at 15 % in 2005 and 2014. Since 2005, the absolute
consumption of nuclear energy in the EU decreased by 12 % (1.4 % per
year). This is because several old nuclear power plants have been shut
down (in Bulgaria in 2002 and 2006, in Lithuania in 2004 and 2009, and in
Slovakia in 2006 and 2008), and more recently, eight nuclear power plants
were shut down in Germany, in 2011, in reaction to the Fukushima accident
in Japan.
 The proportion of renewable energy in EU-28 primary energy consumption
increased from around 7.1 % in 2005 to 13.4 % in 2014. Since 2005, the
absolute consumption of renewable energy in the EU increased by 66 %
(9.6 % year). This growth was stimulated by national and European policies
to promote renewable energy, such as feed-in tariffs and premiums,
obligations for electricity producers, obligations for renewable energy in
transport fuel etc. In recent years, various EU governments have reduced
support levels for renewable energy, partly in response to the decreasing
costs of renewable energy technologies and higher than expected growth
(and thus support costs), but also in response to increasing government
budget deficits following the economic recession [2].
 Although primary energy consumption in the EU declined after 2005, it
increased in non-EU EEA countries, from 109 Mtoe in 2005 to 151 Mtoe in
2014. The main reason for the difference in the trend for these countries is
the large increase in primary energy consumption in Turkey (+4.3 % per
year) and, to a lesser extent, in Norway (+0.9 % per year). In Turkey, the
trend is driven by strong economic and population growth, while in Norway
developments may be driven by growth in certain industrial activities such
as the chemical industry.
 In 2014, the contribution of different fuels in primary energy consumption in
non-EU EEA countries was quite different to that in the EU-28. In particular,
nuclear energy accounts for a significant proportion of the EU-28 energy mix
(15.0 %), while it is absent in the non-EU EEA countries considered here.
Renewables account for a have a larger proportion of primary energy
consumption in the non-EU EEA countries (20.1 %, compared to 13.4 % in
 the EU-28). In 2014, the proportion of fossil fuels (including non-renewable
waste) was 71.6 % for the EU-28 and 80.5 % in the non-EU EEA.
 Fuel switching has implications on how dependent Europe is on imported
fuels (please see ENER036 for a discussion on the EU's dependency on
imported fuels).
 To achieve the EU's 20 % energy efficiency target by 2020, individual EU
countries have set their own indicative national energy efficiency targets
(Council Directive 2013/12/EU). All EU-28 Member States have set targets
for primary energy consumption. In 2014, 25 Member States had managed
to reduce or limit their primary energy consumption increase to levels below
the linear pathways drawn between their 2005 levels and their 2020
targets. Three Member States had not achieved sufficient savings: Estonia,
Malta and Sweden [3].

Fossil fuels (including non-renewable waste) continued to dominate primary

energy consumption in the EU-28, but as a proportion of total primary energy
consumption, they fell from 77.8 % in 2005 to 71.6 % in 2014. The proportion
of renewable energy sources almost doubled over the same period, from 7.1 %
in 2005 to 13.4 % in 2014. Finally, The proportion of nuclear energy in primary
energy consumption was 15.0 % in 2014.( https://www.eea.europa.eu/data-
and-maps/indicators/primary-energy-consumption-by-fuel-6/assessment-1)
Decarbonisation and energy transformation to date.
Since 1990, Emissions have reduced in all sectors, except for the transport sector
(Figure 3). Over the last 3 years changes in emissions were small, with slightly
increasing emissions in 2015 and 2017 and slightly decreasing emissions in 2016.

