COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT   Accompanying document to the  COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS  A Roadmap for moving to a competitive low carbon economy in 2050    {COM(2011) 112 final} {SEC(2011) 289 final}
Date: 2011-03-08
Institutions: European Commission
Subjects: climate change, environmental protection, innovation, investment promotion, reduction of gas emissions, renewable energy

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EUROPEAN COMMISSION 

Brussels, 8.3.2011 
SEC(2011) 288 final 

COMMISSION STAFF WORKING DOCUMENT 

IMPACT ASSESSMENT 

Accompanying document to the 

COMMUNICATION FROM THE COMMISSION 
TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN 
ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE 
REGIONS 

A Roadmap for moving to a competitive low carbon economy in 2050 

{COM(2011) 112 final} 
{SEC(2011) 289 final} 

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Table of content 

1. 

1.1. 

1.2. 

1.3. 

1.4. 

Procedural issues and consultation of interested parties .............................................. 8 

Policy context............................................................................................................... 8 

Organisation ................................................................................................................. 9 

Response to the opinion of the Impact Assessment Board .......................................... 9 

Stakeholder consultation ............................................................................................ 10 

1.4.1.  Stakeholder reports on decarbonisation of the Economy........................................... 10 

1.4.2.  Results from the online questionnaire........................................................................ 14 

2. 

2.1. 

2.2. 

2.3. 

2.4. 

Problem Definition..................................................................................................... 16 

Impacts of climate change, the costs of inaction........................................................ 16 

Avoiding dangerous climate change .......................................................................... 19 

Growing energy resource and security concerns ....................................................... 21 

Making growth and jobs sustainable by overcoming barriers to the development and 
deployment of low carbon technologies .................................................................... 24 

2.5. 

Sustainable shift towards a low carbon economy ...................................................... 24 

3. 

3.1. 

3.2. 

3.3. 

4. 

4.1. 

4.2. 

Objectives................................................................................................................... 25 

General objectives...................................................................................................... 25 

Specific objectives ..................................................................................................... 25 

Operational Objectives............................................................................................... 25 

Scenarios to decarbonise the EU in line with the 2ºC objective ................................ 26 

Methodology .............................................................................................................. 26 

Action in a global context .......................................................................................... 28 

4.2.1.  EU internal action in the context of global action...................................................... 28 

4.2.2.  Fossil Fuel Prices and how they relate to global and EU action................................ 28 

4.2.3.  Macro economic impacts ........................................................................................... 29 

4.2.4.  The missing global link, agriculture, forestry and energy ......................................... 29 

4.2.5.  EU action and global action, the likelihood of meeting the 2ºC objective ................ 30 

4.3. 

The EU perspective towards a low carbon economy and society by 2050................ 30 

4.3.1.  Reference scenario: where do current policies lead us to by 2050? .......................... 32 

4.3.2.  Decarbonisation scenarios in the context of Global Climate Action ......................... 32 

4.3.3.  Decarbonisation in the context of Fragmented Climate Action................................. 34 

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5. 

Analysing the impact of different scenarios............................................................... 36 

5.1. 

Action in a global context .......................................................................................... 36 

5.1.1.  EU internal action in the context of global action...................................................... 36 

5.1.2.  Fossil Fuel Prices and Global Action......................................................................... 39 

5.1.3.  Marco-economic impact............................................................................................. 42 

5.1.4. 

Interaction between energy, agriculture and land use emissions on a global scale ... 45 

5.1.5.  EU action and global action, the likelihood of meeting the 2ºC objective ................ 49 

5.2. 

Analysis of the EU perspective towards a low carbon economy by 2050 ................. 51 

5.2.1.  Greenhouse gas emission reductions over time and sectoral split ............................. 51 

5.2.2.  Greenhouse gas emission reductions in ETS and Non ETS ...................................... 54 

5.2.3.  Energy resources and security of fossil fuel supply................................................... 55 

5.2.4.  System costs: Investments, fossil fuel expenses and carbon prices ........................... 57 

5.2.5.  Sector specific impacts: power................................................................................... 61 

5.2.6.  Sector specific impacts: transport .............................................................................. 65 

5.2.7.  Sector specific impacts: industry ............................................................................... 71 

5.2.8.  Sector specific impacts: the built environment .......................................................... 74 

5.2.9.  Sector specific impacts: Agriculture and other Non CO2 emissions......................... 76 

5.2.10.  Sector specific impacts: Land Use, Land Use Change and Forestry ......................... 80 

5.2.11.  Social impacts for households.................................................................................... 85 

5.2.12.  Leveraging finance..................................................................................................... 88 

5.2.13.  Employment impacts.................................................................................................. 90 

5.2.14.  Co-benefits in terms of air pollution .......................................................................... 91 

6. 

7. 

7.1. 

7.2. 

7.3. 

7.4. 

7.5. 

7.6. 

Conclusions ................................................................................................................ 94 

ANNEXES ................................................................................................................. 98 

2010 Global Climate Highlights ................................................................................ 98 

Overview of studies that look into impacts of climate change in the EU .................. 99 

Analysis of global emission pathways towards achieving the 2ºC objective .......... 100 

Economic modelling tools used ............................................................................... 101 

Drivers assumed in the POLES scenarios................................................................ 103 

EU sectoral GHG reductions in case of global action.............................................. 104 

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7.7. 

Assessing global GHG emissions using the POLES, GLOBIOM and G4M models
.................................................................................................................................. 104 

7.7.1.  Methodology of the integrated POLES, GLOBIOM and G4M scenarios ............... 104 

7.7.2.  Sensitivity analysis - exogenous productivity in crop and livestock sectors ........... 105 

7.8. 

7.9. 

Projections of impact on oil and gas imports into the EU of Fragmented and Global 
Action using the POLES model ............................................................................... 107 

Further information on the main assumptions and drivers of the PRIMES scenarios
.................................................................................................................................. 109 

7.9.1.  Assumptions in relation to all scenarios for the EU in the PRIMES – GAINS 

modelling setup ........................................................................................................ 109 

7.9.2.  Specific assumptions in relation to the reference scenario for the EU in the PRIMES 

– GAINS modelling setup........................................................................................ 111 

7.9.3.  Detailed description of the different decarbonisation scenarios .............................. 114 

7.10.  Overall Carbon price and GHG profile of the different reference and decarbonisation 
scenarios................................................................................................................... 117 

7.11. 

Sectoral changes in average yearly total investments and fuel expenses................. 120 

7.12. 

7.13. 

Further information on the main assumptions and drivers of the agriculture scenarios 
for the EU................................................................................................................. 126 

Examples of innovative policy schemes to spur energy related investments for 
households................................................................................................................ 128 

8. 

Bibliography............................................................................................................. 130 

List of figures 

Figure 1: Received responses from stakeholders by affiliation ............................................... 14 

Figure 2: Weather catastrophes globally 1980 – 2009............................................................. 16 

Figure 3: Key impacts as a function of increasing temperature change................................... 19 

Figure 4: GHG emissions in the EU under current trends and policies ................................... 21 

Figure 5: GHG emission profile EU27, per sector................................................................... 21 

Figure 6: Incremental primary energy demand, 2008-2035..................................................... 22 

Figure 7: World oil production................................................................................................. 23 

Figure 8: Incremental oil production by country ..................................................................... 23 

Figure 9: International energy prices in reference and in the context of global climate action33 

Figure 10: ETS carbon price differentials between regions over time..................................... 37 

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Figure 11: Per capita GHG emissions in the Global action scenario ....................................... 38 

Figure 12: Average annual OPEC oil export revenues per scenario........................................ 41 

Figure  13:  World  oil  production  up  to2035  in  case  of  the  new  energy  policies  scenario  of 
WEO 2010, compared to POLES projection oil production fragmented action.............. 42 

Figure  14:  GHG  emissions  from  Agriculture  and  gross  deforestation  in  baseline  and  Global 
Action Case ...................................................................................................................... 47 

Figure 15: Impact yield improvements on overall costs agricultural goods. ........................... 48 

Figure 16: GHG emission pathway in case of Global Action, all sectors and gases ............... 50 

Figure 17: Temperature increases associated with emission pathways ................................... 51 

Figure 18: EU GHG emissions over time for selected scenarios ............................................. 53 

Figure 19: Gross energy consumption in relevant scenarios over time ................................... 56 

Figure 20: Carbon price evolution ........................................................................................... 58 

Figure 21: Gross electricity consumption in relevant scenarios .............................................. 61 

Figure 22: CO2 emissions from power and steam generation and district heating.................. 62 

Figure 23: Share of low carbon technologies in power generation.......................................... 63 

Figure 24: Power investments over time.................................................................................. 64 

Figure 25: CO2 emissions from transport................................................................................. 66 

Figure 26: Energy carriers in the transport sector .................................................................... 68 

Figure 27: CO2 emissions from transport, impact of an oil shock ........................................... 69 

Figure 28: CO2 emissions from road transport and the power sector in case of decarbonisation
.......................................................................................................................................... 71 

Figure  29:  Energy-related  investments,  fuel  and  electricity  costs  and  industrial  CCS 
expenditures ..................................................................................................................... 73 

Figure 30: Residential emissions over time ............................................................................. 75 

Figure 31 Non-CO2 GHG emissions in the reference and effective technologies case .......... 78 

Figure 32: Demand for energy wood in the EU ....................................................................... 81 

Figure 33: Changes in wood production in the EU.................................................................. 83 

Figure 34: Impact on LULUCF of different wood production levels ...................................... 84 

Figure 35: Expenditure of households on energy related equipment, fuels and electricity ..... 86 

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Figure 36 : Transport costs per household ............................................................................... 87 

Figure 37: Emissions pathways compatible with a 2°C limit ................................................ 101 

Figure 38: Historic annual rate of yield change (%) compared to the applied on in GLOBIOM
........................................................................................................................................ 106 

Figure 39: Animal numbers per production system in Baseline in Globiom......................... 107 

List of tables 

Table 1: Overview of all EU level scenarios............................................................................ 31 

Table 2: Greenhouse gas emissions in the Baseline and Global action scenario ..................... 37 

Table  3:  Primary  energy  demand  in  the  Baseline,  Global  action  and  Fragmented  action 
scenario............................................................................................................................. 39 

Table 4: Global oil prices in different scenarios ...................................................................... 40 

Table 5: GDP impacts fragmented action ................................................................................ 44 

Table 6: Employment impacts fragmented action.................................................................... 44 

Table 7: Impacts on energy intensive industrial sectors from fragmented action.................... 45 

Table 8: EU Greenhouse gas emission reductions overall and in different economic sectors in 
different decarbonisation scenarios.................................................................................. 52 

Table 9: Emissions in ETS and Non ETS sectors .................................................................... 54 

Table 10: Fuel import dependency across scenarios ................................................................ 56 

Table 11: Imports of oil and gas and corresponding expenses in 2050 ................................... 57 

Table 12: Average yearly total investments and fuel expenses ............................................... 59 

Table 13: Average yearly total investments and fuel expenses in scenarios with an oil shock or 
high fossil fuel prices ....................................................................................................... 60 

Table 14: CO2 emission reductions in energy intensive industries in 2030 and 2050 ............ 72 

Table 15: Useful energy requirements across scenarios .......................................................... 76 

Table 16: EU GHG share CO2 – Non-CO2, 1990-2005........................................................... 76 

Table 17: Non -CO2 emissions total in 2030 (MtCO2eq.) ...................................................... 78 

Table 18: Non -CO2 emissions total in 2050 (MtCO2eq.) ...................................................... 79 

Table 19: CO2 and Non CO2 emissions .................................................................................. 79 

Table 20: Bio-mass production requirements in reference case for energy use....................... 80 

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Table  21:  Bio-mass  production  requirements  in  effective  technologies  decarbonisation  case 
for energy use ................................................................................................................... 81 

Table 22: Cohesion Policy 2007-13 allocations contributing to sustainable growth ............... 89 

Table  23:  Impacts  on  air  pollution  and  air  pollution  control  costs  (change  compared  to  the 
reference).......................................................................................................................... 92 

Table 24: Impacts on sensitive ecosystem ............................................................................... 94 

Table 25: GDP and population assumptions in POLES: yearly growth rates (%)................. 103 

Table 26: EU-27 Greenhouse gas emissions by sector in the Global action scenario, .......... 104 

Table 27: Import dependency Oil and Gas............................................................................. 108 

Table 28: Oil consumption, expenses and import in the EU.................................................. 108 

Table 29: Gas consumption, expenses and import in the EU................................................. 108 

Table 30: Policy drivers in the reference scenario ................................................................. 112 

Table 31Carbon price evolution different scenarios .............................................................. 117 

Table 32 GHG emission profile per sector different reference and decarbonisation scenarios
........................................................................................................................................ 117 

Table 33: Average yearly total investments in energy related capital goods, CCS expenditures 
and fuel expenses in industry ......................................................................................... 121 

Table 34: Average yearly total investments in energy related capital goods, CCS expenditures 
and fuel expenses in industry in case of an oil shock or high fossil fuel prices............. 121 

Table 35: Average yearly total investments in energy related goods and fuel expenses in the 
residential and tertiary sector ......................................................................................... 122 

Table 36: Average yearly total investments in energy related goods and fuel expenses in the 
residential and tertiary sector in scenarios with an oil shock or high fossil fuel prices . 123 

Table 37: Average yearly total investments and fuel expenses in transport .......................... 123 

Table 38: Average yearly total investments and fuel expenses in transport in scenarios with an 
oil shock or high fossil fuel prices ................................................................................. 124 

Table  39:  Average  yearly  total  investments  and  fuel  expenses  in  the  power  sector  (includes 
steam) ............................................................................................................................. 125 

Table  40:  Average  yearly  total  investments  and  fuel  expenses  in  the  power  sector  (includes 
steam) in scenarios with an oil shock or high fossil fuel prices ..................................... 125 

Table 41: Core policy assumptions for the August 2009 CAPRI baseline ............................ 126 

Table 42 Core market assumptions for the August 2009 CAPRI baseline ............................ 127 

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1. 

PROCEDURAL ISSUES AND CONSULTATION OF INTERESTED PARTIES 

1.1. 

Policy context 

The EU has a binding legal framework in place to reduce greenhouse gas (GHG) emissions 
for the period after 2012, when the first commitment period of the Kyoto Protocol ends. The 
Climate  and  Energy  Package  sets  an  EU  wide cap  for  the  EU  emission  trading  system  (EU 
ETS)1 and national targets for the sectors not covered by the EU ETS2. The time horizon of 
the  Climate  and  Energy  Package  focuses  on  2020,  even  though  the  ETS  cap  continues  to 
strengthen after 2020.  

The  Copenhagen  Accord3  underlined 
low-emission  development  strategies  are 
indispensable  to  sustainable  development.  This  was  confirmed  at  the  16th  Session  of  the 
Conference  of  the  Parties  to  the  UNFCCC  that  decided  that  developed  countries  should 
develop low-carbon development strategies or plans4. 

that 

The  European  Council  supports  an  EU  objective,  in  the  context  of  necessary  reductions 
according to the IPCC by developed countries as a group, to reduce emissions by 80-95% by 
2050 compared to 1990 levels5. The European Parliament similarly endorsed the need to set a 
long-term  reduction  target  of  at  least  80%  by  2050  for  the  EU  and  the  other  developed 
countries6. 

At present, beyond the existing requirements in the Climate and Energy Package, no vision, 
strategy or roadmap exists in the EU on how to achieve such levels of reductions beyond 2020 
up to 2050.  

The Communication that this impact assessment accompanies has the intention to develop a 
roadmap  to  achieve  such  reductions  in  the  EU  up  to  2050.  This  impact  assessment  gives 
information on the overall and sectoral pathways, the underlying technological and structural 
changes required, the investment and cost patterns and other impacts, synergies and trade-offs 
related to the broader sustainability and resource efficiency agenda. This is done for a broad 
range  of  sectors  that  cover  the  whole  economy  and  all  types  of  GHG  emissions.  This 
information will give insights in ambition required in different sectors and could be used as 
guidance when further developing policies and specific sectoral roadmaps for these sectors. 

The EU Environment Council has indicated to look forward to the Commission’s roadmap for 
a safe and sustainable low-carbon economy by 20507. The European Council confirmed this 

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Directive 2009/29/EC 
Decision No 406/2009/EC 
UNFCCC, 2010, Decision 2/CP.15, Copenhagen Accord. 
UNFCCC, 2010, Decision -/CP.16, Outcome of the work of the Ad Hoc Working Group on long-term 
Cooperative Action under the Convention. 
European Council, Brussels, 29/30 October 2009, Presidency conclusions. 15265/1/09 
European  Parliament  resolution  of  4  February  2009  on  "2050:  The  future  begins  today  – 
Recommendations for the EU's future integrated policy on climate change; resolution of 11 March 2009 
on  an  EU  strategy  for  a  comprehensive  climate  change  agreement  in  Copenhagen  and  the  adequate 
provision of financing for climate change policy; resolution of 25 November 2009 on the EU strategy 
for the Copenhagen Conference on Climate Change (COP 15) 
3036th Environment Council meeting, Luxembourg, 14 October 2010 

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and  indicated  that  due  consideration  should  be  given  to  fixing  intermediary  stages  towards 
reaching  the  2050  objective8.  Also  the  European  Parliament  supports  the  establishment  of 
action  plans  for  achieving  emission  reductions  in  the  period  up  to  2050  consistent  with  the 
2°C limit9. 

Furthermore  this  roadmap  is  a  key  part  of  the  initiatives  to  deliver  on  a  Resource  Efficient 
Europe, one of the 7 flagships of the Europe 2020 strategy10, which aim is to support the shift 
towards  a  resource  efficient  and  low-carbon  economy  that  is  efficient  in  the  way  it  uses  all 
resources,  decoupling  economic  growth  from  resource  and  energy  use,  reducing  CO2 
emissions, enhancing competitiveness and promoting greater energy security. 

1.2. 

Organisation  

The impact assessment was elaborated by DG CLIMA in collaboration with DG ENER and 
DG  MOVE.  A  joint  analytical  framework  was  elaborated  between  the  three  DGs  and 
consulted  as  part  of  inter-service  meetings  on  the  Resource  Efficient  Europe  Flagship.  DG 
MOVE coordinated its modelling  projections for the impact assessment of the 'White Paper 
on  the  future  of  transport'  with  those  presented  in  this  impact  assessment.  DG  ENER  will 
build  further  on  the  results  presented  here  when  elaborating  their  'Energy  roadmap  2050' 
planned  for  later  in  2011.  Other  DGs  were  informed  and  consulted  through  inter-service 
consultations.  A  common  EU  reference  scenario  2050  and  a  global  2ºC  scenario  were 
elaborated  and  consulted  as  part  of  inter-service  consultations  on  the  Energy  Roadmap 
between  April  and  September  2010.  Further  specific  inter-service  meetings  to  prepare  this 
impact assessment and the one accompanying the White Paper on the future of transport were 
held on 21 October, 25 November and 14 December 201011. 

1.3. 

Response to the opinion of the Impact Assessment Board  

The  impact  assessment  was  presented  to  the  Impact  Assessment  Board  on  26  January.  The 
board gave a positive opinion on the impact assessment and acknowledged that the submitted 
report  provides  modelling  results  that  can  be  used  as  an  essential  input  for  the  impact 
assessment  work  of  related  decarbonisation  initiatives  exploring  concrete  policy  actions.  It 
will  help  ensure  coherence  between  these  initiatives  on  the  basis  of  a  common  analytical 
basis. While the Board acknowledged the analytical work carried out, it also recommended to 
improve it further.  

Firstly,  the  board  recommended  to  complement  the  modelling  work  with  more  qualitative 
analysis using other available information that goes beyond the insights that the modelling is 
capable  of  supplying.  For  employment  impacts  this  was  addressed  with  a  more  qualitative 
discussion  of  the  issues  at  stake.  The  problem  analysis  and  the  motivation  of  the  different 
scenarios  has  been  extended  and the  limits  of  model  analysis  and  related  uncertainties  have 
been better indicated. Text was improved to explain some of the limitations of the assessment 
on analysing social and environmental impacts and where further work is needed. 

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European Council, Brussels, 4 February 2010, Presidency conclusions, EUCO 2/11 
European  Parliament  resolution  of  25  November  2009  on  the  EU  strategy  for  the  Copenhagen 
Conference on Climate Change (COP 15) 
COM(2010) 2020, EUROPE 2020 - A strategy for smart, sustainable and inclusive growth 
Participating  DG's  following  broad  invitation  include  AGRI,  COMP,  ECFIN,  EMPL,  ENER,  ENTR, 
ENV, INFSO, MARE, REGIO, RTD, SG and TAXUD. 

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Secondly,  the  board  recommended  to  provide  greater  clarity  on  any  action  in  addition  to 
policies already agreed that will be needed by 2020 to deliver on the decarbonisation target 
required by 2050. Therefore conclusions were added that have focus on the near term policy 
relevant implications of the assessment. 

Thirdly,  the  board  recommended  to  asses  key  macro-economic  effects,  such  as  GDP  and 
employment  impacts.  The  Staff  working  document  accompanying  the  Communication 
'Analysis of options to move beyond 20% greenhouse gas emission reductions and assessing 
the risk of carbon leakage' of 26 May 2010 already addressed the macro economic impact of 
more ambitious action up to 2020. After the opinion of the board this modelling was revisited 
and  refined  up  to  2030.  It  was  not  possible  to  project  macro-economic  impacts  up  to  2050. 
This  work  also  addresses  the  issue  of  competitiveness  which  was  listed  as  a  fourth 
recommendation. But is was not possible to address distributive impacts in more depth due to 
a macro economic modelling set up that has the EU as one region in the world. 

Fifthly,  the  board  recommended  that  the  report  should  clarify  a  number  of  methodological 
points  including  e.g.  assumptions  on  technology,  carbon  and  oil  prices.  The  chapter  that 
addresses methodology, modelling set up and scenario description was further refined. 

The board also asked to give more key data and replace charts rather with tables, while also 
shortening the report by moving some detailed data to the annex. Summary tables per scenario 
on  carbon  prices  and  GHG  emissions  per  sector  were  added  in  annex  7.10  and  also  the 
specific impacts on investment, fuel and electricity costs was put in tables rather than figures 
in  chapter  5.2.4  and  annex  7.11.  The  sectoral  detail  of  this  assessment  of  investments  and 
costs  as  well  as  the  technical  detail  of  the  scenario  description  was  put  in  annex  and  the 
detailed  assessment  of  the  stakeholder  consultation  was  put  in  separate  Staff  Working 
Document.  The  Board  also  advised  to  indicate,  where  possible,  follow-up  analysis  and 
planned  impact  assessment  work.  This  was  addressed  in  the  text  in  the  relevant  sectoral 
chapters. 

Finally  the  board  noted  that  this  is  not  a  standard  impact  assessment.  It  has  a  specific 
analytical  focus  that  does  not  assess  and  compare  policy  options  that  could  deliver  on  the 
overall policy goal.  

1.4. 

Stakeholder consultation 

Extensive  reports  have  been  recently  published  by  stakeholders  on  the  issue  of  how  to 
decarbonise both our economy and society. To prepare this impact assessment a review was 
made of the reports available at the end of 2010. For a summary of these reports see chapter 
1.4.1.  Furthermore,  the  Commission  consulted  individuals  and  stakeholders  on  their  vision 
and opinion regarding an EU low-carbon economy by 2050 through an online questionnaire 
"Roadmap for a low-carbon economy by 2050"12. For summary results see chapter 1.4.2. The 
wide  range  of  views  on  how  the  EU  can  decarbonise  its  economy  have  been  taken  into 
account in the context of this impact assessment.  

1.4.1. 

Stakeholder reports on decarbonisation of the Economy 

A number of stakeholders has recently publicised reports that elaborate their thinking on how 
to significantly reduce EU greenhouse gas emissions in the coming decades, often focussing 

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on  the  energy  sector  (see  bibliography  in  chapter  8  for  list  of  reports  analysed).  There  is 
limited attention amongst the published reports for other sectors such as the agriculture and 
LULUCF  (Land  Use,  Land  Use  Change  and  Forestry)  sectors.  This  chapter  tries  to  give  an 
overview  of  the  main  elements  of  these  reports,  what  they  have  in  common  and  where  the 
differences exist. 

All stakeholders agree on the need for action on climate change. Most endorse explicitly the 
need to reduce emissions in 2050 by 80 to 95% compared to 1990 levels. Eurelectric slightly 
differs from the EU's reduction target – in their "Power choices" scenario they set an aim of a 
75%  CO2  emissions  reduction  via  domestic  action  against  1990  levels.13  In  their  position 
papers  business  associations  refer  to  global  targets  and  do  not  explicitly  state  concrete 
numbers  for  GHG  reduction  at  the  EU  level.  Business  Europe  confirms  that  global  GHG 
emissions  need  to  be  at  least  halved  by  2050  compared  to  1990  levels.14  Whereas  WBCSD 
states that carbon emissions should be halved worldwide by 2050, compared to 2005 levels.15 

According  to  most  stakeholders  the  achievement  of  an  EU  low-carbon  economy  would 
require an increase in electricity use, the decarbonisation of power generation as well as fuel 
shifts  in  transport  and  buildings.  Furthermore,  improving  energy  efficiency  is  regarded 
essential.16 Stakeholders underline the linkages between increased electrification and energy 
efficiency gains and think these will benefit both the environment and consumers, because of 
lower energy costs. Moreover, most of the stakeholders tend to agree on key technologies and 
measures that should be implemented: a shift towards renewable energy sources (largely wind 
and  photovoltaic),  roll-out  of  electric  vehicles  as  well  as  the  commercialisation  of  carbon 
capture and storage (CCS).  

All  stakeholders  recognise  that reducing emissions will bring additional  benefits for the  EU 
such  as  enhanced  security  of  energy  supply17.  The  shift  towards  decarbonised  and  more 
efficient electricity use in buildings and transport is expected to lower energy costs and bring 
more stable and predictable energy prices18. Investments in new energy efficiency measures, 
clean technology and new infrastructure are also expected to create new jobs and economic 
growth.19  Some  stakeholders  additionally  point  to  the  reduced  costs  for  climate  change 
adaptation as well as better health conditions for European citizens, resulting from increased 
mitigation efforts.  

Although  stakeholders  agree  on  a  shift  towards  renewable  energy,  accelerated  reduction  of 
fossil fuels consumption and improvement of energy efficiency, opinions differ on the extent 
to which specific energy sources and technologies should be deployed. There is no uniform 
pathway  leading  to  a  low-carbon  economy  by  2050  and  positions  diverge  on  the  share  of 
renewables  in  the  EU's  energy  mix  in  2050.  The  European  Renewable  Energy  Council  and 
environmental  NGOs  favour  a  more  than  90%  share  of  renewables  in  EU's  final  energy 
consumption20, while business associations refer to less ambitious levels of renewables in the 

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Eurelectric (2010), p. 6 
Business Europe (2010), p. 1 
World Business Council for Sustainable Development (2010) 
Business Europe (2010), p. 5 
European Climate Foundation (2010), p. 12 
European Climate Foundation (2010), p. 12 
European Climate Foundation (2010), p. 6 
European Renewable Energy Council (2010), p. 2-3, Greenpeace & EREC (2010), p. 7 

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energy  mix.21  As  to  the  share  of  renewable  energy  sources  in  electricity  production,  the 
number  stated  by  Greenpeace  and  EREC  is  around  97%  by  2050  in  the  EU  27.22  The 
Eurelectric's "power choices" scenario for 2050 assumes about 40% renewables in the power 
generation mix.23 The European Climate Foundation assessed pathways with 40%, 60%, 80% 
and  100%  renewables  in  power  generation  and  concluded  that  an  80%  renewables  share 
would be possible without paying more for electricity.  

Some  stakeholders  support  the  phase-out  of  nuclear  power  plants24  whereas  others  consider 
nuclear  power  to  be  a  key  instrument  for  decarbonising  the  economy.25  Regarding  biomass 
some favour its rapid expansion in all sectors.26 Others project that the future development of 
biofuels  will  be  limited  because  of  their  impact  on  land  use.27  Regarding  fossil  fuels  some 
foresee the complete abandonment of coal and oil consumption by 2050 (except for some key 
transport  sectors).28  Most  of  the  stakeholders  see  a  continued  future  for  fossil  fuels  using 
CCS.29 While CCS contributes to the decarbonisation of the industry sector in the long-term, 
COGEN  underlines  that  combined  heat  and  power  provides  the  most  cost  effective  and 
reliable solution in the short and near term for the sector.30 

Business  associations  are  generally  concerned  about  the  risk  of  carbon  and  job  leakage  and 
advocate  low-carbon  solutions  where  all  energy  sources  play  a  role.31  Positions  differ  also 
with  respect  to  the  EU  Emissions  Trading  Scheme  (EU  ETS).  Some  stakeholders  underline 
that European industry should receive the maximum amount of free allowances to guarantee 
the competitiveness of European industry32. Others argue that all EU ETS allowances must be 
auctioned and part of the revenues should finance the further development and deployment of 
low-carbon technologies.33 

Policy recommendations expressed by stakeholders 

Stakeholders  would  like  to  see  a  strong,  consistent  policy  framework  for  achieving  a  low-
carbon economy by 2050. This should provide the necessary certainty to make upfront capital 
investments and open up the implementation of low-carbon technologies.34 Depending on the 
view  of  the  stakeholder,  the  policy  recommendations  refer  to  the  large-scale  uptake  of 
renewables,  the  fast  deployment  of  CCS  by  2025  and  the  promotion  of  new  generation 
nuclear power plants. Most stakeholders want to see investments in a better, smarter grid.35 . 
Energy  efficiency  and  distributed  power  is  also  highlighted  as  policy  recommendations  and 
would be achieved through investments in better, smarter grid  36. Measures encouraging the 

21 
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28 
29 
30 
31 
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35 
36 

World Business Council for Sustainable Development (2010), p. 24 
Greenpeace & EREC (2010), p. 7 
Eurelectric (2010), p. 61 
WWF (2007), p.4, Stockholm Environment Institute (2009), p. 2 
World Business Council for Sustainable Development, (2010), p.6 
WWF (2007), p.2 
Eurelectric (2010), p. 43 
Stockholm Environment Institute (2009), p. 2 
World Business Council for Sustainable Development (2010), p. 4 
COGEN (2010), p. 8 
Business Europe (2010), p. 6 
Business Europe(2010), p. 10 
Climate Action Network Europe (2010), p. 3 
Eurelectric (2010), p. 85, European Climate Foundation (2010), p. 4 
European Climate Foundation (2010), p. 11, European Renewable Energy Council (2010), p. 7 
European Climate Foundation (2010), p. 11, European Renewable Energy Council (2010), p. 7 

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electrification  of  road  transport  and  efficient  electro-technologies  for  heating  and  cooling 
should also be adopted.37 

Some  stakeholders  propose  the  introduction  of  annual  targets  for  emissions  reduction  to 
facilitate  progress  towards  medium  and  long  term.  In  addition,  the  establishment  of 
EU/national  compliance  mechanism  is  recommended  in  order  to  impose  sanctions  on 
countries, regions and sectors that failed to meet their targets.38 Others favour the introduction 
of  an  EU-wide  carbon  tax  to  accelerate  investments  in  renewable  energy  development  and 
infrastructure.39  

Several stakeholders underline that an international agreement on climate change would foster 
the EU's transition to a low-carbon economy and efforts to conclude an international climate 
negotiations should continue.40 Some stakeholders openly oppose unilateral trade measures as 
a way to enforce non-trade objectives and consider them ineffective given the EU's reliance 
on open markets.41  

Stakeholders have  different  views on  the timing of  measures.  Some  emphasise  that  the  first 
EU  goal  should  be  to  achieve  its  20-20-20  targets  laid  down  in  the  EU  2020  Climate  and 
Energy Package, adopted in 2008.42 Business Europe advises against an increase of the 20% 
emission  reduction  target  until  the  international  conditions  are  fulfilled.43  WBCSD  assumes 
that  the  "transformation  time"  will  happen  after  2020,  while  the  next  decade  defined  as 
"Turbulent  Teens"  would  be  marked  by  ideas  gathering  and  establishing  of  relationships.44 
Also the "Power choices" scenario of Eurelectric considers 20% reduction target by 2020 and 
an  interim  goal  of  40%  emissions  reduction  by  2030.45  Environmental  NGOs  on  the  other 
hand argue for moving to 30% binding emissions reduction target by 202046 and underline the 
urgency of taking action as soon as possible.47  

Some  stakeholders  would  like  to  see  further  energy  efficiency  improvements  across  the 
economy,  improvements  in  existing  technologies  such  as  the  CCS,  PV,  offshore  wind  and 
electric vehicles as well as fuel shifts in energy use for transport and buildings for the next 5 
to 10 years.48 Others see a great potential in CCS and stress the need for fast investments so 
that  it  can  become  commercial  in  the  next  10-15  years.49  Many  stakeholders  focus  on  the 
immediate  need  for  additional  investments  in  renewable  energy  sources.50  They  insist  on 
binding renewable energy targets for 203051 and the need to develop smart grids and to ensure 
transmission and distribution capacity. 52 

37 
38 
39 
40 
41 
42 
43 
44 
45 
46 
47 
48 
49 
50 
51 
52 

Eurelectric (2010), p. 86 
Stockholm Environment Institute (2009), p. 4 
Climate Action Network Europe, (2010), p.7 
Eurelectric (2010), p. 85 
Business Europe (2010), p. 11 
Eurelectric (2010), p. 35 
Business Europe (2010), p. 1 
World Business Council for Sustainable Development (2010), p. 10 
Eurelectric (2010), p. 35 
Greenpeace & EREC (2010), p. 9 
WWF (2007), p.21 
European Climate Foundation (2010), p. 11 
Eurelectric (2010), p. 85 
European Renewable Energy Council (2010), p.4, Eurelectric (2010), p. 85 
European Renewable Energy Council (2010), p.7 
Business Europe (2010), p. 8, European Climate Foundation (2010), p. 11 

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1.4.2.  Results from the online questionnaire  

For a detailed summary and further information on the answers supplied by the citizens and 
organised stakeholders see the public consultation website53. 

In  total,  281  responses  have  been  submitted  via  the  online  questionnaire  and  7  additional 
answers have been sent by e-mail. Out of the 288 evaluated responses, there are 132 responses 
from citizens. The fact that the online consultation was available only in English did not limit 
the diversity of countries of origin of the respondents. Most answers have been received from 
France, followed by Poland and the UK. From all responses, 156 have been submitted from 
organized  stakeholders,  with  very  active  participation  from  companies  and  professional 
associations - 96 in total, as well as from NGOs and associations of NGOs – 32 responses in 
total (see figure below).  

Figure 1: Received responses from stakeholders by affiliation 

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The  daily  choices  that  consumers  make  have  impact  on  the  greenhouse  gases  emitted. 
Changing some habits and preferences could lead to reducing GHG emissions. According to 
the results of the online consultation, all respondents are willing to reduce waste, recycle and 
reuse as well as buy locally produced food. The least popular options are to buy carbon offsets 
and to use biofuels-blended petrol and diesel. Most of the respondents indicated that they are 
ready to pay even more than 12€ on a monthly basis to address climate change. 

The main obstacles to reducing the EU's greenhouse gas emissions identified by respondents 
are the subsidies that support the production and consumption of fossil fuels such as mining. 
Furthermore  many  organised  stakeholders  claim  that  we  still  do  not  have  the  technologies 
ready to reduce emissions in all sectors and that it is too risky to invest a lot of money in new 
low-carbon technologies that may not work or may not pay off in the long run.  

53 

http://ec.europa.eu/clima/consultations/0005/index_en.htm 

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In  the  context  of  helping  developing  countries  to  cope  with  the  challenges  resulting  from 
climate  change,  most  of  the  organised  stakeholders  prioritise  supporting  the  countries  that 
generate  the  most  pollution,  while  individuals  bring  forward  the  need  to  support  countries 
most likely to suffer from climate change. Most of the organised stakeholders choose the ETS 
as the most effective EU legislation in terms of delivering emission reductions by 2020 and 
beyond, although it has been also extensively criticized by others.  

The answers from organised stakeholders overlap to a great extent with the views represented 
in  position  papers  published  on  the  topic  and  discussed  in  chapter  1.4.1.  Nevertheless  the 
range of organisations who shared their positions through the online questionnaire was much 
broader. Some stakeholders updated their positions or provided more detailed information on 
their  stance.  For  example  Business  Europe  stated  that  it  is  still  premature  to  set  targets  for 
2050,  although  they  indicate  some  support  for  the  idea  for  intermediate  targets,  such  as  a 
target for 2030. 54 They underline that the EU will become a leader in fighting climate change 
only if it proves that reducing emissions and securing energy supply can be reconciled with 
economic development. Therefore according to Business Europe priority should be given to 
implementing  cost-efficient  measures,  ensuring  global  competitiveness  of  EU  industry  and 
improving  the  framework  for  investment  in  low-carbon  technologies  next  to  fostering  the 
cooperation on EU level.55  

For the European Trade Union Confederation (ETUC) the key to low-carbon economy is to 
introduce competitive energy bills through regulated prices and through policies and measures 
that  improve  energy  efficiency.  ETUC  urges  the  EU  to  provide  the  right  economic  signals 
which could take the form of a CO2 tax for example. Furthermore ETUC calls for a binding 
energy  saving  target  for  each  member  state,  shift  of  structural  EU  funds  towards  climate 
action and use of revenues from auctioned emission allowances as a financial basis for energy 
savings56.  

WWF proposed to adjust the EU 2020 objective to a 40% reduction target. This reiterated the 
position  of  many  environmental  NGOs,  including  the  European  Environmental  Bureau 
(EEB). At the same time a minimum of three-quarters of this target should be achieved within 
the  EU  and  not  through  offset  mechanisms.57  Furthermore  WWF  proposes  that  once  the 
emissions reduction target for 2050 is set, milestones for every decade can be established58, 
while  Greenpeace  opposes  targets  for  2030  because  it  would  take  focus  away  off  2020  and 
2050 targets. Greenpeace favours the implementation of stronger carbon and energy taxation 
as a means to achieve energy security and reduce the use of natural resources59. Also the EEB 
puts  the  focus  away  from  technologies  that  support  unsustainable  and  growing  energy 
consumption and underlines that policy measures should address consumption also60. 

Some public authorities within the EU (UK, Czech Republic, Spain, Sweden, the Netherlands 
and France) and beyond (Norway) have also shared their views on the EU's Roadmap towards 

54 

55 

56 
57 
58 
59 
60 

"BUSINESS  EUROPE's  Preliminary  Views  on  the  Roadmap  for  a  Low  Carbon  Economy  by  2050", 
Position Paper, 15 December 2010, p. 2. 
"BUSINESS  EUROPE's  Preliminary  Views  on  the  Roadmap  for  a  Low  Carbon  Economy  by  2050", 
Positio Paper, 15 December 2010, p. 3. 
ETUC, "Resolution on Energy Strategy for Europe 2010-2020", 1 December 2010, p. 2. 
WWF, Answer to the Online Questionnaire 
WWF, Answer to the Online Questionnaire 
Greenpeace, Answer to the Online Questionnaire 
EEB, Answer to the Online Questionnaire 

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a 2050 low-carbon economy. The UK consider moving to a 30% emissions reduction target 
by  2020  as  the  best  means  to  demonstrate  the  EU's  commitment,  to  create  incentives  for 
investment  in  low-carbon  technology  and  to  unlock  greater  ambition  in  the  international 
negotiations.  Furthermore  the  UK  supports  the  creation  of  new  large  scale  sectoral  market 
mechanisms  to  promote  net  emission  reductions  in  developing  countries61.  The  Czech 
Ministry  of  the  Environment  and  the  Department  Environment  and  Housing  of  the 
Government of Catalonia also support the deployment of sectoral crediting62. In addition, the 
Czech  Environmental  Ministry  highlights  the  need  of  increased  investments  in  the 
infrastructure  and  smart  grid  technologies  and  mid-term  objectives  which  should  lie  on  the 
linear trajectory between the targets for 2020 (as set by the Climate and Energy Package) and 
205063.  The  French  authorities  argue  that  the  EU's  future  climate  action  should  be 
accompanied by the creation of new jobs and accelerated innovation. In addition, investments 
should prioritise technologies identified in the Strategic Energy Technology Plan (SET Plan) 
of the European Commission64. 

2. 

PROBLEM DEFINITION  

2.1. 

Impacts of climate change, the costs of inaction  

Whereas temperatures were exceptionally low in December in large parts of Europe, globally 
records were broken in the opposite direction during 2010. Global temperatures for 2010 tied 
with 2005 and 199865. The first ten years of this millennium where the highest ever recorded, 
confirming the finding of the IPCC that total temperature increased already with 0.76°C from 
the period 1850–1899 to the period 2001–200566. Annex 7.1 gives a further overview of some 
of the weather related global climate highlights in 201167. 

Such  weather  anomalies  seem  to  result  more  frequently  in  weather  related  catastrophes. 
Munich Re68, one of the world's leading reinsurers, estimated that 2010 was the year with the 
second-highest number of natural catastrophes since 1980, i.e. 950 (nine-tenths of these were 
weather-related), markedly exceeding the annual average for the last ten years (785 events per 
year). Two major weather related catastrophes stood out with a heat wave in Russia (July to 
September) and major flooding in Pakistan (also July to September).  

Figure 2: Weather catastrophes globally 1980 – 2009 

61 
62 

63 
64 
65 

66 
67 
68 

UK Government, Department of Energy and Climate Change, Answer to the Online Questionnaire 
Government  of  Catalonia,  Department  of  Environment  and  Housing,  Answer  to  the  Online 
Questionnaire & Czech Ministry of the Environment, Answer to the Online Questionnaire 
Czech Ministry of the Environment, Answer to the Online Questionnaire 
The Permanent Representation of France to the European Union, Answer to the Online Questionnaire 
World Meteorological Organization, press release nr 906,  
http://www.wmo.int/pages/mediacentre/press_releases/pr_906_en.html  
IPCC, 4th Assessment Report, Climate Change 2007: Working Group I, Summary for Policymakers 
Source: National Oceanic and Atmospheric Administration. 
Munich,  3  January  2011,  Press  release  Munich  Re  :  Overall  picture  of  natural  catastrophes  in  2010, 
http://www.munichre.com/en/media_relations/press_releases/2011/2011_01_03_press_release.aspx  

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Source: NatCatSERVICE, Geo Risks Research, Munich Re (July 2010) 

According to the European insurance and reinsurance federation (CEA)69 the World-wide the 
average  number  of  major  weather-related  natural  catastrophes  has  increased  significantly, 
from about 1.5 in the 1950s to 4.5 in recent years. Apart from the increase in the frequency of 
weather-related  natural  catastrophes,  the  global  economic  impact  of  these  events  has  also 
increased  significantly,  with  a  record  high  cost  of  weather  related  catastrophes  of  US$  228 
billion in 2005, which included Katrina, the costliest hurricane of all time.  

Whereas  in  2010  the  US  coast  was  not  affected  majorly  by  hurricanes  in  2010,  the  number 
and  intensity  of  the  storms  was  one  of  the  severest  hurricane  seasons  of  the  past  100  years 
with 19 named tropical cyclones70, equalling the number recorded in 1995 and putting 2010 in 
joint third place after 2005 (28) and 1933 (21). Also in China severe weather events have been 
reported  hitting  the  country  with  a  frequency  and  intensity  rarely  seen,  with  areas  severely 
affected by drought, with other experiencing exceptional rain71. 

Also  2011  started  with  major  catastrophes,  associated  with  a  strong  La  Niña,  such  as  the 
floods affecting large areas of Australia and Sri Lanka.  

Munich  Re  concluded  that  "the  high  number  of  weather  related  natural  catastrophes  and 
record  temperatures  both  globally  and  in  different  regions  provide  further  indications  of 
advancing climate change". 

The consequent economic and social impacts can be large. For instance the World Bank and 
Asian Development Bank72 estimated that the Pakistani flood, in terms of the likely economic 
impact, is the worst natural disaster in Pakistan's history. Overall damage is estimated at the 

69 

70 
71 
72 

CEA, Brussels, June 2007: Reducing the Social and Economic Impact of Climate Change and Natural 
Catastrophes - Insurance Solutions and Public-Private Partnerships 
National Hurricane Center, 2010 Atlantic Hurricane Season, http://www.nhc.noaa.gov/2010atlan.shtml 
http://www.cma.gov.cn/en/news/201101/t20110113_84904.html 
World  Bank,  Asian  Development  Bank:  Pakistan  Floods  2010  -  Preliminary  Damage  and  Needs 
Assessment, November 2010, Islamabad, Pakistan 

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equivalent  of  5.8%  of  GDP,  resulting  in  likely  substantial  adverse  impacts  on  economic 
growth.  

