COMMISSION STAFF WORKING DOCUMENT
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) 289 final 

COMMISSION STAFF WORKING DOCUMENT 

SUMMARY OF THE 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) 288 final} 

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1. 

(1) 

(2) 

(3) 

(4) 

(5) 

PROBLEM DEFINITION 

To avoid dangerous impacts, the EU has a stated objective of limiting global climate 
change to a temperature increase of 2ºC. The Copenhagen Accord 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.  

The Intergovernmental Panel on Climate Change (IPCC) reported in 2007 that existing 
science  indicated  that  developed  countries  would  need  to  take  a  greenhouse  gas 
emissions  (GHG)  reduction  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 levels. The European Council and Parliament endorsed this 
as an EU objective, in the context of necessary reductions according to the IPCC by 
developed countries as a group.  

The EU as a whole has seen its GHG emissions (without Land Use, Land Use Change 
an Forestry, LULUCF) decrease over the last 2 decades. For 2009 the EEA estimated 
emissions  levels  reduced  further  to  17%  below  1990  levels.  Including  aviation  this 
reduction would be around 16% below 1990 levels. In part this is due to the impact of 
the economic crisis in 2009. 

Today, some 55% of Europe's primary energy is imported. With reduced oil and gas 
output  in  the  North  Sea,  even  with  full  implementation  of  the  Climate  and  Energy 
Package  this  is  expected  to  increase  to  57%  by  2030.  While  energy  dependence  in 
itself  does  not  constitute  an  economic  problem  per  se,  there  are  several  energy 
developments that require attention. Firstly, trends point towards continuing increased 
demand for oil and gas from emerging economies. Secondly, supply side investments 
are  not  in  line  with  increasing  demand.  The  International  Energy  Agency  estimates 
that by 2035 some 75% of conventional crude oil production will have to come from 
fields yet to be developed or found. Thirdly, global reserves are often localised in geo-
politically  unstable  regions  and  owned  by  state-run  companies  that  not  always  can 
react  adequately  to  market  forces.  The  European  economy  therefore  will  continue  to 
be exposed to serious risks related to energy prices, in particular the transport sector 
which is more than  90% dependent  on oil. The Roadmap therefore considers  energy 
developments and synergies to enhance energy security. 

Low carbon technology development is crucial for sustainable growth and jobs. But its 
development is  not only hampered by market  failures related to the non inclusion of 
GHG externalities. There is also the problem of uncertainty and knowledge spill-over 
in  general,  which  may  lead  to  lower  investment  in  R&D  than  optimal.  In  addition, 
there  is  a  commercialisation  problem  for  capital  intensive  technologies  where 
investments  are  marked  by  long  lead  times.  It  will  hence  be  critical  to  foster  low 
carbon  technology  development  and  accelerate  the  learning  curve  as  cost-effectively 
as  possible.  This  presents  both  a  major  challenge  and  an  opportunity  for  European 
businesses.  How  the  EU  develops  its  R&D,  demonstration  and  innovation  policies, 
creates framework conditions inducing technological change, public acceptability and 
fosters the competitiveness of a wide range of key manufacturing industries of the EU 
is an essential consideration in the development of a low carbon economy roadmap. 

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(6) 

2. 

(7) 

(8) 

The  transition  towards  a  low  carbon  economy  has  important  implications  for  the 
sustainable  use  of  resources  beyond  energy  resources,  and  hence  the  Europe  2020 
Resource  Efficiency  Flagship.  Reducing  energy  GHG  emissions  coincides  with 
significant  reductions  in  other  air  pollutants  with  associated  health  benefits.  The 
roadmap also needs to consider industrial processes, land use, agricultural and forestry 
practices and the relationship with the production and consumption of food, feed and 
fibre (timber, pulp & paper) and the maintenance of essential ecosystem services (soil 
quality, water availability, biodiversity). 

OBJECTIVES 

The specific objective of the Low-carbon economy roadmap 2050 is to 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 
concerns, 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. 

This impact assessment aims to give 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.  It  aims  to  give  information  for 
developing  EU,  national  and  regional  climate  change  policies  and  specific  sectoral 
roadmaps that are being developed, including outlining milestones. 

3. 

METHODOLOGY AND SCENARIO DESCRIPTION 

(9)  When considering such a long time frame, it is essential to take into account various 
assumptions, uncertainties and different developments over time. Therefore the impact 
assessment  considers  what  it  would  require  for  the  EU  to  achieve  large  emissions 
reductions  in  line  with  the  2ºC  objective  under  different  alternative  scenarios 
("decarbonisation scenarios" instead of policy options) which vary for key parameters, 
e.g. the type of global conditions, the global energy price developments and the rate of 
technological  innovation.  The  scenarios  include  carbon  prices  as  a  cost-effective 
policy  driver.  By  comparing  results  from  different  scenarios  it  is  possible  to  extract 
more robust conclusions, how key parameters influence results and how various parts 
interact. 

