EUROPEAN COMMISSION Brussels, 29.6.2022 COM(2022) 289 final COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL 2022 Strategic Foresight Report



















Twinning the green and digital transitions in the new geopolitical context



I.Introduction The world is experiencing tectonic geopolitical shifts, reinforcing the megatrends already affecting the EU. The long-term implications of Russia’s military aggression against Ukraine, including for energy, food, economy, security, defence and geopolitics, will clearly affect Europe’s path to achieving fair green and digital transitions. However, these and other future challenges will not divert the European Union from its long-term objectives. With the right set of policies, they can serve as a catalyst to speed up achieving them. Ultimately, this could foster our resilience and open strategic autonomy in various areas, from energy, food, security and critical supplies – including raw materials needed for the transitions – to cutting-edge technologies. Against this new geopolitical backdrop, and drawing on a fully-fledged foresight exercise, the 2022 Strategic Foresight Report presents a forward-looking strategic reflection on the interactions between the green and digital transitions. Both are at the top of the EU’s political agenda and their interplay will have massive consequences for the future. Their success will also be key for achieving the United Nations Sustainable Development Goals. While they are different in nature and each subject to specific dynamics, their twinning – i.e. their capacity to reinforce each other – deserves closer scrutiny. The green transition will not happen without the targets and policies set out in the European Green Deal, a cross-cutting strategy to reach climate neutrality and reduce environmental degradation by 2050. Until recently, the digital transition progressed with only limited sustainability considerations. To diminish adverse side effects and deliver its full potential for enabling environmental, social and economic sustainability, the digital transition requires appropriate policy framing and governance, as presented in the Digital Compass and Fit for 55. On the path towards 2050, twinning will depend on the ability to deploy existing and new technologies at scale, as well as on various geopolitical, social, economic, and regulatory factors. Based on their analysis, this Communication identifies ten key areas where action will be needed. A comprehensive, future-oriented and strategic approach to the twin transitions, recognising their inherently geopolitical nature, is necessary to further reinforce their synergies and address tensions. II.Synergies and tensions between the green and digital transitions Digital technologies could play a key role in achieving climate neutrality, reducing pollution, and restoring biodiversity. By measuring and controlling inputs, and with increased automation, technologies like robotics and the internet of things could improve resource efficiency and strengthen the flexibility of systems and networks. Energy efficient blockchain-based data management across the lifecycle and value chain of products and services could galvanise the progress towards a more circular economy and competitive sustainability. Digital technologies could also support monitoring, reporting and verification of greenhouse gas emissions for carbon pricing. Digital product passports enable enhanced material, component and end-to-end traceability and make data more accessible, which is essential for viable circular business models. Digital twins could facilitate innovation and the design of more sustainable processes, products, or buildings. Quantum computing will facilitate simulations too complex for classical computers. Space-based data technologies providing real-time global information monitor progress towards sustainability. Data sharing or gamification can increase public participation in steering the transitions and co-creation of innovations. Pursuing the green transition will also transform the digital sector. Renewables, renewable hydrogen, nuclear energy (including small modular reactors) and nuclear fusion technology will all be important in the context of growing energy needs in the digital sector. Fostering policies aiming at climate neutrality and energy efficiency for data centres and cloud infrastructures by 2030, including by meeting their electricity demand with solar or wind energy, will support the greening of data-based technologies, such as big data analytics, blockchain, and the internet of things. However, delays in the deployment of renewable generation capacity and infrastructure can pose a challenge. Better location planning and use of suitable technologies could allow reusing the heat produced by data centres in tertiary sectors. Sustainable finance will help mobilise climate neutral investments in the digital sector. Better design, more circular business models and production patterns can help reduce electronic waste. On the demand side, consumption and practices of businesses and citizens will be important to reduce energy consumption when using digital technologies. Unless digital technologies are made more energy-efficient, their widespread use will increase energy consumption. Information and communications technology (ICT) is responsible for 5-9% of global electricity use and around 3% of greenhouse gas emissions. The lack of an agreed framework for measuring the environmental impact of digitalisation, including possible rebound effects, lead to marked variations in these estimates. However, studies show that ICT power consumption will continue to grow, driven by increasing use and production of consumer devices, demand from networks, data centres, and crypto assets. Power consumption will also rise due to the increased use of online platforms, search engines, virtual reality concepts such as the metaverse, and music or video streaming platforms. On the other hand, deployment of next generations of low-power chips and more efficient connectivity technologies (5G and 6G, networks powered by artificial intelligence) might