According to Munich Re, less than one third of global losses related to natural catastrophes 
were  insured.  This  also  affects  high  income  regions  such  as  the  EU.  For  instance  the  most 
expensive individual event in the EU was winter storm Xynthia, which mainly affected Spain 
and France and caused overall losses of € 4.5 billion, of which only little more than 50 % was 
insured.  

But social impacts can also be dire. The Russian drought and subsequent fire were estimated 
by Munich Re to have led to 56000 dead as a result of heat and air pollution, making it the 
second  biggest  deadly  natural  disaster  last  year  after  the  earthquake  in  Haiti.  The  Russian 
drought  has  been  generally  also  indentified  as  one  of  the  elements  that  contributed  to  the 
increasing global food prices over the last year. Climate change will have impacts on the long 
term on food production. As the IPCC indicated, the potential for food production is projected 
to decrease globally with increases in local average temperature over a range of 1-3°C73. 

Without  taking  additional  action,  temperatures  are  expected  to  rise  well  above  2ºC  already 
this century (see also chapter 5.1.5) leading to more weather anomalies and catastrophes. In 
2007 the IPCC collated current scientific research in its 4th Assessment Report (AR4) on the 
potentially dramatic impacts of temperature increases (see Figure 3) showing potentially large 
scale impacts if temperatures indeed increase beyond 2ºC.  

As the Stern Review pointed out, this could have significant economic impacts with GDP per 
capita losses ranging from 1 to 8% (taking into account market, non-market impacts, risks of 
catastrophes and climate feedbacks) by the end of his century and 2.9 to 35.2 % by 220074. 
This could disproportionally affect the poorest, who are also the least capable of adapting to 
the impacts of climate change. 

But  the  largest  impacts  can  be  expected  from  potentially  large  scale  irreversible  impacts, 
including  potential  tipping  points75  in  our  earth  climate  system  with  potential  dramatic 
impacts.  It  is  the  magnitude  and  implications  of  such  potential  large  scale  events  that  are 
particularly difficult to capture in a quantitative analysis.  

73 

74 
75 

IPCC, 4th Assessment Report, Climate Change 2007: Working Group Working Group II to the 
Fourth  Assessment  Report  of  the  Intergovernmental  Panel  on  Climate  Change,  Summary  for  Policy 
Makers. 
Stern (2007) The economics of climate change, Cambridge University Press, pp. 177-179. 
Lenton et al., 2008 

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Figure 3: Key impacts as a function of increasing temperature change 

Global mean temperature change of 2ºC 
relative to pre-industrial times 

Source:  Adapted  from  'IPCC,  Contribution  of  Working  Group  II  to  the  Fourth  Assessment  Report  of  the 
Intergovernmental Panel on Climate Change, Summary for Policymakers, Figure SPM.2, 2007  

For  Europe  similar  effects  can  be  expected  of  climate  change,  with  significant  differences 
between regions. For a review of recent findings, see annex 7.2. 

2.2. 

Avoiding dangerous climate change 

To avoid dangerous impacts, the EU has a stated objective of limiting global climate change 
to  a  temperature  increase  of  2ºC.  The  Copenhagen  Accord76  included  reference  to  this 
objective. It was further confirmed within the UNFCCC in the decision of the 16th Session of 
the  Conference  of  the  Parties  to  the  UNFCCC  that77  recognised  that  deep  cuts  in  global 
greenhouse  gas  emissions  are  required  according  to  science  with  a  view  to  reducing  global 

76 
77 

UNFCCC, 2010, Decision 2/CP.15, Copenhagen Accord. 
UNFCCC, 2010, Decision -/CP.16, Outcome of the work of the Ad Hoc Working Group on long-term 
Cooperative Action under the Convention. 

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greenhouse gas emissions so as to hold the increase in global average temperature below 2°C 
above pre-industrial levels78.  

In order to have a likely chance to limit long term global average temperature increase to 2°C 
or  less  compared  to  pre-industrial  levels,  global  emissions  need  to  peak  by  2020  and  be 
reduced by at least 50% globally by 2050 compared to 1990. The EU has endorsed this GHG 
emission reduction objective79. Annex 7.3 gives an overview of the science that translates the 
2ºC objective into this ambition level of global GHG reductions. The Intergovernmental Panel 
on Climate Change (IPCC) reported in 2007 that the existing science indicated that developed 
countries would need to take a target within the range of 80 to 95% below 1990 emissions by 
2050  to  limit  global  climate  change  to  a  temperature  increase  of  2ºC  compared  to  pre-
industrial  levels80.  The  European  Council  and  Parliament  have  endorsed  this  as  an  EU 
objective,  in  the  context  of  necessary  reductions  according  to  the  IPCC  by  developed 
countries as a group (see chapter 1.1).  

Whereas the EU as a whole has seen its GHG emissions (without LULUCF) decrease over the 
last 2 decades, the EU GHG emissions are not on a path in line with an 80 to 95% reduction 
below 1990 levels by 2050.  

In 2008 GHG emissions where estimated to be 11% below 1990 levels81. For 2009 the EEA 
estimates  even  significantly  lower  emissions  levels  of  17%  below  1990,  in  part  due  to  the 
impact  of  the  economic  crisis  82.  Including  aviation  this  reduction  would  be  around  16% 
below 1990 levels. Currently implemented policies such as the EU emissions trading system 
(ETS) or the legally binding renewable energy and non-ETS targets would lead at best to 20% 
reductions by 2020 and provide an important basis to decarbonise further. Decreases by 29% 
in 2030 and by 39% in 2050 compared to 1990 are projected (see Figure 4) mainly delivered 
by ETS sectors, with emissions nearly 50% lower than 1990, due to its linearly decreasing cap 
also beyond 2020. 

78 

79 

80 

81 

82 

It also includes the need to consider in the context of a periodical review the strengthening of the long-
term  global  goal  on  the  basis  of  the  best  available  scientific  knowledge,  including  in  relation  to 
temperature rises of 1.5°C. 
The EU has expressed itself as preferring the option of global peaking by 2020 and to have global GHG 
emissions  reduced  at  least  with  50%  compared  to  1990  levels  by  2050.  See  Council  conclusions  on 
Climate  change,  Follow-up  to  the  Copenhagen  Conference,  3002nd  Environment  Council  meeting, 
Brussels, 15 March 2010; European Council Conclusions, 29/30 October 2009,  
IPCC,  4th  Assessment  Report,  Climate  Change  2007:  Working  Group  III:  Mitigation  of  Climate 
Change, chapter 13.3.3 Proposals for climate change agreements, box 13.7. Scenario category for GHG 
concentration levels of 450 ppmv CO2-eq. 
Source:  Annual  inventory  submissions  to  the  UNFCCC,  2010.  This  excludes  bunker  fuel  GHG 
emissions.  If  emissions  from  aviation  fuels  sold  in  the  EU  would  be  included,  the  level  of  emissions 
would rather be around -10% compared to 1990 in 2008. 
EEA 2010a, this does not include the emissions from aviation, nor other bunker fuels. 

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Figure 4: GHG emissions in the EU under current trends and policies 

GHG emissions in the EU in reference case

%
0
0
1
=
)
n
o
i
t
a
i
v
a

.
l
c
n
i
(

G
H
G
7
2
U
E
0
9
9
1

100%

80%

60%

40%

20%

0%

1990

2000

Total

2010

2020

ETS

2030

2040

2050

Non ETS

Source: PRIMES, GAINS (reference scenario) 

The energy system remains the single largest source of emissions in the EU producing around 
80%  of  GHG  emissions,  with  the  energy  sector  itself  taking  the  largest  share  (31%  of  all 
emissions) followed by transport (22%), industry (11%) and heating for housing (11%). Most 
of the energy emissions are CO2 emissions, in total representing 83% of the EU's emissions, 
including certain CO2 emissions from certain oxidation processes in industry. 

Figure 5: GHG emission profile EU27, per sector 

Waste
Waste
2.8%
2.8%

Other
Other
0.2%
0.2%

Agriculture
Agriculture
9.6%
9.6%

Industrial 
Industrial 
process 
process 
emissions
emissions
8.3%
8.3%

F-gasses
F-gasses
1.4%
1.4%

N2O
N2O
7.4%
7.4%

CH4
CH4
8.4%
8.4%

Energy
Energy
79.1%
79.1%

CO2
CO2
82.9%
82.9%

Source:  Annual  inventory  submissions  EU  Member  States  to  the  UNFCCC,  2010,  GHG  emissions  2008 
excluding emissions and absorption from Land Use, Land Use Change and Forestry 

All sectors need to contribute to limiting GHG emissions, but it is clear that CO2 will be the 
single  largest  gas  contributing  to  any  GHG  emission  reductions  total.  Therefore  the  term 
'decarbonisation'  is  used  when  referring  to  the  need  to  achieve  very  large  greenhouse  gas 
emission reductions, whether or not those reductions are take the form of CO2 or other GHGs. 

2.3. 

Growing energy resource and security concerns  

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Today, some 55% of Europe's primary energy is imported. With reduced oil and gas output in 
the  North  Sea,  this  is  expected  to  increase  to  57%  by  2030  and  58%  by  2050,  despite 
increasing contributions from renewables (achievement of 20% target by 2020).  For oil  and 
gas this is even higher, with import dependency of over 60% for gas and 80% for oil today 
already, increasing to over 80% and 90% in 2030 and to over 90% (gas) and close to 100% 
(oil) in 2050 in the worst case if no action is taken. While energy dependence in itself does 
not constitute an economic problem per se, there are several energy developments that require 
careful attention.  

First, increasing energy consumption in emerging economies will continue to push up demand 
and  competition  for  gas  and  oil,  requiring  the  exploration  of  less  accessible  and  more 
expensive resources. Already today oil prices exceed 100$ despite the economic crisis. As an 
example of increasing demand in emerging economies, the IEA projects passenger vehicles to 
double  from  800  million  vehicles  today  to  1.6  billion  in  2035,  with  the  increase  coming 
almost exclusively from non OECD countries.  

Figure 6: Incremental primary energy demand, 2008-2035 

Source: IEA, WEO 2010 

Secondly,  IEA  data  suggest  that  supply  side  investments  are  not  in-line  with  increasing 
demand and with the declining production of depleting oil fields. It projects that conventional 
crude oil production will plateau for the next 25 years with additional demand being met by 
unconventional  sources.  By  2035  it  is  estimated  that  some  75%  of  conventional  crude  oil 
production will have to come from fields yet to be developed or found. 

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Figure 7: World oil production  

Source: IEA, WEO 2010 

Thirdly,  global  reserves  are  often  localised  in  geo-politically  unstable  regions,  and  are  in 
many cases owned by state-run companies that are not always reacting adequately to market 
forces. Additional supply would need to be delivered to a large extent by the Gulf region.  

Figure 8: Incremental oil production by country 

Source: adapted from IEA, WEO 2010 

While  the  overall  dependency  of  the  economy  on  oil  has  decreased  significantly,  transport 
still remains for more than 90% dependent on oil.  

Unless significant increases in resource efficiency are achieved, the European economy will 
continue to be exposed to serious risks related to energy prices, including potential oil shocks 
or  gas  shortages.  2010  is  an  example  of  this  volatility.  The  IEA  estimated  that  the  EU  oil 
import bill has increased in 2010 alone with $ 70 billion, and is estimated to represent in 2011 
2.1% of its GDP83. As experienced in the 70s and early 80s, oil price shocks can again lead to 

83 

Financial Times, interview chief economist F. Birol of the International Energy Agency, 05/01/2010. 

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deep recessions, reduced competitiveness and rising unemployment. Household incomes and 
transport dependent industries will suffer from increasing oil prices, resulting in inflation as 
well as budgetary and trade deficits. 

2.4.  Making growth and jobs sustainable by overcoming barriers to the development 

and deployment of low carbon technologies 

Today,  the  EU  faces  the  most  serious  economic  and  financial  crisis  in  decades.  There  is  a 
need  to  get  out  of  this  crisis,  and  to  create  new  jobs  as  quickly  as  possible.  Beyond  this 
timeframe, further efforts are needed to turn the EU into an economy delivering high levels of 
employment,  productivity,  competitiveness,  sustainability  and  social  cohesion.  The  Europe 
2020 strategy sets the framework for delivering smart, sustainable and inclusive growth and 
jobs. To become a resource  efficient,  carbon low economy the  way  energy is produced and 
consumed will need to undergo fundamental changes with a range of low carbon technologies 
deployed at a much wider scale than today. These technologies will be one of the key growth 
sectors of the future and a source of competitive advantage for a wide range of manufacturing 
industries  in  a  world  that  will  goes  towards  low  carbon  development,  and  their  widespread 
deployment is considered one of the key domains of sustainable job creation. 

However,  low  carbon  technology  development  is  not  only  hampered  by  market  failures 
related  to  the  non  inclusion  of  GHG  externalities.  There  is  also  the  well  known  problem  of 
uncertainty and knowledge spill-over in general, which may lead to lower investment in R&D 
as optimal from a societal perspective. In addition, there is a commercialisation problem for 
capital intensive technologies in sectors and markets in which investments are marked by long 
lead  times.  Energy  technologies  are  a  prime  example  of  such  problems84.  It  will  hence  be 
critical  to  foster  low  carbon  technology  development  and  accelerate  the  learning  curve  as 
cost-effective  as  possible.  The  wide  scale  application  of  low  carbon  technologies,  replacing 
today's  mainstream  technologies,  and  often  transforming  the  required  skills,  presents  both  a 
major challenge and an opportunity for European businesses and employees. 

How  the  EU  develops  its  R&D,  demonstration  and  innovation  policies,  creates  framework 
conditions inducing technological change and fosters the competitiveness of a wide range of 
key  manufacturing  industries  of  the  EU  is  an  essential  consideration  in  the  overall 
development of a low carbon economy roadmap.  

2.5. 

Sustainable shift towards a low carbon economy 

The transition towards a low a carbon economy has important implications for the sustainable 
use of resources beyond energy resources, and hence on other elements of the Europe 2020 
Resource  Efficient  Europe  Flagship.  Reducing  emissions  from  fossil  fuels  tends  to  coincide 
with  significant  reductions  in  pollutants  other  than  GHGs.  This  reduction  in  local  air 
pollutants  has  significant  co-benefits;  not  only  impacting  positively  human  health,  but  also 
reducing  pressures  on  our  ecosystems  and  additionally  decreasing  the  costs  of  air  pollution 
specific polices.  

The roadmap also needs to consider land use and agricultural and forestry practices and the 
use  of  the  available  land  for  different  services:  the  production  of  sufficient  food  and  the 

84 

See  analyses  for  the  SET  Plan  Communication  on  Investing  in  the  Development  of  Low  Carbon 
Technologies, SEC(2009) 1297. 

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enhancement  of  food  security,  the  production  of  feed,  fibre  (timber,  pulp  &  paper)  and  the 
maintenance of essential ecosystem services (soil quality, water availability, biodiversity). 

Whilst individual assessments of these changes would go beyond this impact assessment, the 
most  relevant  element  to  the  low  carbon  economy  roadmap  is  the  role  of  bio-energy.  Bio-
energy could be a significant element in the shift away from fossil fuels, however its use must 
be  considered  as  part  of  wider  sustainability  view  of  land  use,  within  the  EU  and  globally. 
This  requires  careful  analysis  to  identify  the  conditions  under  which  different  needs  can  be 
made compatible. In this regard, changes towards more sustainable agricultural and forestry 
practices including potential productivity increases are important parameters to consider. 

3. 

OBJECTIVES  

3.1. 

General objectives  

Shape a vision and strategy of how the EU can become a low carbon economy by 2050 and in 
doing so make its contribution to the global challenge to keep climate change below 2°C, to 
prevent  severe  and  irreversible  impacts  of  climate  change  on  the  global  economy  and 
ecosystems. 

3.2. 

Specific objectives  

The  specific  of  this  roadmap  objective  is  to  develop  give  insight  on  how  the  EU  policy 
framework should develop in the next 10 years and beyond to (1) enable deep reductions of 
greenhouse  gas  emissions  consistent  with  science  while  at  the  same  time  (2)  reducing 
vulnerability to oil shocks and other energy security concern, and (3) reaping opportunities for 
sustainable  growth  and  jobs  (related  to  new  low  carbon  technologies),  while  taking  into 
account wider sustainability and resource efficiency considerations. 

3.3. 

Operational Objectives  

This  impact  assessment  has  the  intention  to  give  information  on  the  overall  and  sectoral 
pathways,  the  underlying  technological  and  structural  changes  required,  the  investment  and 
cost patterns, impacts on energy security and other impacts, synergies and trade-offs related to 
the  broader  sustainability  and  resource  efficiency  agenda  that  would  need  to  be  associated 
with a economy that decarbonises by 2050.  

In developing these insights, it is important to take into account:  

(1) 

(2) 

the specificities of sectors, and the interaction between them; 

risks  and  uncertainties  related  to  climate  and  energy  actions  by  third  countries, 
subsequent energy price developments and technological developments;  

(3) 

synergies with other policy objectives, co-benefits and potential trade-offs. 

The insights from this impacts assessment can be used as guidance when further developing 
climate  policies  and  specific  sectoral  roadmaps  at  sectoral  detail  (e.g.  the  Transport  White 
Paper and the Energy Roadmap 2050). Such policies can include: 

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(1) 

(2) 

(3) 

to  set  more  clearly  sectoral  milestones  or  potential  targets  to  mobilise  stakeholders, 
benchmark progress and give certainty to the business community;  

to  develop  policy  instruments  that  provide  the  specific  required  economic  stimuli 
towards low carbon investments, such as the ETS; 

to develop a broader policy framework comprising regulatory, sectoral, budgetary and 
financial measures to enable the low carbon transformation. 

4. 

SCENARIOS TO DECARBONISE THE EU IN LINE WITH THE 2ºC OBJECTIVE 

4.1.  Methodology 

This impact assessment is not a traditional impact assessment that lists policy options to meet 
a certain policy goal and that then assesses these policy options to determine a preferable one. 
It  assesses  rather  a  set  of  possible  future  'decarbonisation'  scenarios  to  get  more  robust 
information  on  how  the  EU  economy  could  decarbonise  by  2050  in  line  with  the  2ºC 
objective and compares this to a reference scenario that projects existing policies. It does this 
at  two  levels,  the  global  level,  because  climate  change  and  energy  security  are  to  a  great 
extent global problems and cannot be addressed by looking at the EU only, and, as primary 
focus of the analysis, at EU level, but consistent with the different global settings. 

Projecting  sectoral  developments  up  to  2050  is  a  long  time  from  today.  If  ones  looks  back 
forty years, for instance in the field of energy, one sees fundamental changes that might have 
been difficult to project exactly in 1970. Commercial nuclear was still tiny, North Sea oil and 
gas exploration were not yet developed and renewables other than hydro were not used on a 
large  scale  commercial  basis.  On  the  other  hand,  these  technologies  were  already  proven 
technologies  in  the  1970s,  but  still  required  further  innovation  to  make  them  widely 
commercially  available.  The  incentives  to  do  so  were  provided  by  the  numerous  oil  crises 
since the 1970s, in combination to policy initiatives that reacted on these crises and later on 
policies to achieve the Kyoto Protocol climate targets, as in part was demonstrated with the 
huge  surge  in  renewable  technologies  that  came  to  market  in  the  last  5  years.  Hence  also 
important  long  term  regularities  and  stable  causal  relations  can  be  observed  on  which 
quantitative modelling can build for scenarios extending in the future. 

The  methodology  applied  uses  energy  system  modelling  tools  that  project  the  evolution  in 
supply and demand sectors in a coherent manner, without looking at any sector in isolation. 
This  coherent  modelling  set  also  allows  to  take  into  account  resulting  changes  in  energy 
prices, an important driver for change in the energy system. The models used are POLES for 
the global energy system modelling and PRIMES for the EU energy system modelling.  

This modelling framework is expanded with specific modelling tools that address sectors that 
emit  greenhouse  gases  that  are  not  directly  related  to  the  energy  system.  The  Non  CO2 
emissions from agriculture and industry are assessed with the GAINS model, with input from 
the CAPRI agricultural model to assess production from agriculture and subsequent emissions 
(e.g.  livestock  emissions,  emissions  from  fertiliser  use).  The  land  use,  land  use  change  and 
forestry emissions and removals are assessed with the G4M and GLOBIOM. These modelling 
tools are used in a coherent manner with the energy system models. For instance the land use 
and  agriculture  models  require  to  foresee,  where  possible,  sufficient  supply  of  natural 

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resources  to  correspond  to  the  demand  for  bio-energy  and  biofuels  from  the  energy  system 
models. 

Not  all  aspects  could  be  modelled.  Significant  environmental  impacts  that  go  beyond 
greenhouse  gas  emissions,  such  as  on  biodiversity,  were  not  assessed  quantitatively.  The 
exception is air pollution, for which the impact through climate action was assessed using the 
GAINS model.  

GDP  and  overall  employment  impacts,  as  well  as  competitiveness  impacts  for  energy 
intensive  industries  were  assessed  using  the  GEM  E3  model.  It  was  not  possible  to  assess 
impacts on different household income levels, neither distributional impacts at Member State 
level. The global version of GEM E3 that was used does not have Member States detail. 

Thus a quantitative methodology is the core of this assessment, supplemented by qualitative 
considerations  where  appropriate.  It  is  applied  in  a  way  that  factors  in  uncertainties  but 
ensures  for  a  coherent  approach  based  on  proven  technologies,  applying  the  following 
principles and limitations:  

•  Take  into  account  existing  capital  infrastructure  and  limitations  regarding  capital  stock 

turn-over; 

•  It  is  not  possible  to  predict  one  future.  Uncertainties  and  different  options  must  be 
recognised. In this impact assessment the focus is on the major technological and energy 
price drivers. The level of the energy price is driven predominantly by the level or not of 
global action on climate change; 

•  Only by looking at different scenarios is it possible to draw more robust conclusions; 

•  Limitations  of modelling long term  horizons must be considered.  Technological progress 
over  time  is  assumed  as  typical  in  long  term  modelling  (see  also  annex  7.9.1).Potential 
break-through  technologies  depending  or  unforeseeable  structural  change  have  not  been 
taken  into  account.  A  particular  example  is  the  limitations  in  terms  of  modelling  energy 
storage  and  smart  grid  solutions  that  would  enable  very  wide  scale  deployment  of 
distributed generation.  

•  Similarly,  major  lifestyle  changes,  beyond  demand  side  effects  of  carbon  pricing  on 
behaviour, have not been taken into account in quantitative terms, as this goes beyond the 
capabilities of the quantitative modelling tools. 

•  The  modelling  also  could  not  take  into  account  effects  of  the  changing  climate  itself  on 
GHG emissions and potential reductions. These will have an impact on the energy system 
and  the  agriculture  sector.  Effects  can  go  in  different  directions  and  will  depend  on  how 
climate changes in different parts of the EU (e.g. more demand for cooling, less demand 
for  heating,  impact  on  water  availability  for  power  plant  cooling  or  hydroelectricity 
production,,  changing  agricultural  patterns).  These  impacts  can  also  be  more  or  less 
outspoken depending on fragmented or global action to mitigate climate change. Research 
on these aspects is ongoing (see for example the ClimateCost project85). 

85 

http://www.climatecost.cc/ 

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By comparing results from different decarbonisation scenarios, it is possible to extract more 
robust conclusions, how key parameters influence  the results and  how various parts interact 
with each other. The impact assessment hence considers what it would require for the EU to 
achieve  very  large  emissions  reductions  in  line  with  the  2ºC  objective  under  different 
alternative  scenarios  ("decarbonisation  scenarios",  instead  of  policy  options)  which  vary  in 
terms  of  key  parameters,  e.g.  in  terms  of  the  global  conditions  in  which  decarbonisation 
would need to materialise, in terms of the key energy developments (most notably fossil fuel 
prices), and in terms of key technological changes over time. Chapters 4.2 and 4.3 will outline 
the different scenario options assessed and explain the quantitative methodology at global and 
EU level in more detail.  

4.2. 

Action in a global context 

4.2.1.  EU internal action in the context of global action 

To  achieve  the  stabilisation  of  GHG  concentrations  at  a  sufficiently  low  level  to  be  in  line 
with  the  2ºC  objective,  IPCC  AR4  concluded  that  the  existing  science  estimated  that 
developed countries would need to take a GHG emission reduction target within the range of 
80 to 95%, below 1990 levels by 205086. The IPCC was not explicit about what the level of 
internal reductions would need to be to achieve this target of 80% to 95%, and how much of 
this could be achieved via the international carbon market.  

To assess the order of magnitude of the required EU's own internal GHG emission reductions 
by 2050, a review of recent science is presented in chapter 5.1.1. Additionally, specifically for 
this  impact  assessment,  the  POLES  model87  was  used  to  assess  a  mitigation  scenario  that 
reduces global emissions by 50% by 2050 compared to 199088.  

4.2.2.  Fossil Fuel Prices and how they relate to global and EU action  

Fossil  fuel  prices  matter  when  one  needs  to  assess  required  efforts  and  impacts  of  reducing 
GHG reductions in the EU. But fossil fuel prices are not determined by the EU but are to a 
large extent set in the global market. At the same time global action on climate change can 
impact the price level of these fossil fuels due to the impact in reduced global energy demand 
and changes in the type of energy sources used.  

To assess this potential interaction of climate action on a global level and fossil fuel prices 3 
scenario's are compared in chapter 5.1.2, using the POLES model: 

–  Global  baseline:  globally  no  additional  climate  action  is  undertaken  up  to  2050.  The  EU 
implements the climate and energy package but nothing additional is undertaken (for the 
EU this is actually similar to the so called reference case). 

86 

87 

88 

IPCC,  4th  Assessment  Report,  Climate  Change  2007:  Working  Group  III:  Mitigation  of  Climate 
Change, chapter 13.3.3 Proposals for climate change agreements, box 13.7. 
For a description of the major drivers in the global POLES scenarios (i.e. global GDP and population 
growth) see annex 7.5. 
Preliminary  results  that  looked  at  the  required  EU  internal  effort  were  already  presented  in  the  Staff 
Working  Paper,  Part  II,  Chapter  4,  accompanying  the  Communication  "Analysis  of  options  to  move 
beyond 20% greenhouse gas emission reductions and assessing the risk of carbon leakage" (SEC(2010) 
650). 

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–  Global Action: global action that leads to a reduction of global emissions of 50% by 2050 

compared to 1990 (same scenario as the one presented in chapter 4.2.1) 

–  Fragmented Action: EU pursues an ambitious reduction strategy (represented by the same 
carbon price signal as in the Global action scenario up to 2050). But other countries do not 
follow  the  Global  action  scenario.  They  only  comply  with  the  lower  end  of  the 
Copenhagen  Accord  pledges  until  202089.  After  2020  these  countries  are  assumed  not  to 
increase their effort (represented by assuming constant a carbon price signal after 2020 in 
line  with  the  required  carbon  price  that  achieves  their  Copenhagen  pledge  in  2020). 
Countries with no Copenhagen pledge are assumed to follow baseline.  

This analysis will give information of potential price impacts on fossil fuel prices of global or 
fragmented  climate  action.  This  information  will  be  used  to  determine  fossil  fuel  price 
assumptions in subsequent scenarios that model ambitious EU climate action in more detail 
(see chapter 5.2)90.  

4.2.3.  Macro economic impacts 

EU action on GHG emissions does not only have direct impacts through changing production 
and consumption patterns in foremost the energy sector, but it also has indirect effects on the 
economy on a wider scale. To assess these, a macro economic model is used, i.e. the GEM-E3 
model, that can also look at the indirect effects of interconnections between sectors with in the 
EU and third countries with home EU sectors compete.  

The  impact  of  scaling  up  EU  action  up  to  2020  beyond  the  present  20%  target  was  already 
assessed  for  the  Communication  'Analysis  of  options  to  move  beyond  20%  greenhouse  gas 
emission reductions and assessing the risk of carbon leakage'91. The Staff Working Document 
assessed  emission  reduction  levels  by  2020  similar  to  those  assessed  in  this  impact 
assessment, with internal reduction by 2020 in the range of 20 to 25%.  

This Macro economic modelling was revisited and extended to the 2030 time horizon, with a 
focus on the impact of ambitious EU action without other regions going beyond the pledges of 
the Copenhagen Accord after 2020. 

For a more detailed description of the scenarios assessed and the impact on GDP, employment 
and  production  in  the  energy  intensive  industries  exposed  to  international  competition  see 
chapter 5.1.3.  

4.2.4.  The missing global link, agriculture, forestry and energy  

Most models only address emissions from  energy  and industry.  But  a significant amount of 
global  emissions  comes  from  the  agriculture  and  forestry  sector  (typically  deforestation), 

89 

90 

91 

Under  the  Copenhagen  Accord  the  largest  global  emitters  have  pledged  action  to  mitigate  emissions. 
This  is  estimated  not  to  be  sufficient  to  be  on  track  to  achieve  the  2ºC  objective.  See  for  instance: 
Chapter  2.4,  Staff Working Paper,  Part  II, accompanying  the  Communication  "Analysis  of options  to 
move  beyond  20%  greenhouse  gas  emission  reductions  and  assessing  the  risk  of  carbon  leakage" 
(SEC(2010) 650) or UNEP: The Emissions Gap Report: Are the Copenhagen Accord pledges sufficient 
to limit global warming to 2 or 1.5°C?, 9 November 2010. 
The analysis presented in chapter 5.2 is done by the PRIMES – GAINS  modelling tools. These tools 
focus on the EU and have fossil fuel prices as an exogenous variable. 
COM(2010) 265 final, SEC(2010) 650 

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representing  around  30%  of  global  emissions92.  At  the  same  time,  remaining  forest  act  as  a 
carbon  sink.  Climate  change  policies  in  the  energy  sector  will  have  an  impact  on  those 
emissions  and  removals  through  increased  demand  for  bio-energy.  This  cannot  be  seen  in 
isolation.  Production  and  trade  of  agriculture  and  forestry  products  will  be  influenced  by 
climate action, both directly and indirectly.  

At the same time in order to achieve a 50% GHG reduction globally, also these sectors should 
actually contribute considerably to global emissions reductions by 2050. To achieve the most 
efficient  outcome,  the  sink  function  and  competing  uses  (such  as  for  materials  and  energy) 
should be balanced. Important questions can be raised regarding the impact of these opposing 
forces  on  the  agricultural  and  forestry  sector  on  a  global  scale,  sectors  that  are  crucial  for 
global  sustainable  development  (i.e.  food  supply,  biodiversity,  etc.).  Chapter  5.1.4  assesses 
this in more detail. 

4.2.5.  EU action and global action, the likelihood of meeting the 2ºC objective 

Meeting the 2ºC objective requires the halving of global emissions by 2050 (see also annex 
7.3 for more background). EU action alone cannot achieve this objective, given that the EU 
represents only a bit more than 10% of global emissions, a share that continues to decrease93. 
Chapter  5.1.5  assesses  the  likelihood  of  achieving  the  2ºC  objective  in  the  three  different 
action  cases  as  examined  in  chapter  5.1.2,  i.e.  the  global  baseline,  fragmented  action  and 
global action scenarios. 

4.3. 

The EU perspective towards a low carbon economy and society by 2050  

Whereas chapter 4.2 introduced scenarios that look at impacts of action on a global scale, this 
chapter will focus on EU action, using an EU quantitative modelling approach, looking at the 
different  actions  and  investments  that  can  over  time  lead  to  large  scale  reduction  of  GHG 
emissions in the EU. 

To  do  so,  the  PRIMES  energy  system  model  covering  all  EU  CO2  emissions  is  used  in 
combination  with  the  GAINS  emissions  model  for  projections  of  EU  Non  CO2  emissions, 
using also the agriculture EU production projections from the CAPRI agricultural model. See 
annex 7.4 for more background information on the modelling tools used and annex 7.9.1 for 
an overview of assumptions used in all scenarios with PRIMES – GAINS modelling.  

A common feature of EU-level models is that variables mainly determined at the global level 
(e.g. fossil fuel prices) are exogenous, i.e. have to be defined by assumptions. Therefore some 
results  of  the  analysis  with  the  POLES  model  looking  at  the  global  scenarios  presented  in 
chapter  4.2  and  assessed  in  detail  in  chapter  5.1  are  important  inputs  into  the  scenario 
development at the EU level. 

Foremost there is the EU internal reduction effort required by 2050. As chapter 5.1.1 points 
out,  internal  reductions  in  the  order  of  magnitude  of  75%,  80%  or  more  are  projected  as 
appropriate  for  the  required  EU  internal  reduction  in  the  context  of  achieving  the  2ºC 
objective. In line with these results a decarbonisation challenge of -80% domestic reductions 
of GHG below 1990 by 2050 is used as key constraint for the EU decarbonisation scenarios. 

92 

93 

IPCC,  4th  Assessment  Report,  Climate  Change  2007:  Working  Group  III:  Mitigation  of  Climate 
Change, Technical Summary, figure TS.2b: GHG emissions by sector in 2004. 
EEA 2009 

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Furthermore  as  chapter  5.1.2  demonstrates,  the  EU  could  be  confronted  with  considerably 
different  fossil  fuel  prices  depending  on  what  level  of  climate  action  others  do.  In  case  of 
fragmented  action  fossil  fuel  prices  seem  likely  to  remain  high  even  if  the  EU  takes  action 
itself, with a remaining risk of future oil shocks and high fossil fuel prices. In the case of true 
global  action  these  risks  on  oil  shocks  or  high  fossil  fuel  prices  reduce,  actually  showing  a 
considerable  reduction  of  fossil  fuel  prices  compared  to  the  baseline  price  development. 
Hence  low  import  fossil  fuel  prices  are  introduced  to  reflect  significant  impacts  on  global 
fossil  fuel  prices  in  case  of  Global  action  on  climate  change  while  fossil  fuel  prices  are 
assumed to increase in the reference scenario, which projects current trends and policies, as 
well  as  in  the  Fragmented  action  scenarios,  which  models  fragmented  global  action  on 
climate,  fossil  fuel  prices  are  assumed  to  increase  over  time.  Additionally  a  high  fossil  fuel 
price  scenario  and  an  oil  shock  scenario  are  modelled  to  reflect  the  remaining  risk  of  such 
events in case of only fragmented action at global level. 

The developments in the decarbonisation scenarios to meet the -80% constraint are driven by 
carbon prices relating to CO2 and Non CO2 emissions. This is in line with approaches used in 
climate  mitigation  science94  and  differs  from  the  approach  of  some  stakeholder  2050 
scenarios which start with a predefined target for the energy mix in 205095. A common carbon 
price  across  all  sectors  and  gases  is  assumed.  This  reflects  economic  cost-effectiveness 
considerations,  because  it  ensures  that  in  all  sectors  the  same  level  of  economic  effort  is 
applied to reach the target.  

Chapters  4.3.1  to  4.3.3  explain  key  features  of  the  different  EU  scenario  types,  e.g.  the 
the  context  of  global  action  and 
reference  scenario,  decarbonisation  scenarios 
decarbonisation  scenarios  in  the  context  of  fragmented  action.  The  table  below  gives  an 
overview of the detailed EU scenarios assessed. 

in 

Table 1: Overview of all EU level scenarios 

SCENARIO 
REFERENCE  

GLOBAL CLIMATE ACTION  

Effective and widely accepted technology 
Delayed CCS – higher efficiency 
Delayed electrification  

Delayed climate action  
FRAGMENTED ACTION  

AND 

TRENDS 

KEY ASSUMPTION 
ONLY 
CURRENT 
POLICIES 
-80%  GHG  IN  EU,  GLOBAL  ACTION 
RESULTING  IN  REDUCED  ENERGY 
IMPORT  PRICES  COMPARED  TO 
REFERENCE 
Enabling framework for all technologies 
Lower contribution CCS (timing and costs) 
Lower  contribution  electrification  of  transport 
(timing and costs) 
Reinforced action only from 2030 onwards 
FRAGMENTED 
ONLY 

ACTION 

94 

95 

See for instance work done in the context of the ADAM FP7 project (Schade et al., 2010) or the 2050 
EU vision report of the Netherlands Environmental Agency and the Stockholm Resilience Centre (PBL, 
2009). 
E.g.  European  Climate  Foundation:  Roadmap  2050.  A  practical  guide  to  a  prosperous,  low-carbon 
Europe. Technical Analysis, 2010; European Renewable Energy Council: Re-thinking 2050 – a 100% 
Renewable Energy Version for the European Union, 2010. A mixed approach of emission constraints 
and predefined technological choices is taken by the Stockholm Environmental Institute: Europe's share 
of the Climate Challenge. Domestic Actions and International Obligations to Protect the Planet, 2009.  

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31 

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Effective and widely accepted technology 

Specific  measures  for  sectors  exposed  to 
global competition (2 variants) 

High fossil fuel price variants 

Delayed climate action  

but 

society 

GLOBALLY,  NOT  RESULTING 
IN 
REDUCED  IMPORT  ENERGY  PRICES 
COMPARED TO REFERENCE 
Enabling  framework  for  all  technologies,  -
80% GHG target maintained 
a)  As  Effective  and  widely  accepted 
technology, 
compensating 
additional costs energy intensive industry 
b) carbon prices for energy intensive industries 
only as in reference scenario and thus resulting 
in lower emission reductions in this sector 
a)  Oil  shock  occurring  2030  with  prices 
returning close to reference afterwards 
b) Structural increase of fossil fuel prices from 
2030 onwards 
Reinforced action only from 2030 onwards 

4.3.1.  Reference scenario: where do current policies lead us to by 2050? 

The  aim  of  the  reference  scenario  is  to  project  trends  up  to  2050  based  on  already 
implemented  EU  and  national  policies96.  A  common  reference  scenario  has  been  defined 
between different Commission services for this purpose. It also includes those policies agreed 
in  the  Climate  and  Energy  package  for  which  national  measures  have  not  yet  been  fully 
implemented,  i.e.  the  legally  binding  targets  for  renewables  to  achieve  a  20%  overall  share 
and  a  specific  10%  share  in  transport  and  the  legally  binding  targets  for  non-ETS  GHG 
emissions and the ETS target to achieve the 20% reduction target in 2020 compared to 2005. 
Current policies, including the achievement of the legally binding renewables and greenhouse 
gas  target  do  not  result  in  the  full  achievement  the  20%  energy  savings  target  by  2020, 
compared to the 2007 baseline, but would only realise half of this. 

See annex 7.9.2 for more details on the specific policy assumptions for the reference scenario. 
See Figure 4 in chapter 2.2 for the overall emission profile in the reference case. 

It provides a long term baseline or benchmark with which the results of the decarbonisation 
scenarios can be compared. It is a projection of developments in the absence of new policies 
which will be decided at the EU and national level. It is not a forecast but a benchmark for 
evaluating new policy measures against developments under current trends and policies.  

International fossil fuel price assumptions do not presuppose significant global climate action 
and thus follow global baseline projections. Energy import prices follow a rising trend with 
oil  prices  increasing  to  127  $(08)/barrel  in  2050.  Gas  prices  follow  oil  prices  reaching  98 
$(08)/boe in 2050 whereas coal prices remain much lower at 30 $(08)/boe97 (see Figure 9).  

4.3.2.  Decarbonisation scenarios in the context of Global Climate Action  

96 
97 

The agreed cut-off date for policies which could be taken into account is March 2010.  
Baseline global fossil fuel prices were calculated based on the stochastic PROMETHEUS world energy 
market model. These price developments are comparable with the IEA World Energy Outlook 2009. 

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32 

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An internal greenhouse gas emission reduction contribution of around 80% in 2050 is taken as 
key  constraint  for  exploring  different  scenarios  on  how  such  a  decarbonisation  would  be 
possible in the EU.  

To  ensure  that  decarbonisation  efforts  are  comparable  across  options  and  scenarios,  the 
equalisation  of  cumulative  emissions  across  scenarios  is  used  as  an  additional  constraint, 
underlining  the  importance  of  the  climate  impacts  of  cumulative  emissions  over  the  whole 
period until 2050 (and beyond)98.  

Common  carbon  values  applied  to  all  sectors  and  greenhouse  gas  emissions,  covering  ETS 
and  Non  ETS  sectors,  are  used  as  key  driver  to  reach  the  GHG  emission  reductions  and  to 
ensure  cost  efficient  reductions  across  sectors.  As  economic  drivers,  they  influence 
technology choices and demand behaviour. Their respective level is not an assumption but a 
result of the modelling. 

A  second  driver  are  international  energy  prices.  Given  that  these  scenarios  assume  global 
action, significantly lower fossil fuel prices are assumed than those in the reference scenario. 
Their order of magnitude has been set at a similar level as the results of the global analysis in 
chapter  5.1.2  and  recent  IEA  projections  which  assessed  the  impacts  of  ambitious  climate 
policies99. 

Figure 9: International energy prices in reference and in the context of global climate action 

140

120

100

80

60

40

20

e
o
b
/
8
0
$

Oil reference

Oil global action

Gas reference

Gas global
action

Coal reference

Coal global
action

0
1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

Starting  from  these  common  assumptions,  different  decarbonisation  options  are  defined  to 
reflect  uncertainty  and  the  role  and  impact  of  potential  key  drivers  to  decarbonise.  In 
particular,  different  assumptions  on  technological  progress  and  diffusion  speed  of  key  low 

98 
99 

Meinshausen et al. 2009  
International Energy Agency, World Energy Outlook 2009, Energy Technology Perspectives 2010 

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33 

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carbon  technologies  have  been  specified  to  assess  the  impact  of  remaining  barriers  to 
technology  development  (for  those  technology  assumptions  which  remain  constant  across 
scenarios see annex 7.9.1, for a description of the technology assumptions that differ across 
the scenarios see annex 7.9.3):  

•  Effective  and  widely  accepted  technology  scenario:  An  Effective  and  widely  accepted 
technology scenario assumes that climate policies provide a sufficiently enabling context 
which overcomes barriers to the commercial deployment of low carbon technologies, such 
as  energy  efficiency  and  renewables,  carbon  capture  and  storage  (CCS),  nuclear  and 
electrification of transport. 

•  Delayed  CCS  scenario:  Carbon  Capture  and  Storage  has  the  potential  to  become  a  key 
low  carbon  technology  which  allows  continued  use  of  fossil  fuels  (coal  and  gas)  for 
electricity  supply  even  under  a  strict  carbon  constraint  and  enables  radical  emission 
reductions  of  industrial  processes.  However,  the  commercialisation  of  the  technology 
presupposes continued improvement of capture technologies and the availability and public 
acceptance of a new transport and storage infrastructure for CCS. A Delayed CCS scenario 
explores  the  consequences  if  CCS  is  enabled  less  successfully  and  to  which  extent  other 
low carbon power technologies and increased energy efficiency can step in.  

•  Delayed electrification scenario: Electrification of transport is currently widely regarded 
as promising a decarbonisation technology in the transport sector. These expectations are 
underpinned in particular by recent technological progress in battery development and an 
increasing offer of electric vehicles on the market. However, it is uncertain if the current 
speed  of  development  and  cost  reductions  continues  and  how  quick  a  corresponding 
fuelling  infrastructure  will  be  developed.  A  delayed  electrification  scenario  explores  the 
consequences  for  abatement  in  other  sectors  and  technologies  if  further  innovation  and 
large  scale  deployment  is  delayed.  To  enable  a  meaningful  analysis  of  the  impacts  of 
technology  failure,  it  is  not  assumed  that  another  possible  future  key  transport 
decarbonisation technology, e.g. hydrogen and fuel cells, could easily step in. 

Delayed climate action scenario: In addition to these technology variations, the impacts of a 
10  year  delay  to  further  climate  action  beyond  the  current  Climate  and  Energy  package  are 
explored in a delayed climate action scenario. Is it still feasible to achieve deep carbonisation 
levels  in  2050  under  these  conditions,  and  what  would  be  the  economic  impacts  of  such  a 
delay?  