(10)  The range for the reduction target of 80 to 95% for developed countries, as presented 
in  the  IPCC's  4th  Assessment  Report  covers  both  internal  reductions  and  the  use  of 
international  credits.  To  assess  the  order  of  magnitude  of  the  required  EU's  internal 
reductions by 2050, a review of recent science is presented together with projections 
of the POLES model in line with the 2ºC objective, i.e. halving of global emissions by 
2050 compared to 1990. 

(11)  Fossil  fuel  prices  are  important  when  assessing  the  impacts  of  reducing  GHG 
emissions but they are largely determined by global markets. In addition, global action 
on  climate  change  can  impact  the  prices  of  fossil  fuels.  Using  the  global  POLES 

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model the interaction of climate action and fossil fuel prices was analysed through 3 
scenarios: 

•  Global baseline: globally no additional climate action is undertaken up to 2050.  

•  Global Action: global action halving global emissions by 2050 compared to 1990. 

•  Fragmented Action: EU pursues a decarbonisation strategy but other countries do 
not  follow.  They  only  comply  with  the  lower  end  of  the  Copenhagen  Accord 
pledges until 2020 and undertake no additional efforts after 2020. 

This  model  projection  was  extended  to  include  global  agriculture  and  land  use 
change projections using the GLOBIOM an G4M models. 

(12)  For  the  EU  modelling,  PRIMES,  an  energy  system  model  was  used  in  combination 
with  the  GAINS  model  for  projections  of  EU  Non  CO2  emissions.  Also  at  the  EU 
scale, the relationship between energy and LULUCF has been analysed with the G4M 
and GLOBIOM models. Decarbonisation is driven mainly by carbon prices relating to 
CO2 and Non CO2 emissions.  

(13)  The scenarios projected at EU level are:  

•  A  reference  scenario  that  reflects  implementation  and  continuation  of  existing 

policies (i.e. the Climate and Energy Package up to 2020). 

•  A  number  of  decarbonisation  scenarios  that  reflect  an  internal  EU  reduction  of 
80% in 2050 compared to 1990, except for one fragmented action scenario where 
additional  measures  are  taken  to  protect  the  international  competitiveness  of 
energy intensive industries.  

•  Decarbonisation scenarios are differentiated according to fossil fuel energy prices 

in line with the results of global analysis with the POLES model:  

–  scenarios with low energy prices staying relatively stable (oil prices in real terms 

in 2050 at around 70$2008/barrel), likely to occur with Global Action.  

–  scenarios  with  oil  prices  gradually  doubling  (increasing  to  127$2008/barrel  in 

2050), as in the reference scenario, likely to occur with Fragmented Action. 

–  scenarios with a temporary oil shock or continued high energy prices from 2030 
onwards (doubling to 212$2008/barrel in 2030), for which a real risk remains with 
Fragmented Action. 

•  Decarbonisation  scenarios  are  differentiated  according  to  assumptions  on 

technological developments: 

–  effective  technology  scenarios  to  represent  successful  enabling  of  efficient  and 

low carbon technologies  

–  'delayed  CCS'  and  'delayed  electrification  scenarios'  to  assess  sensitivities 

regarding the availability of certain technology pathways. 

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–  a  sensitivity  analysis  on  delayed  climate  action  that  assumes  no  new  and 

additional climate policies before 2030. 

(14)  Future modelling improvements could take into account the impact of climate change 
itself,  for  instance,  on  agricultural  and  energy  production  and  consumption.  Further 
improving  the  modelling  of  energy  storage  and  smart  grid  solutions  could  better 
project the deployment of distributed generation. 

4. 

RESULTS FROM THE GLOBAL ANALYSIS 

Global reduction efforts, and the EU contribution  

(15)  The review of the latest scientific literature and the model projections by the POLES 
model show that the EU would need to reduce its greenhouse gas emissions internally 
by at least 75%, 80% or more by 2050 compared to 1990.  

(16)  A  global  effort  consistent  with  2°C  would  imply  that  other  developed  countries  take 
action  with  the  same  stringency  as  the  EU  modelled  through  an  equal  carbon  price 
signal.  Emerging  countries  would  do  so  gradually,  simulated  through  a  gradual 
developing  carbon  market  with  carbon  prices  equal  in  developed  and  emerging 
countries by 2030. This results in a reduction of developing countries GHG emissions 
by  80%  in  2050  compared  to  baseline,  back  to  or  even  below  1990  emissions.  This 
implies that in case of global action, international credits are not cheaply available and 
large-scale offsetting is not an alternative to domestic action. The 80 to 95% reduction 
objective  in  the  EU  will  largely  need  to  be  met  internally,  also  from  a  cost-
effectiveness  perspective.  Emissions  per  capita  would  converge  over  time  with 
absolute  differences  by  2050  significantly  smaller,  even  though  per  capita  emissions 
remain higher in developed countries. 

