A European consensus may still exist on the end goal of climate neutrality, yet there is no such consensus on the political, economic and social choices required to reach it. Each possible pathway carries a distinct set of costs and trade-offs across the energy trilemma of sustainability, affordability and security.
An excessively benign reading of the international environment, political and economic negligence and a lack of sufficient action on key parameters of the trilemma have put Europe on a decarbonisation trajectory of high prices and low security. This has become increasingly untenable. The long-term reliance on Russian natural gas was a fateful symptom of this predicament but is not a stand-alone example. Europe’s situation is currently aggravated by a series of equations that do not compute, with targets being set not matched by the required efforts and investments across core areas of Europe’s ambitions, such as wind, hydrogen, nuclear, net-zero manufacturing and energy efficiency. Europe is, consequently, on paths towards endpoints that are inconsistent with the EU’s Fit for 55 and 2040 climate scenarios.
All too often, the EU’s energy choices have been an outcome of inner-EU compromises, rather than a reflection of the long-term strategic approach. All this is happening in a stormy international environment, with President Trump abandoning international cooperation and climate ambitions while China’s overcapacities are taking global economic relations to the brink. Consequences are bound to be dire. Unless yearly energy system investments can be significantly ramped up, suggestions that Europe can no longer pursue its 2050 net-zero objective at the expense of cost competitiveness and economic security will only get stronger.
Europe should not abandon its net-zero ambitions, but a significant course correction is required. Building on the former European Central Bank President Mario Draghi’s call for a joint approach to decarbonisation and competitiveness and adding an economic security perspective, this paper proposes eight recommendations for Europe’s net-zero course correction. We argue that the best course of action for Europe is to gain ‘escape velocity’ on the green transition: prioritising cost-effective investments in clean industry and energy infrastructure, which are essential to enable a transition to clean energy.
While the competitiveness debate tends to focus on the more immediate ways of activating growth, economic security encompasses a broader, forward looking framework that emphasises resilience. This includes managing risks, reducing dependencies, and preparing for potential disruptions. Staying on track toward achieving net-zero emissions by 2050 must remain Europe’s overarching objective, coupled with a parallel goal of optimising economic value-creation and reducing the cost, uncertainty and risks of the energy transition.
EIGHT RECOMMENDATIONS FOR EUROPE’S NET-ZERO COURSE CORRECTION
- Prioritise and coordinate large-scale investments to achieve ‘escape velocity’ in the energy transition.
- Set realistic targets and priorities using foresight and analysis recognising the interdependencies between policy levers at EU and national levels.
- Double down on electrification through proactive technology-neutral supply policies, grid investment, strategic industrial policy and enabling frameworks.
- Elaborate and implement a dedicated ‘masterplan for energy system flexibility, grid investment and energy storage’.
- Anchor the Clean Industrial Deal on an ‘economic security yardstick’ involving strategic funding for European ecosystems, enabling infrastructure and necessary shielding.
- Factor in nuclear power investments as an essential component in Europe’s net-zero scenario.
- Strengthen single market coordination, price differentiation and investment incentives while expanding long-term contractual solutions.
- Develop a comprehensive energy system risk management approach.
Read the full paper here.