The EU wants to electrify Europe
Europe's dependence on fossil fuel imports has received increasing attention in recent years, especially in the face of sweeping changes in the geopolitical landscape. In response to these challenges, the European Commission presented a plan in July with the aim of strengthening Europe's competitiveness, accelerating decarbonisation and reducing dependence on imported energy sources.
The ambition is to lay the foundation for a more robust and independent energy supply, with an ambitious goal of making Europe the world's first electrified continent.
Electrification goals in brief:
Significantly increase the electrification rate : The Commission sets a target for electricity to account for 46% of total energy consumption by 2040, compared to around 23% today. This would mean reducing gas imports by over 70% compared to today.
Reducing dependence on fossil fuels: More electrification should reduce the need for oil and gas imports. The Commission estimates that this could reduce the EU's fossil energy imports by up to €260 billion annually by 2040.
Accelerating decarbonisation: Increased use of clean and cheap electricity will contribute to significant emission reductions. The Commission estimates that emissions could be reduced by more than 2,000 million tonnes of CO2 by 2040 compared to today's levels.
Strengthening European competitiveness : Cheaper and more accessible electricity will make European industry more competitive and protect households against large global price fluctuations related to fossil energy.
Electrification of industry, transport and buildings: The plan targets sectors where the use of fossil energy is still widespread, including through increased use of electric vehicles, heat pumps and electrification of industry.
Making electricity more competitive with fossil fuels: A key challenge is that electricity is currently often more expensive than gas, which weakens the incentives for electrification. The Commission will therefore reduce this price barrier by gradually phasing out fossil fuel subsidies and addressing the tax gap between electricity and gas.
The EU's emissions trading system (ETS) in focus
The EU's goals are to be realized, among other things, through reforms in climate policy, which could have implications for Norwegian actors. Electrification has primarily been a climate measure for the EU, but is now also being linked to industry, competitiveness and energy security. The government has communicated in the climate report that they want to continue cooperation with the EU on the new climate policy and quota system also after 2030.
The Commission's proposal means that the allocation of free allowances should be more closely linked to investments in decarbonisation. The Commission underlines that financial contributions from industry should also be returned to industry through measures that support and promote decarbonisation. The aim is to reward European companies that make green investments, while establishing stronger financial incentives for emission reductions for companies that have not made the same progress in the transition.
While the Commission is proposing more permanent solutions to reduce emissions, the proposals reflect a more sober political approach than before. The share of free allowances for businesses outside the power sector will still account for around 78% of the total number of allowances, and the gradual phasing out of free allowances is proposed only in 2040. This is a later phase-out than previously communicated, even though the EU is still moving towards fewer climate allowances and higher carbon costs.
Disagreement in Brussels
A key issue in the Commission's proposal is whether the proposed structure of the ETS will be sufficient to support the EU's overall target of a 90% emission reduction by 2040. Although the Commission is planning significant emission reductions in the ETS sectors, there is uncertainty about how large the actual reduction will be, and thus how large a part of the overall climate target must be realised through sectors outside the quota system.
At the same time, the proposal has faced criticism from environmental organizations and experts, who fear that a more flexible ETS scheme could weaken the financing and incentives for industrial decarbonization. The debate illustrates a challenging balance between climate action and considerations of European competitiveness.
Read more here:
Commission boosts Europe's competitiveness, decarbonisation and independence