The link between climate action and global fossil fuel prices 

(17)  The  analysis  with  POLES  demonstrates  the  interaction  between  global  action  on 
climate change and future fossil fuel prices. While baseline projections for oil prices 
almost  double,  oil  prices  in  a  world  of  global  climate  action  in  2050  would  remain 
stable compared to today. These relative reductions would result from reduced energy 
demand and a shift towards low carbon fuels. Essentially, a world of Global Action is 
characterised by lower fossil fuel prices and high carbon prices. 

(18)  The analysis shows that in a world of 'Fragmented Action', oil prices reduce only 15% 
compared  to  baseline  levels.  These  results  are  broadly  consistent  with  the  World 
Energy Outlook 2010 of the International Energy Agency. The IEA data indicate clear 
energy security risks related to the combination of rising demand, difficulties in terms 
of supply and geopolitical risks in oil and gas exporting regions. 

(19)  Changes  in  prices  for  energy  sources  will  results  in  changes  in  income  of  countries 
that export these goods. But these impacts are manageable. Annual revenues for OPEC 
are  projected  to  be  much  higher  in  the  next  20  years  compared  to  the  previous  20 
years, even in the case of Global Action.  

The global contribution from agriculture and forestry and the link with bio-energy 

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(20)  As part of a global effort consistent with 2°C, also the contribution of agriculture and 
LULUCF  and  the  correlation  with  the  energy  sector  on  a  global  scale  was  analysed, 
taking into account: 

(a) 

(b) 

(c) 

(d) 

(e) 

the need to ensure food security to feed the increasing global population 

the  EU  objective  to  reduce  global  deforestation,  in  particular  in  developing 
countries, and stop global forest cover loss by 2030 

efforts to reduce agricultural emissions 

increased biomass use for energy in case of climate change action 

Dietary  habits  remain  the  same  with  changes  towards  more  carbon  intensive 
food due to welfare increases.  

From  the  analysis,  it  is  concluded  that  agriculture  and  forestry  can  achieve  the  above 
requirements  by  2050  if  appropriate  incentives  are  set,  but  productivity  improvements  on  a 
global scale will be crucial. If these improvements cannot be achieved, the above listed goals 
are simply not met or can only through significant food price increases.  

Reversing existing trends, towards more carbon intensive food, could also contribute, but this 
has  not  been  analysed.  Lifestyle  and  behavioural  changes,  could  increase  the  likelihood  of 
meeting  deep  reduction  objectives  as  well  as  the  overall  cost-effectiveness  of  action  by 
helping to avoid more expensive mitigation options in other sectors. Biodiversity will benefit 
majorly  from  limiting  global  climate  change  to  2ºC  by  preserving  tropical  forests  which 
exhibit very high biodiversity values, but care should be taken that increased productivity in 
agriculture/forestry  is  not  leading  to  reduced  biodiversity,  increased  depletion  of  water 
resources or cause other environmental problems.  

5. 

RESULTS FROM THE EU ANALYSIS 

Overall EU reduction pathways, and sectoral contributions  

(21)  The analysis of the projections of the different EU decarbonisation scenarios show that 
by 2050, an 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  (range  of  around  €  100  to  €370  per  ton  of  CO 2-eq.  by  2050).  This  will  require 
substantial  continued  innovation  in  existing  technologies  but  is  possible  without  the 
deployment of break-through technologies, such as nuclear fusion, hydrogen and fuel 
cells,  or  an  electricity  grid  with  wide  scale  application  of  distributed  energy  storage, 
and without major lifestyle changes (e.g. dietary changes, strong changes in mobility 
patterns). Such developments could further facilitate a low carbon economy, but were 
not  included  in  the  analysis  considering  the  uncertainties  of  their  technical  and 
economic feasibility and because of the difficulties of including them in the modelling 
tools.  

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(22)  Despite  the  significant  variations  in  technological  and  fossil  fuel  price  assumptions 
across  the  different  scenarios,  the  results  are  robust  in  terms  of  the  speed  and 
magnitude of emission reductions with variations at sectoral level a bit larger. 

