The Sustainability Impact of the EU Emissions Trading System on the European Industry. Bruges European Economic Policy (BEEP) Briefing 17/2007

This BEEP explains the mechanism of the EU Emissions Trading System (ETS) for the greenhouse gas carbon dioxide and explore into its likely sustainability impact on European industry. In doing so, it focuses on energy-intensive industries like cement, steel and aluminium production as well as on the emerging hydrogen economy. The BEEP concludes that at the moment it is still very inconsistently implemented and has a fairly narrow scope regarding greenhouse gases and involved sectors. It may also give an incentive to relocate for energy-intensive industries. In its current format, the EU ETS does not yet properly facilitate long term innovation dynamics such as the transition to a hydrogen economy. Nevertheless, the EU ETS is foremost a working system that – with some improvements – has the potential to become a pillar for effective and efficient climate change policy that also gives incentives for investment into climate friendly policies.

You'd better bet on the ETS. Bruegel Policy Brief 2013/02, April 2013

The issue: The European Union's emissions trading system (ETS), introduced in 2005, is the centerpiece of EU decarbonisation efforts and the biggest emissions trading scheme in the world. After a peak in May 2008, the price of ETS carbon allowances started to collapse, and industry, civil society and policymakers began to think about how to ‘repair the ETS’. However, the ETS is an effective and efficient tool to mitigate greenhouse gas emissions, and although prices have not been stable, it has evolved to cover more sectors and greenhouse gases, and to become more robust and less distorting. Prices are depressed because of an interplay of fundamental factors and a lack of confidence in the system. Policy challenge The ETS must be stabilised by reinforcing the credibility of the system so that the use of existing low-carbon alternatives (for example burning gas instead of coal) is incentivised and investment in low-carbon assets is ensured. Further-more, failure to reinvigorate the ETS might compromise the cost-effective synchronisation of European decarbonisation efforts across sectors and countries. To restore credibility and to ensure long-term commitment to the ETS, the European Investment Bank should auction guarantees on the future emission allowance price.This will reduce the risk for low-carbon investments and enable stabilisation of the ETS until a compromise is found on structural measures to reinforce it in order to achieve the EU's long-term decarbonisation targets.

The Potential Evolution of the European Energy System to 2020 and 2050. CEPS Working Document No. 392, 26 March 2014

This paper assesses the impact of decarbonisation of the energy sector on employment in Europe. Setting the stage for such an assessment, the paper provides an analysis of possible pathways to decarbonise Europe’s energy system, taking into account EU greenhouse gas emissions reduction targets for 2020 and 2050. It pays particular attention to various low-carbon technologies that could be deployed in different regions of the EU. It concludes that efficiency and renewables play a major role in any decarbonisation scenario and that the power sector is the main enabler for the transition to a low-carbon economy in Europe, despite rising electricity demand. The extent of the decline in the share of fossil fuels will largely depend on the existence of carbon capture and storage (CCS), which remains a major source of uncertainty.

A European response to the resource and climate challenge. CHALLENGE EUROPE Issue 22 - Challenges and new beginnings: Priorities for the EU's new leadership, September 2014

The 20th Century was characterised by growth: the world population grew by four times and its economic output grew by 40 times. At the same time, the resource use and greenhouse gas emissions increased drastically. Only within the last two decades, the worldwide extraction of resources increased by over 50%. With the expectation that the demand of resources will triple by 2050 and the demand for food, feed and fibre is projected to increase by 70%, there is no doubt that we will exceed our planet's boundaries, the safe thresholds within which humanity can continue to develop and thrive for generations to come. Crossing these boundaries could generate abrubt or irreversible environmental changes. Respecting them reduces the risk that human society and ecosystems will face irreversible damages.

Consensus, contradiction, and conciliation of interests: the geo-economics of the Energy Union. EPC Policy Brief, 8 July 2015

European Union energy policy calls for nothing less than a profound transformation of the EU's energy system: by 2050 decarbonised electricity generation with 80-95% fewer greenhouse gas emissions, increased use of renewables, more energy efficiency, a functioning energy market and increased security of supply are to be achieved. Different EU policies (e.g., EU climate and energy package for 2020) are intended to create the political and regulatory framework for this transformation. The sectorial dynamics resulting from these EU policies already affect the systems of electricity generation, transportation and storage in Europe, and the more effective the implementation of new measures the more the structure of Europe's power system will change in the years to come. Recent initiatives such as the 2030 climate/energy package and the Energy Union are supposed to keep this dynamic up. Setting new EU targets, however, is not necessarily the same as meeting them. The impact of EU energy policy is likely to have considerable geo-economic implications for individual member states: with increasing market integration come new competitors; coal and gas power plants face new renewable challengers domestically and abroad; and diversification towards new suppliers will result in new trade routes, entry points and infrastructure. Where these implications are at odds with powerful national interests, any member state may point to Article 194, 2 of the Lisbon Treaty and argue that the EU's energy policy agenda interferes with its given right to determine the conditions for exploiting its energy resources, the choice between different energy sources and the general structure of its energy supply. The implementation of new policy initiatives therefore involves intense negotiations to conciliate contradicting interests, something that traditionally has been far from easy to achieve. In areas where this process runs into difficulties, the transfer of sovereignty to the European level is usually to be found amongst the suggested solutions. Pooling sovereignty on a new level, however, does not automatically result in a consensus, i.e., conciliate contradicting interests. Rather than focussing on the right level of decision making, European policy makers need to face the (inconvenient truth of) geo-economical frictions within the Union that make it difficult to come to an arrangement. The reminder of this text explains these latter, more structural and sector-related challenges for European energy policy in more detail, and develops some concrete steps towards a political and regulatory framework necessary to overcome them.