4.3.3.  Decarbonisation in the context of Fragmented Climate Action  

The  scenarios  grouped  under  fragmented  climate  action  explore  the  important  possible 
consequences if the world did not act in line with the 2ºC target, but the EU would maintain 
its policy of climate leadership and act consistently with available scientific evidence of what 
the required reduction effort should be. Such scenarios would be characterised by two main 
differences with regard to global climate action as described in chapter 4.3.2 (for a technical 
description of the different scenarios see annex 7.9.3):  

World energy prices would be not as low as in case of a Global Climate Action scenario, but 
correspond rather to those in the context of a fragmented action globally. As can be seen from 
the  analysis  in  chapter  5.1.2  this  results  in  a  significantly  lower  reduction  in  global  energy 
prices and continued risks regarding long term energy security.  

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34 

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This is reflected in the detailed EU projections by assuming the same fossil fuel import price 
level as in the reference scenario. The impact of a fossil fuel prices that continue to increase 
over time is explored only in the 'Effective and widely accepted technology scenario' variant 
for the EU. Furthermore 2 high oil price scenarios are projected using this scenario variant. As 
such  it  isolates  the  effects  of  different  fossil  fuel  prices  and  allows  for  meaningful 
comparisons of the impact on EU decarbonisation efforts between the contexts of global and 
fragmented climate action.  

The 2 high oil price scenarios reflect the remaining realistic risk of oil price development in a 
world  that  does  not  act  globally  on  climate  change.  The  exact  probability  and  extent  of 
impacts  of  such  risks  cannot  be  predicted.  To  appropriately  take  related  uncertainties  into 
account, two different scenarios are developed:  

•  Oil Shock scenario: This explores the impacts of a temporary oil price increase, assumed 

to double prices around 2030.  

•  High  Oil  Price  scenario:  This  explores  a  world  where  demand  side  reactions  are  not 
sufficient to counterbalance problems related to supply100. It assumes that prices remain at 
a continuously high level after the price increase in the period around 2030. 

Both  scenarios  are  also  assessed  in  the  context  of  the  reference  case  in  the  EU  with  no 
additional climate action beyond the existing policies to see by comparison what the impact is 
of fossil fuel price risks on the EU with or without additional climate policies in place. 

Specific measures for sectors exposed to global competition: 

Furthermore  in  the  context  of  fragmented  action  in  which  the  EU  acts  more  strongly  than 
other countries in the world carbon leakage may become a problem. An assessment of impact 
of this is on the EU economy overall and more specific on the energy intensive industries up 
to 2030 was carried out using a macro-economic model, GEM E3, in chapter 5.1.3. 

But  also  more  specific  measures  in  the  EU  for  sectors  exposed  to  global  competition  after 
2030  up  to  2050  are  considered,  a  timeframe  where  CCS  becomes  important  to  reduce 
industrial  emissions  in  the  energy  intensive  sectors.  These  scenarios  explore  either  what 
compensation  energy-intensive  industries  would  require  for  the  deployment  of  such 
technologies  or  what  the  impact  would  be  of  not  requiring  additional  emission  reductions 
compared  to  the  reference  scenario  for  such  industries.  The  EU  internal  efforts  in  power 
generation,  land  transport,  heating  and  cooling  and  agriculture  are,  however,  assumed  to 
remain  similar  to  those  in  the  global  climate  action  scenario.  Again  this  scenario  was  only 
modelled using the 'Effective and widely accepted technology scenario' variant for the EU. 

Finally  also  in  the  context  of  fragmented  action,  a  delayed  climate  action  scenario  is 
explored. What are the impacts of such a delay if energy prices remain at the higher levels of 
the reference scenario?  

100 

For instance due to underinvestment in new capacity, problems related to unconventional oil sources, 
problems with deep sea exploration or simply political insecurity in key exporting countries) 

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35 

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5. 

ANALYSING THE IMPACT OF DIFFERENT SCENARIOS 

5.1. 

Action in a global context 

5.1.1.  EU internal action in the context of global action 

The 22nd Energy Modelling Forum exercise (EMF 22)101 compared the results of a set GHG 
mitigation  scenarios  modelled  with  different  tools  at  a  global  scale.  It  looked  at  different 
combinations of GHG concentration stabilization cases with ten integrated assessment models 
(IAMs)  or  energy  models.  Fifteen  projections  saw  emissions  reduce  globally  in  2050  by 
around  50%  or  more  compared  to  2000  levels.  Twelve  out  of  15  of  these  projections  saw 
internal emissions in the EU reduce by around 80% or more compared to 2000.  

The  IEA  in  its  WEO2010  publication  also  assessed  the  required  emissions  reductions  for 
achieving low GHG concentration levels in the longer term, stabilising at 450 CO2-eq. ppmv. It 
projected  CO2  emissions  from  the  energy  system  up  to  2035.  For  the  EU,  this  resulted  in  a 
reduction of energy CO2 emissions by 54% over the period 1990 – 2035102.  

The Final Report of the ADAM project103 concluded that Europe can make its proportionate 
contribution  to  achieving  the  ‘two-degree  target’  by  reducing  greenhouse  gas  emissions  by 
between  60  and  80  per  cent  by  2050.  The  ADAM  project  also  assessed  actions  and 
technologies, at sectoral level, that could result in EU GHG reductions of 80% by 2050104. 

Specifically  for  this  impact  assessment,  the  POLES  model  by  JRC,  IPTS,  was  used  to 
estimate  emissions  from  energy  and  industry  on  a  global  scale  and  the  resulting  necessary 
reductions  in  the  EU.  Emissions  from  international  bunkers  (international  maritime  and  air 
transport)105 are included but not disaggregated by country or region.  

The  global  action  scenario  projected  by  POLES,  is  a  policy  case  in  which  global  emissions 
are  reduced  by  around  50%  with  respect  to  1990  levels  by  implementing  energy  efficiency 
policies  and  the  introduction  of  a  global  carbon  price  incentive.  It  is  assumed  that  there  is 
gradual participation of the different areas in the global effort and in the international carbon 
market,  resulting  in  a  gradual  equalisation  of  carbon  price  incentive  across  regions  and 
sectors106. According to this scheme, a carbon price is first established in the EU ETS sectors. 

101 
102 
103 

104 
105 

106 

Clarke et al 2009 
Annex A, WEO 2010, IEA 
http://adamproject.info/index.php/Download-document/456-Adam-Final-Report-revised-June-
2009.html 
See Schade et al. 2010. 
The POLES model estimates international maritime and aviation emissions to represent 0.76 and 0.44 
Gt  CO2  in  2010.  Furthermore  this  underestimates  the  relative  impact  on  the  climate  of  aviation 
emissions which has been estimated by the IPCC as being two to four times higher than the effect of 
CO2 emissions alone due to releases of nitrogen oxides, water vapour and sulphate and soot particles 
(excluding cirrus cloud effects) (see Summary for Policy Makers IPCC Special Report on Aviation and 
the Global Atmosphere, 1999). 
The  methodology,  with  global  climate  goals  achieved  through  the  gradual  development  of  carbon 
markets  was  first  presented  in  the  impact  assessment  accompanying  the  Communication  'Limiting 
Global Climate Change to 2 degrees Celsius- The way ahead for 2020' (COM(2007) 2 final), adopted 
on  10/01/2007,  which  formed  the  basis  for  the  Commission's  proposal  to  adopt  a  20%  unilateral 
greenhouse gas target for the EU and a 30% conditional target. The methodology also formed the basis 
for  the  information on global  efforts  and mitigation  costs  as presented in  the  staff  working  document 

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36 

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In other regions the carbon price for the ETS sectors gradually catches up with the EU price. 
For  the  sectors  outside  the  ETS,  energy  efficiency  policies  are  first  implemented  and 
subsequently  carbon  prices  are  introduced.  By  2030,  carbon  prices  are  equal  to  the  ETS 
sectors in all countries except low income developing countries including India. By 2050, all 
sectors and countries globally experience the same carbon price. 

Figure 10: ETS carbon price differentials between regions over time 

ETS Carbon price differentials between regions over time

250%

200%

150%

100%

50%

2
1
0
2
n

i

e
c
i
r
p
n
o
b
r
a
c
U
E
=
%
0
0
1

EU and other
developed countries

Economies in
transition

High income DCs

Developing
countries

Low income DCs

0%

2015

2020

2025

2030

Source, POLES, JRC, IPTS 

Results of the global GHG emissions projections using the POLES model: 

Globally, greenhouse gas emissions from the energy sector and industry in the Global action 
scenario peak between 2010 and 2020. By 2050 emissions return to a level that represents a 
49% reduction with respect to the 1990 level (a 55% reduction if international bunkers are not 
included). This reduction corresponds to a 77% reduction with respect to the baseline in 2050 
(-79%  if  international  bunkers  are  not  included).  The  reduction  in  emissions  for  developed 
countries is 80% with respect to 1990 and 76% with respect to baseline in 2050. Developing 
countries emissions keep growing until 2020 but reduce significantly by 2050, down to a level 
of  about  5%  below  1990  levels  or  80%  below  baseline.  This  latter  figure  should  give  an 
appreciation of the level of action required also by developing countries.  

Table 2: Greenhouse gas emissions in the Baseline and Global action scenario 

Region 
1990 = 100% 
World 

Developed 

1990 

2000 

2005 

2010 

2020 

2030 

2040 

2050 

Global baseline 
Global action 

Global baseline 
Global action 

100 
100 

100 
100 

112 
112 

95 
95 

128 
128 

96 
96 

140 
139 

91 
91 

160 
139 

88 
72 

180 
109 

86 
51 

201 
75 

85 
33 

220 
51 

82 
20 

Developing 

Global baseline 

100 

143 

190 

232 

296 

354 

414 

477 

'Towards  a  comprehensive  climate  change  agreement  in 
accompanying  the  Communications 
Copenhagen '(SEC(2009) 101) and 'Stepping up international climate finance: A European blueprint for 
the Copenhagen deal' (SEC(2009) 1172/2). 

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37 

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Global action 

100 

143 

190 

232 

265 

211 

141 

EU27 

Global baseline 
Global action 

100 
100 

93 
93 

95 
95 

88 
86 

82 
73 

77 
55 

71 
36 

Source: POLES, JRC, IPTS 

95 

66 
22 

For the EU, emissions in 2020, 2030 and 2050 respectively are 28, 45 and 78% below 1990 
levels  (about  66%  less  than  in  the  POLES  baseline  by  2050).  There  is  in  principle  no 
economic incentive to do fewer reductions internally through the acquisition of international 
carbon credits, given that carbon prices are equal globally. No cheap reduction options remain 
available in other regions outside the EU.  

Thus  in  order  to  meet  the  2ºC  objective,  the  EU  is  bound  to  make  very  large  reductions 
internally, in the POLES model resulting in reductions or 78% in the EU by 2050 compared to 
1990.  Taking  into  account  the  lower  reduction  potential  in  agriculture,  not  going  beyond 
halving of GHG emissions by 2050 compared to 1990 (see chapters 5.1.4 and 5.2.9), which is 
the  major  sector  not  included  in  the  POLES  reductions,  total  internal  reductions  are  around 
75% in the EU. 

This confirms the results of the other global GHG projections discussed above, with similar 
internal reductions for the EU or even higher ones of 80% and more.  

For a sectoral differentiation of global and EU reductions between sector see annex 7.6. The 
results of the split in EU sectoral reductions are in line with those projected for the detailed 
EU analysis presented in chapter 5.2.1. 

Emissions  per  capita  would  converge  over  time.  Developed  countries  emissions  continue  to 
decline,  but  at  a  higher  rate  from  2010  onwards.  Developing  country  emissions  per  capita 
peak  sooner  than  total  emissions,  due  to  continued  population  growth.  Notable  is  also  that 
Chinese  and  EU  emissions  per  capita  are  similar  from  2020  onwards  in  a  Global  Action 
Scenario.  By  2050  absolute  differences  are  significantly  smaller,  even  though  per  capita 
emissions remain higher in developed countries. 

Figure 11: Per capita GHG emissions in the Global action scenario 

16

14

12

10

8

6

4

2

0

World

Developed
Countries
Developing
Countries
EU 27

China

1990

2010

2030

2050

Source: POLES, JRC, IPTS (excludes emissions from land use, deforestation and agriculture) 

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5.1.2.  Fossil Fuel Prices and Global Action 

Global fossil fuel prices are driven by supply and demand. The POLES model projects both 
endogenously,  representing  a  global  market  for  oil  and  linked  regional  markets  for  gas  and 
coal. As such it is an ideal tool to assess impact from global climate change action on fossil 
fuel  prices.  This  impact  would  primarily  be  driven  through  the  impact  of  climate  change 
policies on demand for energy and a shift in the type of energy resource used. 

The  POLES  model  is  used  to  assess  the  impact  of  baseline,  global  action  and  fragmented 
action as described in chapter 4.2.2. 

The  energy  projections  underpinning  the  Global  action  scenario  project  a  38%  increase  in 
world primary energy demand by 2050. But this increase is significantly smaller than in the 
baseline  (149%).  The  Fragmented  action  scenario  has  a  global  energy  demand  increase  of 
124%,  which  is  not  very  different  from  the  Baseline  case.  All  of  the  growth  in  demand,  as 
could be expected, takes place in developing countries (+171% and +370% by 2050 compared 
to 1990 in the Global action and the Fragmented action scenarios, respectively, but 395% in 
the Baseline), while developed countries have a slight increase over the baseline and a more 
or less pronounced energy demand reduction in the policy scenarios. In the Fragmented action 
scenario the global energy demand increase is so strong that world energy prices are pushed 
up to a level very close to those in the baseline scenario. 

In the EU, energy demand in the policy cases returns to 1990 levels by 2020 and falls by 33-
35% by 2050 compared to the base year. This corresponds to a 38-40% reduction with respect 
to  baseline.  While  such  reductions  are  not  spectacular  overall,  by  2050  they  become 
significant for fossil fuels: -60% to -63% for oil, -31 to -41% for gas, -87% to -88% for coal 
(smaller absolute figures correspond to the global action case). Given that in the Fragmented 
action  scenario  global  oil  prices  (as  well  as  those  of  the  other  fossil  fuels)  are  projected  to 
increase  substantially,  this  energy  frugality  could  provide  a  valuable  shield  against  price 
shocks for the EU energy system.  

Table 3: Primary energy demand in the Baseline, Global action and Fragmented action scenario 

Region 

Scenario 

1990 

2000 

2005 

2010 

2020 

2030 

2040 

2050 

World 

Developed 

Global baseline 
Global action 
Fragmented action 

Global baseline 
Global action 
Fragmented action 

Developing  Global baseline 

EU27 

Global action 
Fragmented action 

Global baseline 
Global action 
Fragmented action 

Source: POLES, JRC, IPTS 

100 
100 
100 

100 
100 
100 

100 
100 
100 

100 
100 
100 

115 
115 
115 

102 
102 
102 

139 
139 
139 

104 
104 
104 

39 

EN 

% 

164 
155 
158 

105 
96 
98 

273 
265 
268 

107 
100 
99 

139 
139 
139 

100 
100 
100 

211 
211 
211 

105 
105 
104 

130 
130 
130 

105 
105 
105 

178 
178 
178 

110 
110 
110 

190 
153 
177 

107 
86 
95 

340 
275 
327 

107 
90 
89 

218 
145 
199 

111 
75 
93 

411 
271 
393 

107 
78 
76 

249 
138 
224 

113 
65 
91 

495 
271 
470 

108 
67 
65 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
On  top  on  this  reduction  in  energy  demand,  climate  change  policies  also  are  a  driver  that 
shifts energy demand away from fossil fuels towards low carbon energy sources. Whereas in 
baseline in 2050 73% of primary energy demand is met with fossil fuels, this reduces to 70% 
in the fragmented action scenario and even 45% in case of Global action on climate. 

The  combined  effect  of  reducing  energy  demand  and  reducing  the  fossil  fuel  share  in 
supplying  this  demand  has  an  impact  on  oil  prices.  Whilst  in  the  Baseline  scenario  the  oil 
price grows, to 138 $/barrel in 2050, due to stringent energy efficiency and carbon mitigation 
policies  in  the  Global  climate  action  case  it  has  a  more  moderate  growth  until  2030  and 
declines to 69$/barrel in 2050 (see table below). On the other hand, in the Fragmented climate 
action  case,  the  oil  price  trajectory  follows  just  below  the  baseline  case,  as  it  continues 
growing  until  2050,  when  it  reaches  117$/barrel.  With  global  climate  action,  oil  prices  are 
projected to  halve  by  2050  compared  to baseline, while  with fragmented action, even  if the 
EU  continues  to  decarbonise  in  line  with  the  2ºC  objective,  oil  prices  reduce  by  only  15% 
compared to baseline, or less than a third of the reduction projected in case of global action.  

Table 4: Global oil prices in different scenarios 

Oil Prices (2005$/barrel) 
Global baseline 
Global action 
Fragmented action 

Source: POLES, JRC, IPTS 

2005 
55 
55 
55 

2010 
70 
70 
70 

2020 
78 
74 
75 

2030 
96 
77 
88 

2040 
115 
76 
102 

2050 
138 
69 
117 

In conclusion, the Global action scenario results in a major divergence in global demand for 
fossil fuels, with consequential impacts on projected world energy prices. Global Action leads 
a reduction of fossil fuel demand compared to baseline, leading to significantly lower prices. 
On  the  other  hand,  Fragmented  Action  means  that  world  demand  keeps  on  growing  fast, 
leading to higher prices close to those in baseline. For a discussion on what this could mean 
for expenses on imports of oil and gas, see annex 7.8). 

Changes in prices for energy sources will results in changes in income of countries that export 
these goods. But these impacts are manageable. Historically OPEC has earned annually a bit 
less than $ 300 billion from oil exports (see figure below, all prices are expressed in 2005 $). 
This is projected to triple in the coming two decades, with not that large a difference between 
the Baseline and the Global action scenario. Only after 2020 this stagnates in case of global 
action,  with  earnings  being  stable,  but  still  3  times  higher  than  the  historical  average.  In 
baseline or in the Fragmented action scenario without global action on climate change these 
would have continued to increase.  

EN 

40 

   EN 

 
Figure 12: Average annual OPEC oil export revenues per scenario  

/

r
a
e
y
$
5
0
0
2
s
n
o

i
l
l
i

B

1800

1500
1200

900
600

300

0

1989-2009

2010-2030 (Global Action)
2010-2030 (Baseline)

2010-2050 (Global Action)
2010-2050 (Baseline)

Source: POLES, JRC, IPTS 

Not acting on global climate change will result in continued high risks for high oil prices or 
temporary shocks. This risk remains high in the Fragmented action scenario. For illustration 
see Figure 13, comparing the oil production projections in POLES for the Fragmented action 
case with the projections made by the IEA in the New Policies Scenario of the World Energy 
Outlook  2010,  which  incorporates  the  Copenhagen  pledges  (see  also  Figure  7,  chapter  2.3). 
The projections are very similar in total quantity. 

As shown in the IEA graph, global oil production in the coming decades would become more 
and more reliant on oil fields still to be developed or yet to be found and on unconventional 
oil (see Figure 13). Oil wells in production today by 2035 will produce only a quarter of their 
current  output,  making  the  energy  system  highly  reliant  on  new  investments  in  OPEC 
countries  and  deepwater  wells107.  This  further  highlights  the  fact  that  the  supply  remains  a 
considerable source of uncertainty and risk regarding future price in case of fragmented action 
on climate change. 

107 

See also IEA, WEO 2010, Figure 3.21. 

EN 

41 

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Figure  13:  World  oil  production  up  to2035  in  case  of  the  new  energy  policies  scenario  of  WEO  2010, 
compared to POLES projection oil production fragmented action 

Source:  Adapted  from  IEA,  WEO  2010,  Figure  3.19  +  Oil  production  in  the  fragmented  action  scenario  from 
POLES (JRC, IPTS) 

Instead  Global  action  on  climate  change  would  greatly  mitigate  the  risk  on  oil  shocks  and 
continuously high oil prices. It would require much less investments in unconventional oil and 
it  would  ensure  for  a  more  stable  economic  environment  with  being  detrimental  for  the 
revenues of oil exporting countries. 

5.1.3.  Marco-economic impact 

In  order  to  assess  the  macro  economic  impact  with  the  GEM  E3  model,  2  scenarios,  the 
Reference and the Fragmented action scenarios, where assessed and compared.  

The following assumptions were applied for the two scenarios: 

For the EU: 

–  In  the  Reference  scenario  the  EU  achieves  its  20%  GHG  reduction  target  by  2020 

internally, and keeps this level of emissions constant up to 2030.  

–  In  the  Fragmented  action  scenario,  the  EU  is  assumed  to  achieve  a  25%  GHG  reduction 

internally by 2020, increasing to 40% by 2030.  

For the other regions: 

–  In the Reference scenario other regions are assumed not to implement specific policies.  

EN 

42 

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–  In the Fragmented action scenario other regions implement the low end ambition level of 
the  Copenhagen  pledges  up  to  2020,  afterwards  the  pledges  are  assumed  to  stay 
constant108. 

For the Non ETS sectors 2 variants are assessed: one where a carbon tax is introduced and one 
without a carbon tax. In the ETS only the power sector is assumed to have auctioning, other 
sectors get a fixed amount of free allocation.  

One additional variant was introduced in GEM E3 scenarios with respect to how companies 
define their product price in case of free allocation.  

Normally  the  GEM  E3  model  assumes  that  the  ETS  companies  fully  take  into  account  the 
opportunity  cost  of  those  allowances  when  setting  its  prices  of  the  goods  they  sell.  The 
product price thus includes the carbon price even for those allowances that they have received 
for free.  

In sectors without international competition, that can fully pass on the opportunity costs of the 
allowance, this inclusion of the opportunity cost can lead to a corresponding increase in the 
price of the good sold, and to significant windfall profits in case of free allocation. The power 
sector  has  often  been  associated  with  such  behaviour.  At  the  other  extreme,  there  could  be 
sectors that simply cannot raise the price of their goods due to international competition (this 
could only happen for sectors that have no product differentiation at all). In these sectors full 
inclusion of the opportunity cost of allowances would in principle lead to companies reducing 
some  of  their  production109.  This  behaviour  is  identical  for  allowances  being  auctioned  or 
allocated  for  free  to  these  sectors  and  is  optimal  behaviour  in  systems  where  the  fixed 
allocation (be it free allocation or auctioning) is determined for an indefinite period. 

But  not  all  industries  agree  that  this  behaviour  correctly  describes  what  takes  place.  Some, 
certainly the energy intensive sectors exposed to outside competition, claim that they do not 
engage in such type of price-setting, when they receive allowances for free. They claim they 
see free allocation rather as a compensation for the costs of the introduction of a carbon price 
on emissions which they will not include in the pricing of their goods. This type of behaviour 
rather focuses on keeping production volumes and market share high, results in principle in a 
lower  production  loss  but  also  lower  profits  than  the  profit  maximising  behaviour  that 
includes  opportunity  costs  of  all  allowances  in  the  production  and  pricing  decisions  of 
companies. It is also associated with allocation systems for free allowances where allocation 
in  future  periods  is  dependent  on  previous  periods  of  production  as  the  benchmarking 
approach does. In such systems companies may have an incentive to maintain production in 
order  to  have  sufficient  access  to  free  allocated  allowances  in  the  next  period.  Here,  the 
product price does not include the opportunity cost of the allowances that were received for 
free  (but  still  does  include  the  cost  of  the  additional  allowances  that  were  bought  on  the 
secondary carbon market). 

108 

109 

See  chapter  5.4.1  of  SEC(2010)  650  (Part  2)  for  further  description  of  how  the  pledges  of  other 
countries are modelled. It is assumed that their 2020 pledge can be met in part (up to 1/3rd of the effort) 
through  international  credits.  After  2020  it  is  assumed  that  countries  with  pledges  that  are  absolute 
targets by 2020, keep emissions stable after 2020. Countries whose pledges are relative target by 2020, 
can see emissions increase again. 
Companies  reduce  production  as  long  as  the  opportunity  cost  for  the  allowances  associated  with  this 
reduced production are higher than the reduction in revenue from the lower production itself. 

EN 

43 

   EN 

 
                                                 
As a sensitivity analysis also this incentive-based price-setting was assessed for the industrial 
sectors in the ETS that receive a fixed amount of free allocation, keeping allocation fixed over 
time  but  not  including  the  opportunity  costs  of  the  freely  allocated  allowances  in  the  price 
setting mechanism. 

Table 5 gives the GDP results for the 4 fragmented action scenarios compared to the reference 
scenario. The impact on GDP is limited, even with a 40% reduction, and confirms previous 
results that higher reduction targets, achieved through taxation and smart revenue recycling, 
could even have a positive impact on GDP development110. 

No inclusion of opportunity costs of free allocation in industrial price setting leads to slightly 
better  GDP  results  as  inclusion  of  opportunity  costs.  No  inclusion  of  opportunity  costs  of 
freely allocated allowances results in higher emissions in those industrial sectors that get free 
allocation (even if the amount of free allocation is the same) and thus pushes up carbon prices 
in the ETS because others need to reduce more. The indirect positive effect of this increased 
revenue recycling from auctioning compensates the negative impact of suboptimal reductions 
in industrial sectors with free allocation compared to the projections that assume full inclusion 
of opportunity costs.  

Table 5: GDP impacts fragmented action 

GDP 

Tax non 
ETS 
Yes 

No 

Industry in ETS price-setting strategy: 
Include opportunity costs free allocation 
Yes 
No 
Yes 
No 

Vs reference in 
2020 
-0.18% 
-0.09% 
-0.97% 
-0.93% 

Vs reference in 
2030 
-0.89% 
-0.74% 
-1.95% 
-1.86% 

Source: GEM E3, JRC, IPTS 

The overall employment effects are represented in Table 6, gives a similar results as the GDP 
impacts, with a positive impact from recycling policies111 and slightly better overall impacts if 
industrial companies would follow a price-setting strategy that does not include opportunity 
costs  of  free  allocation.  The  net  impact  on  jobs  can  be  an  increase  by  0.7%  compared  to 
reference, or an increase with a bit more than 1.5 million jobs by 2020. 

Table 6: Employment impacts fragmented action 

Tax non 
ETS 

Yes 

No 

Employment 
Industry in ETS price-setting strategy: 
Include opportunity costs free allocation 
Yes 
No 
Yes 
No 

Source: GEM E3, JRC, IPTS 

Vs reference in 
2020 
0.57% 
0.68% 
-0.11% 
-0.04% 

Vs reference in 
2030 
0.22% 
0.38% 
-0.62% 
-0.49% 

110 

111 

Revenue recycling is assumed to lead to lower labour costs. See SEC(2010) 650 (Part 2), chapter 5.4.2, 
table 20. 
Lowering  labour  costs  through  recycling  makes  labour  relatively  cheaper  to  capital  goods  in  the 
production  process,  increasing  overall  employment  compared  to  scenarios  where  other  forms  of 
recycling are applied. 

EN 

44 

   EN 

 
                                                 
The impacts on energy intensive sectors are represented in Table 7, giving similar results as 
presented in previous assessments112. Production decreases are very limited in 2020. By 2030 
the impacts are more outspoken, when the EU would reduce emissions internally with 40%. 
In the worst case, production decreases with 2.7 to 4.3 % by 2030 compared to reference. But 
this  depends  to  a  large  extent  on  the  optimisation  strategy  by  industry  itself.  If  they  would 
apply  a  price-setting  strategy  that  does  not  include  the  opportunity  costs  of  free  allocation 
then impacts are much less outspoken. Together with the benefits from increased recycling in 
the  whole  economy,  and  thus  slightly  higher  overall  GDP  growth,  impacts  are  limited  to  a 
decrease  in  production  between  1.5  and  2.9%.  Free  allocation  thus  protect  energy  intensive 
industry in the ETS, even if the EU would implement more ambitious targets in a world where 
other regions have more limited ambition. 

Table 7: Impacts on energy intensive industrial sectors from fragmented action 

Tax non 
ETS 

Yes 

No 

Tax non 
ETS 
Yes 
Yes 
No 
No 

Tax non 
ETS 
Yes 
Yes 
No 
No 

Production Other Energy Intensive Industries 

Industry in ETS price-setting strategy: 
Include opportunity costs free allocation 
Yes 
No 
Yes 
No 

Vs reference in 
2020 
-0.27% 
0.21% 
-1.03% 
-0.61% 

Vs reference in 
2030 
-2.70% 
-1.78% 
-3.62% 
-2.78% 

Production Chemicals  

Industry in ETS price-setting strategy: 
Include opportunity costs free allocation 
Yes 
No 
Yes 
No 

Vs reference in 
2020 
-0.81% 
0.03% 
-1.36% 
-0.57% 

Vs reference in 
2030 
-3.77% 
-2.29% 
-4.34% 
-2.91% 

Production Ferrous and Non Ferrous 

Industry in ETS price-setting strategy: 
Include opportunity costs free allocation 
Yes 
No 
Yes 
No 

Vs reference in 
2020 
-0.91% 
-0.29% 
-0.94% 
-0.37% 

Vs reference in 
2030 
-3.22% 
-1.69% 
-3.24% 
-1.77% 

Source: GEM E3, JRC, IPTS 

5.1.4. 

Interaction between energy, agriculture and land use emissions on a global scale 

The  POLES  model  was  linked  to  the  GLOBIOM  and  G4M  model113  to  assess  global  GHG 
emissions  from  agriculture  and  forestry  (including  the  impact  of  land  use  changes)  in  a 
consistent  manner.  The  POLES  model  itself  does  not  estimate  emissions  in  land  use  and 
agriculture sectors but iterative runs are carried out with GLOBIOM and G4M in a consistent 
manner  with  the  POLES  results  to  achieve  a  global  reduction  of  around  50%  for  all  GHG 
emissions (see annex 7.7.1 for more detailed information on the methodology applied). 

Global  population  is  estimated  to  increase  from  a  bit  more  than  5  billion  people  in  1990  to 
over 9 billion by 2050, who are estimated to see their welfare on average, expressed in GDP 
per capita, increase by a factor of 3 or more. This increase in income will cause dietary habits 

112 
113 

See SEC(2010) 650 (Part 2), chapter 6.1, table 20. 
Both the G4M and GLOBIOM models are maintained by IIASA. 

EN 

45 

   EN 

 
                                                 
to  change,  with  more  meat  consumed  per  capita.  As  a  result,  global  non-energy  GHG 
emissions of agriculture increase in the baseline significantly over time, nearly doubling over 
the period 1990 to 2050 from 4.8 to 9.1 Giga ton CO2-eq.  

Instead, gross deforestation globally is estimated to decrease through efforts to reduce the rate 
of forest loss, predominantly in developing countries. Emissions from gross deforestation in 
the baseline decrease from around 4.9 Giga ton CO2-eq. in 2010, down to 2.2 Giga ton CO2-
eq. in 2050. 

It  should  be  stressed  that  the  order  of  magnitude  of  uncertainty  is  large  with  deforestation 
emissions. Furthermore, this estimate only addresses emissions from gross deforestation and 
not absorptions from afforestation114. Finally this analysis does not take into account possible 
impacts from global warming itself over the period on agricultural production. 

Emissions in agriculture are predicted to increase and those in deforestation are estimated to 
decrease.  The  exact  outcome  of  the  opposing  trends  in  agriculture  and  deforestation  is 
uncertain, but projections including the effects of the increasing bio-energy requirements from 
POLES in baseline, with GLOBIOM and G4M, result in relatively stable aggregate emissions. 

To consider the reduction potential in the agricultural and forestry sectors, the global action 
scenario takes into account the following requirements:  

(1) 

(2) 

(3) 

(4) 

(5) 

The need to ensure food security to feed the global population.  

The  EU  stated  objective  of  reducing  deforestation  as  part  of  a  co-ordinated  global 
action, in particular within developing countries. 

Efforts to reduce agricultural emissions, or rather limit the increase of these 

Increased biomass use for energy as a result of global action on climate change 

Dietary  habits  remain  the  same  as  in  the  baseline  (i.e.  changes  towards  more  carbon 
intensive food linked to welfare increases).  

In the global action case, carbon price incentives are introduced to meet these 5 requirements.  

Total aggregate emissions of agriculture and deforestation reduce by 48% compared to 1990 
levels. Gross deforestation is very small  by 2030, but the  figures  show continued emissions 
from  soils  and  degradation  of  dead  wood  post-2030.  Note  that  in  this  scenario  whilst  food 
demand increases in-line with the baseline, deforestation needs to be halted, emissions from 
agriculture need to be stabilised and at the same time an increased demand of biomass for bio-
energy production has to be satisfied. 

114 

Note that for instance recent preparatory work for the IPCC 5th assessment report in the context of the 
representative concentration pathways, when addressing emissions from deforestation actually looks at 
net deforestation and thus includes absorptions from afforestation. 

EN 

46 

   EN 

 
                                                 
Figure 14: GHG emissions from Agriculture and gross deforestation in baseline and Global Action Case 

Global Action case

Baseline

14

12

10

8

6

4

2

0

q
e
-
2
O
C

t

G

14

12

10

8

6

4

2

0

q
e
-
2
O
C

t

G

1990

2000

2010

2020

2030

2040

2050

1990

2000

2010

2020

2030

2040

2050

Gross Deforestation Non CO2 Agriculture

Gross Deforestation Non CO2 Agriculture

Source: IIASA, GLOBIOM + G4M 

The  impact  on  agricultural  products'  prices  resulting  from  this  policy  scenario  is  moderate. 
While in the baseline, by 2050 prices of agricultural crops on a global scale are projected to 
reduce  by  15%  compared  to  2000,  in  the  reduction  case  the  reverse  is  true,  with  prices 
actually increasing by 28% in the same period.  

This  result  of  the  global  action  case  (moderate  food  price  increases  compared  to  present 
levels,  combined  with  eliminating  deforestation,  increasing  food  production,  increasing  bio-
energy use) is critically dependent on productivity increases in the agricultural sector. 

The  scenarios  in  the  GLOBIOM  model  assume  in  3  ways  that  yields  can  be  improved  (see 
annex 7.7.2 for more information on the scenario description and yield assumptions): 

– 

– 

– 

Switches  are  possible  between  production  systems,  for  instance  for  a  switch 
from  purely  grassland  based  cattle  systems  to  more  intensive  production 
systems is feasible. 

Furthermore, crop and livestock production could be geographically shifted to 
areas where the natural resources allow for higher productivity 

Finally,  exogenous  yield  growths  have  been  assumed  within  crop  production 
systems at 0.5% a year. For livestock no such assumption has been made. 

It is crucially important that these yield increases are actually realised. In Figure 15 the results 
of a sensitivity analysis are shown projecting the impact on prices of agricultural crops of a 
scenario with lower and higher exogenous yield improvements than those assumed in baseline 
and global action case (see annex 7.7.2 for more information on the scenario description and 
yield assumptions).  

Having no yield improvement in agricultural production systems would have adverse effects. 
If there are no yield improvements, prices would increase in baseline by 24% over the period 
1990 to 2050 and by 156% in the Global action case. This situation seems unlikely; both from 
looking  at  historical  yield  improvements  and  given  that  it  would  result  in  increasing  prices 

EN 

47 

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which in turn will be a strong incentive to allow farmers to increase agricultural productivity. 
On  the  other  hand,  there  is  increasing  soil  degradation  globally  (thus  lower  soil  fertility), 
depletion of water resources for irrigation and the potential impact from climate change itself 
that could lower yields115. 

Figure 15: Impact yield improvements on overall costs agricultural goods. 

Crop Commodity Price Index
Baseline

140%

120%

100%

80%

60%

40%

20%

0%

Crop Commodity Price Index
Global Action case

300%

250%

200%

150%

100%

50%

0%

2000

2020

2010
No yield im provem ent
Base case
Higher Yield im provem ent for livestock

2030

2040

2050

2000

2020

2010
No yield im provem ent
Base case
Higher Yield im provem ent for livestock

2040

2030

2050

Source: IIASA, GLOBIOM + G4M 

Achieving  such  yield  increases  requires  specialisation  and  improvement  of  agricultural 
practices, often implying intensification of farming, with certain crops or livestock production 
activities  "migrating"  to  those  regions  where  soil,  climatic  and  other  resources  (including 
capital)  give  them  a  comparative  advantage  relative  to  others.  Examples  of  improved 
agricultural practices and intensification include: 

(1) 

(2) 

Shifts from traditional grassland based livestock production systems to more intensive 
ones  requiring  less  land  area,  these  would  need  important  changes  in  the  diet  of  the 
cattle,  but  would  require  no  additional  deforestation  and  may  even  free  up  land  for 
forest-based biomass production. But care should be taken that conversion of existing 
grassland to other land use activities does not lead to higher net emissions.  

Shifts  from  low  input  and  rain-fed  agricultural  practices  towards  high  input  and 
irrigated crop production systems. However, the feasibility of this option would need 
to be assessed in specific site-conditions according to the projected evolution of water 
availability and other environmental impacts. 

(3) 

Improvement  of  soil  management  practices  to  increase  soil  fertility  and  to  recover 
degraded farmland soils.  

These are processes underlying the increase in agricultural outputs the world has seen in the 
past 50 years. But in the global action case the improvement in efficiency and yields is on a 
truly global scale and is crucial to deliver the combination of often competing requirements. 
Such  changes  will  require  support  from  R&D,  capacity  building  in  improved  agricultural 
practices,  investment  in  agricultural  and  rural  infrastructure  and  sometimes  institutional 
changes, all implying strong domestic land use policies. Also development aid policies by the 
EU will need to further address this issue in both tropical and temperate developing countries. 

115 

Moriando M. (2011)  

EN 

48 

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In conclusion, agriculture and forestry can make a substantial contribution to halving global 
emissions  by  2050  by  improving  agricultural  practices  and  eliminating  deforestation,  whilst 
also  ensuring  food  supply  and  provide  biomass  for  energy  purposes.  But  delivering  on  the 
goals  to  reduce  GHG  emissions  and  increase  biomass  for  energy  and  food  requires 
continuously  improving  agricultural  productivity.  Otherwise  not  all  goals  can  be  met.  The 
sector can also provide biomass for energy purposes, but the development of land based bio-
energy options needs to be checked in terms of the compatibility within a wider sustainability 
agenda of food security and climate change mitigation.  

Biomass can also contribute to mitigation if used to substitute materials that are more GHG 
intensive to produce. This was not assessed in this analysis. 

Global  action  towards  a  2ºC  target  will  be  beneficial  for  biodiversity  since  it  limits  the 
negative  impacts  of  temperature  increases  to  which  natural  systems  would  have  to  adapt, 
therefore  reducing  the  stress  on  living  systems.  In  addition,  tropical  deforestation  is  halted 
with  clear  benefits  for  preserving  biodiversity.  On  the  other  hand  this  will  require  higher 
agricultural productivity on a global scale and afforestation on marginal lands which in itself 
could lead to negative impacts on biodiversity.  

A  worse  outcome  would  be  a  world  that  does  not  undertake  global  action  and  where  EU 
action  and  the  resulting  increase  in  bio-energy  needs  would  lead  to  negative  impacts  from 
indirect land use change in other parts of the world, due to EU bio-energy imports. In part this 
will  require  monitoring  of  imports  of  bio-energy  and  their  corresponding  impacts.  An 
important  element  of  the  solution  would  be  a  global  mechanism  to  reduce  emissions  from 
deforestation and forest degradation, as being discussed in the ongoing international climate 
negotiations. 

Finally,  reversing  trends  away  from  more  carbon  intensive  food  consumption,  such  as  meat 
consumption, can also contribute, but this has not been analysed in this impact assessment. 

5.1.5.  EU action and global action, the likelihood of meeting the 2ºC objective 

The figure below combines the global mitigation scenarios from the POLES model for energy 
and industry scenarios (chapter 5.1.2) with those for agriculture and land use (chapter 5.1.4). 
Global GHG emissions peak between 2010 and 2020 and reduce by -49% by 2050116. 

116 

If the absorptions from additional afforestation in GLOBIOM and G4M would be included then total 
net emissions and absorptions would see a decrease greater than 50% below 1990 levels. 

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Figure 16: GHG emission pathway in case of Global Action, all sectors and gases 

50

45

40

35

30

25

20

15

10

5

.

q
e
-
2

O
C

t

G

0
1990

2000

2010

2020

2030

2040

2050

Energy and Industry

Agriculture

Deforestation

Source: POLES, G4M, GLOBIOM 

Likelihood of achieving the 2ºC objective 

Figure 17 compares the emission pathways of this Global action scenario for all sectors with 
coloured  bands  that  show  emission  pathways  modelled  by  other  Integrated  Assessment 
Models that correspond to different temperature increases. It does so also for the Fragmented 
action and Baseline scenarios. It demonstrates that the Global action emission pathway, which 
sees global emissions halve by 2050, is in line with the 2ºC objective117. But the Fragmented 
action scenario (with the EU the only large region taking action in line wit the 2ºC objective) 
sees  temperatures  already  by  the  end  of  this  century  increase  with  3ºC  or  more  and  the 
Baseline  even  with  4ºC  or  more.  This  actually  would  represent  a  situation  where  the  2ºC 
objective is already crossed by 2050. 

117 

This  is  also  confirmed  using  the  tool  '2ºC  Check',  see  http://www.primap.org/primap2Ccode/,  the 
emission pathway is indicated to have a likelihood of around 60% to meet the 2ºC objective. 

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Figure 17: Temperature increases associated with emission pathways 

Global Action Case

Fragmented Action

Baseline

Source:  Adapted  from  'UNEP,  The  Emissions  Gap  Report:  Are  the  Copenhagen  Accord  pledges  sufficient  to 
limit  global  warming  to  2  or  1.5°C?,  Technical  Summary,  November  2010,  figure  2  +  total  GHG  emission 
pathways  of  Baseline,  Fragmented  Action  and  Global  Action  cases  of  the  POLES  +  GLOBIOM  +  G4M 
modelling setup (JRC, IPTS, IIASA)  

The current 2020 mitigation pledges, as represented in the Fragmented action scenario, do not 
meet the 2ºC objective. This is confirmed by a recent UNEP report118 analysing the existing 
pledges under the Copenhagen Accord and concluding that these pledges represent 60% of the 
required reduction by 2020 to be in line with the 2° C objective119. 

5.2. 

Analysis of the EU perspective towards a low carbon economy by 2050 

The different scenarios to achieve GHG emissions as described in chapter 4.3 are assessed in 
this  chapter.  This  is  done  by  looking  at  the  different  topics  or  sectors  at  a  time,  assessing 
impacts across projected scenarios.  

5.2.1.  Greenhouse gas emission reductions over time and sectoral split 

Decarbonisation scenarios 

The decarbonisation scenarios show that EU internal emission reductions of 80% by 2050 are 
feasible,  if  sufficiently  stringent  carbon  price  incentives  across  sectors  can  be  put  in  place. 
Most of the emission reductions are enabled by changes in technology. Price-induced changes 
of behaviour also make a modest contribution.  

118 
119 

UNEP 2010 
Assessing the high end pledges which are often conditional and assuming that no “lenient” accounting 
rules are applied to land use sectors, surplus emission units (AAUs) and there is no “double counting” 
of pledges through offset credits. 

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Cost-effective emissions reductions alone are around 40% by 2030, except in the case of an 
oil price shock which would see reductions of up to 45%. Stepping up to a low cost pathway 
would see decreases by 25 to 26% by 2020 and 59 to 62% by 2040. 

The contributions of different sectors, in scenarios with equal carbon prices across sectors and 
with  emissions  reductions  leading  towards  an  80%  trajectory120  is  represented  in  the  table 
below. For an overview of the results per sector in each scenario see annex 7.10. 

Table  8:  EU  Greenhouse  gas  emission  reductions  overall  and  in  different  economic  sectors  in  different 
decarbonisation scenarios 

2005 
-7% 

GHG reductions compared to 1990 in % 
Total 
Sectors 
-7% 
Power (CO2) 
Industry (CO2) 
-20% 
Transport (incl. aviation, excl. maritime)121 (CO2) +30%
Transport (excl. aviation, excl. maritime)  +25%
-12% 
-20% 
-30% 

Residential and services (CO2) 
Agriculture (Non CO2) 
Other Non CO2 emissions  

2030 
-40 to -44% 

2050 
-79 to -82%

-54 to -68% 
-34 to -40% 
+20 to -9% 
+8 to -17% 
-37 to -53% 
-36 to -37% 

-93 to -99%
-83 to -87%
-54 to -67%
-61 to -74%
-88 to-91% 
-42 to -49%
-71.5 to -72.5%  -70 to -78%

Source: PRIMES, GAINS 

The  highest  absolute  and  relative  reductions  come  from  the  power  sector.  Under  similar 
carbon price incentives across sectors, it decarbonises fast, reaching usually well above 60% 
emission reductions by 2030 (except in the high fossil fuel price or oil shock scenarios, which 
see  sectors  that  consume  a  lot  of  oil  and  gas contribute  more  to  total  reductions).  By  2050, 
decarbonisation  of  the  power  sector  is  practically  complete  (for  further  analysis  see  chapter 
5.2.5).  