2005 
-7% 

GHG reductions compared to 1990  
Total 
Sectors 
Power (CO2) 
Industry (CO2) 
Transport (incl. aviation, excl. maritime) 
(CO2) 
Transport excl. aviation, excl. maritime +25% 
-12% 
Residential and services (CO2) 
-20% 
Agriculture (Non CO2) 
-30% 
Other Non CO2 emissions  

-7% 
-20% 

+30% 

2030 
-40 to -44% 

2050 
-79 to -82% 

-54 to -68% 
-34 to -40% 

-93 to -99% 
-83 to -87%1 

+20 to -9% 

-54 to -67% 

+8 to -17% 
-37 to -53% 
-36 to -37% 
-71.5 to -72.5% 

-61 to -74% 
-88 to -91% 
-42 to -49% 
-70 to -78% 

Source: PRIMES, GAINS 

(23)  Total GHG emissions reduce in 2030 by around 40%, compared to 1990 except in the 
case  of  high  oil  prices  by  2030,  which  would  result  in  reductions  of  44%.  Further 
intermediate steps of a low cost pathway would be decreases of around 25 % by 2020 
and around 60% by 2040.  

(24)  With equal economic reduction incentives across sectors, a larger contribution by the 
sectors  covered  by  the  EU  Emissions  Trading  System  (ETS)  would  continue  to  be 
cost-effective. Emission reductions of already around 45% by 2030 and around 90% 
compared  to  2005  in  2050  would  be  achieved  in  the  ETS  sectors,  while  non-ETS 
sectors would reduce their emissions by somewhat over 25% by 2030 and nearly 70% 
compared to 2005 in 2050.  

(25)  The  highest  reductions  would  occur  in  the  power  sector.  Under  similar  economic 
incentives across sectors, it decarbonises fast through the penetration of a wide range 
of  low  carbon  technologies  (various  renewable  energy  technologies,  nuclear,  CCS 
after  2020)  and  increased  demand  side  efficiency,  reaching  usually  well  above  60% 
emission  reductions  by  2030.  By  2050,  decarbonisation  of  the  power  sector  is 
practically complete.  

(26)  Above average contributions in the medium and long term can also be achieved by the 
residential and service sector. The key drivers for emissions reductions are significant 
reductions  in  required  heating  due  to  improved  insulation,  more  use  of  (low  carbon) 
electricity  and  renewables  for  building  heating  as  well  more  energy  efficient 
appliances.  

(27) 

Industry decarbonises slightly less than the overall economy in the medium term, but 
in particular industry CCS allows for significant further reduction options, be it later 
(after 2030) than in the power sector.  

1 

Not  including  the  specific  scenario  with  measures  that  require  less  reductions  from  energy  intensive 
industries. 

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(28)  Transport  and  agriculture  are  the  main  sectors  where  no  full  decarbonisation  in  the 

longer term is achieved.  

(29) 

In  transport,  the  increasing  trend  of  the  last  20  years  is  reversed.  In  2030  transport 
emissions  (road,  rail  and  inland  navigation)  are  reduced  below  1990  levels  for  most 
scenarios,  with  the  effective  technology  scenario  at  reference  fossil  fuel  prices 
achieving  -5%  and  at  low  fossil  fuel  prices  achieving  -2%.  But  the  largest  part  of 
reductions  would  be  achieved  between  2030  and  2050,  reaching  levels  around  -60% 
for transport2. 

(30)  For  agriculture  the  pattern  is  the  inverse.  Its  reductions  between  now  and  2030  are 
significant, but then further technical GHG reduction options are more limited. As in 
other  sectors,  there  remains  scope  for  further  analysis  concerning  the  impact  of 
behavioural change on GHG mitigation options.  

(31)  Other  non  CO2  emissions,  such  as  methane  from  landfills  and  industrial  N2O 
emissions  are  also  rapidly  reduced  until  2030,  after  which  only  limited  further 
reductions  are  taking  place.  For  the  non-CO2  emissions  in  the  ETS  these  reductions 
occur already in the reference scenario, for the others sectors such as agriculture, waste 
and F-gases additional actions would be required beyond existing policies. 

System costs: carbon prices, investment expenditure, and fossil fuel costs  

(32) 

In all scenarios, carbon prices increase from around 50 to 60 € per tonne of CO 2-eq: in 
2030 to a range  of € 100 to € 370 per ton  of  CO 2-eq (150 € to 200 € for the effective 
technology  scenarios)  depending  on  the  technological  and  fossil  fuel  parameters 
chosen.  

(33)  Notably,  there  is  a  clear  inverse  correlation  between  fossil  fuel  prices  and  carbon 
prices. Higher fossil fuel prices require lower carbon prices to decarbonise. This is a 
logical consequence of 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 prices those inputs and processes more which are most carbon intensive and 
that revenues are recycled in the local economy, while with high energy prices this is 
not  always  the  case,  especially  for  the  EU  which  is  heavily  reliant  on  fossil  fuel 
imports. 