EU greenhouse gas emissions by sector 1990-2017

Structural changes in the European economy and policies for supporting renewables
and energy efficiency resulted in a decoupling of economic growth from GHG
emissions and energy consumption. GHG emissions in the EU peaked several decades
ago and continuous decoupling of growth and jobs creation from GHG emissions and
energy has been observed since 1990. Between 1990 and 2017, provisional data
indicate a total emissions decrease of 22%, while the EU’s combined GDP grew by 58%,
which implies that the greenhouse gas intensity of the economy was halved in this
period22 . Over the past years, economic growth and energy consumption have also
decoupled. The steadily declining demand for energy in the EU is attributed primarily
to energy efficiency measures in the Member States.
The long-term decoupling trend is clear: in 2016, the EU consumed 2% less primary
energy than it did in 1990, while GDP grew by 54% over the same period. EU energy
consumption gradually decreased between 2006 (its highest point) and 2014, with the
primary consumption reducing by 12% over the period (-1.5% per year) and the final
demand reducing by 11% (-1.4% per year). However, since then, energy consumption
has started to rise again in part due to colder winters, continued economic growth and
lower fuel prices. Statistics show that, in 2016, primary energy consumption was 2%
higher than in 2014 and final demand was 4% higher. Preliminary estimates indicate
that energy consumption has been further increasing in 2017 (+1.4% for primary
consumption and +1% for final consumption compared to 2016). It is clear that with
economic growth pushing energy consumption upwards, further efforts are needed in
order to reach the 2020 energy efficiency target (primary and final energy have to
reduce by respectively 5.2% and 3% over 2018-2020). In this context, a stricter
enforcement of the existing legislation is desirable. Figure 4 shows energy
consumption trends in the EU.

The energy-environment/climate nexus is determined by three factors: sustainability,

secure energy supply and affordability, which are the pillars of our energy and climate
policy. The sustained global economic growth since 1950 is due in part to the
availability of affordable sources of fossil fuels: coal, oil and gas. From a longer-term
perspective, fossil fuels have been fuelling the industrialisation of all the economies of
the world, starting in the middle of the 18th century in the UK, and have contributed
to the increased affluence of the (growing) world population. The mass-scale use of
cheap fossil fuels has enabled global economic growth but also resulted in a great
challenge for our societies: anthropogenic climate change. The growth of energy
consumption in our societies also has a massive external cost, described by the Stern
Review as ‘the greatest and widest-ranging market failure ever seen’. Climate change
is in large part a consequence of energy use. Mitigating climate change depends
critically on whether energy use can be greatly reduced, energy can be decarbonised
or both. Greenhouse gas emissions can be broken down by the economic activities
that lead to their production. The 2017 statistics released by the European
 Environment Agency (EEA) show that energy in the broad sense is responsible for
almost 75 % of direct greenhouse gas emissions in the EU, with the energy supply
sector being the single largest contributor (28 %)2 . Besides climate change, energy use
has a substantial effect on many other societal and environmental challenges such as
air pollution, resource extraction, biodiversity and land use. Taking air pollution as an
example, over 80 % of sulphur dioxide (SO2), nitrogen oxide (NOx) and primary
particulate matter (PM2.5) emissions can be attributed to energy use (International
Energy Agency (IEA), 2016). Accordingly, when aiming for a fundamental change to the
energy system, it is also paramount to take into account these other externalities, and
how the SDGs are affected.

2. What are EU 2050 energy policy targets and how they reflect global climate and
development goals?

The Energy Roadmap 2050 explored the contribution of the energy sector to such
decarbonisation objective (-85% of energy-related CO2 emissions relative to 1990). It set out
four main routes to a more sustainable, competitive and secure energy system in 2050: energy
efficiency, renewable energy, nuclear energy and carbon capture and storage.

The EU is committed to reducing greenhouse gas emissions to 80-95% below 1990 levels by
2050 in the context of necessary reductions by developed countries as a group.

In this Energy Roadmap 2050 the Commission explores the challenges posed by delivering the
EU's decarbonisation objective while at the same time ensuring security of energy supply and
competitiveness.