reduce the overall footprint of ICT. Further tensions will emerge in relation to electronic waste and environmental footprints of digital technologies. Greater reliance on electronics, phones and computer equipment is accelerating the global production of electronic waste, which could reach 75 million tonnes by 2030. In the EU, currently only 17.4% of this is properly treated and recycled, while electronic waste production is increasing annually by 2.5 million tonnes. Without appropriate policies, every switch to new standards or technologies will require a massive replacement of equipment. For example, 5G and 6G will require users to replace equipment to fully reap their benefits, as most existing smartphones, tablets, and computers would only be backwards compatible. Progress in digitalisation will also increase water usage, e.g. for cooling data centres or chip manufacturing. Mining and processing of the raw materials necessary for the transitions raises environmental and ethical concerns. Finally, climate and environmental risks will affect the lifespan and functioning of critical digital infrastructures. Over the next 30 years, the cost of damage from extreme weather events across the EU might rise by 60%. Overall, if properly governed, digital technologies can help create a climate neutral, resource-efficient economy and society, cutting the use of energy and resources in key economic sectors and becoming more resource-efficient themselves. III. Critical technologies for the twinning Energy, transport, industry, buildings, and agriculture are the most greenhouse gas emitting sectors in the EU. Reducing their footprint, as also envisaged by the Fit for 55 package, and strengthening their resilience is thus critical for a successful twinning. However, without appropriate technologies and policies, the adverse environmental impact of these sectors might be more difficult to abate. At the global level, this is especially the case, as an anticipated population of 9.7 billion by 2050 with higher average income will require more food, industrial products, energy, housing, mobility, and water. Until 2030, most of the reductions in CO2 emissions will come from technologies available today. Yet, climate neutrality and circularity by 2050 will be enabled by the development of new technologies, currently at the experimental, demonstration or prototype phase. This includes various digital technologies that might foster twinning across all sectors. 1.Digitalising energy Russia’s military aggression against Ukraine has increased the importance of the geopolitical aspects of the clean energy transition, highlighting the need to accelerate it and to join forces to achieve a more resilient energy system and a true Energy Union. The EU has put forward ambitious options to mitigate the impact of high energy prices on consumers (especially vulnerable and at risk of energy poverty) and industry and to strengthen the security of the EU’s energy supply. In the medium term, an integrated EU system largely based on producing clean energy, diversifying energy supplies, as well as increasing energy savings and energy efficiency in all sectors, is the most cost-effective solution to reduce the EU’s dependence on fossil fuels. For example, full implementation of the Fit for 55 package would lower the EU’s gas consumption by 30% by 2030. This is even more relevant as progress of the twin transitions will increase the demand for electricity. Digitalisation can strengthen the EU’s energy security. Digital technologies can support more efficient flows of energy carriers and increase interconnectivity between markets. They can provide the necessary data to match supply and demand at a more disaggregated level and close to real time. The forecasting of energy production and demand can be improved by digital technologies, novel sensors, satellite data and blockchain. This would allow smart grids to adjust consumption to weather conditions affecting the production of variable renewable energy. That will enable the effective management and distribution of renewable energy, facilitate cross-border exchange and prevent interruptions. Digitalisation will empower people and businesses, allowing them to shift consumption to green energy sources, adjust consumption, or even trade energy. 'Energy-as-a-service' and data-driven innovative energy services can change the way energy suppliers and consumers interact. In addition, microgrids and self-organised grids can become a bottom-up way of managing the energy system. To increase resilience against hybrid threats, the digitalisation of energy systems will require enhanced cybersecurity capacities and secure, autonomous, and ubiquitous communications systems, such as secure space-based connectivity. 2.Enabling greener transport with digital technologies

Coupled with population growth and higher living standards, the demand for transport will continue to grow. Globally, passenger transport could increase nearly threefold between 2015 and 2050. In the EU, road passenger transport is expected to grow by around 21% and freight transport by 45% by 2050, notwithstanding efforts to shift more traffic to other modes such as rail or waterborne. Urbanisation, growing consumer awareness, evolving costs of sustainable transport options (still relatively high today), and new business models (including when it comes to supply chain management) will also affect the sector. In addition, digitalisation may further accelerate the hybridisation of the workplace, affecting workers’ local and cross-border mobility. Combined with digital technologies, broader applications for next-generation batteries will enable a major shift of mobility towards sustainability. This applies to various modes of transport, including passenger and freight, heavy-duty trucks, or aviation. For example, electric aircraft could potentially connect small regional airports throughout the EU. Managing the additional demand for electricity from transport, both for direct electrification and for mass production of renewable and low-carbon fuels for hard-to-decarbonise sectors such as