(34) 

It  is  also  concluded  that  delayed  development  &  deployment  of  certain  technologies 
(CCS, electrification), as well as delayed climate action (no extra action before 2030) 
leads  eventually  to  significant  higher  carbon  prices  and  overall  higher  costs  and 
reduced fuel savings. This highlights the critical importance of :  

•  R&D  and  early  deployment  of  low  carbon  technologies  as  a  means  to  reduce 

overall costs and increase public acceptance for certain technologies. 

•  The need of continuing but gradual reductions over time, so as to avoid that late 

catch-up leads to large, sudden increases in carbon prices.  

2 

NOx emissions from aviation and other indirect impacts of aviation on global warming potential are not 
included. 

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(35)  The  most  important  conclusion  of  all  decarbonisation  scenarios  is  the  massive  shift 
from fuel expenses (operating costs) to investment expenditure (capital expenditure). It 
is important to note from an economy-wide perspective 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 (automotive, power generation, 
industrial and grid equipment, energy–efficient building materials, construction sector 
etc), while fuel expenses are to a large extent flowing to third countries considering the 
EU's strong reliance of fossil fuel imports. 

(36) 

In  case  of  the  effective  technology  scenarios,  by  2040-  2050,  annual  investments  on 
average are around € 550 billion higher than in reference case. 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. 

(37)  The flip side of the investment increases is an equally large reduction of fuel costs. In 
the reference scenario, fuel costs still increases from around €  900 billion on average 
per annum in the period 2010-2020 to around € 1400 billion for the period 2040-2050. 
With reference energy prices, decarbonisation reduces fuel costs almost € 350 billion 
per  annum  in  the  period  2040-2050.  With  global  action,  the  reduction  in  fuel  costs 
compared  to  reference  is  of  course  even  larger,  with  a  bit  more  than  €  600  billion 
saved  per  annum  in  the  period  2040-2050,  because  of  the  combined  effect  of  fossil 
fuel  savings  and  lower  prices  for  fossil  fuels.  Taken  over  the  whole  40  year  period, 
average  fuel  costs  decreases  per  annum  compared  to  reference  are  between  €  175 
billion (fragmented action – reference energy prices) and € 320 billion (global action – 
low fossil fuel prices) provided that electricity penetration in transport is not delayed. 

(38)  An  oil  shock  or  high  fossil  fuel  prices  would  increase  the  required  investment 
expenditure in the reference scenario by about € 100 billion per year; there is however 
no such impact in the decarbonisation scenarios. Fuel expenses are significantly lower 
in  the  decarbonisation  scenarios  combined  with  high  fossil  fuel  prices  than  the 
reference  case  combined  with  high  fossil  fuel  prices.  In  the  high  fossil  fuel  price 
scenario  increases  in  investment  expenditure  for  climate  action  are  more  than 
compensated for by the reduction in fuel costs. 

(39)  The  rise  in  low  carbon  capital  expenditure  is  a  consistent  feature  across  all  sectors 
(power, industry, transport, and the built environment) but in absolute terms the largest 
investment  increases  are  not  taking  place  in  power  generation,  grid  infrastructure  or 
industry,  but  in  demand  side  technologies  in  the  transport  sector  (most  notably 
vehicles),  and  the  built  environment  (energy-efficient  building  materials  and 
components,  heat  pumps,  appliances,  etc).  It  is  especially  the  business  sectors 
providing  those  technologies  and  equipment  that  would  benefit  the  most  from 
decarbonisation. 

(40)  The  size  and  composition  of  low-carbon  capital  expenditures  in  the  coming  decades 
raises  important  questions  in  policy  terms  how,  even  with  strong  carbon  incentives, 
financing  barriers,  in  particular  for  end-users  of  transport  and  buildings,  can  be 
overcome.  Innovative  finance  and  fiscal  instruments  will  be  required  such  as 
preferential  loans,  grants  that  pay  back  part  of  a  low-energy  investment  and  tax 
rebates, with the aim to unlock private investment in low carbon technologies. Also a 
larger  share  of  regional  funding  within  the  EU  budget  would  need  to  go  to  policy 
instruments that leverage private sector resources. 

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Energy resources, energy efficiency and energy security  

(41) 

In the decarbonisation scenarios, the EU's energy resource efficiency would improve 
substantially bringing also energy security benefits linked in particular to lower fossil 
fuel  use  and  imports.  Total  primary  energy  consumption  would  be  reduced  to  1650 
Mtoe in 2030 and some 1300-1350 Mtoe in 2050; compared to more than 1800 Mtoe 
in 2005. More domestic energy resources would be used, in particular renewables, and 
total energy imports would more than halve compared to 2005 by 2050. Starting from 
2025,  this  would  lead  to  a  complete  reversal  of  the  trend  of  fuel  import  dependency 
increases, reducing to less than 35% by 2050. The oil import bill would be halved or 
more  compared  to  today  by  2050,  and  reduced  by  around  80%  compared  to  the 
reference case, the equivalent of € 400 billion or more. 