Above average contributions in the medium and long term are achieved by the residential and 
service sectors, due to significant reductions in required heating from improved insulation and 
greater  use  of  electricity  and  renewables  for  building  heating  as  well  more  energy  efficient 
appliances. Industry decarbonises slightly less than the overall economy in the medium term. 
However industry CCS opens significant further reduction options, although later than in the 
power sector, which in the context of global climate action are economically viable (see also 
chapter 5.2.7).  

Transport and agriculture are the main sectors where no full carbonisation in the longer term 
is achieved. In transport, the increasing trend of the last 20 years is reversed, with emissions 
(excluding  aviation  and  maritime  transport)  by  2030  getting  back  to  levels  below  1990  in 
most scenarios. It has also the largest range of potential reduction by 2050, depending on the 
degree of electrification and the level of oil prices (for further analysis see chapter 5.2.6). For 
agriculture  the  pattern  is  inverted.  Its  contributions  by  2030  are  significant,  but  then  further 
decarbonisation steps are more difficult (see chapter 5.2.9).  

120 

121 

i.e.  covering  both  contexts  of  global  and  fragmented  climate  action  but  excluding  scenarios  with 
delayed action and specific treatment for industry exposed to global competition 
Excludes international maritime bunker fuels, includes inland navigation in the EU 

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With  global  action,  energy  import  prices  are  lower  and  carbon  prices  need  to  be  higher  to 
achieve  the  required  decarbonisation.  The  reverse  is  the  case  for  fragmented  action  that 
requires  more  moderate  carbon  prices  to  decarbonise  because  of  higher  energy  prices  (see 
chapter  5.2.4).  However  this  only  has  a  limited  relevance  for  the  sectoral  split  of 
contributions122. Some meaningful differences exist for those sectors that use relatively large 
amounts of oil and gas, like transport and buildings. With higher energy prices these sectors 
contribute  more  in  the  fragmented  action  scenarios,  with  corresponding  lower  contributions 
by the power sector. 

Even  if  important  mitigation  options  such  as  CCS  or  electric  cars  contributed  less  (delayed 
CCS and delayed Electrification), an EU emissions pathway leading to -80% by 2050 is still 
achievable.  However,  if  several  important  mitigation  options  fail  to  materialise  it  would 
become very difficult to reach such low emission levels.  

Figure 18 represents total GHG emissions over time for scenarios with specific pathways that 
differentiate from the Effective Technologies Scenario and the Reference scenario for reasons 
other than a different enabling for a certain technology such as the delayed electrification and 
delayed CCS scenarios. 

As  to  be  expected,  compared  to  the  reference  case,  high  fossil  fuel  prices  or  an  oil  shock 
decreases  emissions.  But  this  does  not  decarbonise  the  economy  to  the  extent  seen  in  the 
effective  technologies  scenario.  If  further  emission  reduction  policies  were  delayed  until 
2030, stronger mitigation efforts would be required to catch up afterwards. Finally, if there is 
special treatment for industry in the context of fragmented action, emissions are higher than 
the effective technologies scenario (for more details see chapter 5.2.7).  

Figure 18: EU GHG emissions over time for selected scenarios 

t

M
n

i

i

i

s
n
o
s
s
m
e
G
H
G

100%

75%

50%

25%

0%

1990

1995

2020

2010

2015

2005

2030

2000
2025
Reference (frag. action, ref. fossil f. prices)
Reference (frag. action, high fossil f. prices)
Reference (frag. action, oil shock)
Effect. Techn. (glob. action, low fossil f. prices)
Effect. Techn. (frag. Action, high fossil f. prices)
Effect. Techn. + lower EII effort (frag. action, ref. fossil f. prices)
Delay. Clim. Act.  (glob. action, low fossil f. prices)

2035

2040

2045

2050

Source: PRIMES, GAINS 

122 

Of  course  this  is  not  the  case  for  the  option  with  specific  treatment  for  energy  intensive  industries, 
requiring less reductions from this sector in case of fragmented action. 

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The reduction in GHG emissions is in part achieved through the increased use of bio-energy 
(biomass  and  biofuels).  In  the  PRIMES  –  GAINS  model  setup  bio-energy  is  assumed  to  be 
neutral in carbon content. But bio-energy production can have an impact on the emissions or 
absorptions  of  the  land  use  sector,  typically  putting  pressure  on  the  net  sink  that  Land  Use, 
Land  Use  Change  and  Forestry  (LULUCF)  is  at  present  in  the  EU.  For  a  more  detailed 
analysis see chapter 5.2.10. 

5.2.2.  Greenhouse gas emission reductions in ETS and Non ETS  

If currently implemented ETS and Non ETS policies are projected until 2050, sectors covered 
by  the  EU  emissions  trading  system  would  provide  the  bulk  of  the  emissions  reductions  in 
line with the agreed continuously decreasing emissions cap. With the applied assumptions on 
additional  use  of  international  credits,  a  significant  emission  reduction  of  nearly  50%  is 
achieved between 2005 and 2050. Without additional policies, oil shocks or high fossil fuel 
prices, Non ETS sectors would only reduce slightly more than 20% compared to 2005, with 
contributions  beyond  the  implementation  of  the  existing  -10%  non-ETS  target  (by  2020) 
driven by the impacts of current energy efficiency and renewable heat and transport policies, 
continued impact of water and waste policies, as well as existing F-Gas measures.  

In a decarbonised EU, with equal economic incentives across sectors, a larger contribution by 
the sectors covered by the ETS would continue to be cost-effective. With emission reductions 
of  already  around  45%  by  2030  and  around  90%  compared  to  2005  in  2050  in  the  ETS, 
except if high fossil fuel prices or a significant oil shock would occur which would result in 
less reductions in the ETS by 2050, and more in Non ETS sectors (transport, heating). 

The range of the contribution in the GHG reduction scenarios123 which lead towards -80% is 
shown in the following table:  

Table 9: Emissions in ETS and Non ETS sectors 

Reductions compared to 2005  2030 
Overall 
ETS sectors 
Non ETS sectors 

-35 to -40% -77 to -81%
-43 to -48% -88 to -92%
-24 to -36% -66 to -71%

2050 

Source: PRIMES, GAINS 

Non  ETS  sectors  would  also  contribute  significantly  and  reduce  their  emissions  by  nearly 
70% emissions compared to 2005 in 2050. By 2030 the Non ETS sector's contribution would 
be between 24% and 36%. After 2030 further emission reductions are in line with those of the 
ETS  sectors.  This  pattern  is  mainly  due  to  the  limited  number  of  short-term  cost-effective 
reduction options in transport, while in the long term the smaller reductions are related to the 
limited potentials for Non CO2 emissions, in particular of agriculture (see chapter 5.2.9). 

In the medium term, more than in the long term, also the relative level of oil and gas prices 
compared  to  other  energy  sources  plays  a  role  for  the  ETS/Non  ETS  split.  For  example, 
comparing the Effective Technologies scenarios with different oil prices, the ETS/ Non ETS 
contributions in 2030 are; 45%/27% in the context of global climate action with low oil prices 

123 

Covering both contexts of global and fragmented climate action but excluding scenarios with delayed 
climate action and specific treatment for industry exposed to global competition 

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and  44%/29%  in  case  of  fragmented  action  with  reference  energy  prices.  However,  they 
change to 43%/36% with an oil shock or high fossil fuel prices occurring in 2030. 

5.2.3.  Energy resources and security of fossil fuel supply 

Implemented  policies  already  reflected  in  the  reference  scenario  halt  the  trend  of  an  ever 
increasing  gross  energy  demand  and  lead  to  a  slightly  decreasing  overall  use  of  energy 
resources. The projected gross inland consumption is around 1770 Mtoe in 2020, around 1720 
Mtoe in 2030 and around 1750 Mtoe in 2050 compared to 1826 Mtoe in 2005. This is brought 
about by significant increases in energy efficiency. This means that energy intensity of GDP 
would  reduce  significantly,  by  more  than  50%  in  2050  compared  to  2005,  but  absolute 
primary energy savings remain limited.  

In  a  decarbonised  EU,  energy  consumption  would  change  substantially.  The  overall  use  of 
energy resources would decrease significantly across all scenarios, reducing to 1740 Mtoe in 
2020 and going to around 1650 Mtoe by 2030. Decreases would be even steeper after 2030, 
resulting in a projected gross inland energy consumption of between 1300 and 1350 Mtoe by 
2050. 

According to the impact  assessment  for the Energy Efficiency Plan, the effects of  the crisis 
and  implemented  policies  until  December  2009  will  deliver  164  Mtoe  of  energy  savings 
compared to the 2007 Baseline, whereas full implementation of the energy savings objective 
would require a reduction of primary energy use by 368 Mtoe in 2020. Thus, the remaining 
gap  to  achieve  the  20%  energy  efficiency  target  in  2020  is  a  further  reduction  of  primary 
energy  use  equivalent  to  around  200  Mtoe.  Translating  this  into  additional  GHG  emissions 
reductions indicates that around a further 400 Mt CO2 would be reduced in 2020 if the energy 
efficiency  target  is  fully  achieved124,  or  the  equivalent  of  a  further  7%  reductions  of  GHG 
emissions compared to 1990. If this is achieved on top of the GHG reductions in reference by 
2020, this would enable the EU to reduce internal emissions by 25% or more by 2020. 

It is important to note that these levels of reduced primary energy demand do not come from 
reduced  activity  levels.  Instead  they  are  mainly  the  result  of  technological  changes  on  the 
demand side: firstly from more efficient buildings, heating systems and vehicles and secondly 
(most  prominently  in  the  last  2  decades  to  2050)  by  electrification  in transport  and  heating, 
which  combines  very  efficient  demand  side  technologies  (plug-in  hybrids,  electric  vehicles 
and heat pumps) with a largely decarbonised power sector. Energy intensity of GDP reduces 
by around 65%, resulting in significant absolute energy savings of around 30% compared to 
2005.  

Energy resource use is quite similar across scenarios in the context of global climate action. If 
important technological mitigation options like CCS or electrification contribute less, this is 
compensated by higher energy efficiency gains and hence still slightly lower resource use. As 
to  be  expected  this  effect  is  strongly  correlated  to  fossil  fuel  prices  and  is  enhanced  in  the 
context of fragmented climate action, in particular during oil shocks or high fossil fuel prices. 

124 

2  tCO2/toe  (based  on  general  CO2  intensity  in  2020,  PRIMES  2009  energy  efficiency  scenario,  see 
impact assessment of the Energy Efficiency Plan, SEC(2011) 277). 

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Figure 19: Gross energy consumption in relevant scenarios over time 

)
e
o
t
M

(
n
o
i
t
p
m
u
s
n
o
c
y
g
r
e
n
e

s
s
o
r
G

1 900

1 800

1 700

1 600

1 500

1 400

1 300

1 200

1990

2000
Reference (frag. action, ref. fossil f. prices)

2005

1995

2010

2015

2020

2025

2035
Reference (frag. action, high fossil f. prices)

2040

2030

2045

2050

Reference (frag. action, oil shock)

Effect. Techn. (glob. action, low fossil f. prices)

Effect. Techn. (frag. action, high fossil f. prices)

Effect. Techn. (frag. action, ref. fossil f. prices)

Delay. CCS (glob. action, low fossil f. prices)

Delay. Electr. (glob. action, low fossil f. prices)

Source: PRIMES 

Not only the amount, but also the composition of energy resource use would be very different 
in  a  decarbonised  world.  If  the  current  energy  policies  are  implemented  and  maintained  net 
energy  imports  (mainly  oil  and  gas)  would  continue  to  increase  over  time,  reaching  around 
1050 Mtoe in 2050. They would need to cover an increasing share of total energy supply and 
the already high fuel import dependency of the EU (55% in 2008) would reach 58% in 2050.  

In  a  decarbonised  EU,  security  of  fossil  fuel  supply,  which  is  a  key  dimension  of  energy 
security concerns125, would improve substantially. More domestic energy resources would be 
used, in particular renewables, total energy imports would more than halve compared to 2005 
and be around 60% lower in 2050 than in the reference scenario. From 2025, there would be a 
complete reversal of the trend of fuel import dependency increases, decreasing significantly to 
less  than  35%  by  2050  (see  Table  10).  Of  course,  higher  fossil  fuel  prices  or  oil  shocks,  as 
probable in the context of fragmented action, would make this pattern even more pronounced. 

Table 10: Fuel import dependency across scenarios 
Fuel import dependency (in %)  
Reference (frag. action, ref. fossil f. prices) 

2030  2050 
58% 
57% 

125 

It  should  be  noted  that  a  transition  to  a  low  carbon  economy,  while  significantly  mitigating  energy 
security issues related to oil and gas supply, may give higher profile to energy security issues related to 
electricity.  Demand  for  electricity  increases,  which  needs  to  be  available  in  exactly  the  demanded 
quantity at any time. Having much  more dispersed sources of supply – also geographically - requires 
grid  expansion,  building  of  smart  grids,  demand  side  management,  energy  storage  and  back-up. 
Moreover,  new  forms  of  waste  management  related  to  remaining  CO2  emissions  (CCS)  need  to  be 
ensured. However, these issues are more under EU control as the oil and gas supply. The 2050 Energy 
Roadmap will address these issues in more detail. 

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Reference (frag. action, high fossil f. prices / oil shock) 
Effect. Techn. (glob. action, low fossil f. prices) 
Delay. CCS (glob. action, low fossil f. prices) 
Delay. Electr. (glob. action, low fossil f. prices) 
Effect. Techn. (frag. action, ref. fossil f. prices) 
Effect. Techn. (frag. action, high fossil f. prices / oil shock) 47% 

52.5% 49 / 53% 
33% 
52% 
52.5% 31% 
53% 
34% 
50.5% 31% 

29 / 30.5% 

Source: PRIMES 

This  changing  pattern  in  decarbonisation  scenarios  is  the  result  of  a  combination  of  energy 
efficiency  initiatives,  the  use  of  a  wide  range  of  domestic  low  carbon  options  in  power 
generation  and  the  move  away  from  fossil  fuels  in  transport,  heating  and  industry.  For 
example, across the different decarbonisation scenarios renewables cover more than 50% of 
final energy demand in 2050. The import of oil would reduce between 65 and 70% compared 
to reference in 2050, while gas imports would be 36 to 43% lower. Total imports of oil and 
gas would decline by more than half compared to today. With an oil shock or high fossil fuel 
prices, oil import reductions by 2050 would still be more pronounced. 

In  the  global  action  scenarios,  the  combined  impact  of  lower  oil  and  gas  imports  and  the 
reduced oil and gas price would reduce our oil import bill by around 400bn € (2008) and our 
gas  import  bill  by  more  than  120bn  €  (2008)  compared  to  the  reference  in  2050  (see  Table 
11), representing together more than 2% of EU GDP in 2050, and more than halve expenses 
for  oil  imports  compared  to  today.  This  is  broadly  in  line  with  the  findings  of  the  POLES 
model (see also annex 7.8 for the POLES results). 

Table 11: Imports of oil and gas and corresponding expenses in 2050126 

Oil and gas imports in 
2050 
Net oil imports (Mtoe) 
Net gas imports (Mtoe) 
Expenses for oil imports 
(€bn 2008) 
Expense for gas imports 
(€bn 2008) 

Source: PRIMES 

Reference 

547 
340 

474 

224 

Scenarios in the context 
of global climate action 
163-193 
196-217 

78-92 

65-71 

Change vs 
reference (%) 
-65% to -70% 
-36% to -42% 

-81% to -84% 

-68% to -71% 

Decarbonisation  will  significantly  reduce  fossil  fuel  security  risks.  But  large  scale 
electrification  combined  with  more  decentralised  generation  from  variable  sources  involves 
other challenges and opportunities for providing high quality energy services at any time. The 
2050 Energy Roadmap will address these issues in more detail. 

5.2.4. 

System costs: Investments, fossil fuel expenses and carbon prices  

Carbon prices in the reference scenario are around 50 € per ton of CO2-eq. from 2030 onwards. 
Of  course  to  achieve  reductions  well  beyond  the  reference  level,  higher  carbon  prices  are 
required with a range of around € 100 to €370 per ton of CO2-eq. by 2050 (see figure below, 

126 

For  reasons  of  consistency  with  the  POLES  based  global  analysis  of  the  impacts  on  EU  oil  and  gas 
imports of global action (see annex 7.8) and the scope of the EU level analysis which excludes maritime 
bunkers, the latter are not included in the presented results. The decarbonisation scenarios covered are 
Effective Technology, Delayed CCS and Delayed Electrification. 

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for  table  with  carbon  prices  see  annex  7.10).  In  particular  delayed  action  increases  carbon 
prices  later  on,  as  well  as  those  scenarios  that  foresee  the  delayed  deployment  of  a  key 
technology, with the delayed CCS scenario being most outspoken. 

There is a clear inverse correlation between energy prices and carbon prices. Higher energy 
prices require lower carbon prices for decarbonisation. With fragmented action, which means 
energy  prices roughly equivalent  to those  found in the reference  scenario, the carbon prices 
remain around 20% below the level required for global action. 

Figure 20: Carbon price evolution  

Carbon price* 

300.0

250.0

.

q
e
-
2
O
C
n
o
t

r
e
p

200.0

150.0

100.0

50.0

0.0

2020

2025

2030

2035

2040

2045

2050

Reference (frag. action, ref. fossil f. prices)

Effect. Techn. (glob. action, low fossil f. prices)

Effect. Techn. (frag. action, ref. fossil f. prices)

Effect. Techn. (frag. action, oil shock)

Effect. Techn. (frag. action, high fossil f. prices)

Delay. Electr. (glob. action, low fossil f. prices)

Delay. CCS (glob. action, low fossil f. prices)

Delay. Clim. Act. (frag. action, ref. fossil f. prices)

*For reference only ETS carbon price is represented  

Source: PRIMES, GAINS 

The  lowest  carbon  price  needed  to  achieve  reductions  is  those  needed  within  the  scenarios 
which  include  an  oil  crisis  or  high  fossil  fuel  prices.  Of  course  this  points  to  the  fact  that 
pricing  in  general,  be  it  through  the  carbon  price  or  through  energy  prices  themselves  is  an 
important  driver  to  reduce  emissions  due  to  its  impact  on  energy  demand  and  energy 
efficiency. The benefit of carbon pricing clearly is that it  affects those inputs and processes 
more  which  are  most  carbon  intensive.  Furthermore  revenues  are  recycled  within  the  EU 
economy. With high energy prices this is not always the case, certainly not if the high energy 
price  is  due  to  high  import  prices.  If  certain  key  technologies  are  delayed  carbon  prices 
increase  significantly.  Similarly  carbon  prices  increase  significantly  if  climate  action  is 
delayed by 10 years. 

The combined effect of carbon prices and energy costs, including changes in fossil fuel prices, 
is a major driver for the type of investments that will be undertaken in the coming decades. In 

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€
 
 
 
 
the reference scenario average yearly investments in all sectors127 increase from around € 800 
billion in the period 2010-2020 to around € 1000 billion in the period 2040-2050 (see Table 
12). For the decarbonisation scenario this investment expenditure actually increases by 60% 
to an annual average just under €1600 billion in the period 2040-2050, which is an increase of 
just over €550 billion compared with the reference case. Cumulatively over the 40 year period 
this  increase  in  investment  expenditure  compared  to  reference  is  less  pronounced,  with  an 
average  annual  increase  of  around  €  270  billion,  for  both  the  global  and  fragmented  action 
scenarios, without delays in technology penetration. 

Taking action on climate change directly impacts fuel consumption. In the reference scenario 
fuel costs increase from around € 900 billion on average per annum in the period 2010-2020 
to  almost  €  1400  billion  for  the  period  2040-2050.  Fuel  costs  decrease  significantly  when 
action  on  climate  change  is  taken.  In  a  fragmented  world,  but  with  action  in  the  EU,  the 
reduction  in  fuel  costs  is  around  €  350  billion  per  annum  in  the  2040-2050.  With  global 
action, the reduction in fuel costs compared to reference is even larger, amounting to € 600 
billion saved per annum in the period 2040-2050. Over the whole 40 year period average fuel 
costs  decrease  compared  to  reference  are  between  €  175  and  €  320  billion  per  annum, 
depending on whether fragmented or global action is realised, and provided that technology 
penetration is not delayed compared with the effective and widely accepted technology cases. 
Under  delayed  electricity  penetration  in  transport  average  fuel  cost  savings  would  be 
considerably smaller. 

Delaying climate action causes investment expenditure to increase by around €100 billion per 
annum  for  the  20  year  period  from  2030  to  2050,  without  comparably  decreasing  the 
investment needs before 2030. Also fuel savings are lower over time compared the effective 
technology scenarios, making the scenario considerably costlier.  

Table 12: Average yearly total investments and fuel expenses 

Total average yearly investments 
Reference (frag. action, ref. fossil f. prices) 
Effect. Techn. (frag. action, ref. fossil f. prices) 
Effect. Techn. (glob. action, low fossil f. prices) 
Delay. Clim. Act. (frag. action, ref. fossil f. prices)  
Total average yearly fuel expenses 
Reference (frag. action, ref. fossil f. prices) 
Effect. Techn. (frag. action, ref. fossil f. prices) 
Effect. Techn. (glob. action, low fossil f. prices) 
Delay. Clim. Act. (frag. action, ref. fossil f. prices)  

 Source: PRIMES, GAINS 

816 
863 
858 
845 

916 
1040 
1040 
1011 

1014 
1589 
1592 
1689 

2011-20  2021-30  2031-40   2041-50   Average
969 
1299 
1309 
1392 
2011-20  2021-30  2031-40   2041-50   Average
1259 
1034 
834 
1061 

1184 
1008 
863 
1023 

929 
1198 
1200 
1234 

1376 
1019 
760 
993 

1170 
1067 
968 
1118 

930 
911 
892 
922 

An  oil  shock  or  high  energy  prices  result  in  a  similar  absolute  increase  in  fuel  expenses  in 
case  of  decarbonisation  or  no  action.  But  of  course  this  price  increase  in  case  of 
decarbonisation starts from a significantly lower level of fuel expenses than the case where no 
action  was  undertaken.  This  results  in  fuel  expenses  over  the  period  after  2020  in  case  of 
decarbonisation  that  remain  on  average  at  the  levels  below  or  a  bit  above  the  original 

127 

For  all  sectors  except  transport  and  the  power  sector,  the  investments  relate  to  energy  part  of  the 
investment,  not  the  capital  good  as  a  whole.  For  transport  and  power  the  investment  is  related  to  the 
whole capital good. Transport as such represents by far the largest part of investments. 

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reference  case,  whereas  in  case  of  no  climate  action  these  average  annual  fuel  expense 
increase in a range € 100 (oil shock) to 300 billion (long lasting high prices) on average. 

An oil shock or high fossil fuel prices increase the required average investment expenditure 
after 2020 on average by about € 100 billion per year in case of no action on climate change, 
however in the decarbonisation scenarios this additional increase is not detectable (see Table 
13).  

Table 13: Average yearly total investments and fuel expenses in scenarios with an oil shock or high fossil 
fuel prices 

Total average yearly investments 
Reference (frag. action, ref. fossil f. prices) 
Reference (frag. action, oil shock) 
Reference (frag. action, high fossil f. prices) 
Effect. Techn. (frag. action, ref. fossil f. prices) 
Effect. Techn. (frag. action, oil shock) 
Effect. Techn. (frag. action, high fossil f. prices) 
Total average yearly fuel expenses 
Reference (frag. action, ref. fossil f. prices) 
Reference (frag. action, oil shock) 
Reference (frag. action, high fossil f. prices) 
Effect. Techn. (frag. action, ref. fossil f. prices) 
Effect. Techn. (frag. action, oil shock) 
Effect. Techn. (frag. action, high fossil f. prices) 

 Source: PRIMES, GAINS 

816 
813 
813 
863 
863 
863 

916 
983 
981 
1040 
1119 
1116 

1014 
1207 
1213 
1589 
1538 
1559 

929 
1004 
1009 
1198 
1194 
1208 

2011-20  2021-30  2031-40   2041-50   Average
969 
1012 
1029 
1299 
1258 
1295 
2011-20  2021-30  2031-40   2041-50   Average
1259 
1510 
1700 
1034 
1281 
1421 

1184 
1281 
1422 
1008 
1121 
1215 

1376 
1360 
1735 
1019 
1087 
1325 

1170 
1323 
1323 
1067 
1204 
1205 

930 
930 
930 
911 
911 
911 

Taking  action  on  climate  change  results  in  significantly  lower  fuel  expenses  compared  to 
investment cost increases in case of global action. This is not the case with only fragmented 
action globally where more limited reductions in fossil fuel expenses do not fully compensate 
the investment increases. But this reverses with an oil shock. In case of permanently high oil 
prices, increases in investment expenditure for climate action are more than compensated for 
by  the  reduction  in  fuel  costs  over  later  periods  compared  to  a  situation  that  no  action  was 
undertaken. 

Costs are thus highest in the case of no action and with high fossil fuel prices and costs are 
lowest in case of global action on climate change. In contrast to taking no additional action, 
investing in for instance carbon low buildings and transport in the EU can shield the economy 
against  the  worst  effects  of  high  energy  prices  with  significantly  less  costs  related  to  fossil 
fuel imports.  

Costs  can  increase  also  if  certain  technologies  are  not  sufficiently  available  at  competitive 
costs or if action itself is delayed.  

For  a  more  detailed  discussion  on  the  separate  sectors,  see  annex  7.11.  It  is  of  particular 
interest to see the relative differences within each sector, that are often more pronounced than 

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the total aggregate data128. For more detail on the energy intensive industrial sectors see also 
chapter 5.2.7. 

5.2.5. 

Sector specific impacts: power  

Gross  electricity  consumption  shows  a  different  pattern  to  the  described  evolution  of  gross 
energy consumption (see chapter 5.2.3). It is projected to continue to increase in all scenarios, 
albeit  for  partly  different  reasons.  Hence  the  importance  of  the  power  sector  for  achieving 
emission reductions becomes even more important than it is today.  

Figure  21  below  gives  an  overview  of  electricity  consumption  over  time  for  different 
scenarios.  

Figure 21: Gross electricity consumption in relevant scenarios 

6 000 000

5 500 000

5 000 000

4 500 000

4 000 000

3 500 000

3 000 000

2 500 000

2 000 000

h
W
G
n

i

n
o
i
t
a
r
e
n
e
g
y
t
i
c
i
r
t
c
e
l
e

s
s
o
r
G

1990

1995

2000

2005

2010

2015

2020

2025

2030

2035

2040

2045

2050

Reference (frag. action, ref. fossil f. prices)

Effect. Techn. (glob. action, low fossil f. prices)

Delay. CCS (glob. action, low fossil f. prices)

Delay. Electr. (glob. action, low fossil f. prices)

Reference (frag. action, oil shock)

Effect. Techn. (frag. action, oil shock)

Source: PRIMES 

In the reference scenario electricity consumption increases by 50% in 2050 compared to 2005, 
continuing trends observed in the past decades, due to increasing wealth, demand for comfort 
and more use of electricity in transport (e.g. hybrid cars, electrified railways and metros) and 
buildings.  In  the  decarbonisation  scenarios,  carbon  pricing  leads  to  higher  incentives  for 
electricity savings. However this electricity saving element is overcompensated by: 

•  Incentives to further electrify demand sectors to reach ambitious emission reductions. For 
example, gross electricity consumption in 2050 in the Effective Technologies scenario than 
in the Delayed Electrification scenario and is around 850 TWh higher than in the reference 
scenario. Plug-in hybrid cars, electric cars and greater use of heat pumps drive this increase 

128 

Normally the investments relate to energy part of the investment, not the capital good as a whole. This 
is  not  the  case  for  transport  and  power  where  the  given  investment  projections  relate  to  the  whole 
capital good. Transport as such represents by far the largest part of investments. 

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in  electricity  demand.  Delays  in  transport  electrification  would  result  in  only  moderate 
electricity demand increase over reference (about 150 TWh) in 2050. 

•  The higher electricity use of some low carbon technologies (e.g. CCS). For example, the 
Delayed CCS scenario requires in 2050 around 200 TWh less electricity than the Effective 
Technologies scenario that has more CCS.  

All  scenarios  project  that  the  power  sector  is  able  to  cope  with  ambitious  decarbonisation 
requirements even under conditions of increasing power demand, as Figure 22 shows.  

Figure 22: CO2 emissions from power and steam generation and district heating 

1 600

1 400

1 200

1 000

t

M
n

i

i

s
n
o
s
s
i
m
e
2

O
C

800

600

400

200

0
1990

1995

2000

2005

2010

2015

2020

2025

2030

2035

2040

2045

2050

Reference (frag. action, ref. fossil f. prices)
Delay. CCS (glob. action, low fossil f. prices)
Reference (frag. action, oil shock)

Effect. Techn. (glob. action, low fossil f. prices)
Delay. Electr. (glob. action, low fossil f. prices)
Effect. Techn. (frag. action, oil shock)

Source: PRIMES 

The cost effective reduction contribution of the power sector exceeds 95% compared to 1990 
in  most  scenarios,  hence  a  more  or  less  complete  decarbonisation  takes  place.  For  the 
intermediate time horizon of 2030, this translates into reductions of more than 60% (except in 
the  cases  of  oil  shocks  or  high  fossil  fuel  prices,  resulting  in  reductions  a  bit  above  50%). 
Emissions  of  power  plants  and  district  heating  are  down  -64%  compared  to  1990  in  the 
Effective  Technology  scenario  and  -68%  lower  in  the  case  of  delayed  electrification  due  to 
lower electricity demand from transport and therefore higher emissions in that sector. Under 
the current trends of the reference case, emissions in 2030 would decrease by less than 40%. 

This high rate of decarbonisation of power generation is also the most important driver for the 
higher  reductions  in  the  ETS  compared  to  the  Non  ETS  (see  also  chapter  5.2.2)  and  an 
important driver for improvements in air quality (see also chapter 5.2.14). Furthermore there 
is a linkage between emissions levels in the transport and power sector for the decarbonisation 
of  the  economy.  To  achieve  80%  GHG  emission  reductions,  higher  electrification  of  the 
transport sector reduces emissions in transport and allows less absolute emission reduction in 
the power sector and vice versa. See chapter 5.2.6 for further information. 

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The three main low carbon technologies in the power sector are  

–  Renewables 

–  Nuclear  

–  CCS equipped fossil fuel plants 

Near complete decarbonisation is mainly achieved by the combination of these different low 
carbon technologies, which mainly driven by increasing carbon prices together increase their 
share  in  total  electricity  production  from  around  45%  in  2005  via  75  to  80%  in  2030  to 
practically  100%  in  2050  in  all  scenarios  (see  Figure  23).  Of  these  three  technologies, 
renewables  become  the  largest  source  of  electricity,  seeing  its  share  increase  from  15%  of 
electricity production in 2005 to around 50 to 55% 2050, which represents an absolute growth 
of around 500% reaching  2.7  to  3.0  TWh by 2050. However, the projected shares of single 
low-carbon  technologies  should  be  taken  with  some  caution,  in  particular  given  the 
uncertainty  of  individual  technological  progress  rates  and  the  difficulty  in  instigating  a 
possible complete change of the organisation of the power network, which would also enable 
higher renewable shares than those represented in the modelling129. 

Figure 23: Share of low carbon technologies in power generation 

n
o
i
t
a
r
e
n
e
g
y
t
i
c
i
r
t
c
e
l
e

f
o
%

100

90

80

70

60

50

40

2005

2010

2015

2020

2025

2030

2035

2040

2045

2050

Reference (frag. action, ref. fossil f. prices)
Effect. Techn. (glob. action, low fossil f. prices)
Delay. Electr. (glob. action, low fossil f. prices)

Reference (frag. action, high fossil f. prices)
Delay. CCS (glob. action, low fossil f. prices)
Effect. Techn. (frag. action, high fossil f. prices)

Source: PRIMES 

Another  difference  between  the  decarbonisation  scenarios  in  the  context  of  global  climate 
action relates to the role of CCS. If the contribution of CCS is lower and comes later, the cost-

129 

Further  developments  of  the  PRIMES  model  should  enable  an  improved  simulation  of  how  grid 
capacity issues relate to deep decarbonisation scenarios. 

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effective contributions of other sectors are higher along the pathway. However, carbon prices 
become significantly higher towards 2050 in this case. This illustrates also the important role 
of R&D and innovation for a shift towards low carbon technologies at lowest possible costs. 
But  even  in  the  delayed  CCS  scenario  decarbonisation  is  near  complete  by  2050  due  to  the 
availability of other cost-effective low carbon options in combination with a delayed but still 
significant CCS contribution 

In  the  context  of  fragmented  action  with  higher  fossil  fuel  prices  or  even  oil  shocks,  power 
demand  remains  very  similar.  The  corresponding  CO2  emissions  reduction  contribution 
required by the power sector would then be slightly lower, as shown in Figure 24. The reason 
for this is that higher fossil fuel prices or oil shocks induce higher contributions from transport 
and heating.  

This  significant  decarbonisation  of  the  power  sector  would  be  achieved  with  continuously 
increasing investment expenditures. However, as pointed out in chapter 5.2.4 this increase is 
less in absolute terms than for instance  in  the transport, residential and  tertiary sectors.  The 
pattern  also  differs  over  time  for  grid  investments  and  power  plant  investments  (see  figure 
below).  

Figure 24: Power investments over time  

500%

400%

%
0
0
1
=
5
0
0
2

300%

200%

100%

0%

2010

2015

2020

2025

2030

2035

2040

2045

2050

Power grid in Reference (frag. action, ref. fossil f. prices)
Power grid in Effect. Techn. (glob. action, low fossil f. prices)
Power plant in Reference (frag. action, ref. fossil f. prices)
Power plant in Effect. Techn. (glob. action, low fossil f. prices)
Power plant in Delay. CCS (glob. action, low fossil f. prices)
Power plant in Delay. Electr. (glob. action, low fossil f. prices)

Source: PRIMES 

Cumulative  investment  into  the  grid  from  now  until  2050  in  the  reference  scenario  is 
projected to be €1.3 trillion and would need to increase to between €1.6 and 2 trillion in the 
decarbonisation scenarios. The steady increases needed up to 2020 in the reference scenario 
would  need  to  continue  in  the  decarbonisation  scenarios,  with  this  value  tripling  by  2040 
(when  compared  to  2005),  when  grid  investments  would  eventually  start  to  decrease  and 
move towards reference levels.  

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Additional  electricity  generation  plant  investments  will  be  needed  in  the  decarbonisation 
scenarios  compared  to  the  reference  scenario,  reaching  cumulatively  €2.2  to  2.6  trillion 
compared to €1.7 trillion in the reference case (excluding CHP). The pattern is similar as for 
grid investments up until 2040, reaching triple the investment level of 2005, but investments 
needs  further  increase  after  2040  to  400-450%  of  2005  value.  As  to  be  expected,  delayed 
electrification  requires  the  lowest  amount  of  power  plant  investments,  while  delayed  CCS 
requires the highest cumulative amount. 

The  impact  of  decarbonisation  in  the  Power  sector  will  be  further  assessed  in  detail  for  the 
'Energy roadmap 2050' which is planned by the Commission for later in 2011. 

5.2.6. 

Sector specific impacts: transport  

In the reference scenario the total transport CO2 emissions (excluding maritime bunkers) peak 
in 2015, decrease to the level of year 2000 by 2030 and stay roughly constant afterwards (see 
Figure  25  for  details  on  road  and  aviation).  Increased  transport  activity  in  the  reference 
scenario is mainly offset by improvements in efficiency. This is in large due to the effect of 
currently  implemented  policies  on  vehicle  efficiency  (for  road  transport  the  CO2  and  Cars 
Regulation, for aviation the carbon price signal due to the inclusion in the ETS). 

In  the  decarbonisation  scenarios  analyzed  CO2  emissions  reduce  significantly  in  total 
transport  emissions  (including  aviation,  excluding  maritime  bunkers),  in  the  range  of  54  to 
70% in 2050 compared to 1990. This translates to the reduction of 65 to 77% in 2050 when 
compared to 2005. 

In 2030 transport emissions (road, rail and inland navigation) are reduced below 1990 levels 
for all scenarios except those with delayed electrification or delayed action. Emissions from 
transport (road, rail and inland navigation) reduce back to levels below 1990 with a range of 
+8%  to  -17%,  with  the  effective  technology  scenario  at  reference  prices  achieving  -5%  and 
the  effective  technology  scenario  with  low  energy  prices  -2%.  %.  Including  aviation 
emissions, the reductions would result in emission levels in a range of +20% to -9% by 2030, 
relative to 1990. 

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Figure 25: CO2 emissions from transport 

Road

1 000

800

600

400

200

2

O
C

t

M

250

200

150

100

50

2

O
C

t

M

Aviation

0
1990

2010

2030

2050

0
1990

2010

2030

2050

Reference (frag. action, ref. fossil f. prices)
Effect. Techn. (glob. action, low fossil f. prices)
Delay. Electr. (glob. action, low fossil f. prices)

Source: PRIMES 

Energy  efficiency  is  one  of  the  major  contributors  to  decarbonisation  of  transport.  For 
instance  the  average  energy  efficiency  of  passenger  cars  in  1990  was  43.9  toe/Mpkm.  By 
2050 this improves to 23.9 in the reference scenario and in the Effective Technology scenario 
it  further  goes  down  to  13.6  toe/Mpkm.  This  is  achieved  through  gradual  efficiency 
improvements of internal combustion engines and subsequently gradual hybridisation leading 
eventually to high penetration rates for electric propulsion vehicles (such as for example plug-
in hybrids and electric vehicles).  

The  extent  of  the  contribution  of  electric  vehicles,  which  would  have  important  co-benefits 
with regard to air pollution (see chapter 5.2.14) is of course dependent on a quick overcoming 
of barriers to the further development and cost reduction in particular of battery technology. It 
also assumes availability of the necessary rare materials.  

In case of delayed and less widespread electrification, the specific fuel consumption in 2050 is 
higher  (lower  efficiency),  19.2  toe/Mpkm,  due  to  a  higher  remaining  share  of  internal 
combustion  engines.  Moreover,  carbon  prices  necessary  to  achieve  decarbonisation  are 
significantly  higher.  This  shows  the  importance  of  R&D  and  innovation  in  key  low  carbon 
technologies for a low cost pathway. 

Biofuels  are  also  important  to  further  decarbonise  transport  but  do  not  result  in  similar 
efficiency improvements to electrification.  

Growth of biofuels for road transport in the effective technologies scenario is largest before 
2020  due  to  the  20%  overall  renewables  target  and  the  specific  10%  renewables  target  for 
transport,  but  after  2020  growth  stagnates  compared  to  reference  (see  Figure  26).  In  2050 
around  46  Mtoe  of  biofuels  would  be  used  for  road  transport  in  case  of  decarbonisation 
compared to 37 Mtoe in the reference scenario. Increases are mainly due to an increase in the 
use  of  biofuels  for  heavy  duty  vehicles.  If  electrification  of  road  transport  is  delayed  this 

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modest growth after 2020 cannot be kept because biofuels would also be used much more in 
passenger road transport. This would result in total consumption of biofuel in road transport 
by 2050 equal to 92 Mtoe. 

In the aviation sector electrification is not an option, resulting in all decarbonisation scenarios 
in high growth of biofuel use after 2030 with consumption in 2050 at around 25 Mtoe. 

It should also be noted that the modelling did not include the possibility of hydrogen and fuel 
cells to step in for instance in heavy duty vehicle transport. 

This shift translates into an increasing share of aviation in the transport CO2 emissions. In the 
reference  scenario,  the  share  of  road  transport  sector  on  the  total  transport  CO2  emissions 
decreased  from  84%  in  2005  to  77%  in  2050  and  in  scenarios  with  decarbonisation  this 
decreases further to around 65% in 2050 (with exception of delayed electrification where it is 
around 76%). The share of aviation increases from 14% in 2005 to 20% in 2050 in reference 
scenarios, but in the decarbonisation scenarios the share of aviation increases to around 31%. 
In  all  scenarios,  the  combined  share  of  aviation  and  road  transport  accounts  for  more  than 
95% of CO2 emissions from transport (total excluding maritime bunker fuels). Rail transport 
is almost totally decarbonised by 2035 (via electrification). 

Passenger  transport  can  decarbonise  more  than  freight  transport,  with  passenger  transport 
reductions  in  the  range  69  to  76%  compared  to  the  reference  scenario,  whilst  for  freight 
transport reductions are only 54 to 65% compared to the reference scenario. 

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Figure 26: Energy carriers in the transport sector 

Road Transport Energy Mix [Mtoe]
Reference Scenario

Aviation Energy Mix [Mtoe]
Reference Scenario

350

300

250

200

150

100

50

e
o
t
M

100%

Other

13%

Electricity

87%

Biofuels

Oil

80

70

60

50

40

30

20

10

e
o
t
M

100%

100%

0
2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

0
2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

Road Transport Energy Mix [Mtoe]
Decarbonisation scenario under effective technologies
 and global climate action

Aviation Energy Mix [Mtoe]
Decarbonisation scenario under effective technologies
 and global climate action

350

300

250

200

150

100

50

e
o
t
M

100%

80

70

60

50

40

30

20

10

e
o
t
M

Other

Electricity

Biofuels

Oil

13%

39%

25%

36%

100%

42%

58%

0
2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

0
2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

Road Transport Energy Mix [Mtoe]
Decarbonisation scenario under delayed electrification
and global climate action

Aviation Energy Mix [Mtoe]
Decarbonisation scenario under delayed electrification
and global climate action

350

300

250

200

150

100

50

e
o
t
M

100%

Other

13%

13%

Electricity

43%

44%

Biofuels

Oil

80

70

60

50

40

30

20

10

e
o
t
M

100%

51%

49%

0
2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

0
2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

Source: PRIMES 

The  impact  of  an  oil  shock  or  high  fossil  fuel  price  scenario  on  transportation  emissions  is 
much more pronounced in the reference scenarios than it is in the decarbonisation scenarios. 
Decarbonisation  reduces  dependency  on  oil  in  transport  and  thus  makes  the  system  more 
robust to changes in oil price. 

With an oil shock or high fossil fuel prices road transport reduces CO2 emissions between 32 
and 35% by 2050 compared to the reference scenario without an oil shock or high fossil fuel 
prices.  In  the  scenario  with  decarbonisation  the  impact  of  an  oil  shock  or  high  fossil  fuel 
prices is however limited.  

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Figure 27: CO2 emissions from transport, impact of an oil shock 

Road

1,000

800

600

400

200

2
O
C

t

M

0
1990

2010

2030

2050

Reference (frag. action,
ref. fossil f. prices)

Reference (frag. action, oil
shock)

Reference (frag. action,
high fossil f. prices)

Effect. Techn. (frag.
action, ref. fossil f. prices)

Effect. Techn. (frag.
action, oil shock)

Effect. Techn. (frag.
action, high fossil f.
prices)

Source: PRIMES, GAINS 

There are only minimal impacts in all the scenarios analysed on the total passenger transport 
activity  in  the  EU27,  measured  in  passenger-kilometres  (pkm).  This  is  in  part  due  to  the 
modelling framework that focuses on GHG reductions and does not include specific transport 
polices to reduce different kinds of externalities, such as congestion and air pollution which 
can have effects on demand and produce modal shifts that can lead to additional co-benefits in 
terms  of  emission  reductions.  These  aspects  are  dealt  with  in  more  detail  in  the  impact 
assessment of the White Paper on Transport.  

Passenger  transport  increases  in  the  reference  scenario  by  94%  between  1990  and  2050, 
decarbonisation causes limited reduction in this increase. In the worst case, the scenario with 
decarbonisation  and  a  high  fossil  fuel  prices  at  the  same  time  passenger  transport  activity 
increases  by  82%  by  2050  compared  to  1990,  only  slightly  lower  than  the  increase  in  the 
reference scenario with the high fossil fuel prices (84% increase). 

In  a  world  with  global  action  and  low  energy  prices,  activity  might  even  increase  slightly 
more by 99% compared to 1990. By then, the fuel costs represent relatively a lower share of 
passenger transport costs, while capital costs for electrified cars themselves are higher. 