aviation and waterborne, must be matched with improving the energy-efficiency of electric vehicles. It also requires a system-level approach for integrating sensors, computing power and advanced software. The use of data from vehicles and their environment can optimise charging. Bi-directional charging could provide flexibility to smart electricity grids, supporting the integration of renewable energy and maximising its use. Moreover, in combination with space-based services, digitalisation can support reliable solutions for connected and automated (including autonomous) vessels and vehicles, contributing to increased efficiency of traffic management and lower fuel consumption. Experimental designs such as test beds or living labs, which allow testing mobility solutions in a real-world environment, can help better understand the needs of end-users. Digital twins of vehicles can provide full data about real-time performance, service history, configuration, parts replacement, or warranty. Smart mobility will require major investments to develop new technologies and infrastructures, and access to various digital technologies such as artificial intelligence, cloud, or semiconductors. Moreover, to reach a critical mass and avoid dependence on large dominant actors, players in the sector will need to build partnerships, pool investments, and agree on common standards, infrastructures, platforms, and governance frameworks. Social acceptance of self-driving vehicles and the cost-related accessibility will also be key. Digitalisation and artificial intelligence will also boost the emergence of more efficient multimodal mobility solutions, by combining all modes in a single, interoperable platform, such as 'mobility-as-a-service' or 'transport-as-a-service'. This might raise efficiency, consumer choice, accessibility, and affordability, notably of public transport. In addition, digital platforms will boost other options such as pooling and sharing. Digital technology is also key to ensuring that connected multimodal mobility services emerge in cities, as well as remote and rural regions, allowing citizens and businesses to access and choose between different options for both passenger and freight transport. In addition, new low-emission, digital and artificial intelligence-based technologies and solutions, such as drones, have the potential to offer a wide spectrum of new applications and services, from goods’ delivery to medical assistance. This will require further interoperability between different modes, operators and platforms, and ubiquitous connectivity. In particular, better and broader access to mobility data will help public authorities monitor and plan transport activities, infrastructure and services and better match supply and demand at a lower cost and environmental impact. Access to data is also key to improving traffic management and giving customers and businesses a wider choice of sustainable mobility solutions. 3.Galvanising the industry’s climate-neutrality through digital technologies To be on track for climate neutrality in 2050, already by 2030 the EU industry will need to decrease its CO2 emissions by 23% compared with 2015. Industry is globally responsible for about 37% of total final energy consumption and about 20% of greenhouse gas emissions. Four energy-intensive industries – steel, cement, chemicals, pulp, and paper – account for around 70% of its total global CO2 emissions. They are also the largest EU industrial energy users. Digital technologies will be important to manage the supply and demand of large industrial energy users in a system with diverse sources and feedstock. Smart meters, including sub-meters, and sensors could increase energy efficiency, by providing real-time information about its consumption and feeding into the energy management tools. Supervisory control, big data analytics and data acquisition systems will improve the efficiency of industrial processes as well as process data to enable smarter decisions. Digital twins will help improve system designs, test new products, monitor and ensure preventive maintenance, assess the product lifecycle, and select optimal materials. Data-driven optimisation will help improve existing materials, develop greener alternatives, and prolong their lifetime. Monitoring and tracking provide information on materials or parts used in products, which could boost circularity through better maintenance and high quality closed loop recycling. Integration of manufacturing, digital and other advanced technologies, such as robotics or 3D and 4D printing, will also have a major role to play. Uptake of digital solutions by the industrial sector requires higher levels of technological readiness and cybersecurity to protect the data of industrial processes and the integrity of their functioning. 4.Greening buildings with digitalisation Demographic trends and urbanisation will drive changes in demand for buildings. Growing urban population will double the size of the global building stock by 2060. In the EU, the number of people living in predominantly urban and intermediate regions might reach 80% by 2050. There will also be more small-size households, likely to consume more energy per person than those bigger in size. These trends, matched with the use of digital appliances for remote work, education, smart or independent living, will intensify the energy consumption of buildings. In the EU, this sector currently accounts for 40% of energy consumption, while 75% of the building stock is energy inefficient. To achieve climate neutrality and significant benefits from a zero-pollution perspective, new buildings will need to be zero-emission by 2030 and one fifth of the existing ones will need to be retrofitted. Reaching climate neutrality in the sector would require replacing fossil fuel heating with sustainable alternatives, such as heat pumps, reducing the carbon footprint from water use and improving overall energy performance, while ensuring that solutions are available to all. This will contribute to the EU’s objective of renovating 35 million energy-inefficient buildings by 2030. Smart buildings and meters could help achieve these goals and tackle energy poverty. By 2030, building information modelling could further increase the sector’s energy and water efficiency, providing long-term analysis of design choices in construction and use of buildings. Availability of anonymised data, smart appliances, as well as consumer behaviour will enable targeted investments in renovations. Digital logbooks and life-cycle analysis will be necessary to assess, report, store, and track information on whole-life emissions, and will help reduce the environmental impact of materials and help prevent the use of toxic ones. Digital twins could change the way urban spaces are planned, monitored, and managed. This could translate into reduced urban emissions, increased resource efficiencies and quality of life, better use of building space, and could make buildings more resilient to hazardous events. 