“Climate-neutral electricity generation in Europe by 2050 is feasible, both in terms of technology and economics. But in order to achieve it, the European Commission and national governments will need to make a policy shift,” says Remko Ybema, head of the ECN’s Policy Studies unit.
ECN is one of the knowledge institutes that has been working on a study coordinated by the European Climate Foundation (ECF) into the possibilities for Europe to generate climate-neutral electricity (in other words, with no CO2 emissions) by 2050. The results of the study are included in the report Roadmap 2050, a practical guide to a prosperous low carbon Europe, published in April. Its most important conclusion is that CO2-free energy supply will be possible by 2050 and it will not be any more expensive than electricity generated by conventional means. The role of the Policy Studies unit was to make a series of recommendations on how this might be achieved and to provide information on how the cost of solar and wind energy is likely to develop in the coming years. ECN also provided a second opinion (see a powerful and smart electricity network) on the future European electricity grid as part of the Roadmap 2050.
Ybema: “In Roadmap 2050, ECF presents an optimistic picture, outlining how it can be achieved. But the generation of electricity without CO2 emissions is not something that will develop of its own accord. All European government leaders will need to remain firmly fixed on this objective and ensure that they work to create the right conditions, partly because there will be fierce resistance from established players who fear they may lose out commercially.”
Energy efficiency
ECN made nine policy recommendations, subdivided into more specific proposals. Ybema highlights a few of these and offers an explanation. “First and foremost, not only will electricity generation need to be energy efficient, but also electricity consumption. As a result, the government will need to set stricter standards for the energy efficiency of electrical appliances for example and for heat insulation in houses and other buildings.
We also recommend a careful reassessment of the European CO2 emissions trading system (ETS). The CO2 emissions price has been so low in recent times as a result of the economic crisis that companies have had hardly any incentive to invest in reductions in CO2 emissions. We recommend that the ETS ceiling be lowered, meaning that companies will be allocated fewer emission rights each year. This will lead to an increase in the price of these rights, as a result of which the ETS will once more provide electricity and other companies with an incentive for reducing CO2 emissions. Currently, the European Union aims to reduce CO2 emissions by 20% by 2020, compared to 1990 levels. We recommend a more ambitious reduction of 30% by 2020. We also suggest providing percentages for 2030, 2040 and 2050. This provides long-term clarity and offers companies increased security in their investment decisions.”
The researchers have also called for improvements to the ETS. The prices of emission rights are currently subject to significant fluctuations, which inhibits companies in their investment decisions. Ybema: “We therefore propose the establishment of a European bank for emission rights, to be called the European Central Carbon Bank (ECCB). This will ensure that CO2 prices remain within a specific bandwidth. For example, if there is a rights surplus, the bank will be able to buy up these rights in order to raise the price and in times of shortages, the bank can sell rights to bring the prices down. This will provide businesses with greater certainty of achieving returns on their investments. No manager would wish to take the risk of losing money through investing in CO2 reduction, as it could jeopardise his or her career. Policy measures must be used in order to make investment more attractive.”
A combination of instruments
Ybema does not believe that a standard for CO2 emissions per kilowatt-hour for coal-fired power stations will be the solution that ultimately makes the difference. “A combination of different policy instruments will work more effectively. Subsidies and tax credits can be used to help early adopters to invest. The majority will generally cooperate if it can be achieved at a reasonable price. To achieve this, if the ceiling is strict enough and it is used in combination with the ECCB, the ETS is an effective and fair system based on the polluter pays principle. This will mean that companies have a certain degree of room to manoeuvre in terms of making their own choices, which will make any reduction measures all the more effective. But standards alone can make the policy too bureaucratic. Standards are actually only really needed to provide incentives for stragglers, as they make it clear to them that they also need to change.”
The EU already has the Strategic Energy Technology Plan for this energy transition. This concerns the development of new technology, such as solar cells and their introduction into the market. Ybema: “We recommend that this plan be further developed and that efforts be made to ensure that there is sufficient funding for its implementation. The cost of solar cells is already falling rapidly, but their application will not be possible without subsidies.”
Overarching climate framework
The transition to a climate-neutral energy supply not only calls for a technological plan but also for overarching climate legislation, a Climate and Resource Directive, providing a framework for all legislation and measures aimed at energy transition in order to prevent conflicts and ensure that they are all work towards a single goal.
Is this objective realistic? Ybema: “It is easier to reach consensus on 2050 than on 2020. In the short term, there are conflicts of interest. The umbrella organisations of industry occasionally adopt a reserved approach, because they also need to represent the interests of the most conservative companies. It is therefore good that there are such organisations as Groene Zaak, founded to promote sustainable businesses in the Netherlands, to represent companies who see a future in a sustainable economy and want to invest in it.”
How did the ECF come into contact with ECN? “In recent years, we have conducted a great deal of research on energy policy and especially into the effects of all kinds of policy instruments. We have earned ourselves an excellent reputation in this area, which means we increasingly receive commissions from abroad, such as from UNEP, the United Nations Environmental Organisation and from the World Bank.”
Contact
Remko Ybema
ECN Policy Studies
Tel.: +31 (0)22 456 44 28
E-mail: Remko Ybema
Text: Erik te Roller
Info
A zero-carbon European power system in 2050: proposals for a policy package, rapport van ECN.
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