(42) 

It  is  important  to  note  that  these  levels  of  reduced  primary  energy  consumption  are 
mainly the result of technological changes on the demand side, and not from reduced 
energy  services:  first  by  more  efficient  buildings,  heating  systems  and  vehicles, 
reinforced  later  on  by  electrification  in  transport  and  heating,  which  combine  very 
efficient  demand  side  technologies  (plug-in  hybrids,  electric  vehicles,  heat  pumps) 
with a largely decarbonised power sector.  

(43)  Achieving the 20% energy savings target in 2020 enables the EU to reduce domestic 

emissions by 25% or more by 2020. 

(44)  Decarbonisation  will  significantly  reduce  fossil  fuel  security  risks  but  large  scale 
electrification  combined  with  decentralised  generation  involves  other  challenges  and 
opportunities. The 2050 Energy Roadmap will address these issues in more detail. 

Power sector 

(45)  While  final  energy  demand  of  all  sectors  decreases  significantly,  electricity 
consumption keeps on increasing until 2050. This is the result of two opposing trends:  

•  Increased efficiency improvements on the demand side  

•  Especially after 2025, an increasing demand from the heating and transport sector, 
triggered by the wide scale application of efficient demand side technologies (e.g. 
plug-in hybrids, electric vehicles, heat pumps). 

However,  the  pace  of  the  increase  remains  similar  to  historic  trends  of  the  last  20 
years, despite the fact that over time a considerable part of the transport and heating 
sector is switching from oil and gas to electricity.  

(46)  On  the  supply  side,  the  share  of  low  carbon  technologies  in  the  electricity  mix 
(renewables, fossil fuels + CCS, nuclear) is rapidly increasing from 45% today, around 
60%  in  2020  (as  a  result  of  the  full  implementation  of  the  Climate  and  Energy 
Package), to 75 to 80% in 2030 and nearly 100% in 2050. As low carbon electricity 
technologies  are  characterised  by  higher  capital  expenditures  and  lower  fuel  costs, 
generation  investment  expenditures  are  high,  as  well  as  for  grid  expansion.  As  for 
other sectors, the key policy question is how to best enable these investments. 

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Transport  

(47)  Energy efficiency is one of the major contributors to the decarbonisation of transport. 
The  analysis  shows  that  up  until  2025  and  despite  continuously  increasing  transport 
services,  improved  efficiency  of  vehicles  is  the  main  driver  to  reverse  the  trend  of 
increasing  GHG  emissions  and  to  bring  back  land  based  transport  GHG  emissions 
below  1990  levels  in  2030.  For  passenger  cars  for  instance,  these  efficiency 
improvements  go  beyond  existing  CO2&cars  legislation  after  2020,  driven  by  a 
gradual hybridisation. 

(48)  While hybridisation is important from the perspective of increased efficiency up until 
2025, it is from a technological perspective also an essential step to enable the move 
towards electro-mobility (electric propulsion vehicles) after 2025. For passenger cars, 
this is a key technology that enables very strong reductions in the transport sector post 
2030.  For  aviation,  and  to  lesser  extent  heavy  duty  vehicles,  biofuels  would  play  a 
more important role, mostly after 2030.  

(49)  For  aviation  biofuels  become  an  important  GHG  reduction  technology  in  the  period 
after 2030. For road transport the largest increase in biofuels used is in the period up to 
2020  to  achieve  the  20%  overall  renewables  target  and  the  specific  10%  renewables 
target  for  transport.  After  2020  up  to  2050  the  absolute  increase  would  continue  but 
remain lower than in the period 2005 – 2020, if electro mobility penetrates the market 
successfully.  However,  if  this  is  not  the  case,  biofuels  would  need  to  become  more 
important  to  achieve  the  same  level  of  reductions.  Such  increases  in  biofuels  could 
lead  to  increased  pressures  on  land  use,  including  emissions  from  land  use, 
biodiversity, water management and the environment in general, at least assuming that 
land-based biofuels would be used. 

(50)  There is only a small impact in all scenarios analysed on total transport demand. This 
is in part due to the modelling framework that focuses on GHG reductions, and does 
not  include  specific  transport  policies  to  enable  a  more  efficient  transport  system, 
modal  shift  and  to  reduce  different  kinds  of  externalities,  such  as  congestion  and  air 
pollution, that can lead to additional co-benefits in terms of emission reductions. These 
aspects will be dealt with in more detail in the impact assessment of the White Paper 
on Transport. 

