COMMISSION STAFF WORKING PAPER EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT
Date: 2011-12-15
Institutions: European Commission
Subjects: energy policy, nuclear energy, reduction of gas emissions, renewable energy, sustainable development

EUROPEAN COMMISSION 

Brussels, 15.12.2011 
SEC(2011) 1566 final 

COMMISSION STAFF WORKING PAPER 

EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT 

Accompanying the document 

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

Energy Roadmap 2050 

{COM(2011) 885 final} 
{SEC(2011) 1565 final} 
{SEC(2011) 1569 final} 

 
 
 
 
  
 
1. 

PROBLEM DEFINITION 

The well-being of our people, industry and economy depends on safe, secure, sustainable and 
affordable energy. Energy is a daily need in a modern world and is mostly taken for granted in 
Europe.  The  energy  system  and  its  organisation  evolved  over  centuries  if  not  millenaries 
using  different  fuels  and  distribution  systems.  Our  current  energy  system  and  ways  of 
producing, transforming and consuming energy seem unsustainable for the future due to: high 
GHG  emissions;  security  of  supply  risks  and  competitiveness  risks  related  to  high  energy 
costs and underinvestment.  

It  will  take  decades  to  steer  our  energy  systems  onto  a  more  secure  and  sustainable  path. 
There is no silver single bullet how to change this. There is no energy source that is abundant 
and  has  no  drawbacks  in  terms  of  its  sustainability,  security  of  supply  and  competitiveness 
(price).  That  is  why  the  solution  will  require  trade-offs  and  the  market  alone  under  current 
regulatory  environment  might  not  be  delivering.  Significant  investments  will  however  be 
needed  in  the  near  future  to  replace  energy  assets  in  order  to  guarantee  a  similar  level  of 
comfort  to  citizens  at  affordable  prices;  assure  secure  and  competitive  supplies  of  energy 
inputs to businesses and take respect of the environment.  

Relying on more low-carbon, domestic (i.e. intra EU) or more diversified sources of energy, 
produced  and  consumed  in  an  efficient  way,  can  bring  significant  benefits  not  only  for  the 
environment,  competitiveness  and  security  of  energy  supply  but  also  in  terms  of  economic 
growth, employment, regional development and innovation. What are the barriers? Why the 
shift to a low-carbon, more competitive and more diversified sources using energy system is 
not, or too slowly happening? 

There are several factors that hamper the shift:  

1)  Energy  market  prices  do  not  fully  reflect  all  costs  to  society  in  terms  of  pollution,  GHG 
emissions, resources' depletion, waste, land use, air quality and geopolitical dependency.  

2) Inertia of the physical system  
The majority of investments in the energy system are long-term assets leading to significant 
lock-in effects and any change to the system materialises only gradually.  

3) Public perception and mindset of the users 
Perception of the risks related to the construction of new power plants and infrastructure by 
general public can be more negative than expert judgements. It can also take a long time and 
adequate incentives or regulation to persuade people to change the way they heat their houses; 
transport themselves, etc.  

4) Uncertainty concerning technological, demand, prices and market design developments  
The energy system is characterised by a large proportion of long-term fixed costs that need to 
be recovered over several decades. Uncertainty can significantly increase investors' risks and 
costs and makes consumers and businesses reluctant to invest.  

5) Imperfect markets 
There  is  weak  competition  in  some  Member  States  where  markets  are  still  dominated  by 
incumbents. Another factor is market myopia, i.e. the fact that long-term investments are not 
necessarily  pursued  by  market  actors  who  are  generally  drawn  towards  shorter-term  gains. 
Developing markets for energy efficiency services and decentralised RES are faced with low 
number of actors and the lack of enabling regulatory framework. 

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2. 

ANALYSIS OF SUBSIDIARITY AND EU VALUE ADDED  

The EU's competence in the area of energy is set out in the Treaty on the Functioning of the 
European  Union,  in  Article  1941.  EU  competences  related  to  combating  climate  change 
including GHG emission reductions in energy and other sectors are enshrined in Art. 191-193. 
From an economic perspective, many energy system developments can best be achieved on an 
EU-wide  basis,  encompassing  both  EU  and  Member  State  action  while  respecting  their 
respective competences.  

3. 

