Net-Zero Unveiled: UK's Ambitions Analysed

Florian A. Schneider, PhD.

Senior Research Advisor

Tone Langengen

Senior Policy Advisor, Climate & Energy Policy at the Tony Blair Institute for Global Change

UK HG

Memo

Ben Haley

Co-Founder, Evolved Energy Research

Katie Pickrell

Principal, Evolved Energy Research

Ryan Jones

Josh Freed

Co-founder of Carbon-Free Europe

Lindsey Walter

Kelsey Paulding

EU Government Affairs Director

Catherine Grossman

Executive Coordinator

Sarah Cronin

Senior Press Advisor

Isabelle Chan

Non-Resident Fellow

Elena Benaim

Former Policy Analyst

Screenshot 2024-04-22 at 2.03.05 PM

NE Global: Europe needs every clean energy tool it can get to deliver net-zero

Innovation News Network: Is Europe Doing Enough to Achieve Carbon Neutrality? Pg. 375

The EU-US Trade and Technology Council (TTC) held its first stakeholder dialogue of 2024 in Washington, DC in January to discuss the creation of a Green Transatlantic Marketplace. This convening <a href="https://www.whitehouse.gov/briefing-room/statements-releases/2024/01/31/readout-of-u-s-eu-trade-and-technology-council-fifth-ministerial-meeting/" target="_blank" rel="noopener">included discussions</a> with global leaders on strengthening the transatlantic marketplace to support net-zero economies in the US and EU.
Amid ongoing talks at the TTC, Carbon-Free Europe (CFE), Third Way, and Breakthrough Energy convened clean energy leaders for a panel discussion on opportunities for the US and EU to support the TTC’s efforts to fully integrate a climate and trade market and  support the swift deployment of clean energy technologies.
One of the United States Senate’s foremost clean energy leaders Senator Sheldon Whitehouse (D-RI) opened the discussion with remarks on the urgency of leveraging the US and EU’s relationship to bolster clean energy trade and cooperation. The conversation continued with a panel on how the EU and the US can strengthen international cooperation to deploy clean energy technologies, led by EU MEP Lidia Pereira, Heather Evans of the International Trade Administration, Marco Margheri of Eni, and Catrina Rorke of the Climate Leadership Council.
<a title="CFE Convenes Climate and Trade Leaders for Green Transatlantic Marketplace Discussion" href="https://www.flickr.com/photos/thirdwaythinktank/albums/72177720315676011" data-flickr-embed="true"><img src="https://live.staticflickr.com/65535/53610873318_f3486d35b0_z.jpg" alt="CFE Convenes Climate and Trade Leaders for Green Transatlantic Marketplace Discussion" width="640" height="480"></a>

IMG 2359

Carbon-Free Europe Convenes Climate & Trade Leaders for Green Transatlantic Marketplace Discussion

Even at its best, COP - the UN’s annual climate meeting - yields mixed results. Securing bold agreements from 200 countries is near impossible and translating those commitments into action is an even greater challenge. Yet, the process remains valuable. It focuses international attention on addressing climate change and forces conversations on difficult issues. At its best, COP can give countries direction and inspire renewed commitment to reducing emissions at the national and international level. 
I was on the ground in Dubai for COP28 along with Kelsey Paulding, Carbon-Free Europe’s (CFE) EU Director, and Elena Benaim, CFE’s Policy Advisor. In Dubai, our team <a href="https://www.carbonfreeeurope.org/events/cfes-net-zero-for-nuclear-night-at-cop28" target="_blank" rel="noopener">participated in a series of speaking engagements</a> at COP28 and the Net Zero Nuclear Summit 2023. CFE also hosted a reception celebrating the bold new commitments to <a href="https://www.energy.gov/articles/cop28-countries-launch-declaration-triple-nuclear-energy-capacity-2050-recognizing-key" target="_blank" rel="noopener">triple the global nuclear energy capacity by 2050</a> and joined the Atlantic Council’s Global Energy Forum. It was an eventful and informative trip. 
Here are our top takeaways:
<h3>Win for Technology-Inclusivity</h3>
As noted by <a href="https://heatmap.news/technology/cop28-global-stocktake-climate-tech?utm_source=mailchimp&amp;utm_medium=email&amp;utm_campaign=em_newsletter" target="_blank" rel="noopener">Heatmap</a>, technology was the “Stealth Hero'' of COP28. The final announcement at COP expressed a commitment to accelerated development of “zero- and low-emissions technologies” including carbon capture, direct air capture, nuclear, and low-carbon hydrogen. The announcement also called for the tripling of <a href="https://www.france24.com/en/environment/20231202-more-than-110-countries-join-cop28-deal-to-triple-renewable-energy-by-2030" target="_blank" rel="noopener">renewables</a> and <a href="https://www.energy.gov/articles/cop28-countries-launch-declaration-triple-nuclear-energy-capacity-2050-recognizing-key" target="_blank" rel="noopener">nuclear energy</a> as well as new participants in the <a href="https://www.carbonmanagementchallenge.org/cmc/" target="_blank" rel="noopener">Carbon Management Challenge</a>. Since CFE’s launch at COP26, we’ve gone from having to whisper about nuclear and carbon capture technologies to having both identified as critical tools to meet climate targets - a remarkable shift in just a few years. As CFE’s <a href="https://www.carbonfreeeurope.org/modelling/Carbon-Free-Europe-Annual-Decarbonization-Perspective-2023.pdf" target="_blank" rel="noopener">research </a>reinforces, the more clean energy alternatives we have to deploy, the better our odds are of displacing fossil fuels in a timeframe that avoids the worst impacts of climate change. This technology-inclusive approach is critical for de-risking the energy transition and its acknowledgement at COP28 is a massive step in the right direction.
<h3>Keeping Up The Methane Moment</h3>
At COP26, the US and EU spearheaded the launch of the <a href="https://www.globalmethanepledge.org/" target="_blank" rel="noopener">Global Methane Pledge</a> to reduce methane by 30% from 2020 levels by 2030 (which could avert 0.2C of warming by 2050). Since then, more than 150 countries have signed the pledge. At COP28, several countries also announced how they will achieve these targets, including pledging <a href="https://www.wri.org/news/statement-cop28-countries-announce-new-efforts-reduce-methane-pollution" target="_blank" rel="noopener">$1 billion in new grant funding</a>. This year, we also saw 50 of the world's major oil companies join the <a href="https://www.cop28.com/en/news/2023/12/Oil-Gas-Decarbonization-Charter-launched-to--accelerate-climate-action" target="_blank" rel="noopener">Oil and Gas Decarbonization Charter</a> and commit to end flaring and cut methane leaks to "near zero" by 2030 and eliminate methane emissions by 2050. To support the methane phaseout, the World Bank created a $250 million trust fund. However, <a href="https://www.bloomberg.com/news/articles/2023-12-04/chevron-exxon-opt-out-of-funding-cop28-methane-reduction-fund?leadSource=uverify%20wall" target="_blank" rel="noopener">Chevron and Exxon Mobil opted out of contributing</a> to it. We made progress at COP, but considering these companies account for 40% of global oil production, there is still far more that oil and gas companies must do.
<h3>Long Awaited Language on Fossil Fuels</h3>
COP28 <a href="https://unfccc.int/news/cop28-agreement-signals-beginning-of-the-end-of-the-fossil-fuel-era" target="_blank" rel="noopener">closed with an agreement</a> to transition away from fossil fuels. This is a remarkable accomplishment given COP28 President Sultan Al Jaber <a href="https://www.theguardian.com/environment/2023/dec/03/back-into-caves-cop28-president-dismisses-phase-out-of-fossil-fuels" target="_blank" rel="noopener">previous statements</a> that there was no science supporting the need to phase out fossil fuels. Unless countries enact bold policies to reduce emissions at home, this is all just diplomatic talk.
<h3>Falling Short on Adaptation Financing</h3>
Global climate finance has taken off in recent years. As Ede Ijjasz-Vasquez from Brookings <a href="https://www.brookings.edu/articles/the-successes-and-failures-of-cop28/" target="_blank" rel="noopener">stated, </a>“global climate finance has doubled from $653 billion in 2019-2020 to $1­.3 trillion annually in 2021-2022.” In the US alone, 280 clean energy projects amounting to $282 billion in investment were spearheaded in the first year since the Inflation Reduction Act’s passage.
While capital is flowing for clean energy projects, the same is not true for adaptation. <a href="https://www.brookings.edu/articles/the-successes-and-failures-of-cop28/" target="_blank" rel="noopener">Less than 5%</a> of total climate finance is allocated for adaptation. COP28 kicked off with a historic agreement on a loss and damage fund for developing nations to adapt to the impact of climate change. However, wealthy countries only pledged around <a href="https://www.theguardian.com/environment/2023/dec/06/700m-pledged-to-loss-and-damage-fund-cop28-covers-less-than-02-percent-needed" target="_blank" rel="noopener">$700 million</a> - less than 0.2% of what’s necessary. Estimated damages to developing countries because of climate are around <a href="https://www.v-20.org/resources/publications/climate-vulnerable-economies-loss-report" target="_blank" rel="noopener">$400 billion annually</a>.

