EU Energy and CO 2 emission trends to 2050 EU Reference Scenario a reflection of current policies and an input into policy development Joan Canton, Pantelis Capros, Jan Nill* et al. *European Commission, DG Climate Action IEW, 1 June 2016, Cork 1
Introduction, process and policy purpose 2
The EU Reference Scenario What is it? Projection of EU energy, transport and GHG emission trends up to 2050 based on adopted policies (not a forecast) Consistent among policy areas (economic, energy, climate, transport and others, such as agriculture and environment) Previous exercise: EU Energy, Transport and GHG Emissions. Trends to 2050 published in 2013 3
For which purpose is it prepared? Meant to inform decision makers and stakeholders on the effects of the current policy framework Regular exercise (Reference 2010, Reference 2013, Reference 2016) Starting point for Commission Impact Assessments in energy, climate and transport fields with the recommendation to assess policies based on policies in place E.g. Reference scenario 2013 as baseline for preparing 2030 climate and energy framework 4
How is the Reference Scenario prepared? Modelling undertaken by independent consultants (coordinated by ICCS-NTUA E3MLab) on behalf and under the supervision of the European Commission Joint exercise of Commission services: DGs CLIMA, ENER and MOVE (in association with JRC) Extensive consultation with Member States 5
A complex modelling structure 6
Main assumptions for the EU Reference scenario 2016 7
Macroeconomic and demographic assumptions 2.0% 1.5% 1.0% 0.5% Annual growth rate of GDP Based on DG ECFIN and Economic Policy Committee (AWG) projections of GDP (published in 2015) and the EUROPOP2013 projections for population 0.0% 0.30% 0.25% 0.20% 0.15% 0.10% 0.05% 0.00% 2015 2020 2025 2030 2035 2040 2045 2050 Annual growth rate of Population 8 2015 2020 2025 2030 2035 2040 2045 2050
Sectoral activity projections Projection of activity by sector based on GEM-E3 model Increasing share of the services sector Industrial sectors recover from economic crisis Energy intensive industries maintain their shares in gross value added close to present levels 9
Projection of fossil fuel prices Current oversupply leads to lower hydrocarbon prices until 2020 Declining R/P ratios are the main drivers for increases in oil and gas prices after 2020 Deceleration in global demand combined with vast amounts of cheap coal resources mean that coal prices will not exceed recent peaks Lower price trajectories as in Reference 2013 10
11 Key policy assumptions and examples Adopted EU and MS policies until end of 2014 included Assumes achievement of all legally binding targets for 2020 (GHG, RES, RES-T) Does not assume that EU climate and energy targets for 2030 are met Information on national policies based on national MMR submissions, a questionnaire and bilateral consultation of MS EU Emissions Trading System including Market Stability Reserve Energy Efficiency Directive, Eco-design and others National RES supporting policies until 2020 CO2 and cars/vans regulations Impact of ILUC-related revisions of Renewables and Fuel quality directives on RES-T calculations
Key technology assumptions Technological progress in energy supply and demand technologies reflected Progress in renewable technologies including further technology learning Updates reflect recent cost decreases notably for solar and batteries, cost increases notably for nuclear, CCS and offshore wind To add: similar graph for main non RES technologies with carbon price 0 12
Main insights of first results related to energy modelling 13
Primary energy demand in relation to GDP Primary energy demand and GDP decouple, continuing trends observed since 2005 Total energy requirements steadily below 2015 level Energy efficiency improvements drive reduction of demand, mainly driven by policy up to 2020 and by market/technology trends after 2020 Deceleration of energy efficiency progress occurs post-2020 250 200 150 100 50 0 Index 1995=100 Source: PRIMES 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 Gross Inl. Cons./GDP Gross Inland Consumption GDP Trend 1995-2007 14
Industrial energy demand Recovery of activity drives upwards trends in energy demand in the medium term Followed by decrease of energy demand in the long term, driven by - energy efficiency embedded in new capital vintages - structural changes towards higher value added and less energy-intensive production 15
Residential Energy Demand Demand for energy stays below 2015 levels until 2050 Decouples from income, beyond trend extrapolation Driven by efficiency policies, energy intensity improves relatively fast in the medium term, slower after Heating remains the largest energy use but its share decreases due to efficiency Demand for using electric appliances increases, but significantly less than stock, driven by impressive technological progress facilitated by eco-design regulations 16
Energy in services and agriculture Energy decouples from activity growth in services and agriculture Despite high growth of activity in services sectors, demand for energy declines in the medium term and moderately increases only in the long term The efficiency gains are more pronounced in the medium term, driven by the efficiency policies 17