Public  road  and  rail  transport  is  projected  to  have  higher  passenger  activity  in  all  scenarios 
compared to reference scenario. Public road transport in reference scenario sees an increase of 
26% compared to 1990, while this increase is around 57% with decarbonisation. For rail the 
increases are 62% and around 114% respectively. 

But  even  these  high  increases  do  not  significantly  change  the  overall  share  of  cars  in 
passenger  transport  compared  to  the  reference  scenario.  Passenger  cars  reduce  their  share 
from 73% in 2005 to around 64% in decarbonisation scenarios. 

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The average annual distance travelled per person in the EU27 increases from around 10 000 
km in 1990 to just below 13 000 km in 2005 and to more than 18 000 km in 2050, with very 
small variance between scenarios in 2050 (range -3% to +3% difference); with exception of 
the oil shock or high fossil fuel price scenarios, where it decreases by 5% to 6%.  

The total freight transport activity, measured in tonne-kilometres (tkm) in 2050 decreases by 
1% to 7% in scenarios compared to the reference case, however it still grows by 93% to 106% 
when  compared  to  1990  levels  (+109%  in  the  reference  case).  When  the  scenarios  are 
compared to the reference case in 2050, freight activity on rail is higher by around 28%, on 
inland waterways is increased by around 14% and freight transport on road decreases by 10% 
to 15% (in cases with higher oil prices by up to 20%).  

There is a strong correlation between what can or should be done in the transport sector, and 
what  can  or  should  be  done  in  the  power  sector  if  the  economy  is  to  be  decarbonised,  i.e. 
reduce GHG emissions with around 80%. 

In  the  case  where  emissions  are  highest  in  the  road  transport  sector  (i.e.  delayed 
electrification) emissions in the power sector are at their lowest. And conversely in scenarios 
where emissions are lowest in the road transport sector (i.e. effective technologies with an oil 
shock or high fossil fuel prices), emissions in the power sector are at their highest (see Figure 
28).  This  is  due  to  the  impact  of  electrification  itself  on  both  the  emissions  in  the  transport 
sector  (a  lowering  effect  on  emissions)  as  well  as  the  power  sector  (an  increasing  effect  on 
emissions due to the increased demand for electricity). 

The  sum  of  emissions  from  both  sectors  follows  a  rather  consistent  path  towards 
decarbonisation, independent of the scenario chosen. This has implications for the ETS. The 
ETS  sets  a  fixed  reduction  target  over  time  for  the  sectors  involved  and  includes  most 
emissions  of  the  power  sector.  However  in  the  future  all  ETS  sectors  will  be  impacted  by 
developments in the transport sector, such as electrification, even if the road transport sector 
is not part of the ETS. 

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Figure 28: CO2 emissions from road transport and the power sector in case of decarbonisation 

Road transport

100%

GHG emissions

Power generation

Road trans. + Power gener.

100%

80%

60%

40%

20%

0%

80%

60%

40%

20%

0%

100%

80%

%
0
0
1
=
5
0
0
2

60%

40%

20%

0%

2020

2030

2040

2050

2020

2030

2040

2050

2020

2030

2040

2050

Effect. Techn. (frag. action, ref. fossil f. prices)

Effect. Techn. (glob. action, low fossil f. prices)

Effect. Techn. (frag. action, high fossil f. prices)

Delay. Electr. (glob. action, low fossil f. prices)

Source: PRIMES 

5.2.7. 

Sector specific impacts: industry  

Energy intensive sectors 

Industry  emitted  20%  of  the  EU's  CO2  emissions  and  18%  of  the  EU's  GHG  emissions  in 
2005. Of this, 80% were emitted by the 5 energy intensive industries represented separately in 
the  PRIMES  model.  These  are  iron  and  steel,  non-ferrous  metals,  chemicals,  non-metallic 
minerals and the paper and pulp industries. 

These 5 industrial sectors contributed 5% to the total value added of the EU economy. They 
are projected to continue to grow in the reference and decarbonisation scenarios, although in 
line  with  historical  trends  at  slightly  lower  rates  than  other  industrial  sectors.  Nearly  two 
thirds of their CO2 emissions are related to energy combustion and a bit more than one third is 
generated as by-product of various non-energy-related industrial processes (in particular iron 
and steel, cement and some chemicals). 

In  addition  there  are  also  industrial  non-CO2  process  emissions  which  will  be  covered  to  a 
large extent by the EU ETS from 2013 (see also chapter 5.2.9). These non-CO2 emissions are 
expected  to  reduce  rapidly  when  they  are  introduced  to  the  ETS,  because  cheap  abatement 
technology is available, leading to a reduction of some 50Mt of emissions by 2020, reducing 
them  to  very  low  amounts  (see  also  Figure  31  in  chapter  5.2.9)130.  Therefore  the  focus  for 
further decarbonisation in these sectors remains the industrial CO2 emissions. 

130 

For a more detailed analysis see Höglund-Isaksson et al. (2010). 

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Energy  intensive  industries  are  covered  by  the  EU  ETS,  but  a  large  range  of  sectors  and 
subsectors currently  benefits from free  allocation. This is reflected in the reference scenario 
reflecting current trends and policies. 

The  main  projected  results  for  the  reference  scenario  are  significant  increases  in  energy 
efficiency per GDP and significant decreases in CO2 emissions of energy intensive industries, 
continuing the historically observed trends. Energy intensity (energy demand per value added) 
decreased by 32% by 2005 compared to 1990 and is projected to decrease by 53% by 2030 
and  by  62%  by  2050  compared  to  1990.  In  trends  consistent  with  these  energy  efficiency 
increases the CO2 emissions of energy intensive industries already decreased by 18% in 2005 
compared to 1990 and are projected to decrease in the reference scenario by 30% in 2030 and 
by 33% in 2050 compared to 1990. 

In the decarbonisation scenarios the cost-effective contribution of energy intensive industries 
in  the  Effective  Technology  scenario  would  increase  to  around  35%  emission  reductions  in 
2030  and  between  85  and  90%  in  2050,  indicating  very  similar  reduction  potentials  as  for 
overall  CO2  emission  reductions  (see  also  chapter  5.2.1  on  the  contributions  of  different 
sectors  and  Table  14  below).  These  potentials  are  a  combination  of  further  energy  intensity 
decreases,  nearly  75%  in  2050  compared  to  1990,  and  the  application  of  CCS  for  the 
remaining energy intensive industrial CO2 emissions from 2035 onwards.  

Table 14: CO2 emission reductions in energy intensive industries in 2030 and 2050 
% emission reduction in 2030/ 
2050 compared to 1990 

Reference 

Effective Technologies scenarios  

global action, 
low fossil fuel 
prices 

Fragmented action, reference 
fossil fuel prices  

No special 
treatment EII 
-37/-86% 

Lower EII 
effort  
-37/-78% 

emissions  all 

-24/-37% 

-36/-85% 

Total  CO2 
sectors 
CO2 
intensive industries 

emissions 

Energy 

-30/-33% 

-34/-88% 

-34/-87% 

-31/-51% 

Source: PRIMES, GAINS 

In  the  fragmented  action  scenario  with  the  EU  reducing  emissions  significantly  more  than 
other  countries,  certain  industries  supplying  low  carbon  technologies  will  benefit  from 
improved competitiveness due  to  higher internal demand and  first mover advantages  in low 
carbon technologies to the extent that other world regions will follow climate action or further 
invest in their energy security. However, for energy intensive industries it would be difficult 
to  realise  the  described  reduction  potentials  without  affecting  the  economic  competitiveness 
of a large part of these subsectors, in particular if reductions would need to be achieved with 
CCS, which is a technology that has no other real benefits than reduced GHG emissions. 

An  alternative  scenario  is  therefore  analysed  where  energy  intensive  industries  would  be 
subject  to  lower  emission  reduction  requirements.  This  is  simulated  by  keeping  the  same 
carbon prices as in the reference case. This scenario is referred to as the 'Effective Technology 
with  reference  energy  prices  and  less  efforts  for  industry'  (for  results  see  last  column  Table 
14).  In  this  case  industry  emissions  stay  closer  to  the  reference  scenario  results,  producing 
emissions reductions of around 50% compared to the 86% reductions without the exemptions, 
mainly  because  CCS  would  then  not  become  a  mainstream  technology  for  process  related 
emissions. 

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Results  of  this  scenario  for  investments  in  the  energy  intensive  sector,  fuel  and  electricity 
expenses and CCS expenses are shown in the figures below and compared with Reference and 
with the Effective technologies Scenarios (with Global Action)131.  

Figure 29: Energy-related investments, fuel and electricity costs and industrial CCS expenditures  

Energy-related
investment expenditures

Industrial CCS
expenditures

Fuel and electricity costs

)
n
(€b
e
g
a
r
e
v
a
y
l
r
a
e
Y

20

18

16

14

12

10

8

6

4

2

0

10-20

20-30

20

18

16

14

12

10

8

6

4

2

0

250

200

150

100

50

0

40-50

10-20

30-40
30-40
Reference (frag. action, ref. fossil f. prices)
Effect. Techn. (glob. action, low fossil f. prices)
Effect. Techn. + lower EII effort (frag. action, ref. fossil f. prices)

20-30

40-50

10-20 20-30 30-40 40-50

Source: PRIMES, GAINS 

In the Effective Technology scenario with global action CCS costs are a significant factor, as 
this  is  the  key  technology  to  achieve  very  low  emissions  for  certain  process  related  CO2 
emissions.  These  investments  would  be  driven  by  a  high  carbon  price.  As  demonstrated  in 
chapter  5.1.1,  global  action  would  mean  that  other  regions  would  also  be  subject  to  similar 
carbon prices, therefore carbon leakage is not likely to be a problem. 

It is however unlikely that these high costs could be borne in a world of 'Fragmented Action', 
even  more  so  because  CCS  does  not  have  important  co-benefits  such  as  efficiency 
improvements  and  reduced  fuel  costs.  In  the  'Effective  Technology  with  reference  energy 
prices  and  less  efforts  for  industry'  scenario  these  investments  would  not  happen.  Fuel  and 
electricity costs are reduced compared to the reference scenario but are much higher than in 
the  effective  technologies  scenarios  with  global  action  because  of  higher  energy  prices  in 
fragmented  action.  Fuel  and  electricity  cost  increases  in  the  reference  and  decarbonisation 
scenarios over the period 2010 -2050 but remain between 1 to 3 percent of total value added 
of the energy intensive sectors. 

An alternative to this approach would be to keep emission reductions at the same level and to 
protect  energy  intensive  industries  by  other  means.  This  would  imply  that  energy-intensive 
industries  would  require  support  to  compensate  for  additional  costs  incurred.  After  2030, 
these  annual  costs  would  quickly  entail  several  €  billions  per  year,  up  to  more  than  €  10 
billion on average in the last decade. 

131 

New investments in combined heat and power are included in the power sector. 

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Impacts  on  production  of  energy  intensive  industries  compared  to  reference  of  more 
ambitious action, even if other don't do more than their Copenhagen pledges, up to 2030 were 
estimated using a macro-economic modelling tool as discussed in chapter 5.1.3 on the macro-
economic impacts. For detailed results see Table 7. Overall impacts are limited in 2020, and 
become a bit larger by 2030 when the EU would reduce emissions by 40%. The results also 
confirm  that  free  allocation  protects  energy  intensive  industry  in  the  ETS,  even  if  the  EU 
would  implement  more  ambitious  targets  in  a world  where  other  regions  have  more  limited 
ambition. 

Impact on total industry  

The 5 energy intensive sectors described above take a large part of investments and costs of 
industry  as  a  whole  related  to  energy.  Roughly  half  of  the  2/3rd  of  investments  in  energy 
related capital comes from these 5 industries. For a description of the impact on investments, 
fuel and electricity expenses of industry as a whole, see annex 7.11. 

5.2.8. 

Sector specific impacts: the built environment 

The residential and service sectors contribute above average to emission reductions, as shown 
in  Table  8,  chapter  5.2.1.  More  than  70%  of  those  emissions  come  currently  from  the 
residential sector, and this proportion is projected to be rather stable until 2050.  

Figure  30  shows  residential  emissions  over  time  across  a  selection  of  scenarios.  In  the 
reference scenario, residential CO2 emissions decrease in 2030 by 25% and in 2050 by nearly 
40% compared to 2005 (exactly 40% compared to 1990). These decreases are to a significant 
extent  driven  by  EU  and  national  energy  efficiency  legislation.  In  the  decarbonisation 
scenarios, residential emissions decrease by nearly 90% across all scenarios in 2050 compared 
to 2005. Clearly higher fossil fuel prices in the context of fragmented climate action lead to 
higher emission reductions by 2030 in this sector.  

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Figure 30: Residential emissions over time 

500

450

400

350

300

250

200

150

100

50

t

M
n

i

s
n
o
i
s
s
i
m
e
2

O
C

0
1990

1995

2000

2005

2010

2015

2020

2025

2030

2035

2040

2045

2050

Reference (frag. action, ref. fossil f. prices)
Effect. Techn. (glob. action, low fossil f. prices)
Effect. Techn. (frag. action,high fossil f. prices)

Reference (frag. action, high fossil f. prices)
Effect. Techn. (frag. action, ref. fossil f. prices)
Delay. CCS (glob. action, low fossil f. prices)

Source: PRIMES, GAINS 

Currently, two third of the energy use in the residential sector is related to building heating 
and  cooling,  more  than  20%  to  water  heating  and  cooking  and  slightly  more  than  10%  to 
electrical appliances and lighting. Heating and cooling remains the most important component 
but  its  share  decreases  to  less  than  60%  of  residential  energy  use  by  2050.  Electrical 
appliances and lighting, despite significant efficiency improvements, are projected to at least 
double their share to nearly 25%. 

Water heating and cooking energy use is currently marked by a diverse mix of fuels. In the 
reference scenario, this diversity is projected to pertain, with some composition changes, until 
2050. However, in the decarbonisation scenarios it is projected that more than two thirds of 
final  energy  demand  for  water  heating  and  cooking  will  come  from  emission  free  solar 
heating or from decarbonised electricity, the rest from gas and biomass.  

For  space  heating  and  cooling,  emission  trends  are  determined  by  the  space  demand,  the 
efficiency  of  energy  use  and  by  the  fuel  mix.  The  modelling  assumes  an  increase  in  space 
demand132 kept constant across scenarios. Emissions thus have to be saved through changes in 
energy efficiency of the building itself,  in particular by improved thermal insulation, and in 
the efficiency and fuel mix of the heating and cooling equipment for housing. 

Table  15  shows  results  of  different  scenarios  regarding  the  useful  energy  requirements  of 
housing over time. While the reference scenario shows continuous increases of useful energy 
requirements for space heating and cooling compared to 2005, this trend is slowed down and 

132 

In line with current trends household size is assumed to decrease, from 2.4 inhabitants per household in 
2005 to 2.0 in 2050 while space per household is assumed to increase from 87 m2 in 2005 to 113 m2 in 
2050.  

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after 2040 even reversed in the decarbonisation scenarios. This reversal is mainly the result of 
a  significantly  better  thermal  insulation  of  buildings  driven  by  high  carbon  prices,  leading 
gradually to a replacement of the housing stock with passive housing. 

Table 15: Useful energy requirements across scenarios 
Compared to 2005 in % 
Reference (frag. action, ref. fossil f. prices) 
Reference (frag. action, high fossil f. prices) 
Effect. Techn. (glob. action, low fossil f. prices) 
Delay. CCS (glob. action, low fossil f. prices) 
Effect. Techn. (frag. action, ref. fossil f. prices) 
Effect. Techn. (frag. action, high fossil f. prices) 

Source: PRIMES 

2030
13.4%
7.0%
7.0%
6.6%
5.9%
1.4%

2050 
30.7% 
23.9% 
-16.5% 
-21.2% 
-17.6% 
-18.2% 

The  other  main  explanatory  factor  is  a  more  gradual  shift  in  fuel  use  towards  more  energy 
efficient  and  less  carbon  intensive  fuels.  Efficient  heat  pumps  play  an  important  role  by 
allowing  both  to  increase  end-use  efficiency  of  heating  and  the  reduction  of  the  carbon 
intensity  of  the  energy  mix  by  using  geothermal  energy  and  electricity.  Renewables  are  the 
other important driver. 

Currently coal and oil hold still a share of around 25% of final energy used for heating and 
cooling. Already in the reference scenario this decreases to around 15%  in 2050 and would 
practically disappear in the decarbonisation scenarios. Gas would see a decrease from around 
45% today to around 30% by 2050 in the decarbonisation scenarios in the context of global 
climate action. The share of electricity would increase from currently less than 10% to more 
than 20% in the decarbonisation scenarios, and the share of biomass from currently over 10% 
to over 25%. It should be noted that due to the efficiency gains the latter increase corresponds 
more  or  less  to  a  stagnation  of  biomass  use  for  space  heating  in  absolute  terms.  Finally, 
distributed heat would maintain its current share of under 10% by 2050. 

5.2.9. 

Sector specific impacts: Agriculture and other Non CO2 emissions  

Non-CO2 emissions represent around 20% of current EU GHG emissions. In 1990 they were 
around  1175  MtCO2eq  and  declined  to  887  MtCO2eq  in  2005.  Non-CO2  emissions  have 
historically reduced much faster than CO2 emissions. In the period 1990-2005 they reduced by 
almost  a  quarter,  compared  to  only  a  2%  reduction  in  CO2.  In  2005  non-CO2  emissions 
represented 17% of total GHG emissions in the EU, with agriculture representing more than 
half of these, around 9% of EU GHG emissions were agricultural Non-CO2 emissions. 

Table 16: EU GHG share CO2 – Non-CO2, 1990-2005 
EU 27 GHG 
emissions (including 
aviation) 
CO2 
Non CO2 
Total 

1990 
4467 
1175 
5642 

2005
4368
887
5255

1990-
2005 

-2.2%
-24.5%
-6.9%

Source: Annual inventory submissions EU Member States to the UNFCCC, 2010, GHG emissions 2008 

Reference case 

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In the reference  case, these  emissions continue to decrease until 2030,  the main reasons for 
this are:  

•  Prevailing carbon prices in the ETS, reducing industrial non-CO2 emissions. 

•  Waste and waste water treatment legislation (e.g. the reduction of methane emissions from 

landfill sites).  

•  The Nitrates Directive (on the reduction of N2O emissions).  

•  F-gas regulation and Directive on air conditioning systems for motor vehicles (contributing 

to the reduction of F-gas emissions). 

•  Underlying trends in the CAP (e.g. the decline of livestock numbers EU wide). 

•  Methane  emissions  decrease  from  gas  transmissions  due  to  the  improvement  of 
infrastructure  and  from  the  decline  of  the  coal  mining  industry.  Abatement  technologies 
have  also  been  implemented  such  as  the  improved  recovery  of  coal  mine  gas  and 
reductions in gas transmission losses that come at relative low costs. 

After 2030, the reference scenario emissions show a slightly increasing trend. The effects of 
existing  legislation  are  fading.  A  second  notable  effect  is  the  stagnation  of  non-CO2 
emissions  in  agriculture.  In  the  years  up  to  2020  the  evolution  of  agricultural  production 
typically  stagnates  or  even  declines  (in  some  sectors),  however  global  growth  of  demand 
linked  to  population  growth  stimulates  EU  production  in  the  long  run.  In  several  cases  this 
implies  a  turning  point  in  terms  of  assumed  supply  and  activity  levels  after  2020  in  the 
agricultural  sector.  For  more  details  on  the  model  used  and  the  assumptions  regarding 
agriculture production and GHG emissions see annex 7.12. 

Summarising,  in  the  reference  scenario  non-CO2  GHG  emissions  are  expected  to  decline 
considerably  by  one  third  compared  to  2005  in  2030  but  then  remain  more  or  less  stable 
between 2030 and 2050. 

Developments in the effective technology scenario 

The figure below shows the possible reductions in non-CO2 greenhouse gas emissions in the 
effective technology decarbonisation case compared to the reference case. Most notable is that 
in  the  effective  technology  decarbonisation  case  the  largest  contribution  in  emission 
reductions stems from agriculture. In 2020 non-CO2 greenhouse gases could be cut by some 
20  Mt  CO2-eq  compared  to  the  reference  scenario.  60%  of  this  reduction  would  come  from 
agriculture. Overall (from 2020 to 2050) 50 to 60% of the emissions reductions between the 
decarbonisation  case  and  the  reference  case  could  come  from  agriculture.  The  majority  of 
these  reductions  could  come  from  investments  in  farm  scale  anaerobic  digestion,  mixes  of 
feed changes, the reduced and improved timing of fertilizer use and precision farming. 

The air conditioning and refrigeration sector (F-gas emissions) could make the second biggest 
contribution to further emission reductions over the period 2020 to 2050. At least some 20% 
of  the  additional  reduction  of  non-CO2  greenhouse  gases  between  the  reference  and 
decarbonisation scenarios could come from this sector. The reductions would be due to using 
alternative refrigerants and a variety of process modifications. 

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The  remaining  emission  reductions  would  come  from  the  waste  sector  (some  10%),  energy 
(around  7%)  and  industry  outside  the  ETS.  Optimized  solid  waste  treatment  systems  and 
anaerobic digestion with biogas recovery could further reduce methane from the waste sector.  

In the energy sector mine gas recovery, doubling leak control frequencies and replacement of 
grey  cast  iron  gas  distribution  networks  could  further  reduce  methane  losses.  Non-CO2 
emissions from industry in ETS and the waste water treatment sector are already significantly 
reduced  due  to  the  carbon  prices  in  the  reference  scenario  and  additional  potential  appears 
limited. 

Figure 31 Non-CO2 GHG emissions in the reference and effective technologies case  

Source: adapted from IIASA (Hoglund et al, 2010).  

Developments in other scenarios 

Reductions  in  non-CO2  emissions  do  not  differ  substantially  between  the  effective 
technologies and the delayed CCS and delayed electrification scenarios in 2030, both in the 
agricultural and non-agricultural sectors. Differences in carbon prices between these reduction 
scenarios are not significant enough to see large changes in emissions reductions. 

Table 17: Non -CO2 emissions total in 2030 (MtCO2eq.) 

Mio ton CO2-
eq. 

Total  
Non 
Agriculture 

2005 

879 

408 

Ref 
600 

191 

2030 

Eff. 
Tech 
535 

Delayed
CCS 
535 

Delayed 
Electrification
537 

Eff. 
Tech 
+ Oil 
shock 
545 

160 

160 

162 

164 

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Agriculture 

471 

409 

Total  
Non 
Agriculture 
Agriculture 

Source: GAINS 

0% 

0% 
0% 

-32% 

-53% 
-13% 

375 
vs 2005  
-39% 

-61% 
-20% 

375 

375 

380 

-39% 

-61% 
-20% 

-39% 

-60% 
-20% 

-38% 

-60% 
-19% 

Table 18 shows that by 2050 the differences are more pronounced. In the effective technology 
case  emission  reductions  from  Non  CO2  emissions  are  46%  in  2050  compared  to  2005. 
Delayed  CCS  increases  carbon  prices  since  more  expensive  technologies  are  needed.  This 
increases the cost-effective reductions delivered from Non CO2 emissions; to a level of 51% 
below  2005  levels.  Delayed  electrification  would  have  a  similar  impact.  In  the  oil  shock 
decarbonisation  scenario  emissions  are  reduced  only  by  41%  compared  to  2005  instead  of 
46% in the effective technologies scenario. The higher oil price implies lower carbon prices to 
meet  the  emission  reduction  targets.  This  reduces  the  need  to  reduce  Non  CO2  greenhouse 
gases (41% in 2005 instead of 46% in 2050 compared to 2005.  

Table 18: Non -CO2 emissions total in 2050 (MtCO2eq.) 

2050 

2005 

879 

408 
471 

0% 

0% 
0% 

Ref 
625 

216 
410 

-29% 

-47% 
-13% 

Eff. 
Tech 
475 

Delayed
CCS 
428 

Delayed 
Electrification
442 

144 
331 
vs 2005  
-46% 

-65% 
-30% 

125 
303 

-51% 

-69% 
-36% 

133 
309 

-50% 

-67% 
-34% 

Eff. 
Tech 
+ Oil 
shock 
520 

174 
346 

-41% 

-57% 
-27% 

Mio ton CO2-
eq. 

Total  
Non 
Agriculture 
Agriculture 

Total  
Non 
Agriculture 
Agriculture 

Source: GAINS 

Overall,  this  results  in  Non  CO2  emissions  reductions  contributing  significantly  more  than 
CO2 to the 40% reduction milestone in 2030 compared to 1990. This reverses by 2050 with 
CO2 reducing more compared to 1990 than Non CO2. 

Table 19: CO2 and Non CO2 emissions 

Reductions compared to 1990  2005  2030 
Overall 
CO2 
Non-CO2  

2050 
-79 to -82% 
-7% 
-3% 
-85 to -87%
-25% -53.5 to -54% -56 to -63% 

-40 to -44%  
-36 to -42% 

Source: PRIMES, GAINS 

With  emissions  levels  at  around  330  MtCO2eq.  agriculture  represents  around  a  third  of  the 
remaining total GHG emissions in 2050, tripling in share from 2005.  

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This  points  to  the  important  role  of  agriculture  in  achieving  decarbonisation.  If  emissions 
would not continue to decrease by a third by 2050 compared to 2005, then the energy sector 
would have to reduce even more.  

Again, similar to the analysis in chapters 5.2.10 and 5.1.4 this points to the important role of 
yield  improvement  in  agriculture.  The  above  analysis  does  not  include  the  feedback  effects 
that abatement costs might have on agricultural prices, yields and demand. It neither assessed 
potential  impact  on  carbon  leakage  in  this  sector.  A  potentially  important  element  that  is 
neither included in the assessment is the possible impacts of behavioural changes in affecting 
food consumption patterns.  

A transition to more healthy, less fat and meat based diet could reduce methane and nitrous 
oxides  emissions  substantially  at  relatively  low  cost133.  Reducing  food  waste  would  also 
improve resource efficiency and reduce greenhouse gas emissions. Such behavioural changes 
would reduce decarbonisation costs allowing more emissions in other sectors and avoiding the 
need to use the most expensive options. 

Finally,  the  analysis  did  not  consider  alternative,  not  yet  proven,  options  for  the  use  of  F-
gases. If by 2050 it has been possible to develop and deploy such alternative gases with much 
smaller  global  warming  potential,  that  can  replace  the  F-gases  in  the  air  conditioning  and 
refrigeration  sector,  then  that  would  to  a  large  extent  eliminate  this  sector  as  a  source  for 
greenhouse gases in the long term134. 

5.2.10.  Sector specific impacts: Land Use, Land Use Change and Forestry 

This  chapter  addresses  the  potential  impacts  of  the  different  scenarios  on  some  land  use 
activities  and  related  greenhouse  gas  emissions.  However,  it  should  be  mentioned  that  this 
impact  analysis  is  subject  to  high  uncertainties,  as  land  use  statistics,  land  market  mapping, 
land use related greenhouse gas emission accounting, and respective model based quantitative 
analysis face significant gaps and uncertainties. 

Bio-mass  is  projected  to  be  an  important  component  of  the  increase  in  renewable  energy 
projected  over  the  coming  decades.  In  the  reference  case  bio-mass  production  more  than 
doubles by 2050 (see Table 20). In the decarbonisation case the production of bio mass more 
than  triples  in  the  same  period  (see  Table  21).  The  sources  of  this  increased  bio-mass 
production would be crucial in assessing the direct and indirect impacts on GHG emissions. 

Table 20: Bio-mass production requirements in reference case for energy use 
Bio-energy production requirements (Mio toe) 

Domestic production for biomass 
Crops 
Of which 2nd generation crops 
Agricultural residues (including black 
liquor) 
Forestry 
Waste 
Import 

2005 
5 
0 

2030 
76 
57 

2050 
80 
79 

17 

40 
25 
2 

31 

51 
63 
9 

36 

42 
60 
9 

133 
134 

Stehfest et al., 2009, Popp et al., 2010  
In the context of the ongoing review of the F-Gas regulation, a more detailed analysis on the reduction 
potentials and mitigation options in the F-Gas sector is being carried out.  

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Total 

Source: PRIMES 

90 

231 

228 

Table 21: Bio-mass production requirements in effective technologies decarbonisation case for energy use 

Bio-energy production requirements (Mio toe) 

Domestic production for biomass 
Crops 
Of which 2nd generation crops 
Agricultural residues (including black 
liquor) 
Forestry 
Waste 
Import 

Total 

Source: PRIMES 

2005 
5 
0 
17 

40 
25 
2 
90 

2030 
53 
40 
32 

51 
63 
12 
212 

2050 
134 
127 
49 

59 
87 
26 
356 

In  the  reference  the  increased  biomass  demand  mainly  comes  to  be  used  to  meet  increased 
biofuel production from agricultural crops (increase from 5 to 80 Mtoe). The largest part of 
this increase happens already in the period 2010-2020 to fulfil the 10% EU renewables target 
in transport. In the decarbonisation case, a further increase in bio-mass supply of 56% (or 128 
Mtoe) is needed by 2050 compared to the reference case. Part of this increase is met through 
increased imports but the largest absolute increase comes again from crops for biofuels. Table 
21 shows that significant increases also occur in residues from the agriculture sector and the 
waste  sector  in  general.  Both  increase  production  of  bio-energy  by  a  factor  3  from  2005  to 
2050 in the decarbonisation case. 

Figure 32 presents impact on demand for wood used for bio-energy as projected by PRIMES 
and  the  GLOBIOM  model  (excluding  impact  of  demand  from  aviation).  It  confirms  the 
limited  increase  forestry  products  demand  for  energy  purposes  over  time  (see  Table  20  and 
Table  21).  By  2050,  the  projected  demand  for  energy  wood  from  fellings  in  the 
decarbonisation  scenario  is  about  35%  higher  than  the  demand  in  the  reference  scenario. 
Notable is also the increase in demand for fellings as bio-energy in the coming decade due to 
the achievement of the 20% renewables target by 2020. 

Figure 32: Demand for energy wood in the EU 

Demand for logs for energy wood 

140%

120%

100%

80%

2010

2020

2030

2040

2050

Baseline

Reference

Decarbonisation

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Source: PRIMES, G4M + GLOBIOM  

In other words, modest growth is projected in the long term demand for wood for bio-energy, 
although in the short term increases are expected to be more considerable.  

Still  large  uncertainties  remain.  The  required  inputs  in  agriculture  to  produce  the  crops  for 
biofuel  production  could  increase  emissions  through  for  instance  increased  fertiliser  use  in 
agriculture  unless  substantial  progress  will  be  made  also  in  fertilizer  efficiency.  The 
agriculture  projections  presented  in  chapter  5.2.9  already  incorporated  the  impacts  of 
increases in bio-energy demand in the reference case. But this feedback mechanism was not 
examined for the decarbonisation scenario.  

Furthermore  the  significant  increase  in  production  of  crops  for  biofuels  could  increase  the 
area used for crop production, which could result in conversion of grassland or even forests 
into  cropland  or  reduce  the  expansion  of  forest  that  could  otherwise  occur.  This  potential 
impact  could  not  be  estimated,  neither  the  potential  impact  of  regulatory  provisions  that 
would limit grassland conversion.  

Finally  the  demand  for  wood  could  be  considerably  different  in  2050  than  represented  in 
Figure 32. Firstly, higher or lower renewables shares would matter. Secondly if other forms of 
bio  mass  supply  for  energy  use  do  not  materialise  as  represented  in  Table  21,  then  wood 
demand could increase with more. Thirdly demand for wood is not only dependent on wood 
demand for energy use alone, but also on changes in  demand of other type of wood uses135 
such as paper, pulp, construction materials and bio-plastics. For instance, the EUwood study 
has projected that wood demand for other uses than energy will increase with a range of 15 to 
35% over the period 2010-2030. This is not unimportant given that today the share of wood 
felling used for energy production is limited. In the GLOBIOM model around a third of wood 
production is used for energy purposes whereas the EUwood136 study seems to indicate that 
this use might even be lower at present.  

The extent to which increased wood demand, both for energy and other purposes, will be met 
through increased imports or not matters also for the amount of wood production in the EU 
itself. 

Thus large uncertainty remains regarding the magnitude of demand for wood and the related 
impacts on wood production. To assess the possible impacts on emissions and removals in the 
Land  Use,  Land  Use  Change  and  Forestry  activities  (LULUCF)  sector,  two  scenarios  were 
assessed with the GLOBIOM and G4M model137.  

135 

136 

137 

The  analysis  did  not  look  at  the  impact  on  greenhouse  gas  emissions  of  using  wood  products  that 
replace more energy intensive alternatives for instance in construction, that can lower overall lifetime 
emissions. 
See for instance Mantau, U. et al. 2010: EUwood - Real potential for changes in growth and use of EU 
forests. Final report. Hamburg/Germany, June 2010. 160 p 
This  are  results  of  ongoing  work.  First  results  were  reported  in  chapter  5.3  of  the  Staff  Working 
Document,  Part  II,  accompanying  the  Communication  'Analysis  of  options  to  move  beyond  20% 
greenhouse gas emission reductions and assessing the risk of carbon leakage' (SEC(2010) 650/2). The 
projection  represented  builds  on  work  by  the  G4M  +  EUFASOM  models  as  presented  in  SEC(2010) 
650/2, but extends the time horizon to 2050.  

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In one scenario, the "low wood production" scenario, increases in EU wood production were 
assumed to be very limited. The other scenario sees higher overall wood production increases, 
of around 20% by 2030 and 40% by 2050 compared to 2010. 

Figure 33: Changes in wood production in the EU 

Wood production in the EU

3
m
o
M

i

800

750

700

650

600

550

500

450

2010

2020

2030

2040

2050

High wood production increase

Low wood production increase

Source: IIASA, G4M + GLOBIOM 

Figure 34 gives an overview of the impacts on the different LULUCF activities from these 2 
different wood production levels.  

Overall  the  net  sink  from  LULUCF  activities  decreases  over  time,  even  in  the  low  wood 
production  scenario that  sees almost no increase in wood production. This is predominantly 
due  to  reduced  removals  in  forest  management  as  a  result  of  maturing  European  forests. 
Increased  wood  demand  in  the  high  wood  production  scenario  would  however  significantly 
affect the overall LULUCF sink. By 2030 this could result in removals of around 50 million 
ton CO2 less than in the low wood production scenario. This is equivalent to around 1% of 
the EU's 1990 GHG emissions.  

The largest reduction can be seen in forest management. Instead of a sink, forest management 
would  become  a  source  of  CO2  emissions  by  2040.  This  is  mainly  due  to  changes  in 
harvesting cycles and practices to supply more wood.  

The other pronounced difference between the 2 wood production scenarios is the impact on 
afforestation. Afforestation is projected to increase significantly in the high wood production 
scenario to accommodate increased wood demand. This would actually gradually compensate 
the loss in sink from changes in forest management. By 2050 this would fully compensate the 
loss from  forest  management, bringing net  LULUCF removals in the  high wood production 
scenario  back  to  similar  levels  as  the  low  wood  production  scenario,  albeit  at  lower  levels 
than at present. This underlines the potential for afforestation as an activity that can increase 
the sink in the longer term. 

Net emissions from deforestation decline to almost zero in both scenarios. They start from a 
low  base  (from  around  30  Million  ton  CO2  in  2010).  Overall  grassland  and  cropland 
management seem more or less stable as a sink and a source of CO2 but the uncertainty in this 
area is particularly high, also because the impacts of increased crop production for bio-energy 
is not estimated with respect to conversion of grassland into cropland.  

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Figure 34: Impact on LULUCF of different wood production levels 

LULUCF net sink (= A + B +C)

(A) Forest Management

2020

2030

2040

2050

0

2010

2
O
C
n
o
t
o
M

i

-50

-100

-150

-200

High wood production increase

Low wood production increase

(B) Afforestation and Deforestation

2
O
C
n
o
t
o
M

i

50

0

2010

-50

-100

-150

-200

2020

2030

2040

2050

Afforestation (high wood production)

Afforestation (low wood production)

Deforestation (high wood production)
Deforestation (low wood production)

Source: IIASA, G4M 

2
O
C
n
o
t
o
M

i

2
O
C
n
o
t
o
M

i

2020

2030

2040

2050

Forest Management (high wood production)

Forest Management (low wood production)

(C) Cropland and Grassland 
Management

50

0

2010

-50

-100

-150

-200

-250

100

50

0

2010

2020

2030

2040

2050

-50

-100

Cropland Manag. (high wood production)

Cropland Manag. (low wood production)

Grassland Manag. (high wood production)
Grassland Manag. (low wood production)

Uncertainties are thus large. The evolution of the LULUCF sink in the EU depends on several 
elements: 

– 

– 

– 

– 

– 

whether there will be a significant increased demand for wood for bio energy 
use or not in case of decarbonisation. This depends in part on the development 
of  other  sources  of  bio-energy  such  as  waste  and  other  sources  of  renewable 
energy such as hydro, wind and solar.  

the extent to which other wood uses will also grow (note that this demand will 
be negatively affected if increased wood demand for bio-energy would result in 
higher overall wood prices). Improving resource efficiency in general through 
increased recycling rates can also contribute to limit the growth in demand of 
virgin wood. 

the extent that any of this demand growth will be met by internal production or 
increased  imports.  If  the  latter  is  the  case,  attention  should  be  paid  whether 
these imports come from sustainable sources or not and the impact in terms of 
net GHG emissions. 

the  extent  that  increased  production  is  achieved  through  changes  in  forest 
management  or  rather  through  increased  afforestation.  The  most  negative 
impact on the sink would occur if the increased wood production would be met 
through simple deforestation. 

Increased  afforestation  can  compensate  over  time  the  loss  of  the  sink  due  to 
increased  wood  production.  Even  if  wood  production  would  not  go  up, 

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increased  afforestation  could  compensate  in  part  the  reduction  in  the  net  sink 
due to the ageing of EU forests.  

Furthermore  uncertainty  relates  to  the  manner  in  which  these  emissions  and  removals  are 
accounted  for  and  the  inherent  uncertainty  related  to  the  data.  Historical  estimates  of 
LULUCF  by  the  models  used  show  large  differences  with  the  data  provided  by  Member 
States. Member States report LULUCF net removals of around 400 Mio ton CO2 in 2000 and 
stable levels in the period 2000-2008138. The G4M and GLOBIOM models estimate this to be 
lower, at around 250 Mio ton CO2 in 2000, with decreasing trends already in the period up to 
2010.  Differences  are  due  to  the  large  uncertainties  involved,  different  methodologies  and 
sources used (such as forest inventories, timber supply models and extrapolations), different 
land coverage, and the fact that reported emissions and harvesting data are incomplete (not all 
countries  report  on  all  types  of  land  uses  and  carbon  pools).  Further  work  to  accommodate 
some of these differences is ongoing. 

Chapter 5.1.4 assessed these interrelationships on a global scale; looking at what conditions 
need to be met in order to deliver increases in bio-energy, reduced deforestation and increased 
food production. 

It  is  clear  that  this  issue  of  LULUCF  in  the  EU  requires  further  attention  and  examination. 
The  Commission  will  revisit  this  issue  in  the  context  of  the  assessment  regarding  the 
modalities for the inclusion of emissions and removals from activities related to LULUCF in 
the  Community  reduction  commitment  as  foreseen  under  the  2011  Work  Programme. 
Furthermore agricultural policies will also need to give the appropriate incentives to maintain 
the grassland sinks, tackle emissions from crop land by allowing restoration of wetlands and 
peat lands and adapting tillage practices, and reduce soil erosion that releases carbon. 

5.2.11.  Social impacts for households 

The  overall  economic  impacts  show  on  the  one  hand  a  substantial  increase  in  investment 
expenditure,  also  for  households  in  sectors  such  as  transport,  energy  efficiency  in  buildings 
and appliances, and on the other a substantial decreases of overall fuel and electricity costs. It 
is  useful  to  consider  how  decarbonisation  will  influence  the  yearly  costs  for  energy  and 
transport services for households. 

Energy expenditure per household other than transport 

Figure 35 shows the expenditure of an average EU household for energy. The costs included 
are annualised capital139 and fuel costs related to heating and cooling, insulation of buildings, 
electricity costs, as well as energy using equipment and appliances. When considering these 
costs the following elements are of relevance:  

–  investment costs for energy using equipment over time  

–  changes in per unit costs of energy input  

–  overall energy use due to increasing efficiency  

138 
139 

EEA 2010b, Table ES.6 
All annualised costs include the return necessary on private sector investments in the housing sector. No 
social discount rate is applied which would result in lower costs. 

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85 

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Results are displayed in Figure 35. The following conclusions can be drawn:  

–  Until 2025, increased investments outweigh energy savings 

–  After 2025, the share of energy expenditures starts to decrease, with fuel savings as a result 
of  energy  efficiency  investments  overcompensating  the  equipment  costs.  This  leads  to  a 
marginally  lower  annual  costs  in  the  decarbonisation  scenarios  with  reference  energy 
prices  compared  to  the  reference  scenario  and  a  cost  well  below  reference  for  the  global 
action scenario with low energy prices.  

–  After  2040  this  trend  of  a  lowering  share  of  household  income  reverses,  bringing 
expenditures  in  case  of  decarbonisation  back  to  2025  levels  and  above  reference  levels. 
This  is  mainly  driven  by  additional  expenditures  for  thermal  insulation  in  response  to 
further  increasing  carbon  prices,  i.e.  the  shift  towards  passive  housing  and  similar 
standards also in refurbishments. Many of the additional energy savings induced by these 
expenditures will only be reaped after 2050 which is beyond the projection period.  

–  The  impact  of  international  fuel  prices  is  clearly  visible  when  comparing  the  different 
decarbonisation  scenarios.  Household  costs  are  lower  in  the  context  of  global  climate 
action.  

Figure 35: Expenditure of households on energy related equipment, fuels and electricity 

e
m
o
c
n

i

l

d
o
h
e
s
u
o
h
f
o
%
s
a

s
e
r
u
t
i
d
n
e
p
x
e

y
g
r
e
n
E

10%

9%

8%

7%

6%

5%

2010

2015

2020

2025

2030

2035

2040

2045

2050

Reference (frag. action, ref. fossil f. prices)

Effect. Techn. (glob. action, low fossil f. prices)

Effect. Techn. (frag. action, ref. fossil f. prices)

Source: PRIMES, GAINS 

Overall, it can be concluded that energy expenditures as percentage of household income will 
increase somewhat compared to today. 

Transport expenditure per household  

Figure  36  shows  the  expenditure  of  an  average  EU  household  for  transport.  The  costs 
included  are  fuel  and  electricity  costs  as  well  as  the  annualised  total  transport  equipment 

EN 

86 

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costs140 (e.g. full costs for cars, not only energy-related parts). When considering these costs 
the following elements are of relevance:  

–  increased transport activity over time 

–  investment costs for transport 

–  changes in per unit costs of energy input  

–  overall energy use due to increasing efficiency  

Results are displayed in Figure 36. The following conclusions can be drawn:  

–  Until  2030,  increased  investment  expenditure,  increased  annual  mileage,  and  increasing 
CO2,  fuel  and  electricity  prices  outweigh  energy  savings,  after  2030,  the  energy  savings 
dominate, leading to a situation that overall transport costs per household in 2050 are less 
important than today.  

–  Especially  after  2020,  increased  investments  costs  in  the  decarbonisation  scenarios  keep 
overall transport costs per household above reference levels. This is mainly due to the cost 
for electrification of road transport, which outweighs the fuel cost savings.  

–  The  impact  of  different  oil  prices  in  the  decarbonisation  scenarios  is  counter  intuitive. 
Lower  oil  prices  in  the  global  action  scenario  leads  to  higher  mileage  compared  to 
reference. Instead decarbonisation with reference oil prices leads to lower mileage as the 
reference case (see also chapter 5.2.6). As a consequence of these effects on mileage the 
decarbonisation  scenario  with  reference  oil  prices  leads  to  a  lower  overall  expenditure 
compared to the decarbonisation scenario with low oil prices. 

Figure 36 : Transport costs per household  

e
m
o
c
n

i

l

d
o
h
e
s
u
o
h
f
o
%
s
a
t
s
o
c
t
r
o
p
s
n
a
r
t

r
e
g
n
e
s
s
a
P

32%

31%

30%

29%

28%

27%

26%

25%

2010

2015

2020

2025

2030

2035

2040

2045

2050

Reference (frag. action, ref. fossil f. prices)

Effect. Techn. (glob. action, low fossil f. prices)

Effect. Techn. (frag. action, ref. fossil f. prices)

140 

All annualised costs include the return necessary on private sector investments in the transport sector. 
No social discount rate is applied which would result in lower costs. 