Debrief from Dubai: Takeaways from COP28 

<div class="Highlight">
<div class="content">
<h2>Takeaways</h2>
<ul class="boldList">
<li>
Powering Up the Power Sector: Italy requires massive investment in and deployment of renewable electricity capacity to move away from fossil fuel dependence. </li>
<li>
Building Public Support for Decarbonisation: Italy should involve a range of different actors, agencies, and community representatives in the decision-making process to ensure public acceptance.</li>
<li>
Bridging the Geographical Divide: Italy requires investment into domestic and cross-border T&amp;D and electricity storage infrastructure to ensure grid stability and security.</li>
<li>
Embracing Technology Inclusivity: Italy must expand its hydrogen supply chain and explore clean energy technology to ease transition for hard-to-electrify sectors. Italy will benefit from a diversified energy system that boosts resilience, security, independence from fossil fuels, and strategic autonomy.</li>
</ul>
</div>
</div>
<h2>Introduction</h2>
Within the next year, Italy will need to update its National Energy and Climate Plan (NECP) and long-term energy strategy to reflect the latest EU targets. Not only does Italy need to reach at least 55% emissions reduction by 2030, it also needs to meet specific targets established in the Fit-for-55 package and REPowerEU for deploying clean energy, reducing energy demand, and diversifying energy supplies.
Italy’s last NECP, published in December 2019, set a preliminary goal of a 33% reduction compared to 2005 GHG emissions by 2030.1 While it is on track to meet this target, Italy will need to reshape its energy systems to keep pace with the more ambitious reductions linked to the EU’s binding targets.
The country’s energy mix still relies heavily on fossil fuels, comprising 83.4% of the energy supply and powering 63.5% of the country’s electricity.2 Much of that fuel comes from Russia, which only increases the urgency to decarbonise to shake Italy free of its dependency on unreliable partners that yield energy as a geopolitical weapon. There is no one-size-fits-all strategy to achieve these ambitious emissions reduction and energy security targets. Italy, as with other member states, must chart a course to net zero that suits its needs and plays to national strengths.
Despite two strong motivators for decarbonisation—climate mitigation and energy security—Italy still faces significant roadblocks in its path to emissions abatement. The country’s bureaucratic processes and regulations, coupled with the challenges of maintaining popular support for emissions reductions, will challenge the country’s efforts to meet its goals. We have seen this playout over the past decade as renewable energy deployment has slowed significantly compared to years prior. The country also faces a mismatch between the locus of demand (northern Italy) and the locus of production, areas with the greatest potential for renewable generation (southern Italy).
In this memo, we confront these challenges head on and outline the changes needed to allow Italy to meet its emissions abatement goals, in the face of the country’s unique sociopolitical challenges. Our analysis highlights four key areas of improvement to help Italy meet its new, more ambitious climate targets:
<ol>
<li>Powering Up the Power Sector</li>
<li>Building Public Support for Decarbonisation</li>
<li>Bridging the Geographical Divide</li>
<li>Embracing Technology Inclusivity</li>
</ol>
<h2>Methodology</h2>
This memo is part of a broader study from Carbon-Free Europe (CFE) that models 12 potential pathways (5 scenarios and 7 sensitivities) for the EU and UK to achieve net zero emissions by 2050. This report includes an assessment of what it will take for Italy’s energy system to reach carbon-neutrality across three of the 12 potential pathways:
<ul class="boldList">
<li>
Core Pathway: This path allows countries to use all available clean energy technologies, in line with their national policies, and assumes high levels of energy efficiency and electrification. It is the most feasible, cost-effective path to net zero.</li>
<li>
Constrained Renewables Pathway: This pathway considers less available land for solar and onshore power than the Core Pathway because of siting, permitting, supply chain, or social constraints.</li>
<li>
High Hydrogen Pathway: This path assumes delayed efforts to electrify end-uses like vehicles and industrial processes as compared to the Core Pathway, increasing the demand for zero-carbon fuels to replace liquid fossil fuels.</li>
</ul>
To learn more about the other pathways and our full 2023 analysis, please <a href="https://www.carbonfreeeurope.org/modelling" target="_blank" rel="noopener">click here</a>.
<h2>Powering Up the Power Sector</h2>
Our analysis identifies a gap between Italy’s current electricity generation and capacity, and what is needed to achieve net zero emissions by 2050. CFE’s model reveals that the most feasible path to net zero (known in our analysis as the ‘Core Pathway’) will require a fourfold increase in electricity capacity, bringing Italy’s total electricity capacity from 118 gigawatts (GW) today to 234 GW in 2030 and 456 GW in 2050. While overall primary energy consumption will decrease with energy efficiency improvements from 145 Mtoe in 20223 to 76 Mtoe by 2050 (Core Pathway), the increase in electricity demand is inevitable as Italy electrifies economic sectors such as industry, residential, and transport.
<div class="entry-image"><img src="//images.ctfassets.net/228txxvb8tt7/2s9Faw0dT54SJ7NQi9eIva/f48d26e1f1cb6e19b293eaa1a91c63b9/Italy_chart_Figure_1.jpg" alt="Image Alt Text" width="1375" height="1535"></div>
In 2022, fossil fuels made up 50% of Italy’s electricity capacity.4 To meet its climate goals, the country must reduce that figure to 18% by 2030 and 8% by 2050. This small amount of remaining fossil fuel capacity is maintained for reliability in extreme events. Italy can then deploy carbon capture and carbon sequestration technologies to counterbalance the remaining 8% fossil fuel-based electricity generation, or even run gas turbines with low carbon fuels like ammonia instead of fossil fuels.
These changes strike a delicate balance: Italy must dramatically increase electricity production, while, simultaneously, transforming how it generates electricity. Renewable proliferation is happening in Italy, but it will need to move faster than ever before to meet the country’s needs and climate goals. The country’s renewable energy supply needs to increase from the 59 GW capacity calculated in 2022 to 419 GW by 2050, according to our analysis.
In practice, which increase requires at least 18,300 additional onshore wind turbines, with an average power of 3MV and an additional 3,630 Photovoltaic (PV) farms with an 84 MW capacity. That means the country will need to build almost 4000 PV farms that match the output of the country’s second largest PV farm, the Montalto di Castro PV power station, which covers 166 hectares and has more than 275,000 operational solar modules.5 It is no exaggeration to say that increasing renewable deployment to this scale will be a massive undertaking. Our analysis shows it will also require significant investment: constructing both solar and onshore wind is estimated to cost at least 282 and 93 billion Euro by 2050. To meet its goals, Italy will need to leverage public sector investment and regulatory signals to crowd in significant private sector investment.
<div class="entry-image">
<img src="//images.ctfassets.net/228txxvb8tt7/2zJbJoPytOhALs3fPTKXkv/a9976a5bb167ac69e87bcc5eed897275/Italy_chart_Figure_2.jpg" alt="Image Alt Text" width="1375" height="1875"> 
</div>
<h2>Building Public Support for Decarbonisation</h2>
Public support for clean energy technology plays a critical role in deployment, in particular for renewables like solar and on- and offshore wind. Without adequate support from individuals and civil society, projects can slow significantly or halt entirely, posing a major hurdle to the clean energy transition.
Building an additional 305 GW of solar and 55 GW of onshore wind requires large areas of land and roofs, perhaps prompting a “NIMBY” mentality (not in my backyard) that could prove difficult to overcome as the Italian government works to deploy additional energy resources.
Should the Italian government fail to build adequate public support for new projects on land, as indicated in our Constrained Renewables Pathway, Italy will need to rely on additional offshore wind development (20 GW) to replace solar and onshore wind and meet its climate goals. That shift in electricity capacity, from more onshore capacity in the Core Pathway to more offshore capacity in the Constrained Renewables Pathway, will make the energy transition much more expensive, requiring an additional 12 billion Euro investment by 2050.
To avoid this costly and politically untenable situation, the Italian government must involve a range of different actors, agencies, and community representatives in the decision-making process. Italy should work to build consensus that increased clean energy proliferation is good for Italy’s economy, community, and future wellbeing. Ensuring public acceptance and involvement is pivotal to reaching the 2050 targets. The Italian government should also consider more energy dense resources like nuclear energy which, despite their high upfront cost, have smaller land footprints while providing more and firm zero-carbon electricity capacity.
<div class="entry-image">
<img src="//images.ctfassets.net/228txxvb8tt7/4BP4qhpIEYRmGC7FSTJq2f/53b7844364582f549343ce10c7a96606/Italy_chart_Figure_3.jpg" alt="Image Alt Text" width="2750" height="2238"> 
</div>
<h2>Bridging the Geographical Divide</h2>
Italy has historically been an electricity import country. In 2022, Italy required 47.4 TWh of imports compared to 4.4 TWh of exports.6 Demand for electricity is highest in Northern Italy with 58% of electricity consumption in 2022.7 Italy’s North holds the bulk of the country's industrial activity, but solar and onshore wind capacity, which is modelled to provide 96% of the country’s electricity generation under the Core and High Hydrogen pathway, are concentrated in the south-eastern region and in Sicily and Sardegna. This mismatch makes it hard for the north of Italy to obtain the energy it needs and makes it harder to obtain public support in regions where ambitious renewable deployment efforts are instead required.
The practical challenge inherit in this geographical mismatch will require substantial investment in domestic and cross-country transmission and distribution (T&amp;D) infrastructure. Terna announced a 21 billion Euro domestic T&amp;D investment by 2033.8 In addition, our Core pathway models cross-country transmission investments of 2 billion Euro by 2030, like Terna’s development plan, and 4 billion Euro by 2050 to expand grid capacity to Tunisia, Greece, Austria, France, Slovenia, and Switzerland. In addition, due to the power intermittency and solar dependence (solar share will need to be 79% of electricity composition by 2050 according to our Core Pathway) Italy will have to invest at least 78 billion Euro into cost-effective electricity storage solutions with a capacity of at least 64 GW, dwarfing the current 3 GW of storage capacity.
<h2>Embracing Technology Inclusivity</h2>
Renewable technologies are the key power resource to reduce greenhouse gas emissions, and they are essential to meeting net zero targets. Reaching carbon neutrality and ensuring stability in the energy system with a purely renewable approach is significantly harder than an approach that uses a broader diversity of clean energy technologies. Italy is already relying on significant amounts of electricity imports. Dependency on purely intermittent electricity capacity may create bottlenecks at cross-country transmission. Deploying a broad array of energy sources helps ensure the energy system is strong, resilient to change, and secure. A renewables-only approach is more land-intensive and less resilient than an energy sector that deploys a broader range of clean energy technologies including nuclear, clean hydrogen, and geothermal.
Nuclear energy is independent of weather resources. Advanced small modular reactors could be built in Italy’s North, where solar and onshore wind resources are lacking. Nuclear thus reduces transmission and distribution costs, uses less land,9 provides highly efficient, concentrated, and firm electricity when intermittent power systems do not operate, and high temperature operations can be used for district heating and hydrogen production. Additionally, hard to electrify industrial processes that rely on high temperature heat could use nuclear power stations to meet their energy needs.
Clean hydrogen produced by nuclear-based high temperature electrolysis can provide fuel for hard-to-electrify transportation subsectors such as heavy-duty trucks or industrial work. Our Core Pathway suggests that by 2050 Italy could produce 40-50% more green hydrogen than it requires domestically, making Italy the third largest green hydrogen producer in the EU, enabling export, and providing a stable energy source for critical manufacturing.
Our High Hydrogen pathway, however, indicates that, should the country delay electrification, Italy will be required to produce even more hydrogen than illustrated in the Core Pathway in order to meet its domestic energy needs and provide essential hydrogen export to other European economies that have limited hydrogen production abilities. In this pathway, without nuclear power, Italy would require 38 GW of additional renewable electricity capacity to produce hydrogen for both domestic and trade needs to lower greenhouse gas emissions.
<div class="entry-image">
<img src="//images.ctfassets.net/228txxvb8tt7/3E897SmSKaapxILcAgAGbf/3e900199396a7e05258202fcd68d0ded/Italy_chart_Figure_4.jpg" alt="Image Alt Text" width="1375" height="1257"> 
</div>
The current insufficient funding via the National Hydrogen Strategy and the 450 million Euro State Aid by the EU Commission10 is but barely a jumpstart compared to the costs our pathways predict. According to our Core and High Hydrogen pathways, the government needs to invest significantly higher funds to develop and shift its focus toward hydrogen as a clean energy technology, especially if electrification is delayed (High Hydrogen Pathway).
Incorporating a strong hydrogen supply chain using both renewable and nuclear power is an essential move that would ease the transition to net zero for hard-to-electrify sectors, while boosting the resilience of Italy’s energy system independent of delays. This clean technology inclusive approach can make Italy a clean energy leader that ensures European energy security, independence from Russian fossil fuels, and strengthens Italy’s strategic autonomy and role in Europe’s net zero ambitions.
<h2>Conclusion</h2>
Italy's decarbonization challenge is attainable. It requires a comprehensive shift in the power sector, led by a transition from fossil fuels to renewables, coupled with robust public support. Bridging geographical disparities will be essential and considering a clean technology-inclusive approach can ease Italy’s journey toward a decarbonised economy. This transformative path aligns with climate goals and provides greater energy security, economic resilience, and reduced dependence on intermittent electricity sources. Italy has an opportunity to lead by example in Europe's clean energy transition and ensure a sustainable and secure energy future.<a href="#_ednref1" name="_edn1"></a>

Italy’s Decarbonisation Challenge

Electric Demand Map

Final Energy Demand

Electric Transmission Map

Electricity

Electric Capacity Map Thumbnail

Electric Capacity

Low-Carbon-Fuels Map

Low Carbon Fuels

CCUS Map

CCUS

Hydrogen Map

Hydrogen

France

Denmark

Belgium

Croatia

Bulgaria

Austria

Cyprus

Czechia

Estonia

Finland

Germany

Greece

Hungary

Ireland

Italy

Latvia

Lithuania

Luxembourg

Malta

Netherlands

Poland

Portugal

Romania

Slovakia

Slovenia

Spain

Sweden

United Kingdom

modeling-background

Electric Transmission

Annual EU Net-Zero Outlook 2022

<div class="Highlight">
<div class="content">
<h3>Overview of Modelling Analysis</h3>
As part of Carbon-Free Europe's (CFE) first analysis in 2022, CFE modelled five potential pathways for the EU and UK to achieve net-zero emissions by 2050.  The Core pathway is the least constrained, allowing countries to use all available clean energy technologies and assuming high levels of energy efficiency and electrification. This is the most feasible, cost-effective pathway to net-zero.  The other four pathways are designed to explore how different policy and implementation constraints impact the route to carbon-neutrality. To learn more about the other pathways and our full 2022 analysis, visit <a href="https://www.carbonfreeeurope.org/" target="_blank" rel="noopener">www.carbonfreeeurope.org/modelling/archive/2022</a>.
</div>
</div>
<h2>Today’s Energy System</h2>
In 2019, 78% of the UK’s energy supply came from fossil fuels (3.5% from coal, 39.5% from gas, and 35% from oil). Nuclear energy supplied 8% and renewable energy sources, including biofuels, provided 12%. The most emissions come from transportation (27% of total GHG emissions), followed by residential and commercial buildings (17%), electricity (13%), and industry (10%). 2019 is a good baseline year to understand Europe’s long term energy demand and supply since impacts from the pandemic have heavily skewed data from 2020-2021. 2019 is also the most recent year for which final Eurostat energy balance data is available.
<h2>Key Takeaways: The Core Pathway in 2050</h2>
<ol class="boldList">
<li>
The UK’s most feasible and cost-effective pathway to net-zero is the Core pathway, which includes the use of every available clean energy technology including nuclear energy and carbon capture. In this pathway, by 2050, the UK’s estimated electricity mix is 51% wind, 9% solar, 39% nuclear, and 1% gas. The Core pathway requires 770 billion pounds of investment through 2050 in key technologies including electricity generation and storage, clean fuels, direct air capture, and heat pumps.
</li>
<li>
In a carbon-free economy, the UK becomes a key energy producer, building more nuclear power and offshore wind than any EU country. The UK expands its electric generation capacity by an additional 59 gigawatts (GW) of nuclear power and 96 GW of offshore wind in the Core pathway. 
</li>
<li>
Abundant domestic nuclear power and offshore wind enables the UK to become a leading producer of low-carbon hydrogen. In the Core pathway, the UK becomes the second largest producer of high-temperature electrolysis and fourth largest producer of low-temperature electrolysis supported by availability of offshore wind and nuclear heat. 
</li>
<li>
The UK becomes an essential exporter of electricity and hydrogen to mainland Europe. To deliver this energy, the UK becomes the second largest constructor of new electricity transmission (39 GW of new connections to other countries in the Core pathway) and the tenth largest builder of new hydrogen pipelines (13 GW in the Core pathway up to 44 GW in constrained pathways). 
</li>
<li>
Carbon capture is used to reduce emissions from cement production and yield negative emissions in biofuel production. Captured carbon is sequestered in geologic formations. The UK stores up to 71 million tons of CO2 in geologic storage reservoirs annually by 2050. In the Core pathway, UK is the fourth largest storer of captured carbon, storing 36 million tons. 
</li>
<li>
The UK ramps up biofuel production to replace fossil fuels primarily in aviation and chemical manufacturing. By 2050, the UK becomes the sixth largest producer of biofuels, producing 6600 kilotons of oil equivalent (ktoe) in the Core pathway.
</li>
<li>
 The UK sees the second largest reduction in consumer gas demand and third largest in consumer oil demand. This is because the UK is a relatively large consumer of oil and gas among EU + UK countries today, and can leverage a diverse array of clean energy resources to displace fossil fuels by 2050.1
</li>
<li>
Electricity demand will increase by 240%. As the UK electrifies buildings, transport and parts of industry, and begins using electricity to produce hydrogen, electricity demand is modeled to increase by approximately 240% in 2050.
</li>
<li>
The UK will need to ramp up the pace of renewables deployment by as much as 3.5 times to decarbonise. From 2011 to 2020, the UK built on average 4 gigawatts of renewables a year. To meet demand, the UK will need to build 5-14 gigawatts annually (representing a 125-350% increase). 
</li>
<li>
The UK can dramatically reduce its dependence on natural gas-fired boilers for space and water heating. Modelling shows natural gas consumption for residential space heating gas boilers can reduce from 14,445 ktoe to 8,235 ktoe by 2035, and further reduce to 2,275 ktoe by 2040—a 75% reduction in this timeframe.
</li>
</ol>
<h2>Key Energy Metrics</h2>
The table below shows key energy system metrics from the Core pathway, which is the most cost-effective, feasible trajectory to net-zero. The table also shows a range for each metric. That range is generated by comparing the Core pathway to four other modelled pathways designed to evaluate specific constraints. 
The Slow Demand Transformation pathway imposes delays in electrification of surface transportation, heating, and industry. The 100% Renewables pathway relies strictly on renewables, phases out nuclear power, and prevents carbon capture and sequestration. The Limited Renewable Siting pathway restricts the deployment of wind and solar to reflect land-use and siting constraints. The Domestic Preference pathway prioritises domestic energy supplies and reduces transborder transmission lines and pipelines. 
We provide a range for each metric in the table to indicate which model results are highly sensitive to constraints, and which are consistent across all scenarios such that they represent low-regret strategies. We also show the UK’s rank in each metric relative to all EU + UK countries, to identify segments of the decarbonised energy economy where the UK has an opportunity to lead. 
<img src="//images.ctfassets.net/228txxvb8tt7/7fe1ygdt31dv5yUKL1jB9U/1beadbb7961c827b9f65f60cfc23e915/United_Kingdom_Summary_tableonly_082522.jpg" alt="United Kingdom Key Metrics from Different Pathways" width="1254" height="1126">

2022 Country Summary: United Kingdom

Country Summary: UK Republic Feature

Country Summary: United Kingdom

Czech Republic

CFE - web header 1

Annual Decarbonisation Perspective 2023

Join Carbon-Free Europe for an upcoming webinar discussion on the implications and consequences of the EU’s new 2040 Climate Targets.
Panelists will examine the potential impacts of these targets as well as how Europe will need to ensure clean infrastructure growth, technology development, financing, and equitable distribution among EU Member States in order to secure a net-zero economy.
<h3>Panelists</h3>
Moderator Ciarán Humphreys, Senior Fellow, Institute for Climate Economics Dr. Florian A. Schneider, Senior Research Advisor, Carbon-Free Europe Maja Pozvek, Government Affairs Manager, Clean Air Task Force, Europe Adriana Rodriguez, Research Associate, Climate Strategy and Partners
Tuesday, 19 March 2024 14:00-15:00 CET Zoom
<h3><a href="https://us02web.zoom.us/webinar/register/WN_r1Q-e8B5SBSvujAWzxcMLA#/registration" target="_blank" rel="noopener">Register Here</a></h3>

Florian A. Schneider

cfe webinar-01

Webinar - From Vision to Reality: Understanding and Achieving the EU's 2040 Climate Targets