Energy in the transport sector Transport activity for passenger (incl. international aviation) and freight increases but less than GDP Energy intensity of transport activity significantly reduces over time, as result of policies and technological progress Recently observed decoupling of energy from activity is projected to continue and intensify in the future Energy demand in transport sector decreases, unlike trends until 2007, and slightly increases again only long term Biggest decrease in cars, reflects also CO 2 regulation 18
Demand for Electricity Demand for electricity is projected to recover after stagnation in recent years Electrification is a persisting trend in final demand Electricity is increasingly used for heating of buildings (heat pumps) and in thermal processes in industry Specific electricity uses also increase significantly in all sectors Energy efficiency improvements in end-uses, notably in the domestic sector, mitigate electricity demand growth
Power generation mix Significant development of RES (solar and wind onshore) Biomass remains stable over the period Decline of generation from solid fuels Gas-fired generation decreases until 2020, but increases thereafter playing a balancing role Nuclear decreases slightly in the medium term 14
Investments in power generation New plant investment is dominated by RES 400 350 300 Investment in new capacities 112 Other RES Solar Wind Offshore New thermal plant investment is mainly CCGT and CHP plants New nuclear investment takes place mainly after 2030 GW (net) 250 200 150 100 50 0 300 106 94 19 41 50 18 25 36 81 136 56 18 21 30 2011-20 2021-30 2031-40 2041-50 Retrofitting or replacement of old plants Wind Onshore Hydro Biomass Other gas/oil Gas Plants CCS Solids Nuclear Solar Source: PRIMES Retrofitting of old plants concern solid fuels plants in the short/medium term, nuclear throughout the projection and RES replaced on the same site GW (net) 250 200 150 100 50 0 18 23 15 55 93 62 2011-20 2021-30 2031-40 2041-50 70 46 13 93 22 Wind Offshore Wind Onshore Hydro Biomass Other gas/oil Gas Plants CCS Solids Nuclear 10 Source: PRIMES
Gross Inland Consumption Oil maintains the largest share in GIC, due to low substitution possibilities in the transport sector Gas maintains its share and is widely used in all stationary and energy supply sectors Solid fuels decline, while nuclear maintains a share a little below current levels Biomass/waste increase in volume and share terms Rest of RES increase steadily to the same share of GIC as nuclear, driven by impressive development in power sector 22
Energy imports Decrease in EU production of fossil fuel sources projected Import dependence only slightly increases over the entire projection period RES deployment, combined with energy efficiency improvement and nuclear production, help mitigating potentially stronger increases 23
Main insights of first results related to CO 2 emissions from energy and industrial processes 24
Role of EU ETS in decreasing emissions Assumption: in line with current legislation the ETS cap decreases for stationary installations annually by a linear factor of 1.74% ETS main driver of long term emission reductions ETS cap trajectory requires a continued decarbonisation of the power sector Resulting ETS carbon prices are projected simultaneously with energy system Based on simulation, the Market Stability Reserve effectively stabilises the market before 2025, with increasing carbon prices in line with long term reduction requirements 25
CO 2 emissions by sector Significant emission decreases if current policies are implemented Power and heat production reduces most, as RES and ETS enable restructuring away from carbonintensive generation In industry sector reductions in energy related emissions, while process emissions remain rather stable 26
CO 2 emissions by sector ctd. In the other sectors not covered by the ETS (e.g. buildings, transport) no such long term policy is present Energy efficiency is the main driver of emission reduction in end-uses of energy Transport also projected to reduce, but lowest CO 2 emissions reductions under Reference assumptions Transport overtakes power as largest CO 2 emitting sector 27
Outlook 28
Looking ahead beyond Reference: New EU Energy Union and Climate policies Commission proposals under negotiation by EU legislators Revision EU Emissions Trading System 2021-30 Regulation on security of gas supply and revision of the Decision on inter-governmental agreements Planned Commission policy proposals for 2016 Completing INDC implementation: Effort sharing legislation 2021-30 and integration of the Land Use, Land-Use Change and Forestry sector (LULUCF) into 2030 framework Energy efficiency package, including energy efficiency for buildings Electricity market design and the regulatory framework Renewable energy package, incl. biomass sustainability criteria 29
Finalisation and publication of Reference 2016 due for July Thank you for your attention 30