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87 

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Source: PRIMES, GAINS 

Overall,  it  can  be  concluded  that  transport  expenditures  as  percentage  of  household  income 
will  decrease  somewhat  compared  to  today,  despite  the  continuously  increasing  transport 
services and mileage that the average household is experiencing.  

Overall,  the  household  costs  for  transport  and  energy  in  a  decarbonised  EU  are  moderately 
higher than in the reference scenario, but their combined share in household income in 2050 is 
not higher than today, with household income projected to increase on average with 90% over 
the period 2010-2050.  

However,  in  particular  the  need  for  high  investments  upfront  to  benefit  from  the  fuel  and 
electricity  cost  savings  later  on  may  pose  a  challenge  for  households,  even  more  so  for  the 
most  vulnerable  households  with  lower  income  which  cannot  afford  increased  investment, 
even  if  over  time  compensated  by  energy  savings.  Households  are  not  the  same,  and  some 
might have problems mobilising the necessary resources for the upfront costs. This impact on 
different types of households was not assessed in this Impact Assessment. 

5.2.12.  Leveraging finance 

Total annual investments over the next 40 years related to the decarbonisation of the economy 
are projected to be around € 270 billion, for both the global and fragmented action scenarios 
(see chapter 5.2.4). 

Mobilising on average an additional € 270 billion a year in the coming 40 years will require 
specific attention from a policy perspective. This projected to represents on average 1.5% of 
our  GDP  over  that  period.  To  put  this  investment  increase  in  perspective:  in  2008  the  EU 
invested141  21.1%  of  its  GDP,  in  2009  this  was  reduced  to  19.1%.  In  this  context,  it  is 
interesting to take note that other economies invest a much larger shares of GDP (e.g. China: 
48%, India: 35% and Korea: 26% in 2009)142. 

Given the scarcity of public funds and magnitude of the transition challenge towards a 2050 
low-carbon economy, a key question is how to achieve the required level of funding. As the 
vast majority of financial investments will have to come from the private sector, the role of 
public funding is to generate the enabling environment for private sector financing to leverage 
investments into low carbon investments that often will increase long term productivity and to 
create new markets. Investors might otherwise choose to fund opportunities with the lowest 
capital intensity rather than the ones with the lowest cost over time. The challenge is to find 
effective ways to incentivise and finance the additional upfront expenditure and the necessary 
research  and  demonstration.  It  becomes  clear  that  the  cheapest  abatement  opportunities  are 
not always those  with  the lowest  capital spend or  the highest productivity increase over the 
longer time. 

This  will  often  involve  ensuring  access  to  information  on  the  real  costs  and  benefits  of  the 
investments made. This will allow private sector investors to judge better the real long term 
impact of their investment, thereby indirectly lowering the private discount rate closer to the 

141 

142 

EN 

Eurostat, National accounts, Gross fixed capital formation (investments), % of GDP:  
http://epp.eurostat.ec.europa.eu/portal/page/portal/national_accounts/data/main_tables 
Gross 
World 

Indicators, 

formation 

capital 

Bank, 

(% 

of 

GDP):

http://data.worldbank.org/indicator/NE.GDI.TOTL.ZS/countries 

88 

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social  optimum.  An  important  element  is  not  only  information  on  the  technology  itself,  but 
also a sufficiently strong long term carbon price signal that gives investment certainty. 

But another important tool will be ensuring better access to financing itself. To be equitable it 
will also be important to  ensure  that  poorer households, that often only have access to high 
cost credit, can mobilise the resources upfront at more reasonable prices to invest in carbon 
low investments.  

Public funding should only support those investments that are economically efficient but not 
financially viable. Public funding should not crowd out private investments. Rather, the role 
of public spending is to "crowd in" investments.  

Realising  investment  can  be  constrained  by  practical  factors  as  well,  like  in  the  case  of  the 
housing  sector:  While  builders  and  owners  refrain  from  making  investment  into  energy 
efficiency because they do not benefit from the financial savings, tenants are equally reluctant 
when they are not certain to stay long enough to get back their investment. 

To  tackle  these  barriers  to  investments,  financial  and  fiscal  instruments  are  part  of  a  policy 
package,  which  should  include  regulatory,  facilitation  and  communication  elements.  The 
finance  and  fiscal  instruments  essentially  fall  into  different  categories:  preferential  loans, 
grants that pay back part of a low-energy investment and tax rebates. Different public funding 
instruments have been introduced along the innovation chain in EU Member States to crowd 
in private investments and create a leverage effect. See annex 7.13 for a list of examples of 
such policies. 

To  achieve  this  level  of  leverage,  a  larger  share  of  regional  funding  within  the  EU  budget 
would need to go to low carbon related investments and different policy instruments will need 
to be applied, with more focus on how this funding can really lead to leverage of national and 
private sector resources.  

At  present  30%  of  the  total  €  344  billion  Regional  funding  over  2007-2013  is  available  for 
activities with a particular impact on sustainable growth, or an average annual amount of €15 
Billion of which at this point in time not all investments go to low carbon technologies. By 
the  end  of  2009,  22%  of  this  funding  for  sustainable  growth  had  been  allocated  to  specific 
projects  compared  to  27%  for  the  total  of  Regional  funding.  In  particular,  investments  for 
energy-related  and  environmental  programmes  were  below  average,  which  points  out  that 
scope improve the implementation of financing instruments for low carbon development. 

Table 22: Cohesion Policy 2007-13 allocations contributing to sustainable growth 

Cohesion Policy 2007-13 allocations contributing to sustainable growth 

DIRECT  
Water supply  
Waste water  
Waste 
Air quality 
Nature protection  
Climate change adaptation 

Amount of adopted 
Operational Programs 
Bn € ( rounding) 
45.5 
8.1 
13.9 
7 
1 
5.2 
7.8 

Amount allocated to selected 
operations by end 2009 
Bn € (rounding) 
9.9 
1.7 
3.8 
1.1 
0.1 
1 
1.8 

% 

22%
21%
27%
16%
6% 
19%
23%

EN 

89 

   EN 

 
  
  
 
Eco-innovation in SMEs  
INDIRECT 
Rail  
Urban transport 
Other sustainable transport  
Electricity 
Sustainable energy 
Urban & rural regeneration 
TOTAL  

2.5 
59.5 
23.9 
7.8 
4.6 
0.6 
9 
13.6 
105 

0.5 
13.4 23% 
5.4 
2.2 
1 
0.02 
1.4 
3.4 
23.3 

20%
23%
23%
28%
22%
4% 
15%
25%
22%

Source: COM(2011) 17 final, Communication 'Regional policy contributing to sustainable growth in EUROPE 
2020, Member States Strategic Reports, September 2009 – January 2010. 

5.2.13.  Employment impacts 

The transition towards a low-carbon economy will have a significant impact on the structure 
of the economy since it will affect the demand and supply of energy goods and services and 
will  have  an  impact  in  the  behaviour  of  consumers,  employees  and  employers  and  public 
authorities.  Deep  emission  reductions  have  marked  effects  that  redirect  investments  and 
impact employment. For instance the renewables sector has already seen a job increase from 
230000  in  2005  to  550000  in  2009143.  Also  investments  in  residential  and  commercial 
buildings are projected to increase by around 30% compared to the reference scenario in the 
next 2 decades, reaching nearly € 70 billion annually instead of nearly € 50 billion annually 
expected in the reference scenario (see table Table 35). Beyond that they will be even larger. 
It is clear such additional investments in a labour intensive sector, currently employing around 
15 million people144, will have beneficial impacts on employment. A number of studies have 
calculated employment effects of green or energy saving building investments in the EU and 
its  Member  States145.  Based  on  their  results,  it  can  be  estimated  that  these  additional  €  20 
billion investment annually in the coming decade lead annually to 150.000 to 500.000 direct 
construction jobs being created or maintained, and to 250.000 to 750.000 jobs if also indirect 
employment effects in other sectors are taken into account. The upper range estimates come 
from  studies  on  investments  taking  place  in  new  Member  States  due  to  their  significantly 
higher labour intensity.  

Also  investments  in  the  power  sector,  both  for  grids  and  power  plants,  are  projected  to 
increase by more than €30 billion annually in the decarbonisation scenarios compared to the 
reference  scenario  by  2020-2030  (see  Table  39).  A  recent  study  with  the  macroeconomic 
E3ME  model  for  the  European  Commission  has  estimated,  that  additional  €50  billion 
investment in this sector over the coming decade would lead cumulatively to around 400 000 
additional jobs, if indirect and induced effects are included146.  

143 
144 

145 

146 

Source: European Renewable Energy Council, http://www.erec.org/statistics/jobs.html 
Eurostat:  The  EU-27  construction  sector:  from  boom  to  gloom  -  Issue  number  7/2010,  Catalogue 
number: KS-SF-10-007-EN-N 
See  e.g.  Ürge-Vorsatz,  Diana  et  al.  (2010),  Clausnitzer,  Klaus-Dieter  et  al.  (2010),  Klinckenberg 
Consultants  (2010)  and  European  Commission  (2008):  Summary  of  the  impact  assessment  of  the 
proposal for a recast of the energy performance of buildings directive, SEC(2008)2865. 
European  Commission  (2010):  Impact  assessment  for  the  Communication  Energy  infrastructure 
priorities  for  2020  and  beyond  -  A  Blueprint  for  an  integrated  European  energy  network.  SEC(2010) 
1395 final. 

EN 

90 

   EN 

 
                                                 
But impacts  on employment are not  only driven by direct impacts in  the concerned sectors. 
There are indirect effects economy-wide that to a large extent depend on the type of policy 
implemented to achieve the emission reduction. The Staff Working Document accompanying 
the COM (2010) 265 'Analysis of options to move beyond 20% GHG emission reductions'147 
underlined  already  that  different  mitigation  policies  can  have  different  impact  on 
employment. For example raising revenue through carbon pricing (auctioning in the ETS or 
taxation in the non-ETS) and directing this to lowering taxation on labour can have positive 
effects, most notably for employment. This analysis was revisited and extended to the 2030 
time horizon for this impact assessment (see chapter 5.1.3), confirming that full recycling of 
revenues to reduce the costs of labour potentially could increase employment in the EU with 
around 0.7% by 2020 compared to reference, or around 1.5 million jobs (see Table 6).  

Even  if  impacts  can  be  positive  overall,  significant  shifts  in  employment  among  or  within 
sectors  are  expected148.  The  development  of  accommodating  policies  will  matter  a  lot  to 
ensure  for  an  orderly  transition  of  job  prospects  between  sectors.  This  is  particularly 
significant in the energy sector with sectors that experience growth and decline as a result of 
major shifts in investments and changes in production and consumptions patterns. The main 
need will be to revise and upgrade the 'green' skills of existing workers in all sectors. This is 
the  case  even  where  there  have  been  major  increases  in  demand,  such  as  workers  in  the 
building renovation sector to improve energy efficiency and in sectors that are only indirectly 
involved  such  as  the  banking  sector  that  needs  to  approve  the  loans  for  the  relevant 
investments149.  

Beyond  specific  'green'  know  how,  there  is  a  need  to  reinforce  human  capital  in  general 
because  of  the  changes  in  production  methods  and  adoption  of  new  business  models  in  a 
resource constrained world. Skills needs are also compounded by general weaknesses in the 
labour  force  and  in  particular  the  lack  of  interest  in  science  and  engineering,  leading  to  a 
deficit  in  available  technical  skills.  The  issue  is  further  tackled  in  the  Europe  2020  flagship 
initiative ‘An Agenda for new skills and jobs’150. 

But  not  only  re-skilling  will  be  important,  mainstreaming  climate  change  objectives  in  the 
overall policy framework will be beneficial for overall employment. For instance, according 
to  recent  estimates,  achieving  the  EU  target  of  spending  3%  of  EU  GDP  on  R&D  by  2020 
could create 3.7 million jobs and increase annual GDP by close to €800 billion by 2025151. As 
such  there  is  a  particular  need  to  lift  barriers  on  R&D  on  climate  issues,  and  when 
accompanied  with  a  long  term  carbon  price  signal,  giving  investors  more  certainty,  and 
improved framework conditions for R&D, this can results in net benefits in job creation and 
welfare152. 

5.2.14.  Co-benefits in terms of air pollution 

147 
148 
149 

150 
151 

152 

SEC(2010) 65 
Employment in Europe Report 2009, ISSN 1016-5444 
European  Centre  for  the  Development  of  Vocational  Training,  Thessaloniki,  Greece,  2010:  Skills  for 
green jobs – European Synthesis Report 
COM(2010) 682 final. 
P. Zagamé, (2010) The cost of a non-innovative Europe,  
http://ec.europa.eu/research/socialsciences/policybriefsresearchachievements_en.html 
European  Economy.  Economic  Papers.  413.  June  2010.  Brussels,  Andrea  Conte,  Ariane  Labat,  János 
Varga  and  Žiga  Žarnić:  What  is  the  Growth  Potential  of  Green  Innovation?  An  Assessment  of  EU 
Climate Change Policies.  

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The  reductions  in  GHG  emissions  of  different  decarbonisation  scenarios  also  have  positive 
impacts on air pollution. This is so because of the reduction in energy consumption and a shift 
to renewable energy sources. For this analysis the same methodology (the GAINS model) was 
as in the "Analysis of options to move beyond 20% greenhouse gas emissions reductions"153. 
This permits a broad estimation of the changes in air pollution impacts, including air pollution 
control  costs  and  physical  health  impacts.  The  analysis  was  carried  out  for  the  reference 
scenario, the effective technology scenario and the delayed action scenario. Both the effective 
technology and the delayed action scenario assume global action and thus low energy prices.  

Table  23  shows  that  reducing  GHG  emissions  in  2020,  2030  and  2050  will  further  reduce 
emissions of PM2.5, SO2 and NOX in the EU compared to the reference case154. The reductions 
are  more  pronounced  for  SO2  and  NOx.  Looking  at  the  sum  for  the  three  pollutants  the 
effective  technologies  case  reduces  air  pollution  by  nearly  10%  in  2030  and  some  29%  in 
2050 compared to reference. Compared to 2005 this would represent a reduction of 68% in 
2030 and 67% in 2050. In the delayed action the reductions in 2020 and 2030 are smaller but 
bigger in 2050.  

The  reduction  in  air  pollution  has  positive  impacts  on  human  health.  The  table  shows  the 
impacts on mortality. Effective decarbonisation will reduce the number of life year lost due to 
PM2.5  by  2.6  million  in  2020,  6.3  million  in  2030  and  14.3  million  in  2050.  Delayed  action 
will have smaller positive effects in 2020 and 2030 and larger positive impacts in 2050. With 
effective decarbonisation the number of premature deaths due to ground level ozone drops by 
174  in  2020,  415  in  2030  and  846  in  2050.  With  delayed  action  these  number  are  lower  in 
2020 and 2030 but higher in 2050.  

This  reduction  in  emissions  can  also  be  expected  to  further  reduce  the  costs  of  controlling 
traditional air pollutants. Table 23 shows that the effective decarbonisation case also cuts the 
costs of controlling air pollution by €3.6 billion in 2020, nearly €13 billion in 2030 and €46 
billion in 2050. With delayed action cost savings are initially lower but higher in 2050.  

The  reduction  in  mortality  can  also  be  valued  economically.  The  table  shows  that  effective 
decarbonisation reduces this type of health damage due to air pollution by €3 to 7 billion in 
2020  compared  to  the  reference.  The  largest  part  comes  from  PM2.5.  In  2030  the  damage 
reduction increases to around €7-17 billion and in 2050 to €17-38 billion. Delayed action will 
lead to smaller reductions in damage in 2020 (€1 to 2 billion) and 2030 and more pronounced 
impacts in 2050 (around €18 to 42 billion/year).  

Table 23 shows that effective decarbonisation can reduce air pollution cost (of both damage 
and air pollution control) by some €11 billion in 2020, €29 billion in 2030 and €85 billion in 
2050.  With  delayed  action  the  savings  are  smaller  in  2020  (€3  -  €4  billion)  and  2030  and 
higher later (€66-89 billion in 2050).  

Table 23: Impacts on air pollution and air pollution control costs (change compared to the reference) 

Change  compared  to  the 
reference 

2020 

2030 
Effective Delayed  Effective Delayed  Effective  Delayed 

2050 

153 
154 

SEC (210)650 
Note that the reference scenario on air emissions (in particular NOx) from the transport sector has some 
uncertainties  due  to  the  difference  between  "real  world  emissions"  and  estimated  emissions  and  the 
assumptions regarding fleet turnover These effects may influence the air pollution benefits  

EN 

92 

   EN 

 
                                                 
in 

SO2, 

in  premature 

reduction 
NOX, 

SO2 emission (1000t) 
NOx emission (1000t) 
PM2.5 emissions (1000t) 
Air  pollution 
(%)(sum 
PM2.5) 
Reduction 
health 
impacts  (million  life  years 
lost due to PM2.5) 
Reduction 
deaths ozone (cases/year) 
ECONOMIC 
IMPLICATIONS 
Reduced 
pollution 
air 
control cost (€billion/year)  
Reduced  damage  health 
PM2.5 (billion €/yr).  
Reduced  damage  health 
ozone (€billion/year) 
SUM  of  reduced  health 
damage (€billion/year) 
SUM  of  reduced  control 
costs  &  damage  savings 
(billion/yr) 

-106 
-161 
-19 

-3 
-48 
-6 

-314 
-369 
-36 

-159 
-222 
-29 

-877 
-1089 
-43 

-944 
-1155 
-54 

-3.2 

-0.6 

-9.8 

-5.6 

-28.5 

-30.5 

2.6 

0.8 

6.3 

4.5 

14.3 

15.6 

174 

53 

415 

288 

846 

870 

3.6 

1.9 

12.6 

8.1 

2.9-6.6 

0.9-2 

6.9-15.9 

5-11.4 

46.3 

15.7-
36.3 

48.0 

17.1-
39.5 

0.2-0.4 

0.1-0.1 

0.4-0.9 

0.3-0.6 

0.9-1.8 

0.9-1.8 

3-7 

0.9-2.1 

7.3-16.8 

5.3-12 

6.6-10.6 

2.8-4.0 

20-29.4 

13.8-
20.6 

16.6-
38.1 

62.9-
84.4 

18-41.4 

66-89.4 

Source: IIASA (2011) based on GAINS for emissions, health impacts and air pollution control costs (in €2008). 
Benefit valuation uses valuation of mortality used for the Climate and Energy package.155 

The reduction in greenhouse gas emissions will also reduce morbidity. A recent study shows 
that a reduction of the EU's GHG emissions by 25% (in 2020 compared to 1990) could have 
significant  health  implications:  it  would  reduce  chronic  bronchitis,  hospital  admissions, 
restricted  activity  days,  medications  use,  days  with  lower  respiratory  symptoms  and 
consultations  for  asthma  and  breathing  problems156.  The  study  valued  the  benefits  of  these 
improvements at around €1.5 billion per year in 2020. Given the more significant reduction in 
emissions  of  air  pollution  in  2030  (6  to  10%)  and  2050  with  decarbonisation,  morbidity 
benefits can be higher in 2030 and 2050 than in 2020.  

These  gains  will  be  important  also  in  the  light  of  the  comprehensive  review  of  the  EU  Air 
Quality Policy foreseen for 2013 at the latest where the aim is to maximise co-benefits with 
climate policy and minimise trade-offs. 

Furthermore,  damage  to  materials,  crops  and  sensitive  ecosystems  (due  to  acidification, 
excess nitrogen deposition and ground level ozone) can be expected to be reduced. Table 24 
shows  the  reduction  in  ecosystem  areas  in  the  EU27  were  acidification  and  euthrophication 
exceed  critical  loads.  I.e.  in  2050  the  impacts  of  effective  and  delayed  decarbonisation  are 
significant.  

155 
156 

Commission Staff Working Document, Part II (SEC(2010) 650. 
Holland, M. (2010) 

EN 

93 

   EN 

 
 
 
 
 
 
 
                                                 
Table 24: Impacts on sensitive ecosystem  

Reduction 
reference 

compared 

to 

the 

  E

- 

area 

Forest 

Acidification 
exceeded (1000 km2) 
Acidification  -  Catchment  area 
exceeded (1000 km2) 
Eutrophication  -  Ecosystems  area 
exceeded (1000 km2) 

f
f
e
c
t
i
v
e

4 

1 

11 

2020 

2030 

2050 

D
e
l
a
y
e
d

1 

0 

4 

E
f
f
e
c
t
i
v
e

9 

1 

D
e
l
a
y
e
d

6 

1 

17 

10 

E
f
f
e
c
t
i
v
e

22 

3 

63 

D
e
l
a
y
e
d

24 

3 

67 

Source: IIASA (2011). 

6. 

CONCLUSIONS 

The European  Council and  Parliament have endorsed a target  of 80  to  95% greenhouse gas 
emission reductions below 1990 by 2050 in the context of necessary reductions by developed 
countries  as  a  group  according  to  the  IPCC  to  limit  global  climate  change  to  a  temperature 
increase  of  2ºC.  The  global  analysis  has  shown  that  for  cost-effectiveness  reasons  the  EU 
would need to achieve most of these emission reductions internally by 2050, and can thus not 
expect to reach this target range by 2050 using a large amount of international credits.  

With no global action on climate change but rather fragmented action future fossil fuel prices 
are  expected  to  continue  to  increase  significantly  and  the  risk  for  oil  crisis  or  permanently 
high  oil  prices  remains.  Instead  with  global  action  in  line  with  the  2ºC  target  much  lower 
fossil fuel prices are projected, with prices in 2050 roughly similar to today.  

In  all  EU  decarbonisation  scenarios,  the  EU's  energy  resource  efficiency  would  improve 
substantially.  More  domestic  energy  resources  would  be  used,  in  particular  renewables,  and 
total energy imports would more than halve compared to 2005. Thus the policy objectives of 
reaching long term climate targets and increasing energy supply security go hand in hand, also 
if other regions in the world would not fully decarbonise and the risk of oil crises remain.  

The  assessment  shows  that  by  2050,  a  80%  EU  internal  reduction  compared  to  1990  is 
technically feasible with proven technologies if a sufficiently strong carbon price incentive is 
applied across all sectors. Despite significant variations in technological and fossil fuel price 
assumptions,  results  are  quite  robust  in  terms  of  the  speed  and  magnitude  of  emission 
reductions over time. 

Milestones of a cost effective path towards -80% by 2050 are emission reductions by around 
25% in 2020, around 40% in 2030 and around 60% in 2040. Reaching these emission levels 
will require further action, given that our current policies are projected to reduce emissions to 
-20%  in  2020,  -30%  in  2030  and  around  -40%  in  2050.  Given  that  investments  often  have 
long lead times, delaying climate action would lead to significantly higher needed reduction 
steps  later  and  significantly  higher  carbon  prices  and  costs.  Current  policies  in  place  (20% 
GHG  target  by  2020,  20%  renewables  target,  a  number  of  EU  energy  efficiency  measures) 
would lead to reductions of -20% by 2020. To increase reductions to -25% additional energy 

EN 

94 

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efficiency  policies  are  important.  Full  achievement  the  20%  energy  savings  target  by  2020 
would enable the EU to reduce internally emissions by 25% or more. 

Shifting  towards  a  low  carbon  pathway  leads  to  a  massive  shift  from  fuel  expenses  to 
investment  expenditure.  Averaged  out  over  the  40  year  period,  this  increase  in  investment 
expenditure amounts to around € 270 billion annually, both in case of global and fragmented 
action. This represents on average 1.5% of our GDP over that period. These costs are largely 
compensated  by  reduced  fuel  costs  over  time,  with  largest  cost  reductions  in  case  of  global 
action that sees the costs for remaining fossil fuel imports also decrease.  

As shown this offers opportunities for sustainable growth and jobs given that investments are 
to a large extent expenditures in the domestic economy, requiring increased added value and 
output  from  a  wide  range  of  manufacturing  industries  as  well  as  the  construction  sector, 
whereas no action would continue to see increasing import expenses flowing to third countries 
considering  the  EU's  strong  reliance  of  fossil  fuel  imports.  Furthermore,  policies  that 
introduce a carbon price signal through taxation or auctioning can allow for revenue recycling 
that can increase economic growth and employment.  

Climate  and  energy  policies  in  the  coming  decade  will  thus  require  a  combination  of  smart 
pricing policies as well as instruments that can unlock private investment. Given the scarcity 
of  public  funds  and  the  magnitude  of  the  transition  challenge  towards  a  2050  low-carbon 
economy, the role of public policy is to generate the enabling environment for private sector 
financing  to  leverage  investments  into  low  carbon  investments  that  often  will  increase  long 
term  productivity  and  to  create  new  markets.  This  will  involve  improving  the  access  to 
information for private investors on the real costs and benefits of the investments made on the 
longer  term  but  also  ensuring  better  access  to  financing  itself.  Member  States  have  already 
introduced  policies  such  as  preferential  loans  schemes,  grants  that  pay  back  part  of  a  low-
energy investment and tax rebates, with the aim to unlock private investment in low carbon 
technologies.  These  type  of  policies  will  need  to  continue  and  be  expanded.  Also  a  larger 
share of regional funding within the EU budget would need to go to policy instruments that 
leverage private sector resources.  

Currently,  the  EU  Emissions  Trading  System  (ETS)  is  the  main  policy  instrument  setting 
carbon  price  incentives.  A  larger  contribution  by  the  sectors  covered  by  the  ETS  would 
continue to be cost-effective. Emission reductions of already nearly 50% by 2030 and around 
90% compared to 2005 in 2050 would be achieved. The highest reductions would occur in the 
power  sector,  but  in  the  longer  term  also  the  industry  sector  would  provide  above  average 
contributions. The existing ETS target, even though continuing after 2020, will not lead to the 
level  of  reductions  projected  for  2030  or  afterwards.  Current  prices  in  the  ETS  seem  not 
sufficient  to  see  large  scale  deployment  of  CCS  in  the  power  sector  from  2020  onwards.  A 
delay in the deployment of CCS could see costs increase later on to reduce emissions. 

But also the non-ETS sectors would reduce their emissions with more than the current target 
of  -10%  by  2020  compared  to  2005.  By  2030  emissions  would  be  at  around  -30%  and  by 
2050 nearly at -70% compared to 2005. All sectors would contribute, but to a varying degree. 
Above average contributions can also be achieved by the residential and service sector, while 
transport and agriculture are the main sectors where no full decarbonisation in the longer term 
is  achieved.  Electrification  can  play  an  important  role  in  making  transport  and  heating  low 
carbon, reducing emissions of land based transport back to or below 1990 levels by 2030.  

The  agriculture  sector  continues  to  decrease  its  emissions,  but  after  2030  reductions  slow 
down. By 2050 it reduces emissions by up to 50% compared to 1990. It then would represent 

EN 

95 

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a third of total EU emissions, tripling its share compared to today. Its importance in terms of 
climate policy is therefore bound to increase: if it does not achieve the projected emissions, 
other sectors would need to reduce even more, which would come at a high cost. Given that 
changes in this sector are gradual, with no major technological solutions available, it is crucial 
that  European  agricultural  policies  focus  on  further  efficiency  gains,  such  as  more  efficient 
fertiliser use, improved manure management and improved livestock productivity. Globally, 
increases in productivity of agriculture to meet a number of competing goals (increased food 
and bio-energy demand, the need to reduce deforestation) will be crucial. Reversing existing 
global  trends  by  reducing  food  waste  and  re-orienting  consumption  towards  less  carbon 
intensive food could also contribute. 

The forestry sector and land use sectors are expected to see their sink function decrease over 
time,  in  part  due  to  increased  bio-energy  and  other  wood  demand.  Over  time  this  can  be 
compensated  through  afforestation.  Also  imports  could  in  part  compensate  for  any  wood 
demand  increase,  but  of  course  this  should  not  lead  to  carbon  leakage  in  to  form  of 
unsustainable  forestry  practices  in  third  countries.  Furthermore  other  land  uses  can  also 
contribute  such  as  the  maintaining  of  grasslands,  the  restoration  of  wetlands  and  peat  lands 
and  the  reduction  of  soil  erosion.  This  underscores  the  need  to  consider  all  land  use  in  a 
holistic manner, and the importance to address Land Use, Land Use Change and Forestry in 
EU  climate  policy  in  a  holistic  manner,  recognising  that  uncertainties  remain  high  and 
improved monitoring and reporting of emissions and absorptions are crucial.  

An EU internal reduction of -80% will require continued innovation in technologies through 
efficiency and cost improvements, and the provision of the corresponding infrastructure. This 
can benefit from demonstration at industrial scale of key technologies, also to improve public 
acceptability. Effective R&D and infrastructure policies for key low carbon technologies can 
facilitate this innovation process. The SET plan has the objective to address this and should 
thus  be fully  executed.  R&D  and  innovation can also further  spur  job growth in  the overall 
economy. 

The shift towards investments and the decrease in household fuel expenditures result in costs 
for  households  for  transport  and  energy  to  moderately  increases  in  a  decarbonised  EU 
compared to the reference scenario. But their combined share in household income in 2050 is 
not higher as today. To be equitable it will also be important to ensure that poorer households, 
that  often  only  have  access  to  high  cost  credit,  can  mobilise  the  resources  upfront  at  more 
reasonable  prices  to  invest  in  carbon  low  investments.  Government  policies  that  try  to 
leverage finance should address this. 

Employment  effects  are  estimated  to  be  overall  positive  due  to  the  increased  focus  on 
investments  often  associated  with  production  industries  and  services  localised  in  the  EU. 
Furthermore  pricing  policies  can  allow  for  smart  recycling  of  revenues,  with  employment 
benefiting  most  from  reductions  in  labour  costs.  Even  if  impacts  can  be  positive  overall, 
significant shifts in employment among or within sectors are expected. The development of 
accommodating policies will matter. The main need will be to revise and upgrade the 'green' 
skills  of  existing  workers  in  all  sectors.  This  is  not  only  limited  to  sectors  that  see  growth 
decrease or increase but also in sectors that are indirectly involved such as the banking sector. 

Overall action on climate change is expected to drive innovation in the EU and improve the 
competitive position of EU manufacturing industry . The impact of a more ambitious climate 
policy  on  energy  intensive  industries  was  also  assessed.  The  results  of  the  macro-economic 
modelling  presented  in  the  Staff  Working  Document  accompanying  the  Communication 

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'Analysis of options to move beyond 20% greenhouse gas emission reductions and assessing 
the risk of carbon leakage' of 26 May 2010 was revisited and refined up to 2030. It confirmed 
that the impact on the production levels of energy intensive industries were limited and that 
free allocation protects energy intensive industry in the ETS, even if the EU would implement 
more  ambitious  targets  in  a  world  where  other  regions  have  more  limited  ambition.  But 
climate action would not only require the application of more advanced industrial processes 
and equipment, that results in fuel cost reductions. Also carbon capture and storage would be 
needed  on  a  broad  scale  as  an  end-of  the-pipe  technology  after  2035,  notably  to  capture 
industrial process emissions (e.g. in the cement and steel sector). This would entail an annual 
investment of more than € 10 billion. In a world of global climate action, this would not raise 
competitiveness  concerns.  But  if  the  EU's  main  competitors  would  not  engage  in  a  similar 
manner, the EU would need to consider how to address the risks for carbon leakage. 

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7. 

ANNEXES 

7.1. 

2010 Global Climate Highlights 

The  US  National  Oceanic  and  Atmospheric  Administration,  National  Climatic  Data  Center, 
listed to following highlights for 2010 in relationship to the global climate157:  

–  Combined global land and ocean annual surface temperatures for 2010 tied with 2005 as 
the warmest such period on record at 0.62 ºC above the 20th century average. The range of 
confidence  (to  the  95  percent  level)  associated  with  the  combined  surface  temperature  is 
+/- 0.07 ºC.  

–  The global land surface temperatures for 2010 were tied for the second warmest on record 
at  0.96  ºC  above  the  20th  century  average.  The  range  of  confidence  associated  with  the 
land surface temperature is +/- 0.11 ºC.  

–  Global ocean surface temperatures for 2010 tied with 2005 as the third warmest on record, 
at  0.49  ºC  above  the  20th  century  average.  The  range  of  confidence  associated  with  the 
ocean surface temperature is +/- 0.06 ºC.  

–  In 2010 there was a dramatic shift in the El Niño-Southern Oscillation, which influences 
global  temperature  and  precipitation  patterns  —  when  a  moderate-to-strong  El  Niño 
transitioned  to  La  Niña  conditions  by  July.  At  the  end  of  November,  La  Niña  was 
moderate-to-strong.  

–  According  to  the  Global  Historical  Climatology  Network,  2010  was  the  wettest  year  on 
record,  in  terms  of  global  average  precipitation.  As  with  any  year,  precipitation  patterns 
were highly variable from region to region. 

–  The  2010  Pacific  hurricane  season  had  seven  named  storms  and  three  hurricanes,  the 
fewest on  record  since the mid-1960s when  scientists started using satellite observations. 
By  contrast,  the  Atlantic  season  was  extremely  active,  with  19  named  storms  and  12 
hurricanes.  The  year  tied  for  third-  and  second-most  storms  and  hurricanes  on  record, 
respectively. 

–  The  Arctic  sea  ice  extent  had  a  record  long  growing  season,  with  the  annual  maximum 
occurring  at  the  latest  date,  March  31,  since  records  began  in  1979.  Despite  the  shorter-
than-normal  melting  season,  the  Arctic  still  reached  its  third  smallest  annual  sea  ice 
minimum on record behind 2007 and 2008. The Antarctic sea ice extent reached its eighth 
smallest  annual  maximum  extent  in  March,  while  in  September,  the  Antarctic  sea  ice 
rapidly expanded to its third largest extent on record. 

–  A negative Arctic Oscillation in January and February helped usher in very cold Arctic air 
to  much  of  the  Northern  Hemisphere.  Record  cold  and  major  snowstorms  with  heavy 
accumulations  occurred  across  much  of  eastern  North  America,  Europe  and  Asia.  The 

157 

http://www.noaanews.noaa.gov/stories2011/20110112_globalstats.html 

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February  Arctic  Oscillation  index  reached  -4.266,  the  largest  negative  anomaly  since 
records began in 1950. 

–  From mid-June to mid-August, an unusually strong jet stream shifted northward of western 
Russia  while  plunging  southward  into  Pakistan.  The  jet  stream  remained  locked  in  place 
for weeks, bringing an unprecedented two-month heat wave to Russia and contributing to 
devastating floods in Pakistan at the end of July.  

7.2. 

Overview of studies that look into impacts of climate change in the EU  

IPCC  AR4  results  for  Europe158  show  that  with  increasing  temperatures  water  availability 
becomes the critical factor in southern Europe and EU-wide both droughts and flood events 
will occur far more frequently than at present. Changes to both temperature and precipitation 
rates are estimated to decrease the snow cover and as a consequence the ski season in the Alps 
will  shorten.  A  reduction  in  heating  demand  for  buildings  coupled  with  a  decrease  in  cold 
weather deaths is predicted for northern Europe; however this is counter to the predictions for 
southern Europe where increases in cooling demand are paired with increases in heat-related 
deaths.  

The  IPCC  study  also  predicted  that  European  flora  species  would  be  come  increasingly 
vulnerable,  with  up  to  20%  becoming  critical  endangered  and  some  extinctions.  Within  the 
agricultural  sector  crop  yield  losses  are  also  predicted  to  far  exceed  the  temperature-related 
gains. 

The PESETA study159 contains a spatially disaggregated, detailed assessment of the potential 
impacts  of  climate  change  in  Europe  (with  temperature  increases  in  the  EU  in  the  range  of 
2.5ºC and 5.4ºC) for a number of sectors. The research project evaluates the economic effects 
of  the  2080s  climate  on  the  current  economy160.  Impacts  assessed  include  the  effects  of 
changing  temperature  and  precipitation  levels  in  agriculture,  changed  in  the  frequency  and 
severity  of  river  floods,  sea  level  rise  in  coastal  systems  as  well  as  impacts  on  tourism  and 
human health. For agriculture, rivers floods, coastal systems and tourism the study finds total 
welfare  losses  in  these  sectors  for  the  EU  that  range  from  0.2  to  1.0%,  depending  on  the 
climate scenario.  The study does not examine  all potential climate losses,  e.g. for  transport, 
energy, forest (i.e. biodiversity), winter tourism and catastrophic events. The PESETA study 
has  the  benefit  of  examining  specific  impacts  on  the  whole  economy  but  it  underestimates 
potentially the impacts of climate change in Europe because it does not assess all impacts; e.g. 
impact  of  climate  change  on  transport,  energy,  forestry,  winter  tourism  and  catastrophic 
events are not considered. In particular this last category is difficult to assess but may lead to 
high impacts. 

The ongoing EU-funded ClimateCost project161 will add further details to impacts per sector 
in the EU. The ClimateCost project also estimated that by 2080 between 0.3 and 1.3 million 

158 

159 
160 

161 

IPCC, Europe. Climate Change 2007: Impacts, Adaptation and vulnerability. Contribution of Working 
Group II to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change. 
Ciscar et al. (2011) and JRC, Final report of the PESETA research project, 2009. 
A comparative statics analysis is performed, comparing the economy as of today with the economy as 
of today subject to the 2080s climate. The analysis of potential impacts, defined as impacts that might 
occur  without  considering  public  adaptation,  can  allow  the  identification  of  priorities  in  adaptation 
policies across impact categories and regional areas. 
http://www.climatecost.cc/ 

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additional  people  in  Europe  would  experience  flooding  due  to  sea-level  rise  if  no 
improvements are undertaken in coastal defences. 

7.3. 

Analysis of global emission pathways towards achieving the 2ºC objective  

As the climate system is complex, the answer to which GHG emission pathways will achieve 
the 2ºC objective depend on the value taken by a number of parameters which are uncertain. 
One of the most important of them is the climate sensitivity parameter, which links the level 
of GHG concentrations in the atmosphere with the change in temperature. The parameter is 
defined  as  the  increase  in  average  temperature  corresponding  to  a  doubling  of  emissions 
concentrations  relative  to  pre  industrial  levels.  However  its  value  cannot  be  defined  in  a 
laboratory setting and is estimated based on past observations as well as on atmospheric and 
ocean circulation models. Therefore we are confronted with a range of expected outcomes.  

that  based  on  available 

The  Intergovernmental  Panel  on  Climate  Change's  Fourth  Assessment  Report  (IPCC  AR4) 
concluded 
the  equilibrium  climate  sensitivity 
information, 
(temperature increase as a result of a doubling of GHG concentrations) is likely to be in the 
range 2°C to 4.5°C, with a best estimate value of about 3°C. It is very unlikely to be less than 
1.5°C. Values which are substantially higher than 4.5°C cannot be ruled out, but are unlikely. 
This  implies  that  stabilizing  GHG  emissions  concentrations  at  a  level  of  550  ppmv  CO2-eq. 
(equal to double the preindustrial level) would lead to an increase in temperature around 3°C 
as  best  estimate.  Stabilizing  GHG  emissions  concentrations  at  around  450  ppmv  CO2-eq. 
increases temperature by 2.1°C as best estimate with a likely range between 1.4 and 3.1°C162.  

The  IPCC  AR4  on  Climate  Change  Mitigation  assessed  a  large  number163  of  long  term 
emission  pathways  resulting  in  stabilization  scenarios  with  different  levels  of  stringency  in 
terms  of  GHG  concentrations  (in  CO2  equivalent).  At  that  time  a  limited  number  of  6 
scenarios had looked at low stabilisation levels of GHG emissions concentrations in the order 
of 450 CO2-eq.  

Since the release of the IPCC AR4, researchers have made additional projections looking at 
emission  reductions  that  achieve  low  stabilisation  GHG  emission  concentrations.  A  recent 
review  for  UNEP164  looked  at  the  results  of  a  set  of  recent  scenarios  that  assessed  low 
stabilisation GHG emission concentrations. The exercise included both Integrated Assessment 
Modelling  (IAM)  results  that  look  at  the  economic  and  technical  challenges  of  emission 
reduction scenarios across all sectors and gases, and approaches that used climate modelling 
to see the impacts of stylised emission patterns.  

Figure 37 gives an overview of the scenarios projected by the IAMs. The left hand side shows 
GHG  emissions  scenarios  that  have  a  "likely  chance"  (i.e.  more  than  66%  chance)  of  not 
overshooting  the  2ºC  temperature  increase  compared  to  pre-industrial  levels  during  the  21st 
century. The right hand side represents the scenarios that have a medium chance (from 50 to 
66%  chance)  of  achieving  the  same  outcome.  The  red  lines  represent  GHG  emission 
reductions of around 50% compared to 1990 by 2050. 

162 

163 

164 

IPCC,  4th Assessment  Report,  Climate  Change 2007: Working  Group  I:  The  Physical  Science  Basis, 
Technical Summary, chapter 4.5 Climate Response to Radiative Forcing. 
IPCC,  4th  Assessment  Report,  Climate  Change  2007:  Working  Group  III:  Mitigation  of  Climate 
Change, chapter 3.3.5 Long-term stabilization scenarios, table 3.5. 
UNEP:  The  Emissions  Gap  Report:  Are  the  Copenhagen  Accord  pledges  sufficient  to  limit  global 
warming to 2 or 1.5°C?, Full Report, 9 November 2010  

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Scenarios  with  relatively  late  or  extended  global  peaking  beyond  2020  typically  have 
emissions  still  well  above  half  of  the  1990  level  by  2050  (see  scenarios  right  hand  side  of 
Figure  37).  They  typically  require  near  zero  or  even  negative  global  emissions  during  the 
second  half  of  this  century  to  achieve  a  medium  likelihood  of  keeping  within  the  2ºC  limit 
during this century.  

Instead, scenarios that see their emissions peak before 2020 and then reduce by around 50% 
or more compared to 1990 by 2050 typically have a "likely chance" (> 66%) meeting the 2ºC 
limit and require no negative emissions during the second half of this century. 

All  scenarios  see  an  overshoot  of  GHG  concentration  levels  above  the  450  CO2-eq.,  with 
significantly higher peaking in those with a late global GHG peak. 

Figure 37: Emissions pathways compatible with a 2°C limit 

Source:  Adapted  from  'UNEP,  The  Emissions  Gap  Report:  Are  the  Copenhagen  Accord  pledges  sufficient  to 
limit global warming to 2 or 1.5°C?, 8 November 2010,  

Not  reaching  the  global  GHG  emissions  peak  soon,  clearly  increases  the  risk  of  seeing 
temperature  increases  above  the  2ºC  limit,  and  at  the  same  time  requires  more  challenging 
emission reductions later on in the century or even significant negative emissions on a global 
scale.  

The EU ambition of seeing global emissions peak by 2020 and the reducing by at least 50% 
by  2050  compared  to  1990,  is  estimated  to  have  a  likely  chance  of  limiting  global  climate 
change to a 2ºC temperature increase or less compared to pre-industrial levels and to ensure 
its  technical  feasibility  over  the  longer  term  (by  lowering  the  probability  that  net  negative 
emissions will be required). 

7.4. 

Economic modelling tools used  

POLES 

The  POLES  (Prospective  Outlook  for  the  Long  term  Energy  System)  model  is  a  global 
sectoral simulation model for the development of energy scenarios until 2050. The dynamics 
of the model is based on a recursive (year by year) simulation process of energy demand and 
supply  with  lagged  adjustments  to  prices  and  a  feedback  loop  through  international  energy 
price. The model is developed in the framework of a hierarchical structure of interconnected 
modules at the international, regional and national level. It contains technologically-detailed 

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modules for energy-intensive sectors, including power generation, iron and steel, the chemical 
sector, aluminium production, cement making, non-ferrous minerals and modal transportation 
sectors (including aviation). 

The  world  is  broken  down  into  47  regions,  for  which  the  model  delivers  detailed  energy 
balances. Emissions of all Kyoto gases are calculated for the sectors covered by the model. 

PRIMES 

Primes simulates the response of energy consumers and the energy supply systems to different 
pathways of economic development and exogenous constraints. It is a modelling system that 
simulates  a  market  equilibrium  solution  in  the  European  Union  and  its  member  states.  The 
model  determines  the  equilibrium  by  finding  the  prices  of  each  energy  form  such  that  the 
quantity  producers  find  best  to  supply  match  the  quantity  consumers  wish  to  use.  The 
equilibrium  is  static  (within  each  time  period)  but  repeated  in  a  time-forward  path,  under 
dynamic relationships. The model is behavioural but also represent in an explicit and detailed 
way  the  available  energy  demand  and  supply  technologies  and  pollution  abatement 
technologies. The system reflects considerations about market economics, industry structure, 
energy /environmental policies and regulation. These are conceived so as to influence market 
behaviour of energy system agents. The modular structure of PRIMES reflects a distribution 
of  decision  making  among  agents  that  decide  individually  about  their  supply,  demand, 
combined  supply  and  demand,  and  prices.  Then  the  market  integrating  part  of  PRIMES 
simulates market clearing. For further information see  

http://www.e3mlab.ntua.gr/models_menu.php?title=primes. 