Career Page Header 2023@1.25x

Carbon-Free Europe (CFE) recently convened global nuclear stakeholders at COP28 for its Nuclear for Net Zero Night, in collaboration with the Atlantic Council and Clean Air Task Force. The event strengthened relationships among some of the world’s foremost nuclear policy experts and stakeholders and offered attendees a closer look at CFE’s <a href="https://www.carbonfreeeurope.org/modelling/Carbon-Free-Europe-Annual-Decarbonization-Perspective-2023.pdf" target="_blank" rel="noopener">2023 Annual Decarbonisation Perspective</a>.
The evening served as a precursor to the World Nuclear Association’s offsite <a href="https://netzeronuclear.org/events/net-zero-nuclear-summit-2023" target="_blank" rel="noopener">Net Zero Nuclear Summit</a>, where CFE co-founder Lindsey Walter moderated a panel on unlocking financing barriers and expanding customer bases for nuclear energy. The panel includedPresident of China National Nuclear Power, Zou Zhengyu; COO of Emirates Steel Arkan, Hassan Salim Shashaa; and Idaho National Laboratory Director of Integrated Energy &amp; Storage Systems, Shannon Bragg-Sitton. 
<a title="CFE’s Net Zero for Nuclear Night at COP28" href="https://www.flickr.com/photos/thirdwaythinktank/albums/72177720313487157" data-flickr-embed="true"><img src="https://live.staticflickr.com/65535/53408884285_00babba385.jpg" alt="CFE’s Net Zero for Nuclear Night at COP28" width="640" height="480"></a>
Carbon-Free Europe engaged with an array of clean energy leaders throughout COP28, here’s a closer look at some of those conversations:
<ul>
<li>CFE co-founder Lindsey Walter spoke on the IAEA Atoms4Climate Blue Zone Pavilion panel Taking Stock of Nuclear Energy’s Role in Climate Action alongside African Commission on Nuclear Energy (AFCONE) Executive Secretary, Mr. Enobot Agboraw, State Secretary to the Swedish Minister for Climate and the Environment, Daniel Westlén, and Founding Director of Terrapraxis, Kirsty Gogan. She spoke about nuclear energy’s treatment in the IPCC Sixth Assessment Report and first Global Stocktake and the risks of leaving nuclear out of climate planning strategies. 
</li>
<li>Lindsey also participated in a private roundtable at the Global Decarbonization Accelerator Pavilion, titled Women and the Clean Energy Transition and hosted by the Business Council for Sustainable Energy in partnership with the US Department of Commerce and Atlantic Council. Participants discussed driving thought leadership and gender considerations in project development and financing. The event was moderated by Lauren Hughes, Deputy Director of the Atlantic Council’s Nuclear Energy Policy Initiative, with participation from Marisa Lago, Under Secretary of Commerce for International Trade. 
</li>
<li>Lindsey attended the Climate Leadership Council’s dinner and roundtable on clean energy trade and opportunities to build a clean transatlantic marketplace. The convening featured opening remarks from Anthony Agotha, Special Envoy for Climate and Environment Diplomacy for the European External Action Service and former member of Frans Timmermans cabinet leading on transatlantic relations. 
</li>
<li>Lindsey spoke on the Emirates Nuclear Energy Corporation and World Nuclear Association's Net Zero Nuclear Export Financing Green Zone Panel, which was specifically designed to highlight Third Way’s recommendations on export finance. She was joined by Omar Ben Halim from the US International Development Finance Corporation, who emphasized the importance of development finance and export credit agencies in supporting nuclear projects. 
</li>
<li>Lindsey moderated a panel, Building Social License for Nuclear, in the Net Zero Nuclear Blue Zone Pavilion with the President Elect of the American Nuclear Society, Lisa Marshall, and Executive VP of AtkinsRealis Nuclear Canada, Gary Rose. They discussed best practices for community engagement for new nuclear projects. 
</li>
<li>Lindsey moderated a panel, Youth and Sweden’s New Nuclear Roadmap, with the State Secretary to the Swedish Minister for Climate and the Environment, Daniel Westlén, and two youth advocates for nuclear energy. They broke down Sweden’s newly released plans to build two large nuclear reactors by 2035 and 10 others by 2045, and discussed the role of young climate activists in changing Sweden’s historic anti-nuclear stance. It wasn’t that long ago in 1980 when Sweden planned to phase out all nuclear energy, but this new nuclear roadmap is the latest in a series of wins for nuclear power in Sweden.</li>
</ul>

COP28 CFE HG

CFE’s Net Zero for Nuclear Night at COP28

On February 6, 2024 the European Commission <a href="https://ec.europa.eu/commission/presscorner/detail/en/ip_24_588" target="_blank" rel="noopener">announced</a> that it would recommend a 90% greenhouse gas emissions reduction by 2040. Carbon-Free Europe’s (CFE) energy systems <a href="https://www.carbonfreeeurope.org/modelling" target="_blank" rel="noopener">modelling</a> points to what steps and transformative investments the EU must make to reach its 2040 climate targets, as visualised in the infographic below. <a href="https://assets.ctfassets.net/228txxvb8tt7/2YhvvGthkBrF4O26Xuc1PV/0a4a15adfddf512200d6d11f247153ee/vision_to_reality_negative_90_percent.pdf" target="_blank" rel="noopener">Click here to view the full PDF. </a>
<div class="entry-image"><a href="https://assets.ctfassets.net/228txxvb8tt7/2YhvvGthkBrF4O26Xuc1PV/0a4a15adfddf512200d6d11f247153ee/vision_to_reality_negative_90_percent.pdf" target="_blank" rel="noopener"><img src="//images.ctfassets.net/228txxvb8tt7/1323qKFOv4Y9ut4gpcGZjM/3ba5fc6fb067b0c20fdfcaef26577914/negative_90_01.jpg" alt="Image Alt Text" width="2550" height="3300"></a></div>
<div class="entry-image">
<div class="entry-image">
<a href="https://assets.ctfassets.net/228txxvb8tt7/2YhvvGthkBrF4O26Xuc1PV/0a4a15adfddf512200d6d11f247153ee/vision_to_reality_negative_90_percent.pdf" target="_blank" rel="noopener"><img src="//images.ctfassets.net/228txxvb8tt7/74JPPtAqqubOrKPl0FFVFG/4156e65f22ca9c74ce2775016be3c1b3/negative_90_02.jpg" alt="Image Alt Text" width="2550" height="3300"></a> 
</div>
</div>

Infographic: How The EU Can Achieve -90% Emissions by 2040

Olivia Sherman

Graphic Designer 

shutterstock 2052065705

Vision to Reality: How the EU Can Achieve -90% Emissions by 2040

Infographic

Olivia-S-Headshot

HG shutterstock 2224421615 v3@1.5x

Blog

Carbon-Free Europe Applauds Electricity Market Design Provisional Agreement

<div class="Highlight">
<div class="content">
<h2>Overview of CFE’s Modelling Analysis</h2>
In 2022, Carbon-Free Europe (CFE) released its first energy systems modelling analysis, identifying five pathways for the EU and UK to reach their 2050 net-zero emissions commitments. Starting in 2023, CFE will update our analysis annually to capture the changing energy and policy landscapes.
The Core pathway is the least constrained, allowing countries to use all available clean energy technologies and assuming high energy efficiency and electrification levels. This is the most feasible, cost-effective pathway to net-zero. The other scenarios explore how different policy and implementation constraints impact the route to carbon neutrality. To learn more, visit <a class="c-link" href="http://www.carbonfreeeurope.org/modelling" target="_blank" rel="noopener noreferrer" data-stringify-link="http://www.carbonfreeeurope.org/modelling" data-sk="tooltip_parent">www.carbonfreeeurope.org/modelling</a>.
</div>
</div>
Due to recent energy supply constraints and electricity price volatility, there is renewed appetite to reform <a href="https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A52023PC0148&amp;qid=1679410882233" target="_blank" rel="noopener">the current EU electricity market</a> under the Green Deal Industrial Plan. Carbon-Free Europe supports an electricity market restructuring that is equitable to all clean power technologies (both firm and intermittent), allows for reliable, secure, and affordable clean energy, and embeds emerging technologies, such as long duration energy storage, in a cohesive and resilient way.
<h2>Current Renewable Integration Flaws</h2>
In Carbon-Free Europe’s modelling, market prices, both in terms of the average annual price as well as price patterns, change dramatically with the introduction of hundreds of GWs of renewable generation. The chart below shows the significant pattern of solar generation in the middle of the day progressing through 2050.
<img src="//images.ctfassets.net/228txxvb8tt7/67bDI0j640mgt8T3qZXdZw/9c7dc069f861f7a71a698ffa2d7244cc/CFE_EMD_white_paper_charts.jpg" alt="" width="2750" height="2250">
This is not a stable investment environment for long-term assets without contractual support. While energy market prices maintain their value as a signal for balancing services, they are insufficient to support renewable energy deployment. Power Purchase Agreements (PPAs) and Contracts for Differences (CFDs) encourage long-term contracting vehicles to provide cost stability to consumers and reduce excess generator profits. While these contractual vehicles may have distorting effects on price and other market signals when applied under various scenarios, PPAs and CFDs will become increasingly important in providing revenue stability for renewables.
<h2>The Significance of Load Flexibility &amp; Energy Storage</h2>
<img src="//images.ctfassets.net/228txxvb8tt7/6eddhPyepPVack5AEGFOry/d69a1a83fcfee518fee63763e18de9eb/CFE_EMD_white_paper_charts2.jpg" alt="" width="2750" height="1896">
Market mechanisms that encourage load flexibility are critical: By 2050, in CFE’s Core pathway, we see 445 GWs of electricity load from hydrogen; 175 GWs of energy from flexible electric heat production; and 75 GWs of coincident end-use load flexibility from space conditioning, water heating, and vehicles. Carbon-Free Europe, therefore, supports the Commission’s efforts to enhance the use of end-use metering data, allow for further sub-metering of customer premise electricity loads, lower the minimum energy bid size to encourage the participation of smaller customers, and expand the use of demand response methods, like peak shaving. In the absence of the participation of these loads, which we term ‘latent storage’ (i.e., storage that already exists in the provision of an energy service), by 2050, we would see a need for an additional 130 GWs of energy storage to balance renewables and avoid peak impacts on the transmission and distribution system. Many of these loads can be optimized both temporally as well as spatially (EV charging, electrolysis, etc.), and information provided by Transmission System Operators (TSOs) in terms of current anticipated grid conditions will be important for their efficient deployment. Even with electricity load flexibility, we see the necessity to deploy hundreds of GWs of storage over the next three decades. However, in order to encourage installed durations (i.e., the amount of time storage can discharge continuously) adequate to meet long-term capacity needs, it’s an open question whether market revenues will be enough, as much of the installed capacity will only be discharged for a few hours every year.
<img src="//images.ctfassets.net/228txxvb8tt7/4gdWgMr1PxgQF6INnw8bDb/ecc6f394ff6c048561a42a5134d1c102/CFE_EMD_white_paper_charts3.jpg" alt="" width="2750" height="1604">
Carbon-Free Europe welcomes the European Commission’s proposal to reform the EU’s electricity market design to align with the EU’s climate commitments, and to protect consumers, CFE therefore, provisionally supports the idea of a low-carbon capacity mechanism, with some caveats. First, much of the existing capacity payment support in Europe is provided to fossil and nuclear resources, with unlimited ability to sustain their energy production for any duration of time. Instead, co-legislators should consider that capacity remuneration will need to be differentiated by resource capabilities to procure an efficient set of flexibility resources. Second, we see an important role for thermal generators as they transition to backing up renewables and are called on only in the event of sustained low renewable outputs. This limited role naturally limits their emissions impacts. Market mechanisms must adequately compensate thermal generators for this continued role as backup generators, even as they run less and less over time and earn limited (and unpredictable) revenue in the electricity markets. If they are not adequately compensated in the electricity markets in the long-term and are not compensated for their capacity provision, this could significantly increase the costs of providing reliable electricity service in a high renewables environment. We see the need for over 500 GW of non-nuclear dispatchable thermal generation running only ~5% of the year in order to provide reliability in an electrified, highly renewable world.
<img src="//images.ctfassets.net/228txxvb8tt7/1boIEOTVTTxucbvi1kBIKk/fa7455a0279f4bd0ba7eb2d2e6f83824/CFE_EMD_white_paper_charts4.jpg" alt="" width="2750" height="1792">
<h2>Prioritizing Energy Consumer Protection</h2>
Carbon-Free Europe also supports some of the targeted energy consumer protection proposals in the EU including requiring the transparent appointment of last resort suppliers and improving the process for consumers who must be switched to these suppliers, clarifying the conditions and procedures under which an emergency can declare price support intervention, and protecting the EU’s most vulnerable citizens from disconnection—an imperative that becomes even more important as the EU transitions to a highly electrified future with over 50% of end-use energy satisfied by electricity.
<h2>Conclusion</h2>
As the EU institutions work to negotiate and finalize the Electricity Market Design reform as part of the Green Deal Industrial Plan, CFE stresses that the final agreement must accelerate the deployment of clean energy technologies in an equitable way. This should include a detailed plan on allowing flexibility via direct access to electricity markets, and reliability via the structural acknowledgement of capacity needs at certain durations.

