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The role of the state in providing infrastructure for decarbonisation

Bruegel Annual Meetings, Day 2 - Who should be responsible for providing crucial infrastructure for decarbonisation and how should it be managed?




by Ben McWilliams

Jean-Bernard Lévy (CEO, EDF) was asked whether the current model is enough for electricity infrastructure to arrive at net zero goals. He argued that it is not yet there. He highlighted a trade-off between two goals of preserving the efficiency of the internal market and preserving the plant. He argued that today competition rules are prioritised. Diedrik Samson (Timmermans Cabinet, European Commission) later pushed back against this claim: arguing that the two can exist alongside one another. And Mr Lévy later commented that there is the need for the development of a clear set of standards to allow for more flexible production of electricity.

Laurence Tubiana (Director, European Climate Foundation) was asked whether responsibilities should lie with markets or the state in building infrastructure. She highlighted that there are a number of trade-offs, and ultimately it must be some combination of the two. She highlighted a second important point: the need for involvement of local citizens in infrastructure problems. This is particularly important given the likelihood of short-term increases in energy prices. Citizens must be kept on board to prevent a backlash against decarbonisation.

Diederik Samsom (Timmermans Cabinet, European Commission) spoke of the natural division of tasks between markets and governments. He argued that capacity (pipelines, transmission network) should be covered by governments whilst increasing intelligence (e.g., smart meters, digitalisation) should be provided by the market. For this to happen, he says the correct market signals are in place for flexible producers and consumers (prosumers) to come onto markets. A theme of his intervention was the need for more risk taking and acceptance of failure.

Simone Tagliapietra (Senior Fellow, Bruegel) wanted to place the conversation in context. He highlighted the scale of the challenge: today, 2.5% of global GDP is invested in energy. These investments must a) be decarbonised, and b) increase to around 4.5% according to most conventional modelling studies produced today with an outlook of net zero GHG emissions by 2050. On the question of state vs markets, he commented that governments must provide the correct framework conditions whilst most investments must come from the private sector. There does exist a role for more explicit government intervention in enabling investments: those are investments which facilitate further investments, e.g., the reinforcements of electricity grids to allow private sector investments into further renewable capacities.

In a second round of interventions, Diedrik Samsom was clear to highlight that it is society and not the Commission who drives the discussion. The Commission only reflects society. To this end, he was keen to emphasise that the defining feature of the Fitfor55 legislation will not be electric vehicles, hydrogen or another new technology but rather solidarity. To this end, the Just Transition funding will be essential for maintaining support across the community.
Georg Zachmann (Senior Fellow, Bruegel) closed the discussion with the thought that the future of climate policy might be one intertwined with all other areas of discussion. A future in which all policy areas are increasingly infected by discussion of decarbonisation.