GAINS 

The  GAINS  model  explores  cost-effective  multi-pollutant  emission  control  strategies  that 
meet environmental objectives on air quality impacts (on human health and ecosystems) and 
greenhouse gases. It is an integrated assessment model that brings together information on the 
sources  and  impacts  of  air  pollutant  and  greenhouse  gas  emissions  and  their  interactions. 
GAINS  brings  together  data  on  economic  development,  the  structure,  control  potential  and 
costs of emission sources, the formation and dispersion of pollutants in the atmosphere and an 
assessment  of  environmental  impacts  of  pollution.  For  further  information  on  the  GAINS 
Europe model which has been used for this analysis, as well as access to background data, see 
http://gains.iiasa.ac.at/gains/EU/index.login?logout=1. 

CAPRI 

CAPRI  models  the  response  of  the  European  agricultural  system  towards  a  range  of  policy 
interventions.  It  is  a  comparative  static  equilibrium  global  agricultural  sector  model  with 
focus on EU27 and Norway. It is solved by iterating supply and market modules. Its supply 
module consists of separate, regional, non-linear programming models which cover about 250 
regions  (NUTS  2  level)  or  even  up  to  six  farm  types  for  each  region  (in  total  1000  farm-
regional  models).  Its  market  module  is  a  spatial,  global  multi-commodity  model  for 
agricultural products, 40 product, and 40 countries in 18 trade blocks. For further information 
see http://www.capri-model.org/. 

GLOBIOM 

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The Global Bio-mass Optimization Model (GLOBIOM) is a global recursive dynamic partial 
equilibrium model integrating the agricultural, bio-energy and forestry sectors with the aim to 
provide policy analysis on global issues concerning land use competition between the major 
land-based  production  sectors.  The  global  agricultural  and  forest  market  equilibrium  is 
computed  by  choosing  land  use  and  processing  activities  to  maximize  the  sum  of  producer 
and  consumer  surplus  subject  to  resource,  technological,  and  policy  constraints.  Prices  and 
international  trade  flows  are  endogenously  determined  for  respective  aggregated  world 
regions. It covers 28 regions, representing a disaggregation of the eleven regions adapted to 
enable linkage with the POLES model. 

The  market  is  represented  by  implicit  product  supply  functions  based  on  detailed, 
geographically  explicit,  Leontief  production  functions,  referring  to  the  supply  of  agriculture 
and  forestry  production  and  explicit,  constant  elasticity,  product  demand  functions  Explicit 
resource  supply  functions,  i.e.  supply  function  for  other  inputs  than  land  in  the  production 
process of agricultural and forestry products, are used only for water supply. 

GLOBIOM  can  be  used  to  estimate  the  role  of  cropland,  grassland,  and  short  rotation  tree 
plantations expansion in global land use change projections including forests. 

www.globiom.org 

G4M 

The  Global  Forest  Model  (G4M)  provides  spatially  explicit  estimates  of  annual  bio-mass 
increment,  development  of  forest  bio-mass  and  costs  of  forestry  options  such  as  forest 
management,  afforestation  and  deforestation  by  comparing  the  income  of  alternative  land 
uses. The model is spatially explicit (currently on a 0.5°x0.5° grid). Increment is determined 
by a global map of potential net primary production (NPP). Such a map shows the biophysical 
potential of tree growth depending on climate conditions but independently of land cover, i.e. 
the  current  presence  of  forests.  At  present  this  NPP  map  is  static  but  can  be  changed  to  a 
dynamic NPP model which reacts to changes of temperature, precipitation, radiation or CO2 
concentration.  Main  forest  management  options  are  application  of  thinning  and  choice  of 
rotation time. The rotation time can be individually chosen but the model can estimate optimal 
rotation  times  to  maximize  increment,  maximize  stocking  bio-mass  or  maximal  bio-mass  at 
harvest time. The model handles also age class dynamics of managed forests. 

Calibrated to historic data G4M picks up the land use change trends of the past and projects 
its future development without explicitly modelling single land use change drivers.  

7.5. 

Drivers assumed in the POLES scenarios 

GDP and population assumptions  

Main assumptions concerning GDP and population growth by region/country are shown in the 
table below. These assumptions are maintained across the three scenarios examined. 

Table 25: GDP and population assumptions in POLES: yearly growth rates (%) 

2010/2005  2020/2010  2030/2020  2040/2030  2050/2040 

Average 
2050/2005 

World 
GDP (B$2005 in PPP) 
Population (Mcap) 

3,0 
1,2 

3,5 
1,1 

EN 

2,4 
0,6 

2,2 
0,4 

2,8 
0,8 

2,8 
0,8 

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Annex I 
GDP (B$2005 in PPP) 
Population (Mcap) 
N-Annex I 
GDP (B$2005 in PPP) 
Population (Mcap) 
EU27 
GDP (B$2005 in PPP) 
Population (Mcap) 

0,9 
0,4 

5,9 
1,4 

0,7 
0,3 

2,5 
0,3 

4,7 
1,2 

2,1 
0,2 

2,1 
0,1 

3,6 
0,9 

1,6 
0,0 

1,7 
0,0 

3,0 
0,7 

1,3 
-0,1 

1,5 
0,0 

2,8 
0,5 

1,3 
-0,1 

1,8 
0,1 

3,8 
0,9 

1,5 
0,0 

7.6. 

EU sectoral GHG reductions in case of global action 

The POLES model project in case of the Global action scenario that in the EU, emissions in 
the power sector fall 93% by 2050 compared to 1990, while important reductions are achieved 
in  the  residential  (-79%)  and  the  industrial  sector  (-72%).  As  demand  for  mobility  is  still 
growing  and  decarbonisation  options  are  more  limited  in  the  transport  sector,  the  emissions 
reduction is only 52% with respect to 1990. This result is made possible by higher penetration 
of hybrid and electric vehicles, as well as by larger use of bio-fuels. Emissions in this sector 
peak by 2010 and by 2030 are already reduced by about 6% compared to 1990. An important 
caveat is that figures for transport do not include international aviation or international marine 
bunkers. 

An  important  role  in  achieving  the  results  in  power  generation  is  played  by  the  increasing 
contribution  of  renewables,  nuclear  and  carbon  capture  and  storage  (CCS).  In  the  Global 
action scenario by 2050 the 81% of remaining CO2 emissions in the power sector is captured 
worldwide  and  76%  in  the  EU.  It  should  be  kept  in  mind  that  a  large  share  of  power 
generation is provided by non-fossil fuel sources. CCS, however, represents a very important 
source  of  abatement  also  in  the  industrial  sector.  Renewables  represent  50%  of  power 
generation  worldwide  and  44%  in  the  EU,  while  nuclear  provides  22%  of  total  power 
generation worldwide and 29% in the EU.  

Table 26: EU-27 Greenhouse gas emissions by sector in the Global action scenario, 

Variable 
1990 = 100% 
GHG Total  
GHG Power Sector 
GHG industry 
GHG transport 
GHG residential services 

Source: POLES, JRC, IPTS 

1990 

2000 

2005 

2010 

2020 

2030 

2040 

2050 

100 
100 
100 
100 
100 

93 
89 
89 
111 
90 

95 
95 
87 
118 
91 

86 
82 
79 
120 
81 

73 
61 
65 
117 
77 

55 
40 
57 
94 
54 

36 
20 
41 
71 
33 

22 
7 
28 
48 
21 

7.7. 

Assessing  global  GHG  emissions  using  the  POLES,  GLOBIOM  and  G4M 
models  

7.7.1.  Methodology of the integrated POLES, GLOBIOM and G4M scenarios 

The POLES model was used to estimate the supply and demand for energy goods, including 
bio-energy (both bio-mass and bio-fuels) on a global scale. It did so both for the baseline as 
well as the Global Action Scenario that sees global GHG emissions from energy and industry 
reduce by around 50% by 2050 compared to 1990. 

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The GLOBIOM model (see annex 7.4 for a brief description) was then used to assess what the 
impact  would  be  on  agricultural  and  forestry  production,  including  land  use  changes,  and 
subsequent  GHG  emissions  to  meet  this  bio-energy  demand  together  with  the  demand  for 
food and wood165.  

Subsequently for the Global action case policies were introduced to limit GHG emissions in 
all  sectors,  including  agriculture  and  forestry.  This  reduction  scenario  in  GLOBIOM  differs 
from the baseline through: 

– 

– 

– 

modified bio-energy demand coming from the POLES Global Action Scenario 

introduction of a reduction target for emissions from gross deforestation with the aim 
to reduce it by half by 2020 and limit it to a minimum by 2030.  

introduction of a reduction target for Non CO2 emissions166 from agriculture with the 
aim to stabilise emissions globally  

The deforestation rate that is projected in baseline in GLOBIOM is lower than recent historic 
deforestation  rates,  indicating  that  deforestation  is  happening  not  only  due  to  permanent 
replacement by cropland and grassland but also due to other reasons, with significant amounts 
of deforested land remaining idle and unproductive.  

G4M was used to estimate the deforestation in baseline and then the impact of a carbon price 
on deforestation in the reduction case, taking into account historic deforestation rates. It was 
ensured that sufficient land for cropland and grass land remains available in G4M to meet the 
required cropland and grassland needs from the GLOBIOM projections. 

As  in  GLOBIOM,  in  G4M  the  target  for  the  Global  action  case  was  to  reduce  gross 
deforestation by half by 2020 and limit it to a minimum by 2030 through the introduction of a 
carbon price. Contrary  to  the projections with GLOBIOM, this carbon price is also a driver 
for further afforestation. 

7.7.2. 

Sensitivity analysis - exogenous productivity in crop and livestock sectors 

Agricultural productivity changes in the future are one of the most important and at the same 
time the most uncertain parameters.  

There may be reasons for optimism. Historically, productivity increases have been higher than 
expected leading to a steady decrease in real agricultural commodity prices. Significant yield 
gaps exist still between regions globally. If the institutional framework is properly set up, just 
catching up of these regions with the rest of the world would lead to considerable productivity 
increases.  

165 

166 

GLOBIOM  operates  in  partial  equilibrium,  with  wood  and  food  demand  driven  by  gross  domestic 
product  (GDP)  and  population  changes.  In  addition,  food  demand  must  meet  minimum  per  capita 
calorie  intake  criteria,  which  are  differentiated  with  respect  to  the  source  between  crop  and  livestock 
calories. Demand is calculated for the different regions on the basis of projections of regional per capita 
calorie  consumption  presented  in  FAO  (2006a).  The  regional  population,  GDP  development  and  bio-
energy demand is the same as the one used for POLES.  
The non-CO2 emissions calculated in Globiom have been calibrated to ensure a perfect match with the 
EPA (2006) numbers for the year 2000. 

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On  the  other  hand  there  are  also  reasons  for  pessimism  in  the  Malthusian  tradition.  Some 
indication  exists  of  a  recent  deceleration  of  the  productivity  gains  in  developed  countries, 
even though it is unclear to what extent this might be due to economic rather than biophysical 
drivers.  Furthermore,  resource  (soil  and  water)  depletion  and  its  negative  effects  on 
productivity might be of concern in some regions and also climate change could contribute in 
some regions to negative impacts on yields already in the coming decades.  

In the GLOBIOM model three factors influence overall yields: 

1. 

2. 

3. 

Exogenous  yield  growth 
in  yield  because  of 
technological  changes  or  more  efficient  management  practices  within  a  given 
production system  

improvements 

representing 

A  pure  yield  effect  when  crops  are  produced  using  another  type  of  production 
system.  For  instance  when  intensification  is  applied,  leading  usually  to  higher 
productivity. 

An  aggregation  effect  when  the  production  of  a  specific  crop  is  shifted  to  more  or 
less  fertile  soils  and  climate  –  with  effects  that  can  be  positive  or  negative  on 
productivity 

Many models cover quite well the first two effects. Because of GLOBIOM's detailed spatial 
resolution, the model also can represent the 3rd effect. This in turn gives the model substantial 
flexibility. 

The exogenous yield growth in GLOBIOM for crops is set at 0.5% pa. See figure below 
comparing historic yield improvements to the “total” yield changes resulting from 
GLOBIOM. The reasonable match of the two demonstrates that the applied exogenous yield 
growth in GLOBIOM is in line with historic yield growth, even though historic yield 
improvements will to some extent also have been influenced by the pure yield and 
aggregation effects. 

Figure 38: Historic annual rate of yield change (%) compared to the applied on in GLOBIOM 

Source: FAO (faostat.fao.org, download 18/11/2010), historic periods assessed are 1962-2008, 1988-2008, 1998-
2008. 

Livestock  production  in  GLOBIOM  is  represented  through  14  production  systems  between 
which  the  model  can  endogenously  choose.  For  the  baseline,  zero  exogenous  yield  growth 
was assumed but full flexibility across production systems. As a result, the purely grassland 
based  cattle  systems  nearly  disappear  by  2050,  mixed  extensive  systems  remain  stable  and 
there is an important increase in the mixed intensive systems. 

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Figure 39: Animal numbers per production system in Baseline in Globiom 

Source: IIASA, Globiom 

Two sensitivity scenarios were assessed regarding the exogenous yield growth: 

– 

– 

A low technological progress scenario with no exogenous crop yield growth (instead 
of  0.5%  pa  in  the  base  case).  Yield  growth  for  livestock  is  kept  the  same  as  in  the 
base case, at zero % pa 

A high technological progress scenario with yield growth for crops kept the same as 
in the base case at 0.5% pa but also applying an exogenous yield growth for livestock 
corresponding to the productivity increases applied with the IMPACT model for the 
report  'Agriculture  at  Crossroads'  for  the  International  Assessment  of  Agricultural 
Knowledge, Science and Technology for Development (Rosegrant 2009).  

7.8. 

Projections  of  impact  on  oil  and  gas  imports  into  the  EU  of  Fragmented  and 
Global Action using the POLES model  

Chapter  5.1.2  discusses  the  results  of  projections  by  the  POLES  model  on  global  and 
fragmented action, indicating that oil prices will be significantly lower in case of global action 
by  2050  compared  to  baseline  (69$/barrel  in  2050  instead  of  138  $/barrel)  with  a  less 
pronounced impact on oil prices in case of the Fragmented climate action(117$/barrel). 

In  baseline  oil  imports  in  stagnate  over  time,  even  though  import  dependency  continues  to 
increases  over  time,  from  74%  in  2010,  to  84%  and  almost  90%  by  2030  and  2050.  At  the 
same  time  oil  prices  increase  from  the  assumed  70  $/barrel  in  2010  to  138  $/barrel.  This 
results overall in an almost doubling of the oil import bill in the EU.  

Taking  action  on  climate  change  has  significant  implications  for  the  EU  fossil  fuel  imports 
and the related bill. The Global action scenario results in 51% lower oil consumption than the 
baseline  level  in  2050.  In  the  fragmented  action  case  this  reduction  in  consumption  is  even 
more outspoken due to the remaining high oil price in this scenario. Resulting decreases in oil 
imports are more than 50%, even higher in case of fragmented action because the remaining 

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high oil price keeps some EU oil production ongoing. The cost on the oil import reduces with 
more than 66% compared to the baseline in 2050, and in case of global action the reduction is 
even higher (-73%) due to the lower resulting oil prices.  

In absolute value the reduction in oil consumption in the global action case translates into $ 
337 billion of avoided expenditures compared to baseline by 2050.  

Table 27: Import dependency Oil and Gas 

Oil imports, change vs 2010 
Baseline 
Global 
Fragmented 
Gas imports, change vs 2010 
Baseline 
Global 
Fragmented 

Source: JRC, IPTS, POLES 

2020 
8% 
-3% 
-2% 
2020 
9% 
0% 
0% 

2030 
6% 
-15% 
-17% 
2030 
18% 
-8% 
-18% 

2040 
-2% 
-36% 
-42% 
2040 
25% 
-33% 
-49% 

2050 
-9% 
-56% 
-63% 
2050 
23% 
-52% 
-79% 

Table 28: Oil consumption, expenses and import in the EU 
Change 
vs 
baseline 

Expense 
in 
B$2005 

Change 
vs 
baseline 

Consum
ption 
Mtoe 

Imports 
Mtoe167 

Change 
vs 
baseline 

Expense 
B$2005 

Change 
vs 
baseline 

Oil - 2050 
Baseline  
Global  
Fragmented  

503 
248 
234 

0% 
-51% 
-54% 

512 
126 
202 

0% 
-75% 
-61% 

437 
211 
175 

0% 
-52% 
-60% 

445 
107 
151 

0% 
-76% 
-66% 

Source: JRC, IPTS, POLES 

Similarly, for natural gas the Global action scenario would result in halving gas consumption 
and  reducing  gas  imports  about  83%  by  2050  compared  to  baseline  or  more  than  50% 
compared to today. With gas prices reduced by 63% these reductions translate into reduction 
of the gas expenditures of up to 82 % compared to baseline, or $ 205 Billion. The import bill 
would have a more substantial reduction, as some domestic gas production still remains. 

Table 29: Gas consumption, expenses and import in the EU 
Change 
vs 
baseline 

Expense 
in 
B$2005 

Change 
vs 
baseline 

Consum
ption 
Mtoe 

Imports 
Mtoe 

Change 
vs 
baseline 

Expense 
B$2005 

Change 
vs 
baseline 

Gas – 2050 
Baseline  
Global  
Fragmented  

405 
201 
173 

0% 
-50% 
-57% 

251 
46 
97 

0% 
-82% 
-61% 

276 
111 
47 

0% 
-60% 
-83% 

171 
25 
26 

0% 
-85% 
-85% 

Source: JRC, IPTS, POLES 

While  oil  and  gas  savings  are  most  significant  in  2050,  their  magnitude  is  projected  to  be 
substantial already by 2030. On top of the direct reductions from reduced volumes of oil and 
gas,  there  would  be  indirect  cost  reductions  in  the  oil  and  gas  sector  due  to  lower  need  for 
capital investments in energy production and transport infrastructure within the EU. 

167 

The  POLES  projections  assume  higher  remaining  potentials  for  domestic  oil  and  gas  production  by 
2050 as PRIMES, resulting in lower relatively imports in baseline in POLES than in PRIMES. 

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7.9. 

Further  information  on  the  main  assumptions  and  drivers  of  the  PRIMES 
scenarios  

7.9.1.  Assumptions  in  relation  to  all  scenarios  for  the  EU  in  the  PRIMES  –  GAINS 

modelling setup 

The following drivers remain constant across all scenarios: 

The  Gross  Domestic  Product  (GDP)  increases  in  line  with  the  2009  Ageing  Report 
developments;  depicting  declining  growth  rates  over  time  as  well  as  great  variation  among 
Member States168. Recovering from the crisis (fully reflected in the scenarios by only 0.6% pa 
GDP  growth  in  2005-2010  and  slowly  recovering  growth  2010-15169),  EU-27  GDP  is 
expected to rise by 1.7% pa from 2010 to 2050, 2.0% up to 2030 and only 1.5% after 2030. 
Over time, labour productivity will become the only driver of growth in the EU. Nonetheless, 
given the recent juncture there remain considerable uncertainty concerning the medium-term 
economic developments.  

These GDP assumptions have been used to project sectoral activity data, e.g. sectoral value 
added, with the help of GEM E3 multi-sector modelling.  

The population projections for EU27 are based on the EUROPOP2008 convergence scenario 
from  Eurostat,  which  is  also  the  basis  for  the  2009  Ageing  Report.  The  key  drivers  for 
demographic change are higher life expectancy, low fertility and inward migration. The EU-
27  population  is  expected  to  grow  by  0.2%  per  year  by  until  2035  and  slightly  decline 
afterwards, remaining fairly stable in number at around 500 million in the next 40 years. 

The  PRIMES  model  includes  details  on  a  great  number  of  technologies  both  for  energy 
demand and energy supply sectors. The technological representation is particularly rich for 
the  power  sector  (more  than  150  technologies  represented),  for  which  data  on  future 
investment  costs,  efficiencies,  operation  and  maintenance  costs  are  included,  so  that  power 
plant  investments  can  be  determined  endogenously  on  the  basis  of  long  run  marginal  costs. 
The model includes all technologies that are relevant for the energy system, including main 
demand side technology options and carbon capture and storage. Technology features in the 
model  draw  on  energy  technology  related  work  from  JRC-IPTS  and  other  sources  having 
benefited from support by e.g. DG RTD over many years. Technology cost assumptions have 
been  compared  with  assumptions  of  other  projections,  in  particular  the  IEA  Energy 
Technology Perspectives 2010. Overall, cost assumptions can be described as moderate.  

The  technical-economic  characteristics  of  existing  and  new  energy  technologies  used  in  the 
demand  and  the  supply  sectors  evolve  over  time  and  improve  according  to  exogenously 
specified trends in line with literature results. These take into account public policies (through 
campaigns, industrial policy, R&D support and other means) that aim at pushing more rapid 

168 

169 

European  Commission,  DG  Economic  and  Financial  Affairs:  2009  Ageing  Report:  Economic  and 
budgetary  projections  for  the  EU-27  Member  States  (2008-2060).  EUROPEAN  ECONOMY  2|2009, 
http://ec.europa.eu/economy_finance/publications/publication14992_en.pdf.  The  "baseline"  scenario of 
this  report  has  been  established  by  the  DG  Economic  and  Financial  Affairs,  the  Economic  Policy 
Committee, with the support of Member States experts, and has been endorsed by the ECOFIN Council. 
The short to medium growth pattern of the reference scenario is hence consistent with the intermediate 
scenario  2  "sluggish  recovery"  presented  in  the  Europe  2020  strategy:  Communication  from  the 
Commission:  Europe  2020.  A  strategy  for  smart,  sustainable  and  inclusive  growth.  COM(2010)2020, 
Brussels, 3.3.2010. 

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adoption  of  new  technologies  by  removing  uncertainties  associated  with  their  use.  Non-
maturity of technologies is reflected by temporary risk premium. Overall, technical progress 
assumptions can be described as moderately optimistic. For example, capital costs of already 
mature  technologies  decrease  by  3%  between  2010  and  2050,  capital  costs  of  new 
technologies  decrease  between  30%  and  70%  between  2010  and  2050  depending  on 
technological  potential  and  expected  use.  Also  solar  PV  investment  costs  are  projected  to 
decrease  by  60%  in  2030  and  by  70%  in  2050  from  today’s  levels  as  a  result  of  strong 
learning  by  doing  associated  with  strong  RES  supporting  policies.  Resource  and  other 
availability constraints are reflected by non linear potential cost curves (e.g. renewable source 
availability, nuclear site availability, CCS storage availability). 

Consumers and suppliers are generally hesitant to adopt new technologies before they become 
sufficiently  mature.  They  behave  as  if  they  perceive  a  high  cost  (higher  than  engineering 
estimations)  when  deciding  upon  adoption  of  new  technologies.  Agents  decisions  on  trade-
offs  between  capital  and  variable  costs  depend  on  weighted  average  costs  of  capital  rates 
which vary between 17.5% for households and cars, 12% for other private transport, industry 
and services and 8% in public transport.  

Nuclear  investment  in  the  longer  term  is  endogenous,  but  Member  State  restrictions  are 
respected where applicable. Nuclear investments are determined on economic grounds in the 
PRIMES  model  unless  a  country  excludes  the  use  of  nuclear  (e.g.  Austria  and  Ireland)  or 
there are other restrictions on nuclear use. Costs of nuclear waste are taken into account in the 
variable costs. 

CCS penetration is determined on economic grounds and depend on ETS prices (apart from 
EU  funding  for  demonstration  plants).  It  is  generally  assumed  that  CCS  infrastructure, 
regulation  and  legislation  develops  in  all  countries  in  a  synchronous  manner  as  CCS 
competitiveness  vis-à-vis  other  power  sources,  assuming  (except  in  the  delayed  CCS 
scenario)  that  there  are  no  regulatory  and  acceptance  issues,  especially  on  transport  and 
storage.  Costs  of  infrastructure  are  recovered  as  variable  payment  by  power  producers  for 
transportation  and  storage.  For  capture  technologies  significant  potential  for  technological 
progress  is  assumed,  leading  to  capital  cost  reductions  per  kW  by  40  to  50%  until  2050, 
depending  on  the  capture  technology.  CO2  transportation  and  storage  infrastructure  is 
assumed  to  develop  under  public  regulation.  Data  on  CO2  storage  and  transportation  were 
compiled  from  various  research  projects.  Total  EU  potential  storage  capacity  is  roughly 
250,000  million  tCO2.  This  compares  to  190,000  million  tCO2  cumulative  emissions  until 
2050  in  the  worst  CO2  projection.  Transportation  and  storage  services  are  priced  by 
regulation reflecting total long-term average costs. Storage prices increase significantly with 
total cumulative volume of CO2 to be stored.  

Renewables  are  represented  in  significant  detail  and  for  various  categories  of  renewable 
source  intensity  (for  intermittent  sources).  Technological  progress  assumptions  differ 
according to maturity, ranging between 10% (e.g. offshore wind, geothermal) and 70% (PV) 
capital  cost  reduction  per  KW  between  2010  and  2050,  It  should  be  noted  that  these  costs 
include  standardized  grid  connection  costs  (including  for  example  costs  of  DC  links  for 
offshore wind farms). Grid parity for PV is expected before 2030 in southern part of Europe. 

With  respect  to  grids,  250  interconnectors  (existing  and  new)  are  modelled.  Costs  increase 
nonlinearly  with  the  share  of  intermittent  RES.  Smart  grid  effects  are  represented  to  some 
extent,  covering  smart  metering  enabling  efficiency,  flexible  controls  preventing  problems 
from  variable  RES  operations,  enabling  deployment  of  small  scale  RES  in  low  voltage  and 

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smart  metering  for  electro  mobility.  However,  the  HV-MV-LV  hierarchy  of  the  grid  is 
maintained but auto-production is included in the modelling. The power sector model includes 
a detailed representation of cogeneration. 

The demand side sub-models of PRIMES decompose energy consumption in nine industrial 
sectors, five types of households, four tertiary sectors and transport by type of transportation 
mode.  Each  sector  is  decomposed  in  sub-sectors,  further  more  in  energy  uses  and  energy 
processes.  At  the  bottom  level  of  this  decomposition  tree  a  specific  generic  technology 
operates and consumes energy forms. The technologies are represented as vintages and their 
characteristics change over time. The consumer may change energy mix for a technology, or 
change technology mix across the future vintages or change energy  process mix, depending 
on  costs,  technical  possibilities  and  useful  energy  requirements.  Energy  consumption  is 
reduced  through  increased  energy  efficiency  as  a  result  of  adopting  more  advanced 
technology vintages, investing in overall energy savings (e.g. thermal integrity of buildings) 
and/or reducing useful energy requirements, the latter being in competition with non energy 
uses and materials.  

The technologies represented are identifiable, including a series of electric appliances used by 
households, specific furnaces and kilns in industry, motors, air compressors, drying systems, 
buildings  (in  categories),  houses  (in  categories),  renewable  production  devices  (e.g.  thermal 
solar  collectors),  heat  pumps,  etc.  Industrial  boilers  and  CHP  by  sector  are  also  represented 
and  are  included  in  the  power/steam  sub-model  which  also  represents  steam  and  heat 
distribution networks in a simplified way. The industrial sub-models represent the production 
of  most  basic  processing  materials  and  include  endogenous  choices  about  recycling.  The 
transport model represents a series of technologies for the various transport means, including 
electric cars, plug-in hybrids, simple hybrids, fuel cells. The transport model also keeps track 
of  technology  vintages  for  all  transportation  means.  The  technological  detail  in  the  demand 
sector models of PRIMES is sufficient to associate information on possible policy measures 
for energy efficiency (e.g. eco-design) and standards. 

The  PRIMES  model  is  based  on  individual  decision  making  of  agents  demanding  or 
supplying  energy  and  on  price-driven  interactions  in  markets.  Correspondingly,  discount 
rates  pertaining  to  individual  agents  play  an  important  role  in  their  decision  behaviour. 
Agents’ economic decisions are usually based on the concept of cost of capital, which is de-
pending on the sector - weighted average cost of capital (for firms) or subjective discount rate 
(for individuals). In both cases, the rate used to discount future costs and revenues involves a 
risk premium which reflects business practices, various risk factors or even the perceived cost 
of lending. The discount rate for individuals also reflects an element of risk averseness. For a 
more detailed background, see chapter 2 of 'EU energy trends to 2030 — UPDATE 2009'. 

7.9.2. 

Specific assumptions in relation to the reference scenario for the EU in the PRIMES 
– GAINS modelling setup 

The reference scenario for 2050 is consistent with the reference scenario until 2030 published 
in September 2010170 (which has been used, amongst others, in the analysis of implications of 

170 

European  Commission,  DG  Energy:  EU  energy  trends  to  2030  -  UPDATE  2009,  September  2010. 
http://ec.europa.eu/energy/observatory/trends_2030/doc/trends_to_2030_update_2009.pdf 
,  Member 
States  have  been  consulted  during  preparation  of  this  2009  energy  trends  baseline  that  include 
projections for all GHG emissions. 

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a  move  beyond  20%  greenhouse  gas  emission  reductions171).  The  detailed  macroeconomic 
assumptions on GDP and population are consistent with the 2009 Ageing Report172. 

A key policy that is assumed to be implemented is the amended EU Emission Trading System 
(ETS)173.  The  ETS  cap  continues  to  decline  by  the  adopted  linear  factor  after  2020174, 
resulting  in  a  cap  of  nearly  70%  below  2005  emission  levels  by  2050  (except  for  aviation, 
where the default reduction beyond 2020 continues to be 5% below 2004-6 levels). But given 
the agreed review of the linear factor after 2025 as well as the unspecified use of international 
credits after 2020, it is assumed to result only in a 50% internal reduction of ETS emissions 
by 2050 compared to 1990. This may be interpreted as a generous assumption of the use of 
international  credits  given  that  at  present  the  legislation  only  foresees  a  certain  amount  of 
international credits up to 2020.  

ETS  prices  are  derived  endogenously  on  the  basis  of  the  above  defined  domestic  emission 
constraint,  while  taking  account  of  existing  ETS  flexibility,  in  particular  with  regard  to 
banking. The ETS carbon price needed to comply with the ETS directive rises from 36 € per 
ton  CO2  in  2030  (in  constant  prices  of  2008)  to  51.5  €  in  2040  and  flattens  out  to  50  €  in 
2050175.  

Non  ETS  and  renewable  energy  legislations176  have  set  legally  binding  national  targets  for 
2020, of which full implementation is assumed. There is no assumption on specific targets for 
later years, but rather a continuation of a policy incentive of similar strength for the Non ETS 
sectors177 and similar facilitation but declining subsidy intensity for renewables, expressed in 
a Renewables (RES) values as shown in the Table 30 below.  

Table 30: Policy drivers in the reference scenario 

ETS carbon price (€/tCO2eq) 
Non ETS carbon value (€/tCO2eq)  5 
RES value (€/MWh) 

2020 2030 2040 2050
16.5  36 
5 

51.5  50 
5 
5 
35 
35 

49.5  35 

171 

172 

173 
174 

175 

176 
177 

European  Commission:  Communication  'Analysis  of  options  to  move  beyond  20%  greenhouse  gas 
emission  reductions  and  assessing  the  risk  of  carbon  leakage'  (COM(2010)  265  final).  Background 
650).
information 

Part 
http://ec.europa.eu/clima/documentation/international/docs/26-05-2010working_doc2_en.pdf 

(SEC(2010) 

analysis, 

and 

II 

European  Commission,  DG  Economic  and  Financial  Affairs:  2009  Ageing  Report:  Economic  and 
budgetary  projections  for  the  EU-27  Member  States  (2008-2060).  EUROPEAN  ECONOMY  2|2009, 
http://ec.europa.eu/economy_finance/publications/publication14992_en.pdf.  The  "baseline"  scenario of 
this  report  has  been  established  by  the  DG  Economic  and  Financial  Affairs,  the  Economic  Policy 
Committee, with the support of Member States experts, and has been endorsed by the ECOFIN Council. 
Directive 2009/29/EC amending Directive 2003/87/EC. 
The ETS cap decrease at a rate equal to a linear factor of 1,74 % compared to the average annual total 
quantity of allowances issued by Member States in accordance with the Commission Decisions on their 
national allocation plans for the period from 2008 to 2012 
The ETS price in 2030 in this reference scenario going up to 2050 is significantly higher than carbon 
price  for  2030  in  the  reference  case  presented  in  the  staff  working  document  accompanying  the 
Communication  'Analysis  of  options  to  move  beyond  20%  greenhouse  gas  emission  reductions  and 
assessing the risk of carbon leakage' (SEC(2010) 650}. The main cause is additional action and banking 
over a longer period of time motivated by expectations on increases of allowance prices in the future 
due to the continuously decreasing ETS cap after 2030 up to 2050. 
Effort Sharing Decision 406-2009-EC, Directive 2009/28/EC 
By holding the non-ETS carbon value needed to achieve the EU non-ETS target in 2020 constant from 
2020 onwards. 

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Source: PRIMES, GAINS 

Non ETS and renewable energy legislations to achieve the binding national targets for 2020 
give  considerable  freedom  to  Member  States  on  how  they  can  achieve  them,  allowing  for 
transfers between Member States if some overachieve the national targets.  

For the achievement of the Non ETS emission targets178, it is assumed that this flexibility is 
fully used. Consequently, a uniform Non ETS carbon value across the EU is used. The policy 
impulse needed to reach the 2020 EU non-ETS target of a 10% emission reduction compared 
to 2005 equals a carbon value of 5 Euro per ton of CO2, as the reference scenario until 2030 
has  shown.  There  is  no  assumption  on  targets  for  later  years.  Instead  it  is  assumed  that  the 
policy  impulse  will  continue  at  the  same  strength,  represented  by  constant  non-ETS  carbon 
values of 5 Euro per ton of CO2 after 2020, and that at least -10% is maintained as minimum 
reduction for the whole period until 2050.  

For  the  achievement  of  the  renewable  energy  targets179,  only  limited  trade  is  assumed  in 
2020 for those Member States that have indicated that they plan to make use of the so called 
co-operation  mechanisms  that  allows  for  such  transfers  to  achieve  the  renewable  energy 
targets. National support measures are assumed to be of similar level in all renewable energy 
sectors  within  a  country,  provided  that  the  transport  specific  target  is  met.  For  reaching  the 
targets,  on  average  a  renewable  energy  incentive  of  around  €50  per  MWh  and  a  biofuel 
support  of  €55  per  MWh  in  2020  are  necessary,  with  considerable  differences  between 
countries. With a 20% average renewable energy share for the EU as a whole, average shares 
are  around  32%  in  the  electricity  sector,  20%  in  heating  and  cooling  and  10%  in  transport. 
There  is  no  assumption  on  targets  for  later  years.  RES  subsidies  decline  after  2020  starting 
with  the phasing  out of  operational aid to new onshore wind  by 2025; Also other RES aids 
declines substantially by 2050 at different rates according to technology. For example, aid to 
solar  PV  remains  important  until  2035  and  becomes  insignificant  for  new  installations  in  a 
great  number  of  Member  States  from  2040  onwards.  Increasing  use  of  RES  co-operation 
mechanisms will also help to reduce RES costs. Policies on facilitating RES penetration will 
continue  at  an  average  level  of  €35/MWh,  reflecting  greater  use  of  trade  between  Member 
States  after  2020.  Decarbonisation  scenarios  see  the  same  phase-out  of  operational  aids  to 
renewables, but an intensification of enabling policies (e.g. quicker authorisation). 

National nuclear policies as of mid 2010 are assumed to continue. Member States that have 
no  nuclear  power  production  remain  so,  except  for  Italy  and  Poland  where  national  plans 
envision nuclear use. Nuclear in Belgium and Germany is phased out according to legislation 
as of mid 2010. Sweden continues to use and invest in nuclear. 

Other  policy  assumptions  are  identical  to  those  described  for  the  reference  scenario  until 
2030 in the 2009 update of the European Energy Trends until 2030180. Notably the reference 
scenario includes the Regulation on CO2 emissions of new passenger cars, the implementing 
measures  of  the  Eco-Design  and  Labelling  Directives  (e.g.  energy  services,  stand-by, 
lighting), the CCS demonstration plants which are part of the  European Energy  Programme 
for Recovery (EEPR), and the recast of the Energy Performance in Buildings Directive. For 
consistency  reasons  to  appropriately  represent  the  integrated  approach  taken  by  the 

178 
179 
180 

Effort Sharing Decision 406-2009-EC. 
Directive 2009/28/EC. 
European  Commission,  DG  Energy:  EU  energy  trends  to  2030  -  UPDATE  2009,  September  2010. 
http://ec.europa.eu/energy/observatory/trends_2030/doc/trends_to_2030_update_2009.pdf 

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Commission  on  CO2  emissions  from  vehicles,  also  the  draft  legislative  proposal  to  reduce 
CO2 emissions from light commercial vehicles (vans) is included, which was adopted on 28 
October  2009  by  the  European  Commission  and  politically  agreed  between  Parliament  and 
Council in December 2010. 

For Non CO2 emissions, the projections assume full compliance with existing EU Directives 
as  well  as  national  legislation.  The  EU-wide  Directives  include  the  Landfill  Directive 
(1999/31/EC),  the  Waste  Directive  (2006/12/EC),  the  Waste  Management  Framework 
Directive (2008/98/EC), the Nitrate Directive (1991/676/EEC), Common Agricultural Policy 
(CAP) Reform and the CAP Health Check, the F-gas Directive (2006/842/EC) and the Motor 
vehicles Directive (2006/40/EC). 

7.9.3.  Detailed description of the different decarbonisation scenarios 

Scenarios in the context of Global Climate Action 

Effective and widely accepted technology scenario  

This option represents a policy environment that enables all mayor low carbon technologies, 
such  as  energy  efficiency  and  renewables,  carbon  capture  and  storage  (CCS),  nuclear  and 
electrification  of  transport.  This  is  reflected  by  the  following  additional  but  realistic 
assumptions compared to current policies: 

•  All  renewable  technologies  are  facilitated  to  a  larger  extent  (e.g.  by  planning  and 
infrastructures,  expressed  in  higher  renewable  values).  The  extent  of  cost  saving 
technological progress in solar technologies is assumed to be larger. 

•  Energy  intensity  improvements  are  brought  about  in  the  context  of  high  ETS  prices  and 
demand  side  policies  are  mirrored  through  high  carbon  values;  in  addition  greater 
penetration of renewables increases the conversion efficiency and hence improves energy 
intensity. 

•  It  is  assumed  that  CCS  is  successfully  demonstrated  and  is  commercially  available  after 
2020,  benefiting  from  cost  improvements  driven  by  carbon  prices;  it  also  assumed  that 
there is public acceptance for the technology 

•  It  is  assumed  that  current  national  nuclear  policies  are  implemented  as  planned.  Nuclear 
energy  is  assumed  to  be  enabled  by  increased  public  acceptance  and  higher  safety  of 
nuclear  waste  operations.  However,  no  new  nuclear  will  be  built  in  countries  which 
continue to exclude this.  

•  Electrification  of  transport  is  enabled  by  R&D  and  other  policies  promoting  progress  in 
battery-driven vehicles. A decrease of battery costs (EUR/kWh) by a factor of 4 in 30years 
is in line with current optimistic expectations. Lighter batteries, faster charging and higher 
power densities are also assumed. An infrastructure enabling full electrification including 
smart  grids  is  built  up  so  that  from  2030  a  transition  to  electric  cars  can  take  place. 
Constraints to electrification only remain in certain parts for non urban long-distance road 
transport, especially for trucks and busses.  

In this enabling context, carbon price equalisation across sectors works as key driver to ensure 
a  cost-effective  decarbonisation  approach  including  the  selection  of  technologies  and 

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fostering  of  demand-side  energy  efficiency.  Also  additional  renewables  incentives  are 
assumed but no further specific energy efficiency policies are assumed beyond those driven 
by the pricing signal  

Delayed CCS 

This  option  explores  the  consequences  if  CCS  as  a  potential  important  new  low  carbon 
technology  is  not  enabled  as  successfully  as  under  the  “Effective  and  widely  accepted 
technology” scenario. If effective, CCS allows continued significant use of fossil fuels (coal 
and  gas)  for  electricity  supply  even  under  a  strict  carbon  constraint  and  enables  radical 
emission reductions of industrial processes. However, the successful deployment presupposes 
the availability and public acceptance of a new transport and storage infrastructure for CCS. 
The  delayed  CCS  scenario  reflects  potential  problems  in  this  regard  in  particular  by 
significant  upward  shifts  in  cost  curves  for  CCS  transport  and  storage  as  well  as  by  more 
conservative assumptions on related cost improvements over time.  

In particular, issues with public acceptance of transporting and storage of substantial amounts 
of CO2 would impede CCS deployment in this scenario, delaying its effective deployment by 
10  to  15  years.  As  a  result  of  non  acceptance  issues  regarding  storage,  manufacturers 
anticipate  smaller  market  for  CCS.  This  causes  lower  technology  learning  due  to  slower 
development of mass production of the capture technologies, which in turn contributes to such 
delays. The cost improvement rates catch up partly after 2040. However storage cost effects 
remain after 2040 in comparison with the effective and widely accepted technology scenario, 
which is more optimistic on CCS. 

Delayed electrification scenario  

This  option  explores  the  consequences  if  the  currently  widely  regarded  promising  key 
decarbonisation  technology  in  the  transport  sector,  i.e.  electrification  of  transport,  is  not 
enabled as successfully as under “Effective and widely accepted technology”. As a result of 
delay  in  R&D,  battery  costs  remain  much  higher,  reflected  by  using  the  lower  bound  for 
battery cost improvements estimated by the IEA181, and the range autonomy of pure electric 
vehicles  develops  in  a  slower  pace  compared  to  the  “Effective  and  widely  accepted 
technology”  case.  This  causes  a  delay  of  15  to  20  years  in  the  effective  deployment  of 
electrification  in  transport  and  in  the  preparation  of  the  infrastructure  needed.  Alongside, 
slower  development  of  mass  production  for  electric  vehicles  leads  to  lower  technology 
learning with cost improvement rates of batteries only partly catching up beyond 2040. It is 
assumed that during the delay period the charging infrastructure develops partially. 

Delayed climate action scenario  

The  scenario  assumes  the  achievement  of  the  climate  change  and  energy  package  by  2020 
(the 20% GHG reduction target and the 20% renewables targets by 2020). Between 2020 and 
2030 action is no more ambitious than for the reference scenario, with carbon prices equal to 
the reference scenario (this thus includes the impact of a continued decrease in the ETS cap 
according  to  existing  legislation).  Action  is  resumed  in  2030,  after  10  years  of  delay,  with 
increasing carbon prices at levels that would cause the cumulative EU carbon emissions over 

181 

International Energy Agency (IEA) 2009, Transport, Energy and CO2: Moving Toward Sustainability,  

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the  full  period  2010  to  2050  to  equalise  with  those  of  the  “Effective  and  widely  accepted 
technology” scenario. 

Technological  change  for  electrification  is  assumed  to  come  at  a  higher  cost  than  in  the 
“Effective  and  widely  accepted  technology”  scenario  due  to  a  corresponding  delay  in 
development  and  deployment,  but  other  technologies  are  for  simplicity  assumed  to  come  at 
same cost.  

Scenarios in the context of Fragmented Climate Action 

Effective and widely accepted technology scenario in the EU 

This scenario explores the effects if the EU would continue its action towards an emissions 
reduction  of  80%  in  a  world  were  others  don't  act  beyond  the  Fragmented  Climate  Action 
scenario.  Hence  global  fossil  fuel  prices  are  assumed  not  to  deviate  from  the  reference 
scenario.  All  other  assumptions  are  equal  to  those  in  the  Effective  and  widely  accepted 
technology scenario in the EU in the context of global action.  

Technology  assumptions  are  kept  similar  as  in  the  same  scenario  in  the  context  of  global 
action. This can be justified methodologically by the interest to isolate price effects. However, 
given  the  size  and  in  many  areas  also  technology  leadership  of  the  EU,  and  the  already 
existing  technology  efforts  in  other  countries,  it  is  also  not  obvious  that  low  carbon 
technology  development  would  be  significantly  slower  in  a  world  in  which  only  the  EU 
increases its actions.  