OBJECTIVES OF EU INITIATIVE 

The general objective is to shape a vision and strategy of how the EU energy system can be 
decarbonised  by  2050  while  taking  into  account  the  security  of  supply  and  competitiveness 
objectives. 

To achieve the general objective more specific objectives are being proposed: 

(i) Provide more certainty to investors as regards possible future policy orientations at the EU 
level by showing different decarbonisation pathways for 2050 as well as their main economic, 
social and environmental impacts; 

(ii)  Show  trade-offs  among  policy  objectives  as  well  as  among  different  decarbonisation 
pathways and identify common elements in all decarbonisation pathways; 

(iii)  Set  milestones  after  2020  to  mobilise  stakeholders  and  give  more  certainty  for  period 
after 2020. 

The  Roadmap  2050  should  be  based  on  the  current  objectives  of  the  EU  energy  policy  – 
sustainability, security of supply and competitiveness.  

4. 

POLICY OPTIONS 

This impact assessment is not a classical one that lists policy options to meet certain policy 
objectives and then assesses impacts of these policy options to determine a preferable one. It 
rather examines a set of possible future developments to get more robust information on how 
the energy system could achieve 85% reduction of energy related CO2 emissions compared to 
1990  (corresponding  to  80%  GHG  emissions  reductions  by  2050)  and  improve  security  of 
supply and competitiveness, without selecting one of them.  

Several  useful  scenarios  could  be  proposed  for  a  decarbonisation  analysis  of  the  energy 
system.  The  design  of  scenarios  was  extensively  discussed  with  various  stakeholders. 
Stakeholders  and  the  European  Commission  identified  four  main  decarbonisation  routes  for 
the energy sector – energy efficiency impacting mostly on the demand side and RES, nuclear 
and  CCS  predominantly  on  the  supply  side  (lowering  the  carbon  intensity  of  supply).  The 
the  four 
policy  options  (scenarios)  proposed  explore  5  different  combinations  of 

1 

In the context of the establishment and functioning of the internal market and with regard for 

Article 194: 
1. 
the need to preserve and improve the environment, Union policy on energy shall aim, in a spirit of 
solidarity between Member States, to: 
(a) ensure the functioning of the energy market; 
(b) ensure security of energy supply in the Union; 
(c) promote energy efficiency and energy saving and the development of new and renewable forms of 
energy; 
(d) promote the interconnection of energy networks. 

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decarbonisation options. Decarbonisation options are never explored in isolation as interaction 
of  different  elements  will  necessarily  be  included  in  any  scenario  that  evaluates  the  entire 
energy system. All decarbonisation scenarios achieve 85% energy related CO2 emissions by 
2050  and  it  will  be  carefully  assessed  whether  each  policy  option  also  improve  security  of 
supply and competitiveness of the energy sector as well as lead to affordable energy costs. 

Policy options 
Business as usual (Common Reference scenario2) 
Current Policy Initiatives – CPI scenario (updated Reference scenario) 
High Energy efficiency scenario 
Diversified supply technologies3 scenario 
High RES scenario 
Delayed CCS scenario 
Low nuclear scenario 

1 
1bis 
2 
3 
4 
5 
6 

5. 

ASSESSMENT OF IMPACTS AND COMPARISON OF OPTIONS  

Environmental impacts 
As regards environmental impacts, all policy options significantly reduce energy consumption 
with the largest reduction coming in the High Energy Efficiency scenario. The composition of 
energy  mix  would  also  differ  significantly  in  a  decarbonised  system  with  strong  increase  in 
RES in all scenarios. Nuclear developments depend on policy assumptions taken and ranges 
from 2 to 18% share in primary energy consumption. The share of gas is the highest in Low 
nuclear scenario with significant CCS penetration. Oil and solids decline. Electricity share in 
final  energy  consumption  doubles  from  current  levels  and  electricity  become  the  most 
important final energy source. All decarbonisation scenarios achieve 80% GHG reduction and 
85%  energy  related  CO2  reductions  in  2050  compared  to  1990  as  well  as  equal  cumulative 
emissions over the projection period. In 2030, energy-related CO2 emissions are between 38-
41% lower, and total GHG emissions reductions are lower by 40-41%.  