The 2050 target of an 80-95% reduction in greenhouse gas emissions from 1990 levels is much
more ambitious than the 20% reduction incorporated in the current 20-20-20 target for 2020.
If the 2050 target is to be achieved, large-scale changes in the energy system will be required
in the short to medium term so that investment in new infrastructure does not produce a
‘lock-in’ to fossil fuel-based technologies. It is often stressed that early action is required to
avoid higher future costs and to reduce frictions as energy production shifts towards
renewable sources (e.g. OECD, 2008). While the Energy Roadmap 2050 provides plausible
routes by which the target can be achieved, the assessments that have been made so far of
the advantages or disadvantages of each route have not yet given detailed consideration to
the impact on the labour market. This report aims to fill that gap. The Energy Roadmap
highlights ten key transformations of the energy system, which are likely to have important
impacts (both positive and negative) on employment in many different economic sectors.
Some examples considered in this report are:  construction and engineering, which could
benefit from a large-scale investment programme, such as in RES equipment  transport and
energy-intensive manufacturing, which could lose out due to higher energy costs  sectors
producing fossil fuels (e.g. coal mining) or the equipment for fossil fuel-based technologies,
which could reduce in size due to lower demand.( https://ec.europa.eu pdf)
The Roadmap does not replace national, regional and local efforts to modernize energy supply,
but seeks to develop a long-term European technology-neutral framework in which these
policies will be more effective.

Forecasting the long-term future is not possible. The scenarios in this Energy Roadmap 2050
explore routes towards decarbonisation of the energy system. All imply major changes in, for
example, carbon prices, technology and networks. A number of scenarios to achieve an 80%
reduction in greenhouse gas emissions implying some 85% decline of energy-related CO2
emissions including from transport, have been examined.

The EU policies and measures to achieve the Energy 2020 goals ( 5 ) and the Energy 2020
strategy are ambitious ( 6 ). They will continue to deliver beyond 2020 helping to reduce
emissions by about 40% by 2050. They will however still be insufficient to achieve the EU’s
2050 decarbonisation objective as only less than half of the decarbonisation goal will be
achieved in 2050. This gives an indication of the level of effort and change, both structural and
social, which will be required to make the necessary emissions reduction, while keeping a
competitive and secure energy sector.
(https://ec.europa.eu/energy/sites/ener/files/documents/2012_energy_roadmap_2050_en_0.
pdf)

Conclusions of the analysis:

Decarbonising the energy system is technically and economically feasible. In the long
run, all scenarios that achieve the emissions reduction target are cheaper than the
continuation of current policies.

Increasing the share of renewable energy and using energy more efficiently are crucial,
irrespective of the particular energy mix chosen.

Early infrastructure investments cost less, and much of the infrastructure in the EU
built 30 to 40 years ago needs to be replaced anyway. Immediately replacing it with low-
carbon alternatives can avoid more costly changes in the future. According to the International
Energy Agency, investments in the power sector made after 2020 would cost 4 times as much
as those made before 2020.

A European approach is expected to result in lower costs and more secure energy
supplies when compared to individual national schemes. With a common energy market,
energy can be produced where it is cheapest and delivered to where it is needed.

3. What are the key policy instruments and strategies used to achieve EU energy policy
goals?
An ambitious set of policy measures, including the rapid phase out of fossil fuel subsidies, CO2
prices rising to unprecedented levels, extensive energy market reforms, and stringent low-
carbon and energy efficiency mandates would be needed to achieve this transition. Such
policies would need to be introduced immediately and comprehensively across all countries

4. How far EU progressing in achieving their energy and climate policies goals?

Under the Energy Efficiency Directive, the EU has set a target of limiting primary energy
consumption to no more than 1 483 Mtoe by 2020. In 2014, the EU was below the linear
pathway between 2005 levels and the 2020 target. The sum of all 2020 targets for primary
energy consumption by the EU-28 (updated target as notified in the NEEAPs 2014 or in a
separate notification to the European Commission in 2015; status October 2015) was equal to
1 527 Mtoe. This is 44 Mtoe (3 %) higher than the EU target for primary energy consumption of
1 483 Mtoe.

Based on preliminary EEA estimates, in 2015, primary energy consumption in the EU-28 was
1525 Mtoe, 1.2 % higher than in 2014 but still below the linear pathway towards the 2020
target.

5. From your analysis, will EU meet their targets? What should EU do more in the
future?

All policy scenarios are coherent with other EU long term objectives (on climate, transport,
etc). There is no clear winner among policy options scoring the best in all criteria and several
trade-offs will need to be taken into account. The role of this analysis is not to select one
preferred pathway but rather to identify the pros and cons of different options and identify
common elements from all of them.