Key Principles to Consider When Redesigning the EU’s Electricity Market

White Paper

<div class="Highlight">
<div class="content">
<h3>Overview of Modelling Analysis</h3>
As part of Carbon-Free Europe's (CFE) first analysis in 2022, CFE modelled five potential pathways for the EU and UK to achieve net-zero emissions by 2050. The Core pathway is the least constrained, allowing countries to use all available clean energy technologies and assuming high levels of energy efficiency and electrification. This is the most feasible, cost-effective pathway to net-zero. The other four pathways are designed to explore how different policy and implementation constraints impact the route to carbon-neutrality. To learn more about the other pathways and our full 2022 analysis, visit <a href="http://www.carbonfreeeurope.org" target="_blank" rel="noopener">www.carbonfreeeurope.org/modelling/archive/2022</a>.
</div>
</div>
<h2>Today’s Energy System</h2>
In 2019, 77% of Germany’s energy supply came from fossil fuels (18% from coal, 25% from gas, and 34% from oil). Nuclear energy supplied 7% and renewable energy sources, including biomass, provided 15%. 32% of Germany’s emissions in 2019 came from the energy sector (primarily electricity generation), 31% from industry, 20% from transport, and 16% from residential and commercial buildings. 2019 is a good baseline year to understand Europe’s long-term energy demand and supply since impacts from the pandemic have heavily skewed data from 2020-2021. 2019 is also the most recent year for which Eurostat data is available.
<h2>Key Takeaways: The Core Pathway in 2050</h2>
<ol class="boldList">
<li>
Germany’s most feasible and cost-effective pathway to net-zero is the Core pathway, which includes the use of carbon capture and every available clean energy technology except for nuclear power. In this pathway, by 2050, Germany’s estimated electricity mix is 34% wind, 32% solar, 20% geothermal, and 10% gas. The Core pathway requires 845 billion Euros of investment through 2050 in key technologies including electricity generation and storage, clean fuels, direct air capture, and heat pumps. Our modelling excludes nuclear power from Germany’s future domestic energy supply based on the country’s current nuclear energy policy.
</li>
<li>
By 2050 in the Core pathway, Germany adds 214 GW of renewable electricity capacity. This includes 148 GW of solar photovoltaic energy, the 3rd most of any EU + UK country; 17 GW of offshore wind and 25 GW of onshore wind through 2050, the 7th and 8th most (respectively); and 24 GW of geothermal energy. Germany is the only EU + UK country to add more than 1 GW of geothermal capacity in the Core scenario.
</li>
<li>
Germany adds up to 53 GW of battery storage, the most of any EU + UK country. Germany adds at least 40 GW of battery storage in all scenarios except when nuclear power is entirely phased out across Europe (in the 100% Renewables pathway). Under the constraints of the 100% Renewables pathway, Germany has less access to electricity imports and builds more geothermal, reducing demand for energy storage to 24 GW. This happens despite the rest of Europe adding 50% more battery storage capacity compared to the Core scenario. 
</li>
<li>
Germany is a significant importer of electricity in 2050, building 63 GW of new electricity transmission by 2050. This transmission addition is the largest of any EU + UK country and more than triples existing import/export lines. 
</li>
<li>
Germany’s decarbonised economy consumes large quantities of hydrogen, most of which is imported via new pipelines. Germany builds 23 GW of new hydrogen pipelines by 2050, the 6th most among EU + UK countries. Germany produces 5 kilotonnes of hydrogen annually by 2050, the 27th most among EU + UK countries. All hydrogen produced domestically uses low-temperature electrolysis, as zero-carbon high-temperature electrolysis requires nuclear heat. 
</li>
<li>
By 2050, Germany sees the largest reduction in end-use gas and oil demand of any EU + UK country.1 This large reduction in demand is driven primarily by Germany’s high oil and gas demand in 2019.
</li>
<li>
In the Core pathway, Germany is a large producer of biofuels and e-fuels, producing nearly 14,000 and over 2,000 kilotons of oil equivalent (ktoe), respectively. Germany is the 2nd largest producer of biofuels and the 8th largest producer of e-fuels.
</li>
<li>
By 2050, Germany sequesters 59 million tons of CO2 annually in geologic formations. This is the most geologic sequestration of any EU + UK country. The sequestered CO2 is captured from production of biofuels and cement.
</li>
<li>
Germany’s high historical pace of renewables deployment will need to be sustained through 2050 to reach net-zero. From 2011 to 2020, Germany built on average 7 gigawatts of renewable energy per year. To meet demand, Germany will need to continue to build between 5 and 7 gigawatts annually through 2050.
</li>
</ol>
<h2>Key Energy Metrics</h2>
The table below shows key energy system metrics from the Core pathway, which is the most cost-effective, feasible trajectory to net-zero. The table also shows a range for each metric. That range is generated by comparing the Core pathway to four other modelled pathways designed to evaluate specific constraints. 
The Slow Demand Transformation pathway imposes delays in electrification of surface transportation, heating, and industry. The 100% Renewables pathway relies strictly on renewables, phases out nuclear power, and prevents carbon capture and sequestration. The Limited Renewable Siting pathway restricts the deployment of wind and solar to reflect land-use and siting constraints. The Domestic Preference pathway prioritises domestic energy supplies and reduces transborder transmission lines and pipelines. 
We provide a range for each metric in the table to indicate which model results are highly sensitive to constraints, and which are consistent across all scenarios such that they represent low-regret strategies. We also show Germany’s rank in each metric relative to all EU + UK countries, to identify segments of the decarbonised energy economy where Germany has an opportunity to lead.
<img src="//images.ctfassets.net/228txxvb8tt7/2Ta5IwUvQJhPAgeDGJQxei/fe284b83f276a51c6793e9dcd26c2815/Germany_Summary_TableOnly_v2.jpg" width="1149" height="1013">

2022 Country Summary: Germany

Country Summary: Germany Feature

Country Summary: Germany

<div class="Highlight">
<div class="content">
<h2>Overview of Modelling Analysis</h2>
As part of Carbon-Free Europe's (CFE) first analysis in 2022, CFE modelled five potential pathways for the EU and UK to achieve net-zero emissions by 2050.  The Core pathway is the least constrained, allowing countries to use all available clean energy technologies and assuming high levels of energy efficiency and electrification. This is the most feasible, cost-effective pathway to net-zero.  The other four pathways are designed to explore how different policy and implementation constraints impact the route to carbon-neutrality. To learn more about the other pathways and our full 2022 analysis, visit <a href="http://www.carbonfreeeurope.org">www.carbonfreeeurope.org/modelling/archive/2022</a>.
</div>
</div>
<h2>Today's Energy System</h2>
In 2019, 73% of Romania’s energy supply came from fossil fuels (15% from coal, 28% from gas, and 29% from oil). Nuclear energy supplied 9% and renewable energy sources, including biomass, provided 18%. When looking at Romania’s emissions that same year, 26% came from the energy sector (primarily electricity generation), 41% from industry, 17% from transport, and 11% from residential and commercial buildings. 2019 is a good baseline year to understand Europe’s long-term energy demand and supply since impacts from the pandemic have heavily skewed data from 2020-2021. 2019 is also the most recent year for which Eurostat data is available.
<h2>Key Takeaways: The Core Pathway in 2050</h2>
<ol class="boldList">
<li>
Romania’s most feasible and cost-effective pathway to net-zero is the Core pathway, which uses every available clean energy technology, including nuclear power and carbon capture. In this pathway, Romania’s estimated electricity mix by 2050 is 12% wind, 21% solar, 59% nuclear, 9% existing hydropower, and less than 1% gas. The Core pathway requires €238 billion of investment through 2050 in key technologies, including electricity generation and storage, clean fuels, direct air capture, and heat pumps.</li>
<li>
In a carbon-free economy, Romania becomes a key nuclear energy producer, building the sixth most nuclear power of any EU + UK country and exporting electricity to its neighbors. Romania adds 12 gigawatts (GW) of new nuclear capacity by 2050 in the Core pathway.</li>
<li>
By 2050 in the Core pathway, Romania adds the 11th most solar and the 12th most offshore wind of any EU + UK country. Romania adds 18 GW of new solar photovoltaic capacity, 3 GW of offshore wind capacity, and 4 GW of onshore wind.</li>
<li>
Romania adds 9 GW of electric transmission by 2050 in the Core pathway. Even when transborder electric transmission is constrained (in the Domestic Preference pathway), Romania builds 5 GW of new transmission, more than double its 2 GW of existing transmission capacity in 2019.</li>
<li>
Romania becomes the 7th largest producer of biofuels in the EU and UK, leveraging the country’s large biomass resource (the 5th largest among EU + UK countries). In the Core pathway, Romania produces 6,600 kilotonnes of oil equivalent.</li>
<li>
Romania leads the EU + UK in hydrogen production via bioenergy with carbon capture and storage (BECCS), producing 600 kilotonnes annually in 2050 in the Core pathway. In some constrained scenarios, high demand for drop-in fuels leads Romania to divert biomass to synthetic hydrocarbons rather than hydrogen.</li>
<li>
By 2050, Romania sequesters 38 million tons of CO2 annually, the 4th most of any EU + UK country. The sequestered CO2 is captured from biofuel and cement production and from direct air capture.</li>
<li>
Romania will need to increase the rate of renewables deployment over the coming decades to reach net-zero by 2050. From 2011 to 2020, Romania built on average 400 MW of renewable energy per year. To meet demand, Romania will need to build between 600 MW to 3 GW annually through 2050, a 1.5 to 8x increase.</li>
</ol>
<h2>Key Energy Metrics</h2>
The table below shows key energy system metrics from the Core pathway, which is the most cost-effective, feasible trajectory to net-zero. The table also shows a range for each metric. That range is generated by comparing the Core pathway to four other modelled pathways designed to evaluate specific constraints.
The Slow Demand Transformation pathway imposes delays in the electrification of surface transportation, heating, and industry. The 100% Renewables pathway relies strictly on renewables, phases out nuclear power, and prevents carbon capture and sequestration. The Limited Renewable Siting pathway restricts the deployment of wind and solar to reflect land-use and siting constraints. The Domestic Preference pathway prioritises domestic energy supplies and reduces transborder transmission lines and pipelines.
We provide a range for each metric in the table to indicate which model results are highly sensitive to constraints and which are consistent across all scenarios such that they represent low-regret strategies. We also show Romania’s rank in each metric relative to all EU + UK countries to identify segments of the decarbonised energy economy where Romania has an opportunity to lead.
<img src="//images.ctfassets.net/228txxvb8tt7/78vHwB4DdBcIB77tdsvFdm/ba21dae9159280992b56acb8d9e0fb6c/Romania_Summary_TableOnly.jpg" alt="" width="1275" height="1206">

2022 Country Summary: Romania

Country Summary Romania

<div class="Highlight">
<div class="content">
<h2>Overview of Modelling Analysis</h2>
As part of Carbon-Free Europe's (CFE) first analysis in 2022, CFE modelled five potential pathways for the EU and UK to achieve net-zero emissions by 2050. The Core pathway is the least constrained, allowing countries to use all available clean energy technologies and assuming high levels of energy efficiency and electrification. This is the most feasible, cost-effective pathway to net-zero. The other four pathways are designed to explore how different policy and implementation constraints impact the route to carbon-neutrality. To learn more about the other pathways and our full 2022 analysis, visit <a href="http://www.carbonfreeeurope.org">www.carbonfreeeurope.org/modelling/archive/2022</a>.
</div>
</div>
<h2>Today’s Energy System</h2>
In 2019, 90% of the Netherlands’ energy supply came from fossil fuels (9% from coal, 45% from gas, and 36% from oil). Nuclear energy supplied 1%, and renewable energy sources, including biomass, provided 8%. When looking at the Netherlands’ emissions that same year, 32% came from the energy sector (primarily electricity generation), 30% from industry, 17% from transport, and 19% from residential and commercial buildings. 2019 is a good baseline year to understand Europe’s long-term energy demand and supply since impacts from the pandemic have heavily skewed data from 2020-2021. 2019 is also the most recent year for which Eurostat data is available.
<h2>Key Takeaways: The Core Pathway in 2050</h2>
<ol class="boldList">
<li>
The Netherlands’ most feasible and cost-effective pathway to net-zero is the Core pathway, which uses every available clean energy technology, including nuclear power and carbon capture. In this pathway, by 2050, the Netherlands’ estimated electricity mix is 80% wind, 10% nuclear, 7% solar, and 3% gas. The Core pathway requires €300 billion of investment through 2050 in key technologies, including electricity generation and storage, clean fuels, direct air capture, and heat pumps.</li>
<li>
By 2050 in the Core pathway, the Netherlands adds the 2nd largest offshore wind capacity of any EU + UK country. Our model estimates that the Netherlands adds 66 GW of new offshore wind capacity. When non-renewable energy sources are not allowed (in the 100% Renewables pathway), new offshore wind capacity is over 100 GW in 2050.</li>
<li>
The Netherlands has the 6th largest battery storage addition made by any EU + UK country. The Netherlands complements its increased intermittent wind generation with 11 GW of new battery storage in the Core pathway.</li>
<li>
The Netherlands builds the 7th most new nuclear of any EU + UK country. The Netherlands adds 8 GW of new nuclear electric capacity by 2050 and maintains its existing 500 MW of nuclear generation, which remains in service through 2050.</li>
<li>
The Netherlands builds 31 GW of new electric transmission capacity, the 5th most of any EU + UK country. However, if transborder transmission is constrained, as seen in the Domestic Preference pathway, new transmission capacity is limited to 5 GW.</li>
<li>
The Netherlands becomes the largest producer of e-fuels among the EU + UK countries, producing 9,700 kilotonnes of oil equivalent (ktoe) in 2050 in the Core scenario. The Netherlands produces approximately 20% of total e-fuels in 2050 in the EU + UK. This e-fuel production is almost entirely ammonia to meet shipping fuel demand.</li>
<li>
In the Core pathway, the Netherlands adds 35 GW of hydrogen pipelines by 2050, the 2nd most of any EU + UK country. The Netherlands is not a leading producer of hydrogen, ranking 16th of all EU + UK countries in total hydrogen production. However, its location positions the Netherlands to import hydrogen from the UK and Norway, both large hydrogen producers, and transport it to demand centers in continental Europe.</li>
<li>
The Netherlands will need to increase the rate of renewables deployment over the coming decades to reach net-zero by 2050. From 2011 to 2020, the Netherlands built an average of 1.7 GW of renewable energy per year. To meet demand, the country will need to build between 2 to 4 GW annually through 2050, increasing the historic build rate by a factor of 1 to 2.5x.</li>
</ol>
<h2>Key Energy Metrics</h2>
The table below shows key energy system metrics from the Core pathway, which is the most cost-effective, feasible trajectory to net-zero. The table also shows a range for each metric. That range is generated by comparing the Core pathway to four other modelled pathways designed to evaluate specific constraints.
The Slow Demand Transformation pathway imposes delays in electrification of surface transportation, heating, and industry. The 100% Renewables pathway relies strictly on renewables, phases out nuclear power, and prevents carbon capture and sequestration. The Limited Renewable Siting pathway restricts the deployment of wind and solar to reflect land-use and siting constraints. The Domestic Preference pathway prioritises domestic energy supplies and reduces transborder transmission lines and pipelines.
We provide a range for each metric in the table to indicate which model results are highly sensitive to constraints, and which are consistent across all scenarios such that they represent low-regret strategies. We also show the Netherlands’ rank in each metric relative to all EU + UK countries, to identify segments of the decarbonised energy economy where the country has an opportunity to lead.
<img src="//images.ctfassets.net/228txxvb8tt7/5eWKJ0HLJFwVqQz6HVgnZv/7d08f86a31091c96945a8ae642500264/Netherlands_Summary_Table.jpg" alt="" width="1275" height="1144">

