Policy brief

Decarbonisation of the energy system

Our analysis highlights that the current national energy and climate plans (NECPs) of EU countries are insufficient to achieve a cost-efficient pathwa

Publishing date
13 January 2022

This Policy Contribution was written building upon a study prepared for the European Parliament’s Committee on Economic and Industry, Research and Energy (ITRE), available here.

Three quarters of the European Union’s greenhouse gas emissions stem from burning coal, oil and natural gas to produce energy services, including heating for buildings, transportation and operation of machinery. The transition to climate neutrality means these services must be provided without associated emissions.

It is not possible today to determine tomorrow’s optimal clean energy system, largely because the cost, limitations and capability developments of competing technologies cannot be predicted. Energy systems with widely diverging shares of ‘green fuels’, in the form of electricity, hydrogen and synthetic hydrocarbons, remain conceivable. We find the overall cost of these systems to be of the same order of magnitude, but they involve larger investments at different stages of value chains. A large share of synthetic hydrocarbons would require more investment outside the EU, but less in domestic infrastructure and demand-side appliances, while electrification requires large investment in domestic infrastructure and appliances. Current projections show an overall cost advantage for direct electrification, but projections will evolve and critical players may push hard for alternative fuels. Policy will thus play a major role in shaping this balance.

Political decisions should, first, push out carbon-emitting technology, primarily through carbon pricing. The more credible and predictable this strategy is over the coming decades, the smoother will be both divestment from brown technologies and investment in green technologies.

Second, policy needs to help ensure that enough climate-neutral alternatives are available in time. Clear public support should be given to three system decisions about which we are sufficiently confident: the massive roll-out of renewable electricity generation; the electrification of significant shares of final energy consumption; and rapid phase-out of coal from electricity generation. For energy services where no dominant system has yet emerged, policy should forcefully explore different solutions by supporting technological and regulatory experimentation.

Given the size and urgency of the transition, the current knowledge infrastructure in Europe is insufficient. Data on the current and projected state of the energy system remains inconsistent, either published in different places or not at all. This impedes the societal discussion. The transition to climate neutrality in Europe and elsewhere will be unnecessarily expensive without a knowledge infrastructure that allows society to learn which technologies, systems, and polices work best under which circumstances.

 

Recommended citation
Zachmann G., F. Holz, C. Kemfert, B. McWilliams, F. Meissner, A. Roth and R. Sogalla (2022) ‘Decarbonisation of the energy system' Policy Contribution 01/2022, Bruegel

About the authors

  • Georg Zachmann

    Georg Zachmann is a Senior Fellow at Bruegel, where he has worked since 2009 on energy and climate policy. His work focuses on regional and distributional impacts of decarbonisation, the analysis and design of carbon, gas and electricity markets, and EU energy and climate policies. Previously, he worked at the German Ministry of Finance, the German Institute for Economic Research in Berlin, the energy think tank LARSEN in Paris, and the policy consultancy Berlin Economics.

  • Alexander Roth

    Alexander Roth, a German citizen, works as a Research Intern at Bruegel in the area of climate and energy policy. He holds a BSc and MSc in Economics from the University of Mannheim and an MSc from the Free University of Brussels (ULB).

    Prior to joining Bruegel, Alex worked on the European Carbon Trading System at DG Climate Action in the European Commission. He conducted research at the Centre for European Economic Research (ZEW), Commerzbank AG and the University of Mannheim.

    Alex's research interests include empirical microeconomics, focusing on climate, energy, and environmental economics and policies.

    He is fluent in German, English and French, and has a good knowledge of Spanish.

  • Ben McWilliams

    Ben is working at Bruegel as a Research Analyst in the field of climate and energy policy. He studied his BSc Economics at the University of Warwick, with one year spent studying at the University of Monash, Melbourne. He then studied an MSc in Economic Policy at Utrecht University.

    His MSc thesis investigated carbon taxation in British Columbia, Canada, and his research interests revolve largely around energy and environmental topics. Further research topics of particular interest include: economic history (20th century), labour markets, and industrial policy.

    Ben is a dual English and Dutch citizen.

  • Franziska Holz

  • Robin Sogalla

  • Frank Meissner

  • Claudia Kemfert

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