Economic impacts 
Various analyses of carbon and energy policies on GDP suggest that impact is rather limited. 
Depending  on  the  decarbonisation  scenario,  there  are  no  average  annual  additional  energy 
system  costs  due  to  the  pursuit  of  this  major  decarbonisation  as  a  part  of  a  global  effort 
compared  with  the  Reference  and  CPI  scenarios,  or  they  are  small.  As  regards  electricity 
prices,  some  policy  options  show  a  small  decrease  in  electricity  prices  as  compared  to 
Reference and CPI scenarios (Energy Efficiency and Diversified supply technologies) while 
some  others  show  increases  (High  RES  and  to  a  lower  extent  Low  nuclear).  ETS  carbon 
prices are significantly higher than in the Reference and CPI scenarios, while fuel prices are 
lower.  All  policy  options  require  more  and  more  sophisticated  energy  infrastructures 
(electricity  lines,  smart  grids  and  storage)  with  High  RES  scenario  having  the  highest 
requirements.  

Social impacts 
Social dimension of decarbonisation roadmaps is crucial as transition to low carbon economy 
will  require  an  in  depth  change  in  several  sectors  affecting  companies,  employment  and 

2 
3 

Used also in the Low Carbon Economy Roadmap and Transport White Paper.  
Scenario  3  reproduces  "Effective  and  Widely  Accepted  Technologies"  scenario  used  in  Low  Carbon 
Economy roadmap and Transport White Paper on the basis of scenario 1bis.  

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working conditions. Education and training need to be addressed at an early stage in order to 
avoid unemployment in some sectors and labour shortages in others.  

The impact of decarbonisation policies on employment are not substantial by 2020 as shown 
by  several  studies  but  investments  in  new  technologies  might  trigger  demand  for  higher 
skilled jobs. Security of energy supply measured as import dependency improves in all policy 
options  by  2050,  the  biggest  improvements  being  in  the  High  RES  scenario.  As  regards 
affordability of energy costs by households, all policy options show significant fuel savings 
but also higher capital and energy efficiency investment costs. Total energy expenditures by 
households  are  higher  in  all  policy  options,  the  highest  increase  being  in  options  showing 
strong energy efficiency policies and RES penetration.  

Options were compared based on their effectiveness; efficiency and coherence.  

As regards effectiveness, the 3 objectives of energy policy – sustainability, security of supply 
and competitiveness - were taken. All policy options were designed to reach 85% reductions 
of  energy  related  CO2  emissions  in  2050,  so  all  are  effective.  It  should  be  noted  that  some 
options are highly dependent on success of new commercially yet not proven technologies. As 
regards  security  of  supply,  all  policy  options  reduce  import  dependency.  However,  in  more 
electrified  world,  stability  of  the  grid  might  be  of  much  higher  concern.  As  regards, 
competitiveness, some policy options show a small decrease in electricity prices as compared 
to  Reference  and  CPI  scenarios  while  some  others  show  increases.  ETS  prices  are 
significantly higher than in the Reference and CPI scenarios, while fuel prices are lower. The 
model triggers adequate investment which are driven by specific policies or carbon prices and 
investment decisions are based on perfect foresight assumption. 

In  terms  of  efficiency,  the  analysis  demonstrates  that  the  costs  of  decarbonisation  of  the 
energy system are similar in all scenarios and that most decarbonisation scenarios even show 
cost savings compared to the Reference scenario. The least costly scenarios are Delayed CCS 
and Diversified Supply Technologies scenarios with significant penetration of nuclear.  

All policy scenarios are coherent with other EU long term objectives (on climate, transport, 
etc). There is no clear winner among policy options scoring the best in all criteria and several 
trade-offs will need to be taken into account.  

6. 

CONCLUSIONS 

Current  trends  projections  show  only  half  the  GHG  emission  reduction  needed;  increased 
import  dependency,  in  particular  for  gas;  and  rising  electricity  prices  and  energy  costs.  The 
model-based analysis has shown that decarbonisation of the energy sector is feasible; can be 
achieved  through  various  combinations  of  energy  efficiency,  renewables,  nuclear  and  CCS 
contributions; and that the costs are bearable.  

Common elements to scenario analysis 

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There is a need for an integrated approach.  
Electricity makes major inroads in decarbonisation scenarios reaching 36-39% share 
in 2050. 
Significant energy efficiency improvements happen in all decarbonisation scenarios.  
The share of renewables rises substantially in all scenarios, achieving at least 55% in 
gross final energy consumption in 2050. 
The  increased  use  of  renewable  energy  as  well  as  energy  efficiency  improvements 
require modern, reliable and smart infrastructure including electrical storage.  