5.Smarter and greener agriculture Climate and environmental crises, changes in demography and geopolitical instability will challenge the resilience of the EU’s agriculture and its path to sustainability. Without policy action, global agricultural emissions might increase by 15-20% by 2050. By that time, 10% of the global area currently fit for crops and livestock is projected to be climatically unsuitable. Other threats will appear for the biosphere, water, soil, or biodiversity. In the new geopolitical context, the EU needs to reduce its dependence on import of feed, fertilisers, and other inputs. This has to happen without undermining productivity, food security or the greening of the sector, and while tackling food insecurity in low-income partner countries. If properly deployed, digital technologies can enable smart and greener farming. The increased use of digital sensing in-situ (to adapt treatments to specific conditions) and EU space-based services could reduce the use of water, pesticides, fertilisers, and energy, which will also benefit human and animal health. Digital twins will provide data to manage the diversification of products and use functional biodiversity to redesign pest control. Quantum computing, in combination with bioinformatics and plant genomics, can enhance the understanding of the biological and chemical processes needed to reduce pesticides and fertilisers. Digital platforms facilitating local distribution and avoiding food waste could boost local production and shorten consumption circuits. Satellite data, sensors, blockchain, and data from along the value chain could increase traceability and transparency. Open agricultural digital platforms providing a basis for secure and trustworthy data sharing and digital services, such as precision farming, could strengthen fair collaboration in the value chain and create efficient marketplaces. Broader uptake of these technologies will require lower installation and maintenance costs and higher connectivity in peripheral and rural areas. In addition, digital solutions developed for standardised processes will need to support more diversified farming models. Trust, high levels of security, and appropriate skills will determine the uptake of twinning-related technologies. IV. Geopolitical, economic, social, and regulatory factors determining twinning The current geopolitical shifts confirm the need to accelerate the twin transitions, reinforcing the EU’s resilience and open strategic autonomy. The repercussions of Russia’s military aggression against Ukraine have already changed geopolitical and economic realities. This includes various factors relevant for twinning: soaring energy and food prices and related social implications, the potential need to temporarily increase the use of coal, further pressure on public finances, higher inflation rates, increased cyber risks, issues with supply chains, and impaired access to critical raw materials and technologies. The new sense of urgency to speed up the transition away from fossil fuels could prove to be a tipping point for the green transition. The geopolitical situation will also galvanise the transformation of supply chains, resulting from changes in global labour and production costs, as well as the repercussions of the COVID-19 pandemic. It will add pressure to move to less vulnerable, more diversified, and more reliable supply chains and, possibly, ‘friend-shoring’. This could in some cases also reduce the carbon footprint and foster circular economy. In this context, EU partners such as South Korea, the United States, and Japan have for instance also put in place or recently started building up supply chain monitoring systems and domestic capacities. Securing access to critical raw materials will be paramount for the EU’s twin transitions. Currently, the EU’s dependence on third countries, including China, for a number of critical raw materials is even greater than that on Russia for fossil fuels. The EU’s own production accounts for only 4% of the global supply chain of critical raw materials used in the production of digital equipment, such as palladium, tantalum, or neodymium. The EU also lacks an adequately scaled-up mining, processing, and recycling industry. Progress in developing domestic deposits, including those of strategic importance for the economy, has been insufficient so far, notably as projects continue to face significant obstacles. At the same time, reaching our clean energy goals will require increasing amounts of various raw materials, e.g. a 3500% increase in the use of lithium, a key component for electric mobility. Chile currently holds 40% of lithium deposits, while China hosts 45% of its refining facilities worldwide. In addition, a 330% increase in the use of cobalt, and a 30-35% increase in the use of aluminium and copper are expected. Trade, cooperation, and partnerships with a diversified array of mineral-rich and like-minded countries remain of particular importance. The global surge in demand heightens the competition for resources and is likely to worsen the production concentration thus creating additional geopolitical risks on the supply. Beyond the access to critical raw materials, the ability to set