(51)  A comparison between different scenarios shows there is a clear correlation between 
GHG reductions in the transport sector and in the power sector. If the transport sector 
reduces  GHG  emissions  more  through  electro-mobility,  electricity  use  is  increased, 
which would have an impact on electricity emissions. So, even if the transport sector is 
not included in the ETS, it would over time increasingly influence developments in the 
EU ETS.  

The built environment  

(52)  Heating & cooling (two third) and water heating & cooking (more than 20%) are the 
most important energy consumers in this sector, with the remaining largely lightning 
and electrical appliances.  

(53)  The  key  trends  observed  are  similar  to  those  in  the  transport  sector.  First,  overall 
energy  demand  is  reduced:  efficiency,  in  particular  the  energy  performance  of 

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buildings,  is  improved  with  passive  house  technology  becoming  mainstream,  and 
much  improved  energy  performance  of  existing  buildings  through  refurbishments. 
This  entails  quite  substantial  investments,  which  can  be  recuperated  over  time  by 
reduced  energy  bills.  A  key  policy  question  is  how  initial  financing  barriers  can  be 
overcome.  

(54)  As in the transport sector, there is an important shift in terms of the fuels used, from 
oil, gas and coal towards electricity and renewable fuels. Efficient heat pumps play an 
important  role  by  allowing  to  increase  end-use  efficiency  as  well  as  to  decrease  the 
carbon  intensity  of  fuels  by  using  geothermal  energy  and  electricity.  In  addition, 
biogas, biomass and solar heating are replacing to a significant extent fossil fuels.  

Industry  

(55)  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.  These  potentials  are  a  combination  of  further  energy 
intensity  decreases,  and  the  application  of  CCS  for  the  remaining  energy  intensive 
industrial CO2 emissions (e.g. process emissions in for instance steel and cement) from 
2035 onwards.  

(56) 

In the context of fragmented action with the EU reducing emissions significantly more 
than  other  countries,  certain  industries  will  benefit  from  additional  investments  in  a 
wide  range  of  low  carbon  technologies  and  improved  competitiveness  due  to  first 
mover advantages.  

(57)  But also the impact of a more ambitious climate policy on energy intensive industries 
was  assessed.  The  results  of  previous  macro-economic  modelling  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.  

(58)  However, for energy intensive industries, the described reduction potentials after 2035 
requires large scale introduction of CCS, which is a technology that has no other real 
benefits than reduced GHG emissions and which brings both extra investment as well 
as higher operating costs.  

(59)  An alternative scenario is therefore analysed where energy intensive industries would 
be  subject  to  lower  emission  reduction  requirements,  where  industry  emissions  stay 
closer to the reference scenario results, reaching not a reduction of -86% by 2050 but 
around -50%, in particular because CCS would not become a mainstream technology 
for  process  related  emissions.  In  such  a  scenario,  energy-intensive  industries  would 
not  need  to  bear  the  extra  costs  related  to  CCS  deployment,  which  would  otherwise 
rise to more than € 10 billion  annually in the last decade.  

Agriculture and other non CO2 emissions 

(60)  From  1990  until  2005,  non  CO2  emissions  were  reduced  by  a  quarter,  considerably 
faster than CO2 emissions. Today, agricultural emissions (N2O and methane) make up 
more than half of non CO2 emissions.  

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(61)  Non  CO2  emissions  other  than  agriculture  are  projected  to  decrease  significantly, 
especially before 2030. The main reasons are the N2O reductions in industrial sectors 
covered by the ETS, reduction of methane emissions due to the full implementation of 
the  Landfill  Directive,  reduction  of  HFCs3,  and  the  reduction  of  methane  releases  in 
mining, energy and industrial sectors.  

(62)  With additional actions agricultural emissions can continue to decrease up until 2030, 
this  trends  slows  down  after  2030.  With  emissions  levels  at  around  330  Mio  ton  in 
2050,  a third below emission levels in 2005, agriculture represents around a third of 
the remaining total EU emissions in 2050, tripling in share from 2005. 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, other sectors would need to 
do even more.  

(63)  At  the  same  time,  as  global  food  demand  grows,  and  food  patterns  change  towards 
more carbon intensive diets, the analysis clearly shows there are limits to the reduction 
of  agricultural  emissions.  A  potentially  important  element  that  is  not  included  in  the 
quantitative  assessment  is  the  possible  impacts  of  behavioural  changes  that  would 
reverse current trends towards less carbon intensive food patterns. In the long term, a 
transition  to  a  more  healthy  diet  could  reduce  methane  and  nitrous  oxides  emissions 
substantially, and have positive impacts on land use requirements. 