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Nuclear has a significant role in decarbonisation with the highest penetration in case 
of CCS delay.  
CCS  contributes  significantly  towards  decarbonisation  in  most  scenarios,  with  the 
highest penetration in case with nuclear constraints.  
All  scenarios  show  a  transition  from  high  fuel/operational  expenditures  to  high 
capital expenditure.  
Substantial changes in the period up to 2030 will be crucial for a cost-efficient long 
term  transition  to  a  decarbonised  world,  economic  costs  are  manageable  if  action 
starts  early  so  that  the  restructuring  of  the  energy  system  goes  in  parallel  with 
investment cycles. 
The  costs  of  such  deep  decarbonisation  are  low  in  all  scenarios  given  lower  fuel 
procurement  costs  with  cost  savings  shown  mainly  in  scenarios  relying  on  all  four 
main decarbonisation options. 
Costs  are  unequally  distributed  across  sectors,  with  households  shouldering  the 
greatest  cost  increase  coming  from  higher  costs  for  direct  energy  efficiency 
expenditures in appliances, vehicles and insulation.  
The  external  EU  energy  bill  for  importing  oil,  gas  and  coal  will  be  substantially 
lower  under  decarbonisation  due  to  substantial  reduction  in  import  quantities  and 
prices. 

Some  policy  relevant  conclusions  can  be  drawn  based  both  on  the  results  of  the  scenario 
analysis as well as on comparison of the idealised market and technological conditions needed 
for modelling purposes and what is found in the much more complex reality.  

Implications for future policy making 

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Successful decarbonisation while preserving competitiveness of the EU economy is 
possible. If there were no global climate action, carbon leakage might be an issue and 
appropriate  instruments  could  be  needed  to  preserve  competitiveness  of  energy 
intensive industries.  
Predictability and stability of policy and regulatory framework creates a favourable 
environment for low carbon investments. While the framework until 2020 is mainly 
given,  discussions  about  policies  for  2020-2030  should  start  now.  Milestones  and 
targets  can  help  avoiding  stranded  costs.  Uncertainty  can  lead  to  a  sub-optimal 
situation where only investment with low initial capital costs are being realised.  
Functioning  of  internal  market  is  a  must  to  encourage  investment  where  it  is  most 
cost-effective.  
Energy  efficiency  tends  to  show  better  results  in  a  model  world  than  in  reality. 
Energy  efficiency  improvements  are  often  hampered  by  split  incentives,  cash 
problems of some group of customers; imperfect knowledge and foresight leading to 
lock-in  in  some  outdated  technologies,  etc.  That  is  why  there  is  a  strong  need  for 
targeted support policies, e.g. for more energy efficient consumer choices.  
Strong support should be given to R&D and demonstration in order to bring costs of 
low-carbon technologies down.  
Due  attention  should  be  given  to  public  acceptance  of  all  low  carbon  technologies 
and infrastructure as well willingness of consumers to undertake implied changes and 
bear higher costs.  
Flanking social policies might need to be considered early in the process given that 
households shoulder large parts of the costs. While these costs might be affordable 
by an average household, vulnerable consumers might need specific support to cope 
with increased expenditures.  

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Flexibility. The future is uncertain and nobody can predict it. That is why preserving 
flexibility is important for a cost efficient approach, but certain decisions are needed 
already  at  this  stage  in  order  to  start  the  process  that  needs  innovation  and 
investment,  for  which  investors  require  a  reasonable  degree  of  certainty  from 
reduced policy and regulatory risk.  
External  dimension,  in  particular  relations  with  energy  suppliers,  should  be  dealt 
with  pro-actively  and  at  an  early  stage  given  the  implications  of  global 
decarbonisation  on  fossil  fuel  export  revenues  and  the  necessary  production  and 
energy transport investments during the transition phase to decarbonisation. 

7. 

MONITORING AND EVALUATION 

The Roadmap is not a one-off exercise and will be regularly updated taking into account the 
most recent developments. In addition, the Commission will constantly monitor a set of core 
indicators which are already available and are being currently used.  

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