2022 Country Summary: Netherlands

Country Summary Netherlands v2

Country Summary: Netherlands

<div class="Highlight">
<div class="content">
<h2>Overview of Modelling Analysis</h2>
As part of Carbon-Free Europe's (CFE) first analysis in 2022, CFE modelled five potential pathways for the EU and UK to achieve net-zero emissions by 2050. The Core pathway is the least constrained, allowing countries to use all available clean energy technologies and assuming high levels of energy efficiency and electrification. This is the most feasible, cost-effective pathway to net-zero.  The other four pathways are designed to explore how different policy and implementation constraints impact the route to carbon-neutrality. To learn more about the other pathways and our full 2022 analysis, visit <a href="http://www.carbonfreeeurope.org" target="_blank" rel="noopener">www.carbonfreeeurope.org/modelling/archive/2022</a>.
</div>
</div>
<h2>Today’s Energy System</h2>
In 2019, 89% of Poland’s energy supply came from fossil fuels (43% from coal, 17% from gas, and 30% from oil). Renewable energy sources, including biomass, provided 9%. When looking at Poland’s emissions that same year, 44% came from the energy sector (primarily electricity generation), 23% from industry, 17% from transport, and 13% from residential and commercial buildings. 2019 is a good baseline year to understand Europe’s long-term energy demand and supply since impacts from the pandemic have heavily skewed data from 2020-2021. 2019 is also the most recent year for which Eurostat data is available.
<h2>Key Takeaways: The Core Pathway in 2050</h2>
<ol class="boldList">
<li>
Poland’s most feasible and cost-effective pathway to net-zero is the Core pathway, which uses every available clean energy technology, including nuclear power and carbon capture. In this pathway, Poland’s estimated electricity mix by 2050 is 42% wind, 42% nuclear, 15% solar, and less than 1% gas. The Core pathway requires €490 billion of investment through 2050 in key technologies, including electricity generation and storage, clean fuels, direct air capture, and heat pumps.</li>
<li>
By 2050 in the Core pathway, Poland adds the 4th most wind and the 5th most solar of any EU + UK country. Our model estimates that Poland will need to add 29 GW of new offshore wind capacity, 30 GW of new onshore wind, and 53 GW of new solar to reach net-zero.</li>
<li>
Poland adds 31 GW of new nuclear electric capacity, the 2nd most of any EU + UK country. Poland does not have any nuclear power plants operating today, but it becomes an important exporter of nuclear power to neighboring countries by 2050.</li>
<li>
Poland is the 5th largest hydrogen producer via high-temperature electrolysis among the EU + UK countries. By leveraging its nuclear energy and renewable potential, Poland annually produces 644 kilotonnes of hydrogen via high temperature electrolysis by 2050. Poland also produces an additional 245 kilotonnes of hydrogen with low temperature electrolysis, the 11th most of any EU + UK country.</li>
<li>
In the Core pathway, Poland ranks 6th for new transmission capacity and 7th for new hydrogen pipelines among the EU + UK region. Poland builds 25 GW of new electric transmission and 21 GW of new hydrogen pipelines to neighboring countries. Much of Poland’s additional electric transmission and pipeline capacity exports to Germany. Its largest hydrogen pipeline imports hydrogen from Lithuania, another large producer.</li>
<li>
Poland produces over 10,000 ktoe of biofuel, the 4th most among EU + UK countries. Poland’s biofuels industry leverages its supply of biomass, the 3rd largest of any EU + UK country. The country’s biofuel production is primarily dedicated to liquid hydrocarbon fuels in the Core pathway.</li>
<li>
Poland provides 12 million tons of geologic CO2 sequestration annually in 2050, the 7th most among EU + UK countries. CO2 is captured in Poland almost entirely from cement production in the Core pathway with a limited amount also captured from biofuels production.</li>
</ol>
<h2>Key Energy Metrics</h2>
The table below shows key energy system metrics from the Core pathway, which is the most cost-effective, feasible trajectory to net-zero. The table also shows a range for each metric. That range is generated by comparing the Core pathway to four other modelled pathways designed to evaluate specific constraints.
The Slow Demand Transformation pathway imposes delays in electrification of surface transportation, heating, and industry. The 100% Renewables pathway relies strictly on renewables, phases out nuclear power, and prevents carbon capture and sequestration. The Limited Renewable Siting pathway restricts the deployment of wind and solar to reflect land-use and siting constraints. The Domestic Preference pathway prioritises domestic energy supplies and reduces transborder transmission lines and pipelines.
We provide a range for each metric in the table to indicate which model results are highly sensitive to constraints, and which are consistent across all scenarios such that they represent low-regret strategies. We also show Poland’s rank in each metric relative to all EU + UK countries, to identify segments of the decarbonised energy economy where Poland has an opportunity to lead.
<img src="//images.ctfassets.net/228txxvb8tt7/4ARrsp6S7A1kSzS66CMTY3/6e6c12ee0096176100293d9b3329dd10/Poland_Summary_Table.jpg" alt="" width="1275" height="1125">

2022 Country Summary: Poland

Country Summary Poland

<div class="Highlight">
<div class="content">
<h2>Takeaways</h2>
<ul>
<li>The NZIA should be designed and implemented in a way that strengthens the EU’s strategic autonomy through a holistic energy technology and supply chain approach, without neglecting the fundamental role that cooperation and international trade play in the rush to accelerate the green transition.</li>
<li>Recognizing that CCU and Nuclear have a fundamental role to play both when it comes to the achievement of the EU’s climate objectives and for our strategic domestic autonomy is a key step into making the NZIA a successful industrial policy.</li>
<li>CCU and Nuclear comply with all the three criteria identified by the Act in order to be considered a strategic net-zero technology.</li>
<li>According to CFE’s Net-Zero Outlook 2023:
<ul>
<li>CCU could contribute up to 150 Mt of CO2 reductions per year.</li>
<li>Nuclear could contribute up to 36% of Europe’s electricity and nuclear derived heat could provide 50% of overall primary energy by 2050.</li>
</ul>
</li>
</ul>
</div>
</div>
The Net-Zero Industry Act (NZIA), published by the European Commission on March 16th, doesn’t include Carbon Capture and Utilization (CCU) nor nuclear as part of the Strategic Net-Zero technologies. This decision comes as a surprise. These energy technologies are increasingly important in the long term, as the EU is transitioning away from fossil fuels while maximizing its clean energy manufacturing.
As part of the Green Deal Industrial Plan, the NZIA is envisioned as a regulatory framework to drive industrial decarbonization in the EU, to serve two main objectives: reach the EU’s 2030 and 2050 targets and strengthen the EU’s domestic supply chain of net- zero technologies1. The Act, identifies Strategic Net-Zero technologies that will benefit from special treatment in terms of permitting process, prioritized judicial status and access to funding. To be considered as such, these technologies need to be compliant with 3 criteria2:
<ol>
<li>the technology readiness level of strategic technologies needs to fall under technology readiness level (TRL) 8. This criterion is the same required by article 3 which identifies the net-zero technologies (i.e. also CCU and nuclear);</li>
<li>they need to contribute to decarbonization and competitiveness, which includes those net-zero technologies that will deliver a significant contribution of reducing GHG by at least 55% relative to 1990 levels; and</li>
<li>they need to increase the manufacturing capacity and supply chain resiliency, which is intended to identify those technologies that will strengthen the security of supply chains.</li>
</ol>
As per the Annex of the Act3, neither CCU nor nuclear made it in the final text, and are therefore not considered Strategic. The Commission does however recognize that CCU and nuclear are compliant with the first criteria. Art. 3 specifically mentions SMRs, advanced reactors and CCU as net-zero technologies, having reached a TRL of at least 84. So, out of the three criteria required to be identified as Strategic, the Commission recognized that CCU and nuclear are compliant with only one. However, CCU and nuclear are compliant with all three criteria and should therefore be include in the Annex.
It is fundamental that the EU is not overly dependent on the imports of clean technologies – especially from one single country or unreliable partners. The NZIA should therefore, be designed and implemented in a way that strengthens the EU strategic autonomy through a holistic energy technology and supply chain approach, without neglecting the fundamental role that cooperation and international trade play in the rush to accelerate the green transition. Transforming the NZIA into a comprehensive yet granular industrial strategy, recognizing the fundamental role that energy technologies can play in the long-term while strengthening the manufacturing capacity of segments of the supply chains when representing a valuable strategic option, is what EU institutions need to work on in the months to come.
Recognizing that CCU and nuclear play an important part in the transition both for the achievement of the EU’s climate targets and for the strengthening of our domestic strategic autonomy, it’s a key step into making the NZIA a successful industrial policy.
<h2>The Case for CCU</h2>
Technology Readiness Level: as recognized and stated by the IEA5, CCUS have different maturity when it comes to the different technologies available, several are already considered mature and could be scaled up quickly while others are not.
There are several CCU projects in Europe that today have reached a TRL level of 8, some have even reached a TRL of 9, so higher than the threshold required by the Commission’s proposal to be considered a Strategic Net-Zero technology. The AGGREGACO26 for example, or the Power to Fuel – FlagshipONE7 project in Sweden.
Contribution to Decarbonization: In its 6 Assessment report8, the United Nations’ Intergovernmental Panel on Climate Change (IPCC) included CCU as one of the important technologies to reduce CO2 emissions. Also, in its assessment of the CCU and CCS technologies9, the International Energy Agency (IEA) stresses that “around 230 Mt of CO2 are currently used each year, mainly in direct use pathways in the fertiliser industry for urea manufacturing (~130 Mt) and for enhanced oil recovery (~80 Mt)”. The Agency also underlines that tackling emissions from today’s power stations and industrial plants (by using CCU technologies to retrofit existing power and industrial plants – in particular in hard-to-abate sectors such as cement or steel production) will need to be central to the global clean energy transition. In addition, there are many new applications which may use captured CO2 such as CO2-based synthetic fuels or chemical and building aggregates. According to the IEA, around 5 Mt CO2 per year by 2030 could be captured and used for the production of these synthetic fuels, which will become more present in the coming years also as a way to decarbonise the EU transport sector. Furthermore, CFE's Net-Zero Outlook 202310 shows that CCU could contribute up to 150 Mt of CO2  reductions per year across the EU and UK. This underscores the important role CCU could play in decarbonisation - like as a feedstock for zero carbon liquid fuels - most notably for hard to decarbonise sectors.
<div class="entry-image entry-image-offset"><img src="//images.ctfassets.net/228txxvb8tt7/2QvWieM2qLcGBZujAYAr7p/031452e82f88512f3626d6ce0c07cb3e/EU_Maximizing_Figure_1.jpg" alt="Image Alt Text" width="2242" height="1240"></div>
Security of Supply Risks: According to the IEA11, using CCU and CCS can enable the production of the least-cost low-carbon hydrogen. The European Commission – in its REPowerEU communication12 – sees hydrogen production and consumption as one of the key elements of the EU’s energy security. Low-carbon hydrogen (produced among others using CCU) will have a significant role to play in achieving this objective. Furthermore, thanks to CCU technologies, captured carbon can be reused for various applications (such as feedstock to produce fuels and chemicals), CCU can contribute to the EU economy’s resilience and circularity and making it more self-sufficient (reusing carbon emissions that cannot be avoided).
<h2>The Case for Nuclear</h2>
Technology Readiness Level: Based on the IEA’s assessment, similar to the treatment of CCUS, nuclear energy’s technology readiness level depends on the specific types of nuclear reactors that are being considered. For example, large-scale reactors – currently in operation in many EU Member States and playing an important part in their decarbonisation plans – are considered by the IEA to be at the TRL level of 10-11 – therefore much higher than the threshold suggested by the Commission in its proposal (level 8). Other nuclear reactors are assessed by the IEA at the TRL level of around 8: (a) light water reactor-based small modular reactor – level 6-9, (b) high-temperature reactor and very high-temperature reactor – level 7-8, (c) sodium-cooled fast reactor – level 8-9.
Contribution to Decarbonisation: According to the IPCC, holding a global average temperature increase to 1.5℃ requires a doubling of global nuclear energy generation by 205013. Additionally, a report issued by the IEA and the OECD NEA titled “Projected Costs of Generating Electricity 2020”14 confirms that “nuclear energy remains the dispatchable low-carbon technology with the lowest expected costs in 2025”. According to Carbon-Free Europe’s Annual Net-Zero Outlook 2023, with technological innovation, nuclear energy could contribute up to 36% of Europe’s electricity and nuclear derived heat could provide 50% of overall primary energy by 2050.
<div class="entry-image">
<div class="entry-image"><img src="//images.ctfassets.net/228txxvb8tt7/3zzd3GehMz2oTyFDRX6BzP/5839d84f68d00c27a11e0834653df1d3/EU_Maximizing_Figure_2.jpg" alt="Image Alt Text" width="1888" height="1281"></div>
</div>
Security of supply risks: nuclear energy contributes to ensuring energy security and decreasing dependence on importing fossil fuels. As assessed by the IEA in its report “Nuclear power and secure energy transitions: From today’s challenges to tomorrow’s clean energy systems”15, nuclear energy “can help ensure secure, diverse, low-emissions electricity systems”.
<h2>Conclusion</h2>
The NZIA should be designed in a way that supports the achievement of two fundamental purposes: reaching 2030 and 2050 targets and strengthening the manufacturing capacity of the EU.  A long-term industrial plan that strengthens domestic supply chain resiliency and lessens dependencies from third countries is a welcome policy. However, cooperation and international trade are fundamental in order to reach the EU’s climate targets. Domestic industrial policies and strategic cooperation need to be pursued in tandem. The NZIA should not aim at replacing imports from reliable trading partners, rather it should strengthen the supply chain resiliency of every fundamental clean energy technology needed for the EU to reach its climate targets, this includes CCU and nuclear.<a href="#_ednref1" name="_edn1"></a>