Land use, land use change and forestry 

(64)  Energy  from  biomass  will  be  a  significant  component  of  the  increase  in  renewable 
energy projected over the coming decades. In the reference case bio-energy production 
more  or  less  doubles  between  2010  and  2050.  In  the  decarbonisation  case  the 
production of bio-energy more than triples on  the same period. Increased  bio-energy 
supply  mainly  comes  from  increased  biofuel  production  from  agricultural  crops, 
increased use of agricultural residues, woody biomass and waste materials.  

(65)  The increases in bio-energy demand will have effects on the manner that land is used 
in the EU, which are to a certain extent competing with other uses, such as food and 
feed production, paper and timber production. Furthermore, the production itself could 
have  an  impact  on  the  EU's  GHG  emissions  by  changing  (1)  the  required  inputs  in 
agriculture  that  could  increase  emissions  (e.g.  increased  fertiliser  use  in  agriculture), 
(2)  land  use  leading  to  net  increased  greenhouse  gas  emissions  (e.g.  changes  in 
deforestation  or  afforestation  rates  or  conversion  of  grassland  into  cropland)  and  (3) 
forest management practices and thus altering emissions and absorptions of managed 
forests (e.g. change in harvesting cycles).  

(66) 

In  Europe,  land  use,  land  use  change  and  forestry  leads  to  a  net  sequestration  of 
carbon,  in  particular  in  forests.  Over  time,  this  net  sink  is  projected  to  decrease 
significantly,  because  of  maturing  forests,  and  increased  harvesting  for  bio-energy, 
paper production and timber. Reducing the increase in virgin wood demand over time, 
for  instance  through  recycling  of  organic  waste,  paper  and  wood  products,  would 
reduce this lowering of the net sink function over time. 

3 

F-gas Regulation and Directive of mobile air conditioning systems in vehicles. 

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(67)  Uncertainties are large, and interrelations between the energy, forestry and agricultural 
sector complex, also on a global scale. EU demand for bio-energy will partly be met 
through imports, which would lead to lower impacts in the EU, but potentially more in 
third  countries.  It  is  clear  that  this  issue  requires  further  attention  and  examination. 
Productivity  increases  in  agriculture  would  be  very  important  to  ensure  that  these 
increases  in  bio-energy  can  be  delivered  without  too  negative  impacts  on  other  end 
uses  of  forestry  or  agriculture  products.  Finally  also  the  impact  on  biodiversity  of 
changes in management practices will require further attention.  

Employment impacts 

(68) 

In terms of employment, the underlying structural changes are expected to have no or 
a  slightly  positive  impact  on  the  overall  employment  level  (at  least  in  the  long  run), 
but  significant  shifts  in  employment  among  or  within  sectors  are  expected,  provided 
adequate  labour  market  policies  are  implemented.  The  development  of  policies  will 
matter to ensure overall effects are positive and ensure shifts in employment to sectors 
and occupations that are innovative and with high growth potential. The analysis has 
shown  that  increased  investment  in  capital-intensive  goods  (power  generation 
equipment, 
transport  equipment,  buildings  and  building 
components) would require increased output of a wide range of manufacturing sectors, 
as well as in the construction sector.  

renewable  energy, 

(69)  Changing  the  energy  system,  the  transport  and  the  housing  sector,  which  are  main 
sources of GHG emissions, will raise demand for new skills and competences. This is 
particularly  significant  in  the  energy  sector  as  a  result  of  major  investments  and 
expansion  in  renewable  and  energy  management  subsectors.  The  main  need  is  to 
revise and upgrade the skills of existing workers. But reskilling 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. 

(70)  Furthermore  pricing  policies  can  allow  for  smart  recycling  of  revenues,  with 
employment  benefiting  most  from  reductions  in  labour  costs.  The  introduction  of 
pricing policies such as auctioning for sectors not exposed to international competition 
or taxation in the Non ETS, together with a reduction in labour costs through recycling 
can result in net job growth of 0.7% compared to reference, or an increase with a bit 
more than 1.5 million jobs by 2020. 

Co-benefits in terms of air quality 

(71)  Overall, air quality benefits are observed. Average air pollution levels would be more 
than  65%  lower  in  2030  compared  to  2005.  In  2030,  annual  costs  of  controlling 
traditional air pollutants could be more than € 10 billion lower; and in 2050 even close 
to  € 50  billion  could  be  saved  every  year.  These  developments  would  also  reduce 
mortality, with benefits estimated at around € 7 to 17 billion per year in 2030, and € 17 
and 38 billion in 2050. Moreover, public health would be improved, with a reduction 
in  health  care  costs  as  well  as  reduced  damage  to  ecosystems,  crops,  materials  and 
buildings.  

(72) 

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