A potential trade-off between climate change policies and competitiveness continues to be a

risk for some sectors especially in a perspective of full decarbonisation if Europe was to act
alone. Europe cannot alone achieve global decarbonisation. The overall cost of investment
depends strongly on the policy, regulatory and socio-economic framework and the economic
situation globally. As Europe has a strong industrial base and needs to strengthen it, the
energy system transition should avoid industry distortions and losses especially since energy
remains an important cost factor for industry ( 14). Safeguards against carbon leakage will
have to be kept under close review in relation to efforts by third countries.

Implications for future policy making

Successful decarbonisation while preserving competitiveness of the EU economy is possible.

Without global climate action, carbon leakage might be an issue and appropriate instruments
could be needed to preserve the competitiveness of energy intensive industries.

Predictability and stability of policy and regulatory framework creates a favourable

environment for low carbon investments. While the regulatory framework to 2020 is mainly
given, discussions about policies for 2020-2030 should start now leading to firm decisions that
provide certainty for long-term low-carbon investments. Uncertainty can lead to a sub-optimal
situation where only investment with low initial capital costs is realised.

A well functioning internal market is necessary to encourage investment where it is most cost-
effective. However, the process of decarbonisation brings new challenges in the context, for
example, of electricity price determination in power exchanges: deep decarbonisation
increases substantially the bids based on zero marginal costs leading in many instances to
prices rather close to zero, not allowing cost recovery in power generation. Similarly, the
necessary expansion and innovation of grids for decarbonisation may be hampered if
regulated transmission and distribution focuses on cost minimisation alone. Building of
adequate infrastructure needs to be assured and supported either by adequate regulation
and/or public funding (e.g. financed by auctioning revenues).

Energy efficiency tends to show better results in a model than in reality. Energy efficiency
improvements are often hampered by split incentives, cash problems of some group of
customers; imperfect knowledge and foresight leading to lock-in of some outdated
technologies, etc. There is thus a strong need for targeted support policies and public funding
supporting more energy efficient consumer choices.

Strong support should be given to R&D in order to bring costs of low-carbon technologies
down and to minimize potential negative environmental and social side-effects.

Due attention should be given to public acceptance of all low carbon technologies and
infrastructure as well willingness of consumers to undertake implied changes and bear higher
costs. This will require the engagement of both the public and private sectors early in the
process.

Social policies might need to be considered early in the process given that households
shoulder large parts of the costs. While these costs might be affordable by an average
household, vulnerable consumers might need specific support to cope with increased
expenditures. In addition, transition to a decarbonised economy may involve shifts to more
highly skilled jobs, with a possibly difficult adaptation period.
 Flexibility. The future is uncertain and nobody can predict it. That is why preserving flexibility
is important for a cost efficient approach, but certain decisions are needed already at this
stage in order to start the process that needs innovation and investment, for which investors
require a reasonable degree of certainty from reduced policy and regulatory risk.

6. Investment for changing the energy system.

Whatever mix of technology is used to achieve the emission targets, all the studies agreed that
the switch to low-carbon technologies will require significant investment. At present, all low-
carbon technologies carry a relatively high capital cost. The European Climate Foundation
(ECF) study (2010) estimated that the proposed decarbonised scenarios require an increase in
capital expenditure for the power sector of 50% to 110% compared to baseline19 . Another
study (SEFEP, 2012), which looks at the Energy Roadmap scenarios, estimated the required
additional annual investment at around €270bn over the next 40 years. This is equivalent to
additional investment of 1.5% of EU GDP per annum (the present annual level of investment
across the whole economy is 19% of GDP). The cost of the required investment is also affected
by the increased transmission capacity and generation backup requirements needed by low-
carbon technologies. Generally, generation backup requirements tend to increase as the share
of renewables in the electricity generation mix increases (see e.g. ECF, 2010).

The task of developing post-2020 strategies is urgent. Energy investments take time to
produce results. In this decade, a new investment cycle is taking place, as infrastructure built
30–40 years ago needs to be replaced. Acting now can avoid costly changes in later decades
and reduces lock-in effects.

( https://ec.europa.eu pdf)