Elevating CCU and Nuclear in the Net-Zero Industry Act

EU Maximizing HG

<h2>Overview</h2>
In March 2022, Carbon-Free Europe released our <a href="https://www.carbonfreeeurope.org/modeling" target="_blank" rel="noopener">original analysis</a> of five different pathways for the EU and UK to reach net-zero emissions by 2050. Our results showed crucial steps Europe must take over the next three decades to implement credible trajectories to carbon neutrality. The analysis reinforced that the feasibility of reaching emissions goals, both for individual countries and the EU as a whole, is greater when net-zero pathways incorporate a wider range of clean technology options. Increased optionality reduces risk and makes it more likely that clean energy will be cost-effective and net-zero goals can actually be achieved.
Nuclear energy emerged in our analysis as an important zero-carbon technology that, when allowed in a net-zero pathway, played a significant role in decarbonizing the power sector and providing heat for hydrogen production. Though we used a single cost assumption for advanced nuclear reactors in the Carbon-Free Europe scenarios, derived from the MIT Energy Initiative study “The Future of Nuclear Energy in a Carbon-Constrained World”, the future cost of new nuclear energy in Europe is highly uncertain. Because advanced nuclear reactor technologies have not yet been demonstrated at scale, it’s difficult to anticipate their eventual cost—and their cost can likely be influenced by continued investment in R&amp;D and early technology deployment. How much nuclear energy might be economically deployed in Europe if significant reactor cost reductions can be achieved through 2050? And what’s the potential for lower-cost nuclear reactors to reduce the total cost of meeting Europe’s climate targets?
This sensitivity analysis looks to answer those questions by evaluating how the cost of advanced nuclear reactors influences their economic deployment in Europe. We evaluated the various roles nuclear energy can play in a net-zero European energy system at different reactor cost levels. Our results indicate that under the assumptions used in Carbon-Free Europe’s Core scenario, there is an inflection point for nuclear reactor deployment when nuclear electricity costs reach €50/megawatt hour-electric (MWhe)1: at costs below this threshold, nuclear can economically provide a meaningful share of Europe’s total electricity generation and hydrogen production, reducing total annual energy system costs by billions of Euros in 2050. This potential upside warrants continued effort from the public and private sectors to drive down costs of advanced nuclear via technology improvements, economies of scale, and improved financing mechanisms.
<h2>Topline Takeaways</h2>
<ol class="boldList">
<li>
Deployment of nuclear energy increases significantly when reactor costs drop below €50 per megawatt hour-electric. Economic deployment of nuclear reactors increases dramatically in our model results when reactor costs drop below €2,000 per kilowatt-thermal (kWth), corresponding to €50/MWhe nuclear electricity production and €20/MWhth nuclear heat. The total capacity of advanced nuclear reactors deployed in the EU and UK in 2050 jumps from 50 gigawatts-thermal (GWth) to 225 GWth when reactor costs decline from €2,000/kWth to €1,665/kWth. Our modeling indicates very little economic deployment of nuclear if the levelized price of nuclear electricity exceeds €60/MWh.</li>
<li>
Even with higher reactor costs, nuclear remains competitive in direct heat applications. At reactor costs above €2,000/kWth, most nuclear energy is used in direct heat applications (primarily high-temperature hydrogen electrolysis), with a smaller portion used to produce electricity. The large step up in deployed reactor capacity when costs reach €1,665/kWth is largely driven by increased cost-competitiveness of nuclear electricity.</li>
<li>
At baseline reactor costs, all countries where nuclear is allowed deploy some nuclear capacity. At a reactor cost of €1,665/kWth, every country where our analysis allows new nuclear construction adds some advanced reactor capacity by 2050. The degree of nuclear deployment at the country level depends on competition with other sources of zero-carbon electricity: countries with higher-quality renewable resources deploy less nuclear energy than those with limited renewable energy endowment. </li>
<li>
Lower reactor costs result in significant energy system costs savings for both the EU and UK. Reducing the cost of nuclear reactors from €3,000/kWth to our baseline cost of €1,665/kWth reduces total EU and UK energy system costs by over €5B annually in 2050. Further reducing the cost to €1,000/kWth reduces 2050 system costs by over €18B. These annual cost savings can be weighed against the R&amp;D and early-stage deployment investments needed to achieve said reductions.</li>
<li>
Renewables build-out in Europe remains robust even in low nuclear cost scenarios. Some of the cost savings in the low nuclear cost scenario result from avoided renewable power investment. In our modelling, when nuclear reactors cost €1,000/kWth, total new renewable capacity needed in the EU and UK is reduced by 400 GW relative to the €3,000/kWth scenario. This reduction in renewable buildout doesn’t take effect until 2040, suggesting that even if advanced nuclear costs decline significantly, rapid buildout of renewable power in the 2020s and 2030s is still a no-regrets action in Europe.     </li>
<li>
In all reactor cost scenarios, nuclear energy plays a major role in Europe’s decarbonised energy system. In our analysis, nuclear reactors, including existing facilities, generate 17 to 28% of EU and UK electricity in 2050, relative to 25% today. High-temperature electrolysis with nuclear heat produces 20% to 60% of all hydrogen.</li>
<li>
Additional real-world constraints could increase the need for nuclear energy to meet climate goals. All the results presented here correspond to Carbon-Free Europe’s Core scenario, which is the least-constrained scenario we evaluated. Real-world policy and implementation constraints on the path to net-zero could further increase the value of nuclear energy.  </li>
</ol>
<h2>Introduction</h2>
Because advanced nuclear technologies have not yet been deployed at scale, but are expected to dominate new nuclear reactor deployment in the coming decades, long-term forecasts of nuclear reactor costs are highly uncertain. In contrast, renewable energy costs have dropped precipitously over the last decade after being deployed at scale. Comparing nuclear against renewable energy costs today can lead to the conclusion that nuclear energy is likely to be too expensive to compete with renewables in the long term, and that continued investment in nuclear technology advances is therefore a dead end. That conclusion may be premature for two reasons:
1) Non-intermittent electricity generating technologies become relatively more competitive as decarbonisation progresses. At the very high levels of renewable penetration necessary to meet deep decarbonisation targets, constraints—such as declining renewable resource quality, transmission availability, and curtailment— increase the cost and decrease the value of incremental renewable deployment.
2) Advanced nuclear technology and renewables do not necessarily serve the same function in a net-zero energy system. As a thermal energy source, nuclear provides electric reliability, storage and flexibility, as well as direct heat for industrial uses—services that can be difficult to provide entirely with renewable energy. 
In this analysis, we seek to inform the debate not with our own view of future costs, but with a better understanding of an energy system’s willingness-to-pay for the services offered by nuclear technology. We do so by evaluating economic deployment of advanced nuclear reactors at a wide range of costs. From these results, we can develop willingness-to-pay curves for individual countries and for Europe as a whole, which can inform economic targets for nuclear deployment. Our results showcase the broad role that nuclear energy could play in electricity generation, hydrogen production, and reducing overall costs in a net-zero energy system.
<h2>Nuclear Products: Heat and Electricity</h2>
To effectively capture the value that nuclear reactors can provide in a net-zero energy system, we model nuclear heat production separately from nuclear electricity generation. As shown in Figure 1 below, a nuclear reactor produces heat, which can then be converted to electricity in a steam turbine, stored via thermal storage for later use, or used in a direct heat application. Nuclear heat has many direct applications; we focus on hydrogen production and direct air capture (DAC) in our modelling, two important heat needs in net-zero energy systems.
<img src="//images.ctfassets.net/228txxvb8tt7/1dmSdP8QCBBPZFacGt5pNM/66db0f36c14efab5ab4de66f349230f7/NuclearCharts1_v2.jpg" width="1375" height="917">
Our analysis optimizes across three nuclear heat applications (electricity generation, electrolytic hydrogen production, and DAC) to determine the highest value use of nuclear heat in every hour. As a result of this approach, the optimal quantity of nuclear reactor capacity and nuclear electricity capacity constructed in our results are not necessarily equal. 
<h2>Nuclear Costs</h2>
Our analysis seeks to understand how nuclear reactor cost reductions could prompt broader economic deployment of nuclear energy through 2050. The all-in cost of nuclear energy depends on many input costs: upfront reactor costs, financing, fuel, operations and maintenance, waste disposal, and plant decommissioning.2 Forecasting any one of those costs in 2050 is subject to uncertainty. To simplify our analysis, we vary only reactor costs, but we evaluate such a wide range of reactor costs that we effectively capture uncertainty in other cost categories. We use a baseline reactor cost of €1,665/kWth,3 which we vary from €1,000/kWth to 3,000/kWth. We derive the levelized cost of a nuclear reactor’s delivered products—heat and electricity—from the reactor’s upfront cost, its operational profile,4 and O&amp;M and fuel costs.5Figure 2 shows the linear relationship between nuclear reactor cost and delivered nuclear heat and electricity costs under these assumptions.
<img src="//images.ctfassets.net/228txxvb8tt7/2334CuiOymB5mlv56oJZXv/0b9c91dfbed6429d243f28d11d23a795/NuclearCharts2.jpg" alt="" width="1375" height="948">
<h2>Results: Deployment</h2>
Figure 3 shows deployment of advanced nuclear reactors and nuclear electric generation across the spectrum of modelled reactor costs. Reactor deployment increases significantly when costs drop below €2,000/kWth, accelerating from 50 GWth to 225 GWth. At the low end of our modelled cost range, our optimization constructs almost 500 GWth of reactor capacity and 225 GWe of new electricity capacity.
<img src="//images.ctfassets.net/228txxvb8tt7/6Ghv0LsTtoELidA3Nf0eRQ/3a2d875475c4e6f5a2c4536cc16fbda2/NuclearCharts3_v6.jpg" width="1375" height="1173">
While both nuclear reactors and nuclear electric generators are deployed more widely as reactor costs decline, electricity generation capacity is more sensitive to reactor cost than direct heat applications. Figure 4 below further illustrates this trend: as reactor deployment accelerates at costs below €2,000/kWth, most of the incremental heat production is directed to electricity. In contrast, nuclear is a competitive source for direct heat used in hydrogen production and DAC even at relatively high reactor costs. Some nuclear electricity generation is also economical at high reactor costs, but the number of hours when nuclear electricity is cost-competitive grows substantially as reactor costs decline.
<img src="//images.ctfassets.net/228txxvb8tt7/7zT6pqAHbjnTjUWNacJ8DH/6bb6bb9cd7357090dbcf5ef60f9e5f18/NuclearCharts4.jpg" alt="" width="1375" height="1363">
<h2>Results: Country-Level Deployment</h2>
In our Carbon-Free Europe analysis, 14 of the 28 European countries we model are allowed to add new nuclear capacity, based on existing national nuclear policy. All 14 of those countries build some new nuclear reactor capacity under baseline cost assumptions (€1,665/kWth reactor cost), but country-level sensitivity to reactor cost depends on the domestic availability of other zero-carbon resources. Figure 5 shows the total and incremental capacity of nuclear reactors deployed in each country by 2050 under each reactor cost assumption.
<img src="//images.ctfassets.net/228txxvb8tt7/2IowUUu48PZDCsbcx2LjOL/568b7b7b92c5b643c38317b490ed5da8/NuclearCharts5.jpg" alt="" width="1375" height="1221">
In Northern Europe where high-quality offshore wind is abundant, nuclear heat is used primarily to produce hydrogen even at the lowest reactor costs modelled, so reactor deployment does not expand to start providing electricity in any of our scenarios. In Spain and France, where nuclear electricity competes with solar, onshore wind, and offshore wind, nuclear deployment does not accelerate greatly until reactor costs reach €1,000/kWth. In Eastern Europe, where renewables are less abundant, reactor deployment ramps up at €1,665/kWth. 
<h2>Results: System Costs</h2>
The impact of nuclear technology costs on total energy system costs depends on the extent of nuclear deployment as well as the magnitude of nuclear technology’s cost advantage over alternative solutions. In this case, nuclear technology primarily displaces renewable electricity (for electricity and hydrogen production), gas power plants (for reliability), battery storage, and low-temperature electrolysis. The cost advantage of nuclear technology at the examined reactor costs over these alternative solutions is shown in Figure 6 below.
<img src="//images.ctfassets.net/228txxvb8tt7/11DZfECmnrxAGmf07yxJZV/fc659c9817ae808c7227bf1fc4e2cd5a/NuclearCharts6_v3.jpg" width="1375" height="1165">
By 2050, reducing the cost of nuclear reactors from €3,000/kWth to our baseline cost of €1,665/kWth reduces total EU and UK energy system costs annually by over €5B. Further reducing the cost to €1,000/kWth reduces overall energy system costs annually by over €18B. These system cost reductions imply that investment in advanced nuclear R&amp;D and early-stage deployment is a high-value undertaking in Europe if it drives down the cost of nuclear reactors.
<h2>Results: Other System Impacts</h2>
One of the principal benefits of nuclear development is to provide a zero-carbon energy resource in areas that may face constraints to siting renewables. Our analysis shows that low-cost nuclear displaces a significant amount of otherwise-needed renewable power, reducing total new renewable capacity in 2050 by one-sixth (400 GW) compared to the highest cost scenario. This impact, however, isn’t realized until the 2040s, showing the continued need to develop renewables at unprecedented scales (while also maintaining Europe’s existing nuclear fleet).      
<img src="//images.ctfassets.net/228txxvb8tt7/6yWybjbJfqu0N8GDO1yvK7/b28d47d47d49535df595f7c2fe7f136a/NuclearCharts7.jpg" alt="" width="1375" height="1185">
The ultimate contribution that nuclear energy makes to electricity generation and hydrogen production in 2050 is shown below by cost scenario. Under the most optimistic cost projections, nuclear (including existing facilities) exceeds the overall share of electricity generation it makes up today (25% in 2020).6 Nuclear heat becomes critical to hydrogen production in many scenarios, with high-temperature electrolysis representing 60% of hydrogen production under the lowest reactor cost scenario.
<img src="//images.ctfassets.net/228txxvb8tt7/1nyeli7lbQSD0bX2Pd5JTb/562322a2056d9e130ede0e8d5ccb762f/NuclearCharts8.jpg" alt="" width="1375" height="1185">
<h2>Conclusions</h2>
With a breakthrough in costs (€1,000/kWth reactor costs, corresponding with €15/MWhth for heat and €42/MWhe for electricity), nuclear energy in 2050 exceeds the generation share seen in Europe today, reduces the necessary renewable build by 400 GWs, and is used to produce greater than 60% of Europe’s hydrogen. Costs below €1,665/kWth (€20/MWhth for heat or €50/MWhe for electricity) are necessary to see significant economic deployment. These costs can potentially be achieved through technology improvements, economies of scale, and improved financing mechanisms.
Carbon-Free Europe’s analysis evaluated five net-zero pathways: a relatively unconstrained Core pathway,7 and four additional pathways designed to explore how different policy and implementation constraints impact the route to carbon neutrality. This sensitivity analysis of nuclear reactor costs simulates economic deployment of nuclear only under the Core pathway assumptions. Even at higher costs, nuclear technology may be valuable to mitigate risks to decarbonisation represented in our other modelled pathways: the pace of demand transformation (Slow Demand Transformation), limited ability to construct new transmission lines and pipelines (Domestic Preference), or difficulty siting new renewable power (Limited Renewable Siting).