environmental and social standards, ensuring the sustainability of mining, refining, and recycling activities, and production of energy, will be key in the new geopolitical context. Coupled with enough investment, increased circularity and precision in production might help reduce these strategic dependencies. Digitalisation might further accelerate circularity, by improving design, increasing accuracy in production, and improving repair, refurbishment, and recycling processes. For instance, after 2040, recycling could be the EU’s major source of supply for most transition metals, together with the continued need for primary metals. Recycling will be even more important, as, for instance, production of steel or aluminium from scrap is significantly less energy-intensive than from raw materials. Both the quantity and quality of recycling are relevant. For instance, copper contamination of steel and aluminium leads to major losses in value and consequent higher energy use and emissions. The geopolitics of technologies will gain in importance. Access to critical technologies will provide a competitive advantage and reduce strategic dependencies. The EU’s currently limited capacity in some horizontal technologies weakens its position. Technological competition could rapidly increase, leading to the fragmentation of global innovation ecosystems. This can increase costs and cybersecurity risks especially for dual-use technologies, e.g. 5G and 6G infrastructure or digital technologies in agriculture. This is even more relevant as the amount of collected data, including on consumers’ habits and behavioural patterns, and the number of connected appliances will massively increase. Moreover, rivalries based on values and societal models are also expected to grow. This is already visible in different approaches to the internet. For instance, limiting access to specific content (e.g. China, Russia), pursuing a value-based approach (e.g. EU focus on data privacy and trustworthy artificial intelligence) or promoting specific models of governance (e.g. largely privatised, like in the US, or driven by the state, as in the Chinese cyber-sovereignty). There are growing concerns about links between malicious cyber activities and disinformation, which threaten democracy, aggravate divisions, and hinder access to accurate information. This is relevant, as the last 30 years of democratic progress has been eradicated: the average level of global democracy in 2021 is down to its 1989 level. In addition, the current geopolitical context might affect twin transitions-related projects in partner countries, which are already facing financial and supply constraints due to the consequences of the COVID-19 pandemic. This challenge is becoming even more vital, as, for the first time, progress at global level towards the United Nations Sustainable Development Goals has been reversed. Adjusting our policies towards a new economic model will be key to achieving the twin transitions. This entails reorienting the traditional view of economic progress towards a more qualitative one evolving around wellbeing, resource efficiency, circularity, and regeneration. Ultimately, reaching climate neutrality, sustainable resource use, zero pollution and halting the decline in biodiversity, entails a profound change of the economic and social policies, driven by an appropriate mix of market-based instruments (for example, carbon pricing) and investments into sustainable projects, by both the public and private sectors. The growth of social enterprises and investments for impact is also a galvanising factor for this shift. The twin transitions will be fair or will not be: inclusiveness and affordability will condition their success. People with low and medium income are more vulnerable to the impacts and costs of the twin transitions, e.g. job automation, access to digital solutions and digital public services, higher energy and food prices, financing improvements in buildings’ energy efficiency, or transport poverty. There is also a gap between tech-savvy firms and those technologically lagging behind. Regional disparities in the level of economic development and social prosperity may further exacerbate these dichotomies. Frictions in the labour and capital market could make them more lengthy and costly. In this context, achieving climate neutrality and environmental sustainability will only be possible if accompanied by measures supporting these groups in bearing the related financial burdens and by bridging disparities. Reaching the objectives of the EU Digital Decade and the European Pillar of Social Rights will be crucial to close these gaps, but more action may be needed. This is even more compelling in view of the fact that those for whom the transition is most difficult to bear are those who are on the lowest end of emissions. Indeed, currently the richest 10% of Europeans emit per capita more than three times as much as the rest of Europe’s citizens. The twin transitions will result in profound shifts in the EU labour market and related skills. Sectors and regions with heavy dependency on coal mining, fossil fuel extraction, and related processing and supply chains will see job losses. On the other hand, new jobs will be created as a result of the green transition, e.g. in clean energy, renovation, and the circular economy. Similarly, the digital transition is likely to create new employment and business opportunities, e.g. in advanced technologies, while leading to the loss of other jobs, fully or partially automated. Further digitalisation, accelerated by COVID-19, will also affect conditions and patterns of work, as well as access to social protection. These processes will not necessarily be simultaneous, and their impact on different companies, sectors and regions will be uneven, implying potential economic and labour market imbalances. The transformed content of jobs and the reallocation of employment will require different skill sets. Overall, the labour market effects of the twin transitions are potentially complementary, with amplifying and cancelling effects that merit further research.