Specific measures for sectors exposed to global competition 

Scenarios are considered that can give insights into specific measures for sectors exposed to 
global  competition,  given  that  a  level  playing  field  at  global  level  would  not  exist.  The 
consequences of two possible options with regard to specific measures are explored: 

•  One option would be to implement exactly the same reduction as the effective and widely 
accepted technology scenario. But it should then be explored what this means for industry, 
what  type  of  investment  costs  would  they  experience,  what  kind  and  extent  of  R&D 
support  or  what  level  of  direct  support  would  be  necessary  to  compensate  industry  for 
relevant additional costs incurred that industries in third countries would not or to a lesser 
extent face? 

•  Another  option  would  be  to  have  special  provisions  to  allow  industry  exposed  to  global 
competition to reduce less, for instance to stay at the level of the reductions as experienced 
in the reference scenario. This could for instance be achieved by allowing them increased 
access  to  international  credits,  which  might  be available  at  lower  prices  in  such  a  world. 
The  scenario  tries  to  reflect  this  by  applying  reference  scenario  ETS  carbon  prices  to 
industrial  installations  and  industrial  process  emissions  of  energy  intensive  industries 
exposed to global competition. As a direct result of this the overall EU emission reductions 
effort would be lower. 

Oil shock scenario  

To assess the impact of an oil shock in case of fragmented action, a scenario is developed that 
sees the doubling of oil prices in 2030, with lower increases for gas (initially by 50%) and less 
severe increases for coal. Due to the reaction of demand and/or supply to higher prices, this 

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scenario  includes  a  gradual  reduction  of  high  oil  prices  over  time  coming  rather  close  to 
reference case levels by 2050. 

High fossil fuel price scenario  

Furthermore an even more bleak scenario is assessed that would see continued high fossil fuel 
prices.  It  also  assumes  doubling  of  prices  in  2030  but  in  this  scenario  these  high  oil  prices 
remain  at  that  level  over  the  full  period  2030-2050.  This  scenario  is  similar  as  the  high  oil 
price  scenarios  of  US  EIA182  which  assume  that  structural  changes  in  the  energy  markets 
result in long term high fossil fuel energy prices.  

Delayed EU climate action in a world of fragmented climate action  

What are the impacts of delay if energy prices remain at levels of the reference scenario? The 
scenario assumptions to implement the delay are similar as in the above scenario of delayed 
climate action in a world of global climate action. 

7.10.  Overall  Carbon  price  and  GHG  profile  of  the  different  reference  and 

decarbonisation scenarios 

Table 31Carbon price evolution different scenarios 

2020 

25 

25 

16.5 

Carbon price evolution*  
Reference 
(frag. action, ref. fossil f. prices) 
Effect. Techn.  
(glob. action, low fossil f. prices) 
Effect. Techn.  
(frag. action, ref. fossil f. prices) 
Effect. Techn.  
(frag. action, oil shock) 
Effect. Techn.  
(frag. action, high fossil f. prices) 
Delay. Electr.  
(glob. action, low fossil f. prices) 
Delay. CCS  
(glob. action, low fossil f. prices) 
Delay. Clim. Act.  
(frag. action, ref. fossil f. prices)  
* For reference only ETS carbon price is represented  

16.5 

25 

25 

25 

25 

2025 

2030 

2035 

2040 

2045 

2050 

20 

38 

34 

32 

31 

42 

39 

20 

36 

60 

51 

45 

42 

57 

62 

36 

50 

64 

53 

47 

43 

62 

69 

65 

52 

78 

64 

55 

50 

92 

51 

50 

115 

190 

92 

75 

68 

147 

117 

104 

136 

245 

100 

218 

370 

131 

207 

250 

Source: PRIMES, GAINS 

Table 32 GHG emission profile per sector different reference and decarbonisation scenarios 

Reference (frag. action, ref. fossil f. prices) 

GHG vs 1990 

Total 
Sectors 
Power (CO2) 
Industry (CO2) 
Transport (incl. aviation, excl. maritime) (CO2) 

2005 

2020 

2030 

2040 

2050 

-7% 

-22% 

-29% 

-36% 

-39% 

-7% 

-27% 

-39% 

-61% 

-69% 

-20% 

-31% 

-33% 

-35% 

-34% 

30% 

31% 

24% 

24% 

24% 

182 

US EIA: Annual Energy Outlook 2010 

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Transport (excl. aviation, excl. maritime) (CO2) 
Residential and services (CO2) 
Non CO2 emissions  

25% 

20% 

12% 

11% 

10% 

-6% 

-20% 

-33% 

-39% 

-45% 

-25% 

-45% 

-49% 

-47% 

-47% 

Effect. Techn. (glob. action, low fossil f. prices) 

GHG vs 1990 

Total 
Sectors 
Power (CO2) 
Industry (CO2) 
Transport (incl. aviation, excl. maritime) (CO2) 
Transport (excl. aviation, excl. maritime)  
Residential and services (CO2) 
Non CO2 emissions  

2005 

2020 

2030 

2040 

2050 

-7% 

-25% 

-40% 

-62% 

-80% 

-7% 

-34% 

-64% 

-87% 

-98% 

-20% 

-32% 

-35% 

-59% 

-84% 

30% 

25% 

28% 

16% 

12% 

-31% 

-61% 

-2% 

-45% 

-70% 

-6% 

-24% 

-37% 

-62% 

-88% 

-25% 

-47% 

-54% 

-55% 

-60% 

Effect. Techn. (frag. action, ref. fossil f. prices) 

GHG vs 1990 

Total 
Sectors 
Power (CO2) 
Industry (CO2) 
Transport (incl. aviation, excl. maritime) (CO2) 
Transport (excl. aviation, excl. maritime)  
Residential and services (CO2) 
Non CO2 emissions  

2005 

2020 

2030 

2040 

2050 

-7% 

-26% 

-41% 

-61% 

-80% 

-7% 

-34% 

-61% 

-82% 

-97% 

-20% 

-32% 

-36% 

-55% 

-84% 

30% 

25% 

25% 

15% 

7% 

-5% 

-36% 

-64% 

-47% 

-71% 

-6% 

-25% 

-42% 

-67% 

-90% 

-25% 

-47% 

-54% 

-53% 

-58% 

Delay. CCS (glob. action, low fossil f. prices) 

GHG vs 1990 

Total 
Sectors 
Power (CO2) 
Industry (CO2) 
Transport (incl. aviation, excl. maritime) (CO2) 
Transport (excl. aviation, excl. maritime)  
Residential and services (CO2) 
Non CO2 emissions  

2005 

2020 

2030 

2040 

2050 

-7% 

-25% 

-40% 

-61% 

-82% 

-7% 

-34% 

-63% 

-76% 

-99% 

-20% 

-32% 

-34% 

-67% 

-87% 

30% 

25% 

28% 

16% 

12% 

-33% 

-64% 

-2% 

-46% 

-74% 

-6% 

-24% 

-37% 

-63% 

-90% 

-25% 

-47% 

-54% 

-56% 

-63% 

Delay. Electr. (glob. action, low fossil f. prices) 

GHG vs 1990 

Total 
Sectors 
Power (CO2) 
Industry (CO2) 
Transport (incl. aviation, excl. maritime) (CO2) 
Transport (excl. aviation, excl. maritime)  
Residential and services (CO2) 

2005 

2020 

2030 

2040 

2050 

-7% 

-26% 

-40% 

-62% 

-80% 

-7% 

-36% 

-68% 

-92% 

-99% 

-20% 

-32% 

-35% 

-65% 

-85% 

30% 

25% 

29% 

18% 

20% 

-17% 

-54% 

8% 

-28% 

-61% 

-6% 

-24% 

-37% 

-62% 

-89% 

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Non CO2 emissions  

-25% 

-47% 

-54% 

-56% 

-62% 

Effect. Techn. + lower EII effort (frag. action, ref. fossil f. prices) 

GHG vs 1990 

Total 
Sectors 
Power (CO2) 
Industry (CO2) 
Transport (incl. aviation, excl. maritime) (CO2) 
Transport (excl. aviation, excl. maritime)  
Residential and services (CO2) 
Non CO2 emissions  

2005 

2020 

2030 

2040 

2050 

-7% 

-25% 

-40% 

-59% 

-74% 

-7% 

-34% 

-62% 

-83% 

-98% 

-20% 

-31% 

-33% 

-44% 

-54% 

30% 

25% 

25% 

15% 

7% 

-5% 

-35% 

-64% 

-47% 

-71% 

-6% 

-25% 

-42% 

-67% 

-90% 

-25% 

-47% 

-54% 

-53% 

-58% 

Reference (frag. action, high fossil f. prices) 

GHG vs 1990 

Total 
Sectors 
Power (CO2) 
Industry (CO2) 
Transport (incl. aviation, excl. maritime) (CO2) 
Transport (excl. aviation, excl. maritime) (CO2) 
Residential and services (CO2) 
Non CO2 emissions  

2005 

2020 

2030 

2040 

2050 

-7% 

-22% 

-34% 

-41% 

-46% 

-7% 

-27% 

-33% 

-50% 

-61% 

-20% 

-31% 

-37% 

-38% 

-36% 

30% 

25% 

31% 

20% 

6% 

0% 

-9% 

-19% 

-16% 

-28% 

-6% 

-20% 

-47% 

-53% 

-57% 

-25% 

-45% 

-49% 

-47% 

-47% 

Effect. Techn. (frag. action, high fossil f. prices) 

GHG vs 1990 

Total 
Sectors 
Power (CO2) 
Industry (CO2) 
Transport (incl. aviation, excl. maritime) (CO2) 
Transport (excl. aviation, excl. maritime)  
Residential and services (CO2) 
Non CO2 emissions  

2005 

2020 

2030 

2040 

2050 

-7% 

-26% 

-44% 

-60% 

-79% 

-7% 

-34% 

-54% 

-74% 

-93% 

-20% 

-32% 

-39% 

-51% 

-84% 

30% 

25% 

25% 

15% 

-9% 

-45% 

-67% 

-17% 

-54% 

-74% 

-6% 

-25% 

-53% 

-73% 

-91% 

-25% 

-47% 

-54% 

-53% 

-56% 

Reference (frag. action, oil shock) 

GHG vs 1990 

Total 
Sectors 
Power (CO2) 
Industry (CO2) 
Transport (incl. aviation, excl. maritime) (CO2) 
Transport (excl. aviation, excl. maritime)  
Residential and services (CO2) 
Non CO2 emissions  

2005 

2020 

2030 

2040 

2050 

-7% 

-22% 

-34% 

-38% 

-44% 

-7% 

-27% 

-34% 

-49% 

-62% 

-20% 

-31% 

-37% 

-34% 

-33% 

30% 

25% 

31% 

20% 

6% 

-1% 

-3% 

-14% 

-10% 

-24% 

-6% 

-20% 

-47% 

-44% 

-48% 

-45% 
Effect. Techn. (frag. action, oil shock) 

-25% 

-49% 

-47% 

-47% 

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GHG vs 1990 

Total 
Sectors 
Power (CO2) 
Industry (CO2) 
Transport (incl. aviation, excl. maritime) (CO2) 
Transport (excl. aviation, excl. maritime)  
Residential and services (CO2) 
Non CO2 emissions  

2005 

2020 

2030 

2040 

2050 

-7% 

-26% 

-44% 

-59% 

-79% 

-7% 

-34% 

-55% 

-76% 

-95% 

-20% 

-32% 

-40% 

-50% 

-83% 

30% 

25% 
-6% 

25% 

-9% 

-41% 

-66% 

15% 
-25% 

-17% 
-53% 

-50% 
-69% 

-73% 
-90% 

-25% 

-47% 

-54% 

-53% 

-56% 

Delay. Clim. Act. (glob. action, low fossil f. prices) 

GHG vs 1990 

Total 
Sectors 
Power (CO2) 

Industry (CO2) 
Transport (incl. aviation, excl. maritime) (CO2) 
Transport (excl. aviation, excl. maritime)  
Residential and services (CO2) 
Non CO2 emissions  

2005 

2020 

2030 

2040 

2050 

-7% 

-23% 

-33% 

-71% 

-83% 

-7% 

-30% 

-53% 

-97% 

-
100% 

-20% 

-31% 

-31% 

-74% 

-88% 

30% 

25% 

30% 

18% 

16% 

-39% 

-70% 

2% 

-51% 

-76% 

-6% 

-20% 

-27% 

-68% 

-90% 

-25% 

-45% 

-49% 

-59% 

-63% 

Delay. Clim. Act. (frag. action, ref. fossil f. prices)  

GHG vs 1990 

Total 
Sectors 
Power (CO2) 
Industry (CO2) 
Transport (incl. aviation, excl. maritime) (CO2) 
Transport (excl. aviation, excl. maritime)  
Residential and services (CO2) 
Non CO2 emissions  

Source: PRIMES, GAINS 

2005 

2020 

2030 

2040 

2050 

-7% 

-23% 

-35% 

-70% 

-83% 

-7% 

-30% 

-52% 

-94% 

-99% 

-20% 

-31% 

-33% 

-74% 

-87% 

30% 

25% 

27% 

16% 

14% 

-38% 

-70% 

2% 

-48% 

-76% 

-6% 

-21% 

-34% 

-71% 

-91% 

-25% 

-45% 

-49% 

-57% 

-62% 

7.11. 

Sectoral changes in average yearly total investments and fuel expenses  

Industry 

The  5  energy  intensive  sectors,  as  described  in  chapter  5.2.7  take  2/3rd  of  investments  in 
energy  related  capital  come  from  these  5  industries.  In  total,  investments  for  the  whole 
industry increase in the effective technologies scenarios with less than the achieved reductions 
through  fuel  and  electricity  expenses,  certainly  in  case  of  global  action  and  low  fossil  fuel 
prices.  When  CCS  is  included  this  picture  becomes  more  balanced  but  on  average  fuel  and 
electricity expense reductions are higher than investment and CCS expenditures increases. 

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Table 33: Average yearly total investments in energy related capital goods, CCS expenditures and fuel 
expenses in industry 

Total average yearly energy investments 
Industry 
Reference (frag. action, ref. fossil f. prices) 
Effect. Techn. (frag. action, ref. fossil f. prices) 
Effect. Techn. (glob. action, low fossil f. prices) 
Delay. Clim. Act. (frag. action, ref. fossil f. prices)  

Total average yearly fuel and electricity 
expenses Industry 
Reference (frag. action, ref. fossil f. prices) 
Effect. Techn. (frag. action, ref. fossil f. prices) 
Effect. Techn. (glob. action, low fossil f. prices) 
Delay. Clim. Act. (frag. action, ref. fossil f. prices)  
Total average yearly CCS expenses Industry 
Reference (frag. action, ref. fossil f. prices) 
Effect. Techn. (frag. action, ref. fossil f. prices) 
Effect. Techn. (glob. action, low fossil f. prices) 
Delay. Clim. Act. (frag. action, ref. fossil f. prices)  

Source: PRIMES, GAINS 

11-20  
19 
19 
19 
18 

11-20  
209 
210 
207 
209 
11-20  
0 
0 
0 
0 

21-30  
19 
19 
18 
19 

21-30  
276 
274 
255 
272 
21-30  
0 
0 
0 
0 

31-40  
19 
22 
19 
25 

31-40  
311 
286 
246 
286 
31-40  
0 
1 
3 
7 

41-50   Average 

20 
31 
28 
32 

19 
23 
21 
23 

41-50   Average 
356 
338 
275 
334 
41-50   Average 

288 
277 
246 
275 

0 
9 
12 
14 

0 
3 
4 
5 

With an oil crisis, energy related investments in both reference and decarbonisation scenarios 
increase sharply by 2030. With the temporary oil shock they decrease later to slightly below 
reference levels, however in case of remaining high fossil fuel prices they remain higher for 
the reference case. Relative fuel and electricity savings from decarbonisation become higher 
in case of an oil shock or high fossil fuel prices compared to the reference case. Finally CCS 
penetration  and  related  costs  are  lower  due  to  increased  reductions  in  other  fossil  fuel 
intensive sectors which reduce the need for additional reductions in for instance the industry 
sectors. 

Table  34:  Average  yearly  total  investments  in  energy  related  capital  goods,  CCS  expenditures  and  fuel 
expenses in industry in case of an oil shock or high fossil fuel prices 

Total average yearly energy investments 
Industry 
Reference (frag. action, ref. fossil f. prices) 
Reference (frag. action, oil shock) 
Reference (frag. action, high fossil f. prices) 
Effect. Techn. (frag. action, ref. fossil f. prices) 
Effect. Techn. (frag. action, oil shock) 
Effect. Techn. (frag. action, high fossil f. prices) 

Total average yearly fuel and electricity 
expenses Industry 
Reference (frag. action, ref. fossil f. prices) 
Reference (frag. action, oil shock) 
Reference (frag. action, high fossil f. prices) 
Effect. Techn. (frag. action, ref. fossil f. prices) 
Effect. Techn. (frag. action, oil shock) 
Effect. Techn. (frag. action, high fossil f. prices) 
Total average yearly CCS expenses Industry 
Reference (frag. action, ref. fossil f. prices) 
Reference (frag. action, oil shock) 

11-20  
19 
19 
19 
19 
19 
19 

11-20  
209 
209 
209 
210 
210 
210 
11-20  
0 
0 

21-30  
19 
29 
29 
19 
29 
28 

21-30  
276 
304 
303 
274 
301 
300 
21-30  
0 
0 

31-40  
19 
18 
20 
22 
19 
22 

31-40  
311 
363 
403 
286 
332 
362 
31-40  
0 
0 

41-50   Average

20 
19 
21 
31 
28 
32 

19 
21 
22 
23 
24 
25 

41-50   Average
356 
363 
445 
338 
343 
397 
41-50   Average

288 
310 
340 
277 
296 
317 

0 
0 

0 
0 

EN 

121 

   EN 

 
Reference (frag. action, high fossil f. prices) 
Effect. Techn. (frag. action, ref. fossil f. prices) 
Effect. Techn. (frag. action, oil shock) 
Effect. Techn. (frag. action, high fossil f. prices) 

0 
0 
0 
0 

0 
0 
0 
0 

0 
1 
0 
0 

0 
9 
7 
5 

0 
3 
2 
1 

Source: PRIMES, GAINS 

Residential (households) and tertiary 

Investments  in  energy  related  capital  (e.g.  boilers  and  electric  appliances)  are  more  or  less 
stable for the reference scenarios, with some increases by the end of the modelled period (see 
Table  35).  This  changes  dramatically  for  the  effective  technology  cases,  with  investment 
needs increasing by around 30% over the next ten years compared to reference case or almost 
200 billion €, and then further multiplying over the period 2020 – 2050 by a factor of 4. In 
total, the investments required for the effective technology scenarios increase to around € 200 
billion per year by 2050 compared to the reference scenario. On average annual investments 
in this sector over the whole period are around € 80 billion higher than the reference case. 

But this in turn drives significant reductions for the expenses of fuel and electricity, by about 
€ 70 to 100 billion for fuels by 2050 and around € 90 to 120 billion for electricity. On average 
the  annual  fuel  and  electricity  expenses  decrease  in  the  effective  technology  scenarios  over 
the whole period with around € 70 to 105 billion. 

Table  35:  Average  yearly  total  investments  in  energy  related  goods  and  fuel  expenses  in  the  residential 
and tertiary sector 

Total average yearly energy related investments 
Residential + Tertiary 
Reference (frag. action, ref. fossil f. prices) 
Effect. Techn. (frag. action, ref. fossil f. prices) 
Effect. Techn. (glob. action, low fossil f. prices) 
Delay. Clim. Act. (frag. action, ref. fossil f. prices)  

Total  average  yearly  fuel  expenses  Residential 
+ Tertiary 
Reference (frag. action, ref. fossil f. prices) 
Effect. Techn. (frag. action, ref. fossil f. prices) 
Effect. Techn. (glob. action, low fossil f. prices) 
Delay. Clim. Act. (frag. action, ref. fossil f. prices)  

Total  average  yearly  electricity  expenses 
Residential + Tertiary 
Reference (frag. action, ref. fossil f. prices) 
Effect. Techn. (frag. action, ref. fossil f. prices) 
Effect. Techn. (glob. action, low fossil f. prices) 
Delay. Clim. Act. (frag. action, ref. fossil f. prices)  

11-20  
47 
66 
65 
50 

11-20  
229 
222 
220 
228 

11-20  
294 
291 
291 
292 

 Source: PRIMES, GAINS 

21-30  
48 
68 
64 
48 

21-30  
275 
253 
236 
272 

21-30  
377 
369 
361 
371 

31-40  
47 
123 
111 
196 

31-40  
283 
246 
211 
243 

31-40  
423 
387 
366 
386 

41-50   Average

67 
269 
263 
258 

52 
131 
126 
138 

41-50   Average
293 
223 
189 
200 

270 
236 
214 
236 

41-50   Average
459 
368 
336 
358 

388 
354 
339 
352 

Additional investments due to an oil shock or high fossil fuel prices compared to the reference 
are similar to the additional investments undertaken in case of climate action with reference 
fossil  fuel  prices  (see  figure  below).  This  of  course  means  that  total  investments  remain 
significantly higher in case of action on climate change. For fuel and electricity expenses, the 
increases in the absolute amount of the oil bill on average are similar in case of action or no 
action no climate on climate change, but remain on average significantly below the reference 

EN 

122 

   EN 

 
level in case of action on climate change even with high energy fossil fuel prices, whereas in 
case of no action they increase significantly above this original reference level. 

Table  36:  Average  yearly  total  investments  in  energy  related  goods  and  fuel  expenses  in  the  residential 
and tertiary sector in scenarios with an oil shock or high fossil fuel prices 

Total average yearly energy related investments 
Residential + Tertiary 
Reference (frag. action, ref. fossil f. prices) 
Reference (frag. action, oil shock) 
Reference (frag. action, high fossil f. prices) 
Effect. Techn. (frag. action, ref. fossil f. prices) 
Effect. Techn. (frag. action, oil shock) 
Effect. Techn. (frag. action, high fossil f. prices) 

Total  average  yearly  fuel  expenses  Residential 
+ Tertiary 
Reference (frag. action, ref. fossil f. prices) 
Reference (frag. action, oil shock) 
Reference (frag. action, high fossil f. prices) 
Effect. Techn. (frag. action, ref. fossil f. prices) 
Effect. Techn. (frag. action, oil shock) 
Effect. Techn. (frag. action, high fossil f. prices) 

Total  average  yearly  electricity  expenses 
Residential + Tertiary 
Reference (frag. action, ref. fossil f. prices) 
Reference (frag. action, oil shock) 
Reference (frag. action, high fossil f. prices) 
Effect. Techn. (frag. action, ref. fossil f. prices) 
Effect. Techn. (frag. action, oil shock) 
Effect. Techn. (frag. action, high fossil f. prices) 

11-20  
47 
47 
47 
66 
66 
66 

11-20  
229 
229 
229 
222 
222 
222 

11-20  
294 
293 
294 
291 
292 
292 

21-30  
48 
80 
80 
68 
97 
94 

21-30  
275 
292 
292 
253 
270 
271 

21-30  
377 
389 
389 
369 
379 
379 

31-40  
47 
42 
49 
123 
106 
122 

31-40  
283 
311 
339 
246 
274 
292 

31-40  
423 
439 
459 
387 
406 
420 

41-50   Average

67 
63 
71 
269 
255 
256 

52 
58 
62 
131 
131 
135 

41-50   Average
293 
292 
344 
223 
226 
245 

270 
281 
301 
236 
248 
257 

41-50   Average
459 
451 
492 
368 
371 
393 

388 
393 
408 
354 
362 
371 

 Source: PRIMES, GAINS 

Transport 

Yearly average transport investments increase substantially for the reference case, from less 
than € 700 billion to more than € 800 billion by 2050. But this increase is magnified for the 
decarbonisation scenario; with yearly investment requirements upwards of € 1100 billion, or 
around € 300 billion more than in the reference scenario in 2050. 

There are significantly higher reductions in fuel bills compared to the increase in investments 
within the effective technology decarbonisation scenarios with global action, of around € 430 
billion and there are similar reductions in fuel bills compared to the increase in investments 
for  the  effective  technology  decarbonisation  scenarios  with  fragmented  action  scenarios. 
However  the  electricity  bill  rises  for  transport  after  2030  due  to  electrification,  adding  less 
than  €  100  billion  per  year  in  the  period  2030-2040  and  around  €  150  billion  in  the  period 
2040-2050. 

Table 37: Average yearly total investments and fuel expenses in transport 

Total average yearly investments Transport 
Reference (frag. action, ref. fossil f. prices) 
Effect. Techn. (frag. action, ref. fossil f. prices) 

11-20  
669 
693 

21-30  
774 
843 

31-40  
819 
1022 

41-50   Average
830 
1140 

773 
924 

EN 

123 

   EN 

 
Effect. Techn. (glob. action, low fossil f. prices) 
Delay. Clim. Act. (frag. action, ref. fossil f. prices)  
Total average yearly fuel expenses Transport 
Reference (frag. action, ref. fossil f. prices) 
Effect. Techn. (frag. action, ref. fossil f. prices) 
Effect. Techn. (glob. action, low fossil f. prices) 
Delay. Clim. Act. (frag. action, ref. fossil f. prices)  
Total  average  yearly  electricity  expenses 
Transport 
Reference (frag. action, ref. fossil f. prices) 
Effect. Techn. (frag. action, ref. fossil f. prices) 
Effect. Techn. (glob. action, low fossil f. prices) 
Delay. Clim. Act. (frag. action, ref. fossil f. prices)  

690 
693 
11-20  
497 
487 
473 
491 

11-20  
9 
12 
12 
10 

849 
843 
21-30  
619 
546 
488 
573 

21-30  
10 
46 
46 
30 

1048 
1027 
31-40  
667 
493 
383 
528 

31-40  
11 
108 
103 
90 

 Source: PRIMES, GAINS 

935 
953 

1152 
1251 
41-50   Average
728 
435 
296 
444 

628 
490 
410 
509 

41-50   Average

11 
168 
156 
166 

10 
84 
79 
74 

Investments in the effective technology decarbonisation scenarios do not change significantly 
when comparing the scenarios with and without an oil shock or high fossil fuel prices. This is 
not true for the reference scenarios with the oil shock or high fossil fuel prices which incur 
significant additional investment requirements, amounting to around 170 billion in the period 
2040 – 2050, or more than half of what by the would need to be invested additionally in the 
effective technology scenarios.  

Combined fuel and electricity bills increase significantly with an oil shock or high fossil fuel 
price  scenario.  In  case  of  no  action  and  high  fossil  fuel  prices,  the  combined  fuel  and 
electricity bill would have increase by the period 2040 – 2050 with more than € 250 billion 
compared to the reference situation. In case action on climate change would have been taken, 
this increase compared to reference would have been limited to a bit more than € 80 billion.  

Table 38: Average yearly total investments and fuel expenses in transport in scenarios with an oil shock or 
high fossil fuel prices 

Total average yearly investments Transport 
Reference (frag. action, ref. fossil f. prices) 
Reference (frag. action, oil shock) 
Reference (frag. action, high fossil f. prices) 
Effect. Techn. (frag. action, ref. fossil f. prices) 
Effect. Techn. (frag. action, oil shock) 
Effect. Techn. (frag. action, high fossil f. prices) 
Total average yearly fuel expenses Transport 
Reference (frag. action, ref. fossil f. prices) 
Reference (frag. action, oil shock) 
Reference (frag. action, high fossil f. prices) 
Effect. Techn. (frag. action, ref. fossil f. prices) 
Effect. Techn. (frag. action, oil shock) 
Effect. Techn. (frag. action, high fossil f. prices) 
Total  average  yearly  electricity  expenses 
Transport 
Reference (frag. action, ref. fossil f. prices) 
Reference (frag. action, oil shock) 
Reference (frag. action, high fossil f. prices) 
Effect. Techn. (frag. action, ref. fossil f. prices) 
Effect. Techn. (frag. action, oil shock) 

11-20  
669 
666 
666 
693 
693 
693 
11-20  
497 
497 
497 
487 
487 
487 

11-20  
9 
9 
9 
12 
12 

21-30  
774 
792 
789 
843 
880 
879 
21-30  
619 
721 
722 
546 
633 
633 

21-30  
10 
12 
12 
46 
47 

31-40  
819 
863 
856 
1022 
1005 
1018 
31-40  
667 
826 
945 
493 
656 
741 

31-40  
11 
32 
33 
108 
111 

773 
832 
828 
924 
921 
929 

41-50   Average
830 
1006 
999 
1140 
1107 
1125 
41-50   Average
728 
693 
925 
435 
492 
647 

628 
684 
772 
490 
567 
627 

41-50   Average

11 
67 
70 
168 
170 

10 
30 
31 
84 
85 

EN 

124 

   EN 

 
Effect. Techn. (frag. action, high fossil f. prices) 

12 

47 

114 

177 

87 

 Source: PRIMES, GAINS 

Power Sector 

What is probably most notable from the investments in the power sector is that they are lower 
than the additional investment requirements in the transport, residential and tertiary sectors. 
This underlines the crucial importance of energy efficiency measures and fuel switching in 
these sectors, not just the power sector. Nonetheless investments are still significant, increases 
of around 40% compared to reference scenario over the whole period or around € 40 billion 
more by 2050. 

By  2050,  fuel  expenses  have  decreased  by  around  €  60  billion  in  the  effective  technology 
scenario with global action and by about € 25 billion in the effective technology scenario with 
fragmented action.  

Table 39: Average yearly total investments and fuel expenses in the power sector (includes steam)  

Total average yearly investments Power 
Sector 
Reference (frag. action, ref. fossil f. prices) 
Effect. Techn. (frag. action, ref. fossil f. prices) 
Effect. Techn. (glob. action, low fossil f. prices) 
Delay. Clim. Act. (frag. action, ref. fossil f. prices) 
Total average yearly fuel expenses Power 
Sector 
Reference (frag. action, ref. fossil f. prices) 
Effect. Techn. (frag. action, ref. fossil f. prices) 
Effect. Techn. (glob. action, low fossil f. prices) 
Delay. Clim. Act. (frag. action, ref. fossil f. prices) 

Source: PRIMES, GAINS 

11-20  
81 
85 
84 
84 

11-20  
126 
124 
124 
125 

21-30  
75 
110 
108 
101 

21-30  
163 
157 
147 
160 

31-40  
85 
131 
128 
140 

31-40  
178 
165 
143 
160 

41-50   Average

98 
140 
137 
135 

85 
116 
114 
115 

41-50   Average
202 
176 
141 
167 

167 
155 
139 
153 

Investments are resilient in the effective technology scenario with oil shock or high fossil fuel 
price  scenarios,  while  they  increase  in  the  reference  cases  with  oil  shock  or  high  fossil  fuel 
price  scenarios.  Fuel  costs  also  increase  less  in  the  effective  technology  decarbonisation 
scenarios than they do in case of no action. Compared to reference, fuel costs remain lower in 
the effective technology scenarios, even with an oil shock or high fossil fuel price scenarios. 
This is not the case with no action.  

Table  40:  Average  yearly  total  investments  and  fuel  expenses  in  the  power  sector  (includes  steam)  in 
scenarios with an oil shock or high fossil fuel prices 

Total average yearly investments Power 
Sector 
Reference (frag. action, ref. fossil f. prices) 
Reference (frag. action, oil shock) 
Reference (frag. action, high fossil f. prices) 
Effect. Techn. (frag. action, ref. fossil f. prices) 
Effect. Techn. (frag. action, oil shock) 
Effect. Techn. (frag. action, high fossil f. prices) 
Total average yearly fuel expenses Power 
Sector 
Reference (frag. action, ref. fossil f. prices) 

11-20  
81 
81 
81 
85 
85 
85 

21-30  
75 
82 
83 
110 
113 
114 

31-40  
85 
89 
103 
131 
128 
133 

41-50   Average

98 
118 
122 
140 
141 
141 

85 
93 
98 
116 
117 
118 

11-20  
126 

21-30  
163 

31-40  
178 

41-50   Average
202 

167 

EN 

125 

   EN 

 
Reference (frag. action, oil shock) 
Reference (frag. action, high fossil f. prices) 
Effect. Techn. (frag. action, ref. fossil f. prices) 
Effect. Techn. (frag. action, oil shock) 
Effect. Techn. (frag. action, high fossil f. prices) 

126 
126 
124 
124 
124 

176 
175 
157 
169 
169 

201 
215 
165 
183 
195 

211 
240 
176 
178 
197 

179 
189 
155 
164 
171 

Source: PRIMES, GAINS 

7.12. 

Further  information  on  the  main  assumptions  and  drivers  of  the  agriculture 
scenarios for the EU 

The  CAPRI  model  is  used  to  estimate  agriculture  production.  For  the  purpose  of  the  2050 
roadmap the baseline methodology was revised and specific assumptions were made. As far 
as the Common Agriculture Policy (CAP) is concerned, the policy tools taken into account are 
limited  to  those  of  the  current  regime  (including  changes  from  2008  health  check), 
consequently  the  future  changes  in  the  CAP  to  be  introduced  and  their  potential  positive 
impact are not assessed in this modelling exercise. The key revisions compared to the baseline 
delivered in 2009 were:  

•  Use of long run expert projections from FAO and IFPRI183 on the agricultural markets up 

to 2050  

•  Extrapolation  of  fertiliser  projections  from  EFMA  up  to  2050  and  merge  of  these 
extrapolations with the information included in historic trends. In EU15 these trends tend 
to  point  downwards,  reflecting  increasing  environmental  awareness  and  efficiency 
improvements. In the New MS, these trends often slope upwards, reflecting the catching up 
process after the transition phase.  

Other changes were a greater weight for national expert information as it was put forward in 
the consultation process from a subset of MS (all from EU15).  

In addition, specific assumptions were made in terms of policy and market assumptions. The 
most important changes from the CAP Health Check were implemented: abandonment of set 
aside,  expiry  of  the  milk  quota  in  2015,  modifications  to  pillar  1  payments  (increased 
modulation, further decoupling). The possible premium reallocations according to Article 69 
and national preferences have not been implemented (presumably less important). The table 
below summarizes the policy assumptions are the following: 

Base year 

Table 41: Core policy assumptions for the August 2009 CAPRI baseline  
Instrument 
Direct payments EU-15 
Direct payments EU-10 
Direct payments BUR 
Set aside EU-15 
Set-aside EU-10 and BUR 
Article 69 payments 
Modulation 
Decoupling 

As defined in agenda 2000  Health check implemented 
Health check implemented  
Health check implemented  
Abolished (Health Check) 
Abolished (Health Check) 
Implemented 
Health check implemented  
Health check implemented  

Partly 
None 
10% 
None 
None 
None 
Yes 

Baseline 

183 

FAO  (2006)  World  agriculture:  towards  2030/2050,  Global  Prospective  Unit,  Rome.  IFPRI  (2009) 
Agriculture at a Crossroads, IAASTD global report,. 

EN 

126 

   EN 

 
                                                 
Sugar Quotas 
Dairy quotas 

Tariffs, Tariff Rate Quotas 
Export Subsidies 

Yes 
Yes 

Yes 
Yes 

Reform 2006 implemented 
Expiry 2015 (Health 
Check)  
Maintained 
Maintained  

Market  assumptions  are  exogenous  macroeconomic  developments,  but  also  specific 
assumptions on biofuel production from agricultural feed stocks or on mineral fertiliser use. 
Furthermore,  the  CAPRI  baseline  tries  to  stay  close  to  the  percentage  changes  of 
corresponding variables from external sources of information.  

1. 

External  projections  on  agricultural  markets  and  activities  as  prepared  by  various 
agencies: 

a)  Most important are for the medium run perspective (up to 2020) the projections 
from  a  baseline  prepared  with  the  AGLINK  model.  The  CAPRI  baseline  of 
September 2010 uses the AGLINK baseline of 2009. 

b) 

c) 

This is supplemented, again for the horizon up to 2020, with projections from 
FAPRI (also prepared in 2009)  

(World  agriculture: 

For  the  long  run  perspective  (up  to  2050)  increasing  weight  is  given  to  the 
projections  by  FAO 
towards  2030/2050,  Global 
Prospective  Unit,  2006)  and  IFPRI  (Agriculture  at  a  Crossroads,  IAASTD 
global  report,  2009).  Whereas  the  medium  run  evolution  of  agriculture  was 
typically  stagnating  or  even  declining  in  some  sectors,  in  the  long  run  the 
global  growth  of  demand  would  also  stimulate  EU  production  according  to 
FAO and IFPRI. In several cases this implies a turning point in terms of supply 
and activity levels after 2020. 

National expert information on animal numbers of several MS (all from EU15) has 
been considered suitable to supplement the AGLINK projections. 

Fertiliser  projections  for  the  medium  run  have  been  aligned  with  2009  EFMA 
projections.  These  have  been  extrapolated  after  2018  with  a  logistic  extrapolation 
formula  to  obtain  a  historical  projection.  However,  projections  after  2020  were 
increasingly  relying  on  the  historical  evolution  of  summary  CAPRI  indicators  for 
farmers’  behaviour  (over-fertilisation  factor  and  organic  availability  factor).  It  was 
assumed  that  underlying  efficiency  improvements  and  catching  up  processes  for 
mineral  fertiliser  use  in  the  new  MS  would  continue  within  some  limits  (minimal 
efficiency improvement everywhere but not beyond technical frontiers.  

The  PRIMES  baseline  (the  reference  projection  up  to  2050)  is  the  source  for 
macroeconomic assumptions, and biofuel feedstock evolutions. Of these the former 
only add a small modification to the CAPRI baseline. 

2. 

3. 

4. 

The key assumptions under the ‘market assumptions’ heading are in the table below 

Table 42 Core market assumptions for the August 2009 CAPRI baseline  

Variable  
Macroeconomics 

Source  
PRIMES for EU, 

Determines… 
Adjustments of demand 

EN 

127 

   EN 

 
(inflation, GDP) 

FAO/IFPRI elsewhere  

Demographics 

EU  market 
information 
available  from  DG  Agri 
(Aglink) 
national 
or 
experts  
EU  market 
information 
unavailable  from  DG  Agri 
(Aglink) 
World markets  

Yields  

Fertiliser use  

PRIMES for EU, 
FAO/IFPRI elsewhere 

Aglink / national expert 
projections  

relative to external 
forecasts  
Adjustments of demand 
relative to external 
forecasts 
… target values for 
CAPRI estimator (e.g. 
beef supply)  

Constrained trends  

… related variables (e.g. 
suckler cow herd)  

FAO/IFPRI FAPRI plus 
data consolidation 

Aglink or international 
agencies merged with 
historical trends  

EFMA projections and 
historical trends  

… international market 
variables, position of 
behavioural functions, 
starting point for 
simulations 
…market results, position 
of behavioural functions, 
starting point for 
simulations  
… environmental 
indicators, farm income 

7.13.  Examples  of  innovative  policy  schemes  to  spur  energy  related  investments  for 

households184 

–  In France, a 0% interest rate loan for home retrofitting energy efficiency projects up to € 
30,000 have been introduced and low VAT rates supported the refurbishments. The ' Green 
loan  for  social  housing'  aims  to  improve  the  energy  performance  of  the  social  housing. 
From 2009 to 2020 € 1.2 billion of loans with a fixed rate of 1.9% on 15 years is available 
to  finance  the  restoration  of  the  first  100,000  social  housing  units.  To  accelerate  the 
development of the renewable energy market in France, the FIDEME scheme launched in 
2003 foresees a €45m public-private fund, addressing the debt-equity gap in the sector to 
attract lenders. The leverage structure mobilised 20 times the public funding.  

–  The  German  public  bank  KfW  operates  the  German  CO2  Building  Rehabilitation 
Programme  (1996  –  ongoing).  The  objective  is  to  support  investment  in  building  energy 
renovation. Preferential loans are provided for refurbishment measures aimed at reducing 
energy consumption, via local commercial banks. An additional repayment grant is given if 
a more ambitious efficiency standard is achieved. Between 1996 and 2004, € 6bn in loans 
were provided; 57 million m2 floor area in existing buildings renovated; The budget was € 
4bn (in loans) from 2006 to 2009, increasing to € 2bn per year in the 2010-11. Through the 
implementation of the programme, around 220,000 new jobs were created. It was further 
estimated  that  the  various  KfW  programmes  for  buildings  had  a  combined  impact  of 
emission reductions of around 1 Mt CO2 emission reduction per year. From 2007 to 2009 

184 

Sources:  UNEP  &  SEFI  (2008),  SEF  Alliance  and  Bloomberg  New  Energy  Finance  (2010),  BASE  - 
Basel Agency for Sustainable Energy (2006), Clausnitzer et al (2010), Klinckenberg Consultants (2010) 

EN 

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the KfW grants  offered grants as an alternative  to  the  loans. The support varied  between 
5% and 17.5% of the renovation costs.  

–  The  Carbon  Trust,  a  not  for  dividend  company  created  by  the  UK  government,  helps 
businesses  and  public  organisations  to  reduce  their  greenhouse  gas  emissions  and  to 
support  low  carbon  technologies.  Its  Incubator  Programme  runs  technology  accelerators 
through  a  £20m  Carbon  Trust  Venture  Capital  Fund  that  leverages  private  sector 
investments. In terms  of leverage, 11 companies have raised  £14.6 million private sector 
investment since joining the incubators, two of which are venture capital investments. In 
total,  the  Carbon  Trust  has  invested  £26.8  million  in  early  stage  UK  clean  energy 
businesses  and  has  leveraged  £138.9  million  of  private  sector  investment.  This  implies  a 
leverage ratio of 1 to 5. A planned UK Green Investment Bank could play a significant role 
in unlocking further private capital through equity and debt finance. With a capital base of 
£100-400  million,  an  additional  £3  billion  of  finance  can  be  unlocked.  The  Chancellor 
announced in November 2010 in the spending review that the green investment bank will 
be funded with £1 billion. 

–  In  the  Czech  Republic,  the  Green  Savings  Programme  support  equipment  installed  in 
250,000  residential  houses.  The  programme  is  expected  to  cost  approx.  €  1bn  over  the 
programme  lifetime.  By  2012,  250,000  houses  should  have  been  improved,  1.1  Mt  CO2 
emission  annually  reduced  and  30,000  jobs  created  or  retained.  The  cost  effectiveness  is 
expected to be € 20/tCO2. 

–  In  Belgium,  energy  efficiency  measures  of  private  households  are  supported  through  a 
combination of reduced VAT rates, subsidies and income tax reductions. Since 2000, the 
VAT rate for restoring works and transformation works for all dwellings has been reduced 
from  21  to  6%  for  dwellings  older  than  5  years.  This  measure  may  be  cumulated  with 
significant  yearly  the  tax  reductions  of  up  to  40%  of  the  investment  in  energy  related 
improvements in housing, with a maximum tax reduction per year of € 2770 in 2010. This 
is  further  accommodated  with  several  specific  limited  subsidies  for  energy  saving 
investments.  

–  Bulgaria has introduced a building tax exemption for up to 10 years to owners of buildings 
who have obtained energy performance certificates of a higher class. The Bulgarian Energy 
Efficiency  and  Renewable  Energy  Credit  Line  (BEERECL)  is  an  EBRD  facility  helping 
seven Bulgarian banks to lend to private sector industrial energy efficiency and renewable 
energy projects. Besides the credit line, development assistance is also provided for project 
development  services  including  energy  auditing,  financial  analysis,  risk  assessment, 
formulation of loan applications and deal structuring, The facility is partly supported by the 
nuclear power plant Kozloduy International Decommissioning Support Fund (KIDSF). An 
innovative  component  is  that  the  project  sponsors  (borrowers)  receive  an  incentive  grant 
from  the  KIDSF  upon  successful  project  commissioning,  15%  of  the  loan  for  efficiency 
projects and 20% for renewables. 

–  The  Slovenian  financial  stimulation  for  energy  efficiency  renovation  and  sustainable 
buildings  of  new  buildings  (2008-2016)  promotes  the  implementation  of  energy  audits, 
feasibility  studies,  investment  and  project  documentation  for  energy  efficiency  and 
renewable energy. The subsidy is limited to 2.5% of the proposed investment.  

–  The $163m funds provided by the Global Environmental Facility (GEF) between 2003 and 
2006 are estimated to have leveraged seven times more investment through co-financing. 

EN 

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