Deployment of Nuclear Energy in the EU and UK Under Different Reactor Cost Assumptions

Alan Ahn

Senior Resident Fellow for Third Way’s Climate and Energy Program

Deployment of Nuclear Energy in the EU and UK Under Different Reactor Cost Assumptions v2

Report

Summary for Policymakers: Analysis of Net-Zero Pathways for the EU and UK

HG Summary for Policymakers

Summary for Policymakers Analysis of Net Zero Pathways for the EU and UK

<div class="description">
<h3>
Carbon-Free Europe (CFE) is working towards a future where climate and energy policy across Europe is evidence-based, existing carbon-free solutions are rapidly deployed, and investment is readily available for the next generation technologies needed to get all the way to net-zero by 2050.</h3>
CFE was launched by Third Way’s Climate and Energy Program to build international support for a technology-inclusive climate agenda and encourage governments to maximise the next decade to meet climate goals. We advocate for technology-inclusive climate policies, which are essential for deep decarbonisation and to reduce Europe’s vulnerability to volatile energy prices. We also provide expert insights on contemporary issues, including the EU’s Green Deal, national energy and climate plans, and Europe’s energy security.
The EU Government Affairs Manager will lead Carbon-Free Europe’s engagement with the EU Parliament, Commission, Council, and Member States, growing and managing a small team of dedicated policy specialists. The EU Government Affairs Manager will follow EU-level policy developments and continuously assess opportunities for CFE to conduct research and advocacy to support technology-inclusive policy. They will also represent CFE on a regular basis with key stakeholders, including expanding our collaboration with likeminded NGOs, academics, and experts.
</div>
<h3 class="alted">Job requirements</h3>
<div class="description">
As the EU Government Affairs Manager, a typical day might include…
<div>
<ul>
<li>Working with senior leadership to develop and implement CFE’s policy agenda and build and manage CFE’s policy team in Brussels;</li>
<li>Establishing and maintaining relationships with EU Institutions, Member State Representatives, and the broader EU policymaking community including NGOs and academics;</li>
<li>Identifying opportunities for CFE to engage policymakers on technology-inclusive climate policy, whether through research, advocacy, events, or other collaborations;</li>
<li>Collaborating with the Communications team to identify relevant areas for media coverage and develop communications tools, i.e. press statements, op-eds, blogs, social media content, etc.;</li>
<li>Interpreting CFE analysis and developing EU-specific policy recommendations and messaging;</li>
<li>Collaborate with US colleagues to identify transatlantic opportunities;</li>
<li>Serving as a spokesperson for our ideas to policymakers and those who influence them, including in the press and at regular high-profile public speaking engagements, on multifaceted issues;</li>
<li>Performing other duties as assigned</li>
</ul>
<div>
This might be the job for you, if you…
<ul>
<li>Have at least 5 years of relevant experience on EU climate and energy policy (EU Institutional experience is preferred)</li>
<li>Are interested or have knowledge of transatlantic relations and geopolitical developments between the EU and US</li>
<li>Have an ability to communicate clearly and effectively in writing and verbally in English (Additional language competency is preferred)</li>
<li>Are self-starting and able to work independently to identify opportunities</li>
<li>Have extensive knowledge of the EU policy making process and relevant policy areas, including FF55, REPower EU, and the European Green Deal</li>
<li>Committed to the mission of CFE and growing with the organization 
</li>
</ul>
</div>
<div>
In Carbon-Free Europe’s Culture, we are looking for…
<ul class="boldList">
<li>
Self-starters: People who see and seize opportunities, take risks, learn from failure, and will bring a sustained passion for our mission.</li>
<li>
Collaborators: People who work in teams—sharing ideas, brainstorming, co-authoring products, and advancing its shared priorities.</li>
<li>
Creators: People who fosters divergent thinking; that aren’t afraid to challenge the status quo. Team members come up with original insights, find unique ways to look at data, and challenge their preconceptions.</li>
<li>
Results-oriented: People who function with an organizational commitment to clear objectives, ambitious timelines, accountability for results, and a focus on impact.</li>
<li>
Respectful: People who embrace the diverse perspectives of everyone and foster the values of diversity, equity, and inclusiveness at all times.</li>
</ul>
<h3>Apply Here</h3>
<a href="https://thirdwayeu.recruitee.com/o/eu-government-affairs-manager-carbonfree-europe/c/new" target="_blank" rel="noopener">EU Government Affairs Manager Application</a>
</div>
</div>
</div>

EU Government Affairs Manager, Carbon-Free Europe

Position

<h2>Introduction</h2>
In the wake of Russia’s invasion of Ukraine and the subsequent global energy crisis, the restricted natural gas supply from Russia has caused energy prices in Europe to dramatically increase. High natural gas prices impact all sectors of the economy, but Europe’s industrial sector is particularly sensitive because industrial products typically compete in global markets—meaning producers can’t always pass high energy costs on to consumers. Some energy-intensive industries have already announced plant shutdowns in Europe and sustained high gas prices threaten more closures in the near future.1 European Union (EU) policymakers seeking to shield industrial producers from rising gas prices have a range of options—some aligned with the EU’s broader climate and energy goals, and some in opposition to those goals. In this memo, we outline the EU industrial sector’s challenge with high natural gas prices as well as strategies to reduce costs and natural gas demand for industrial consumers.
To recall, EU institutions are already working on a range of policy tools to mitigate the effects of Russia’s invasion of Ukraine on the EU energy landscape and on high energy prices. In May, the European Commission presented the REPowerEU plan, which provides a roadmap to end the EU’s dependence on Russian fossil fuels through energy savings, diversification of energy supplies, and accelerated roll-out of renewable energy to replace fossil fuels among others in industry. Additionally, in July, the Commission proposed a Council Regulation envisaging an immediate voluntary gas demand reduction of 15% this winter in all EU Member States, which was adopted by the Council in August. Possible measures listed in the Regulation include reducing gas consumed in the electricity sector and measures to encourage fuel switch in industry. Most recently, the European Commission confirmed that it is working on an emergency intervention and a structural reform of the EU electricity market that would address the high gas prices at EU level, with a possible gas price cap as one of the options supported by selected EU Member States. There will be an extraordinary Energy Council meeting on the 9th of September to discuss solutions to the soaring energy prices.
<h2>The Industrial Sector’s Exposure to Natural Gas Prices</h2>
The natural gas cost faced by industrial consumers in the EU is made up of several components. The largest component is the cost of energy and supply, for example the price of the fuel itself. The chart below shows the average annual natural gas fuel price faced by EU industrial consumers from 2019-2021.2 For comparison, the chart also shows the average monthly spot price of natural gas imports to the EU.3 Because much of industrial gas demand is typically served with long-term contracts, industrial consumers are not immediately exposed to fluctuations in spot market prices. Nonetheless, as the spot price increases, industrial consumers will eventually face these higher prices and should anticipate a drastic increase in the price of gas during the rest of 2022.
<img src="//images.ctfassets.net/228txxvb8tt7/1vZeWYHmwTh3v9b5qnBIju/5f9c6442d1c3dd6374d8044b2de02a56/SolutionsCharts.jpg" alt="" width="2750" height="1292">
<h2>Which Industries are Large Natural Gas Users?</h2>
Different industries have varying levels of energy intensity and dependence on natural gas. The figure below shows the total natural gas consumption by industry in the EU + UK in 2019.4 (We use 2019 as a benchmark year because it is the most recent pre-pandemic year, and the last year for which EUROSTAT has compiled detailed energy balances).
<img src="//images.ctfassets.net/228txxvb8tt7/1huaFH9r4IyJQxlogVt60X/84a28ad39c8c06a4efc0aa51c0c4e992/SolutionsCharts2.jpg" alt="" width="2750" height="1750">
<h2>Strategies to Reduce Costs and Natural Gas Consumption</h2>
<ul>
<li>Direct Subsidies</li>
<li>Alternative Gas Supply</li>
<li>Fuel Switching</li>
<li>Energy Efficiency</li>
<li>Electrification</li>
</ul>
<h3>1. Protecting Industry with Direct Subsidies</h3>
Subsidies are one available approach for governments seeking to preserve the competitiveness of domestic industry. They can take the form of tax cuts, energy price caps, or rebates. Below, we estimate the total amount of subsidization that would be needed to fully bridge the gap between the 2019 average gas supply price and the average future gas supply price paid by an industrial user. Without knowing exactly how natural gas prices will increase for industrial consumers, we used today’s spot prices as an indicator. Figure 3 below shows the total annual subsidy required at a range of natural gas prices if natural gas demand remains constant at 2019 levels.  
<img src="//images.ctfassets.net/228txxvb8tt7/4jbpWbKc9gvntel8qElPJa/081aa322bddefa83d100cdf1fe59f0a4/SolutionsCharts3.jpg" alt="" width="2750" height="1500">
These values represent annual subsidies that would be required every year that natural gas prices remain elevated, making them costly to maintain. While subsidies might be effective at protecting Europe’s industrial competitiveness, they’re at odds with other EU policy priorities: subsidies encourage continued natural gas use in opposition with the EU’s climate commitments, and they may perpetuate dependence on Russian energy imports. They also do not protect Europe’s industrial sector if gas rationing is required this winter as recommended by the Council of the EU’s regulation that calls for a voluntary reduction of natural gas demand by 15% this winter.
<h2>Alternatives to Subsidies</h2>
Rather than or complementary to subsidizing natural gas consumption, European governments could support their industrial sectors by financing other energy investments that avoid natural gas use and reduce industrial energy costs.
<h3>2. Alternative Gas Supply</h3>
The EU has already responded to reduced natural gas imports from Russia by increasing LNG imports and even planning new LNG terminals. Policymakers could complement that approach by encouraging the development of renewable and synthetic natural gas (RNG and SNG). Both types of natural gas have the potential to compete with imported fossil gas at today’s spot prices, while also contributing to greenhouse gas emissions reductions.
The most significant limitation to RNG and SNG is rapidly expanding supply, which would require capital investment in production facilities—investment that could be supported by government incentives. Since some amount of renewable and synthetic fuel is likely to be a component of any long-term climate solution, public investment in fuel production could deliver important technological advances or price reductions with widespread benefits in the long-term. The following figure shows that various sources of RNG and SNG are competitive with fossil gas in the 20-40 Euro/GJ range.
<img id="__mcenew" src="//images.ctfassets.net/228txxvb8tt7/4ft86g90Q45cj5Jm8ehCZn/c837004265274a85497a8c437a1c25b6/SolutionsCharts4.jpg" alt="" width="2750" height="1500">
<h3>3. Fuel Switching</h3>
Many industrial energy uses that consume natural gas can also be configured to run on other fuels (for example coal, biomass, or petroleum products). This is especially true for boilers, which use fuel to produce heat, and are often designed to operate on multiple fuel types to insulate against fuel price volatility. Policymakers could support investment in adapting or replacing existing industrial equipment to use fuels other than natural gas. Switching to biomass, which is produced, processed, and used in a sustainable and efficient way, is consistent with climate goals and may be cost-effective when compared to current gas prices, though biomass supply will be limited in the near-term. Any fuel switching to coal, while a solution for reducing gas demand and addressing higher energy prices, would delay emissions reductions commitment.
<h3>4. Energy Efficiency</h3>
Energy efficiency presents another opportunity to reduce industrial consumption of natural gas and corresponding costs. Given the increase in natural gas prices in Europe, incremental energy efficiency measures which were uneconomic at lower gas prices are now cost-effective. Industrial gas users may lack motivation to make energy efficiency investments, even if cost-effective, due to limited capital availability, or misalignment with standard planning and investment cycles. Energy efficiency investments also do not guarantee competitiveness—cost-effective energy efficiency will reduce industrial production costs, but not necessarily enough to achieve competitiveness. However, given that industrial energy efficiency is critical to achieving the EU’s climate targets, this period of high natural gas prices presents an opportunity to advance efficiency deployment, in line with the ongoing revision of the Energy Efficiency Directive, that will deliver long-term climate benefits.
<h3>5. Electrification</h3>
Electrification is a final alternative to natural gas consumption. Like energy efficiency, it’s a key piece of the EU’s long-term climate strategy—a large share of industrial energy demand will ultimately need to be converted to electricity to meet emissions targets. Investments in industrial electrification today will provide important pilot opportunities for technologies that will be needed at scale in the coming decades.
The challenge to electrification in the near-term is that high natural gas prices are also straining Europe’s electricity sector—if new electric load is met by increased operation of coal or gas power plants, it’s unlikely to deliver economic benefits or align with the EU’s climate objectives. Industrial gas users may be unwilling to allocate capital to electrification when electricity prices are volatile, making electrification another appropriate area for government support.
<h2>Advancing the EU’s Energy Priorities</h2>
Policymakers considering strategies to insulate European industry from natural gas price shocks should think beyond direct subsidies for natural gas consumption, which are likely to be costly and don’t align with the EU’s climate commitments. Alternate (non-fossil) supplies of natural gas, fuel switching, energy efficiency, and electrification are all strategies that could be pursued in tandem to lower industrial energy costs while advancing industrial decarbonization. Each of these approaches is likely required at scale to meet 2050 emissions targets, and public investment today has the potential to lower cost and technology barriers to facilitate future decarbonization. These considerations should be reflected in the urgent EU policy responses to the energy crisis in the near term, but also over the medium term, including in the finalization of negotiations of the Fit for 55 package. Overall, there are many strategic actions the EU can take to free up natural gas supply in the near-term while supply is constrained, better protect its residents from volatile natural gas prices, and limit dependence on Russian energy imports in the long-term.

Solutions to Shield EU Industry from Elevated Gas Prices

<h2>A technology-inclusive approach to unlocking hydrogen’s full potential</h2>
Carbon-Free Europe (CFE) welcomes the ongoing work in the Council and European Parliament on the review and revision of the Hydrogen and Decarbonised Gas package (<a href="https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32009L0073&amp;from=EN" target="_blank" rel="noopener">Directive 2009/73/EC</a>, <a href="https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32009R0715&amp;from=EN" target="_blank" rel="noopener">Regulation (EC) 715/2009</a>), which aims to enable the market to decarbonise gas consumption. In particular, CFE fully supports the recent developments in the Council, namely the Czech Presidency’s proposal to include in Directive 2009/73/EU the possibility for EU Member States to use low-carbon hydrogen and low-carbon fuels to complement the calculation of industrial and transport binding targets under the currently proceeded <a href="https://www.europarl.europa.eu/RegData/docs_autres_institutions/commission_europeenne/com/2021/0557/COM_COM(2021)0557_EN.pdf" target="_blank" rel="noopener">revision</a> of the <a href="https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32018L2001&amp;from=EN" target="_blank" rel="noopener">Renewable Energy Directive 2018/2001</a>. 
CFE’s research shows that hydrogen has the potential to develop into an entirely new EU industry, becoming the backbone of the decarbonisation of shipping, industry, freight, and aviation. Our <a href="https://www.carbonfreeeurope.org/modeling/Summary-for-Policymakers-Analysis-of-Net-Zero-Pathways-for-the-EU-and-UK.pdf" target="_blank" rel="noopener">report</a> “Analysis of net-zero pathways for the EU and UK”, which compares five different decarbonisation pathways for the EU, confirms that the chances of reaching emissions goals for the EU increase as more low-carbon technology and fuel options, such as low-carbon hydrogen, are included in this transition. Moreover, focusing on all low-carbon technologies rather than solely on renewables reduces risk and makes it more likely that clean energy will be cost-effective and net-zero goals can be achieved on schedule.
For instance, our analysis shows that the amount of electricity generation in the EU will more than triple over the next 30 years as electrification of transport, heat, and hydrogen will drive new demands for clean electricity. However, the analysed 100% renewables pathway, which allows only renewable hydrogen, costs over €80 billion a year more by 2050 compared to the Core pathway and requires a quadrupling, rather than a tripling, of electricity generation to satisfy additional renewable hydrogen production. And while our model still sees over half of hydrogen produced by renewables in most scenarios, other clean power sources make up a significant portion of hydrogen production. For example, by 2050, in the Core pathway, our model anticipates 51% of the EU’s hydrogen to be produced by renewables (low-temperature electrolysis), 4% by bioenergy with carbon capture and storage, and 45% by low-carbon technologies capable of producing hydrogen through high-temperature electrolysis (Figure 1). Additionally, CFE’s model optimizes sector coupling and balances hourly variations of renewable generation to make the energy systems more efficient and flexible during hourly and seasonal variability. These features allow carbon-free sources, such as nuclear power, to supply additional electricity to the grid during periods of low renewable generation and supply hydrogen when renewable generation is higher and there is less demand for electricity from other sources.
<div class="entry-image entry-image-offset"><img src="//images.ctfassets.net/228txxvb8tt7/4sGHR6JBIV7EhKbpIpvJ2L/96acffff340549ce590bed4be98c6e45/Hydrogen_Chart_Figure_2.png" alt="Image Alt Text" width="1876" height="1022"></div>
<h4>A Competitive Advantage</h4>
Producing hydrogen from renewables and low-carbon sources can provide the EU with an opportunity to remain competitive in a €4 Trillion+ global industry1. If the EU does not consider a technology-inclusive approach for hydrogen production, it risks isolating its industry from other nations, like the US and UK, that will have more opportunities to ramp up their supply and export potential. This is of particular relevance and has direct implications for EU Member States that will have difficulties producing large enough volumes of renewable hydrogen due to different geographical resource conditions and land availability.
<div class="Highlight">
<div class="content">
<h2>Recommendations</h2>
Taking into account the results of the CFE modelling and in the context of the ongoing negotiations on the Hydrogen and Decarbonised Gas package, Carbon-Free Europe recommends:
<ul class="boldList">
<li>the Council consider the role low-carbon hydrogen can play in decarbonising the EU’s economy in line with the bloc’s climate objectives. This can be achieved by ensuring that the Czech Presidency’s proposal (new Article 8a in Directive 2009/73/EU) is included in the Council’s General Approach.</li>
<li>the European Parliament support this inclusion as it mirrors its <a href="https://www.europarl.europa.eu/doceo/document/TA-9-2022-0317_EN.pdf">position</a> (Recital 22a) on the Renewable Energy Directive (EU) 2018/2001, recognising the importance of low-carbon hydrogen in the energy transition to reduce emissions of existing fuels (complementary provisions on the role of low-carbon fuels and low-carbon hydrogen to achieve carbon neutrality by 2050).</li>
</ul>
</div>
</div>
<h2>Conclusion</h2>
These recommendations will allow the EU to unlock the full potential of low-carbon hydrogen, which in consequence, can help the bloc achieve net-zero emissions by 2050 while also lowering risks and costs. Furthermore, the accelerated deployment of low-carbon energy sources in tandem with renewables is essential for the European Union to phase out its reliance on Russia and build up its competitiveness in emerging clean energy markets.

Net-Zero Requires Hydrogen from All Low-Carbon Energy Sources

cfe header-01

<div class="Highlight">
<div class="content">
<h2>Key Takeaways</h2>
<ul>
<li>The CBAM is a fundamental mechanism needed to replace the unsustainable scheme of free allowances under the ETS. However, is not a breakthrough tool alone to decarbonize industrial sectors and reach carbon neutrality.</li>
<li>Because the path for decarbonization for industrial subsectors such as cement and aluminium, will not begin to rapidly scale down before 2035, a slower implementation of CBAM up to 2030-2032 will not prevent industry’s ability to reach net-zero by 2050.</li>
<li>The CBAM should be implemented in two phases. The first will ensure the implementation of an enforceable mechanism without exacerbating the current burdens carried by industries. In the second phase, the CBAM should expand, allowing for a greater impact from an environmental perspective.</li>
</ul>
</div>
</div>
<h2>Introduction to the CBAM</h2>
Reaching climate neutrality by 2050 requires targeted solutions for different sectors of the economy. For industry, the European Union (EU) is proposing as a cornerstone solution a Carbon Border Adjustment Mechanism (CBAM). If properly designed and implemented, a CBAM would ensure emissions reductions for major industrial subsectors while maintaining the competitiveness of EU industries. In this memo, we outline the status of current negotiations on CBAM in the EU and Carbon-Free Europe’s recommendations to design and implement a CBAM that enables climate commitments but also takes into consideration the current energy crisis.
In 2019 the European Commission unveiled an ambitious European Green Deal, to set up the roadmap for the EU to become the first carbon-neutral economy by 2050. In July 2021, the Commission published an adherent major legislative package to deliver the Green Deal, the Fit For 55. As part of this legislative package, EU institutions are currently discussing the design and implementation of a CBAM.
A CBAM is a long-term solution that aims at limiting carbon leakage by levelling the playing field between domestic and foreign production, through the implementation of a border carbon tax that reflects the domestic carbon price. The CBAM is envisioned by EU institutions as a tool that will support the decarbonization of domestic industries that so far have been granted free allowances under the Emission Trading System (ETS). Sectors at risk of carbon leakage, emission-intensive, trade-exposed (EITE) goods, were afforded special treatment and received up to 100% of free allowances under the ETS. This scheme of allocation clashes with the overall climate objectives of the EU, and it is therefore of pivotal importance that the unsustainable free allocation regime is replaced by an effective CBAM.
Although a CBAM is easy to explain in principle, it is an extremely complicated multidimensional measure and, depending on its design, could raise challenges on legal, technical and geopolitical grounds. Different design elements of the CBAM could introduce challenges from a  World Trade Organization (WTO) perspective, whereas others could introduce administrative burdens or create trade frictions. These challenges often interact with one another, creating trade-offs. When analysing different options for design and implementation, it is fundamental to take into consideration the risks at play and the possible trade-offs that they might introduce.
<h2>Status of Negotiations</h2>
The CBAM proposal is subject to the ordinary legislative procedure which requires both the European Parliament and the Council of the EU to approve the final text. The Parliament and Council have adopted their positions on the Commission’s proposal and are now discussing in the trialogue phase where they will need to reach compromises for the final text, which will then be adopted in national laws. While the respective positions are similar on several elements, they differ substantially on key issues that will be at the heart of the trialogue discussion.
<img src="//images.ctfassets.net/228txxvb8tt7/1wsde9uTaCvBIkyXwBIwtt/8e8ee449d93e5504b15f8e90807dc100/CFE_CBAM_Table_110222.jpg" width="1372" height="1276">
<h2>Impact of the Current Energy Crisis</h2>
The CBAM discussion falls in a dramatic economic and geopolitical moment. The unfolding of the war in Ukraine, in addition to creating a humanitarian crisis, has also driven up energy prices across the world. Today, Europe is in the midst of an unprecedented energy security and affordability crisis. The emergency has called for several Extraordinary Energy Council meetings. Energy ministers have reached agreements on some elements to address the current crisis and further measures will be taken in the weeks to come to cope with the high energy prices in order to provide some relief to consumers and industries that are carrying the burden of unsustainable costs across the EU.
If we look at specific cases for intensive industries, in the last year, production across the EU has decreased significantly. For the aluminum sector, there has been a 50% reduction in production1with energy costs that are 10 times higher2 and the fertilizer industry is expected to see a 70% reduction by the end of 2022 with 10 fertilizer plants that have already closed by July of 20223.
Today, Europe is faced with a triple challenge: a climate crisis, an energy security crisis, and an affordability crisis. Addressing these different and interconnected challenges entails considering implementing policies that could support one challenge while hindering another. For this reason, it is fundamental to look at two different scales of implementation: the short-term and the long-term.  Policymakers are required to find solutions for the energy security and affordability crisis while ensuring the ultimate goal of reaching carbon neutrality by 2050.
<h2>CFE’s Position on 4 key Design Elements</h2>
<h3>Sectoral Scope</h3>
The Commission and the Council share the same position of covering a first set of five EITE sectors: cement, iron and steel, aluminium, electricity, and fertilizers. They both also propose an assessment in 2026 for potential expansion of the scope into other sectors. The Parliament is proposing to expand the scope from the beginning to hydrogen, polymers, and organic chemicals as well as downstream sectors by 2030,with the possibility of expanding the scope to all ETS sectors. Although from an environmental perspective, the broader the scope the better, it is important to underline the rationale of the CBAM, which is to tackle carbon leakage. Following this principle, only sectors at risk of carbon leakage should be covered4.
Another important consideration is that countries outside of the EU will be impacted by the CBAM proportionate to their exports to the EU. By expanding the scope of the sectors, there is a higher chance of impacting trading partners, and therefore creating geopolitical frictions. This is fundamental when looking at how the additional sectors will negatively impact the economies of developing countries as well as close EU trade partners such as the US.
Take US exports to the EU, for example. Under the more comprehensive list of the Parliament, an estimate of $21 billion would be impacted in reference to the 2021 trade flows, against $1.4 billion if only the 5 core sectors were to be covered5.
A first phase of implementation with a smaller subset of industries, with the potential to expand in later stages, would allow the EU to tackle a core group of sectors in the short-term, create a mechanism that is more easily enforceable because of the reduced complexity and limit the negative impact on third countries in the initial phase. This scale would ultimately provide time to expand the CBAM to other sectors once the EU has more knowledge and experience with implementation.
<h3>Emissions Scope</h3>
Similarly, the Commission is proposing to only cover direct emissions (“emissions from the production process of goods over which the producer has direct control”)6, whereas the Parliament is proposing the inclusion of also indirect emissions from electricity (“direct and indirect emissions released during the production of goods and the electricity consumed during the production processes of goods”)7.
A first argument in favor of including indirect emissions is that they often represent a large share of industrial emissions. For example, 84% of emissions in the aluminium sector are indirect and only 18% are direct8. From a climate perspective, the inclusion of indirect emissions is important.
The CBAM needs to mirror the ETS. Since the EU ETS covers emissions from combustion processes to generate electricity, heat and steam, producers that buy inputs from outside their industrial facility, will be faced with charges related to the (ETS) carbon cost that is passed to them through the imports of electricity steam or heat needed to generate their products. This could be used as an argument for the inclusion of indirect emissions as it would not create an unbalance between the CBAM coverage and the ETS, although it is unsure if this would represent an infringement of WTO law.
However, the inclusion of indirect emissions could actually create a disadvantage for EU producers due to the electricity market price at the margin. Indeed, EU producers that have a very clean energy mix may end up paying for a high indirect energy cost because the price is given by the marginal plant i.e., the most expensive plant that is required to serve demand9.
One important thing to be noted is that in the current system, in order to protect industries against these costs of embedded indirect emissions member states can decide to provide for an indirect cost compensation mechanism. The two mechanisms could not coexist, and the CBAM that would cover for indirect emissions would have to then be accompanied with a strategy to replace the existing cost compensation measure.
Finally, from an administrative and technical perspective, including indirect emissions represents bigger complexity.
Eventually, the expansion of the scope to indirect emissions is desirable, however, there are also many issues related to it. For this reason, in the first phase of implementation, the best option is to exclude indirect emissions This would allow for more analysis to be carried out and to find ways to effectively replace the existing indirect cost compensation mechanism while giving time to the EU’s grid to decarbonize.
<h3>Phase in of CBAM</h3>
Perhaps the most sensitive question around CBAM design is the timeline and schedule for phasing out free allowances under the ETS while phasing in the CBAM. With industries facing uniquely astronomical energy prices, additional costs could have severe impacts on the ability ofindustrial facilities to continue production. The options on the table vary significantly, with the Commission envisioning a gradual implementation over the period of 10 years, the Council envisioning a slower implementation until 2030 and a faster implementation up until 2035 within a 10 year period, and the Parliament envisioning a full phase out by 2032 with a more rapid phase out scale from 2030.
<div class="entry-image entry-image-offset"><img src="//images.ctfassets.net/228txxvb8tt7/1y0AAaNKRcx8lfPoO0vh6L/8a36807972c46618067a658de10d0ec4/CFE_CBAM_Charts_Figure_1.png" alt="Image Alt Text" width="2255" height="1308"></div>
Decarbonization pathways for the industrial sector suggest that most progress this decade will depend on electrification while simultaneously investing in the innovation and deployment of next- generation technologies than can tackle parts of industry that cannot be electrified. In the 2030s and 2040s, industrial emissions will be reduced with innovative clean energy (See Figure 1).Given the trajectory for industrial emission reductions (See Figure 2), full implementation of the CBAM by 2032 versus 2035 will unlikely impact the EU’s ability to decarbonize the industrial sector by 2050. The phasing out of free allowances is a fundamental step in order to incentivize a sustainable transformation, however, a more rapid timeline is unnecessary to ensure net-zero by 2050. A faster timeline could also exacerbate the current burdens on industries.
<div class="entry-image entry-image-offset"><img src="//images.ctfassets.net/228txxvb8tt7/78gDF3ZZE4DEfHkWWNATai/e031e958b0de079d8034dfc9b368e10d/CFE_CBAM_Charts_Figure_2.png" alt="Image Alt Text" width="1625" height="1257"></div>
As mentioned above, new clean energy technologies will play an important role in decarbonizing industries. So a CBAM policy should also be accompanied by policies to support the innovation and deployment of a diversity of clean energy technologies. Because heavy industries operate in long investment cycles (20-30 years), the next years are fundamental to kick-start the large-scale deployment of breakthrough technologies that will then represent a major push along the phase out of free allowances to decarbonize the industrial sector.
<h3>Export Adjustment</h3>
Neither the Commission nor the Council envision the implementation of some type of export mechanism. On the other hand, the Parliament is proposing a system in which companies continue to receive free allowances for the products that they export to ensure competitiveness in foreign markets that have no carbon pricing mechanisms. The rationale behind export mechanisms is that without it, there would be a risk of carbon leakage. This would result in the loss of competitiveness of EU industries in global markets that would be replaced by more intensive products from jurisdictions with no stringent climate policies.
Export mechanisms have been triggering a lot of discussion around WTO compatibility in reference to the rules on prohibited subsidies outlined in the Agreement on Subsidies and Countervailing Measures (ASCM). Specifically, it could be argued that this mechanism is providing an unfair advantage to EU products in the global market. Because of the complexity of determining whether the CBAM represents a prohibited subsidy is important to assess the compatibility with trade rules prior to the implementation, as suggested by the proposal of the EU Parliament.
There are good arguments for both positions. However, in tandem with the phase in of the CBAM and the subsequent phase out of the free allowances, there is the opportunity to link the two policy designs so that, only when free allowances are substantially phasing out and therefore the risk of carbon leakage becomes more relevant, then an export mechanism could be implemented to protect the competitiveness of domestic industries.
<h2>Conclusion</h2>
Today the CBAM discussion falls in a very different economic and geopolitical environment compared to the Green Deal’s announcement in 2019. Europe is faced with an unprecedented energy security and affordability crisis, that has forced already many industries to shut down or reduce production. Although the ultimate goal is and will remain the decarbonization of the industrial sector by 2050, in the short-term it is fundamental to implement policies that do not exacerbate the current crisis.
The CBAM should be viewed in this framework as a necessary tool to replace the unsustainable free allowances scheme under the ETS, and as a long-term solution that however, is not a breakthrough tool alone. Only if paired with policies that support the innovation and deployment of clean energy technologies, the EU will be able to  achieve the decarbonization of the industrial sectors and reach carbon neutrality by 2050.
<div class="mceNonEditable">
<iframe class="tableauPlaceholder" src="https://public.tableau.com/views/CBAMOutputs/2030EmissionsbyCountryandSubsector?:language=en-US&amp;:display_count=n&amp;:origin=viz_share_link:showVizHome=no&amp;:embed=true" width="955" height="955" data-mce-fragment="1"></iframe><img class="tableau-fallback-image">
</div>

Designing a Carbon Border Adjustment Mechanism: Reducing Industrial Emissions While Facing an Energy Crisis 

Modeling

Interactive Maps

Final Energy Demand

Electricity

Electric Capacity

Electric Capacity

Low Carbon Fuels

Low Carbon Fuels

Final Energy Demand

CCUS

CCUS

Hydrogen

Hydrogen