On June 25, 2020, the International Energy Agency (IEA) published guidance for local and national governments worldwide which outlines COVID-19 economic recovery policies and investments based on making energy systems cleaner and more resilient.
The Special Report on Sustainable Recovery is based on an analysis performed in coordination with the International Monetary Fund. The plan details a set of policy actions and targeted investments from 2021 to 2023 that could achieve a number of significant outcomes as governments respond to the economic damage of COVID-19.
The report focuses on cost-effective measures spanning six sectors: electricity, transport, industry, buildings, fuels, and emerging low-carbon technologies. It includes over 30 energy measures that governments could take in response to the pandemic.
It also shows how the European Union is strengthening its efforts to make its energy systems cleaner and more resilient, reinforcing its global leadership in reducing greenhouse gas emissions.
EU greenhouse gas emissions in 2019 were 23% lower than in 1990, meaning the bloc had already met its target of a 20% decline by 2020, according to the new IEA report. Cleaner electricity was the main driver behind the reduction, with the carbon intensity of European power generation now well below most other parts of the world. The EU is a leader in renewable energy technologies, notably offshore wind, and many of its Member States have policies in placed to phase out coal. However, greenhouse gas emissions in the EU transport sector are still rising, and the use of energy in buildings remains fossil-fuel intensive.
The IEA report sets out recommendations to help the EU meet its 2030 targets for greenhouse gas emissions, renewables and energy efficiency as well as its longer-term decarbonization goals. It finds that stronger policies than those currently in place will be needed to deliver on these ambitions and that the energy sector needs to be at the heart of those efforts, as it accounts for 75% of EU greenhouse gas emissions.
In December, the new European Commission led by President Ursula von der Leyen launched the European Green Deal in a bid to make the EU climate neutral by 2050. This plan quickly faced the added challenge of Covid-19, which has pushed the world into a sharp economic downturn. This crisis is a test of energy sector resilience and policy makers’ commitment to clean energy transitions.
The EU energy sector has so far stood up well to the pressures it has been under, but the economic downturn continues to weigh on company and government balance sheets. Last month, the European Commission presented a massive recovery plan to counter the economic damage from Covid-19. The plan aims to achieve a resilient, inclusive and green recovery in Europe while laying the foundations for a low-carbon future.
“With its recovery plans, the EU has a real opportunity to boost economic activity, create jobs and support the long-term transformation of its energy sector,” said Dr. Fatih Birol, IEA Executive Director, as he launched the new report with Kadri Simson, the European Commissioner for Energy.
“The Sustainable Recovery Plan described in the IEA’s recent World Energy Outlook Special Report shows how to achieve these three objectives simultaneously. The IEA is working with the European Commission and EU Member States to design policies to repair the economic damage of the crisis while making their energy systems cleaner and more resilient,” he added.
“The IEA’s review of EU energy policy comes at a crucial moment, as we debate the investment priorities for our economic recovery and the future EU budget,” said Commissioner Simson. “The review supports the Commission’s firm commitment to a green recovery, which is at the heart of our proposal for a €750 billion recovery plan. We will continue to work closely with the IEA as we design European policies to transform our energy sector and at the same time provide jobs, growth and better quality of life.”
As EU Member States have different energy policies and approaches to decarbonization, the IEA report concludes that strong cooperation will be needed under the framework of the National Energy and Climate Plans. It also recommends that the EU build on the bloc’s integrated energy market and cross-border trade and develop stronger carbon price signals.
“The European Green Deal represents an opportunity to strengthen economies across the continent by pooling investments in energy technologies that are likely to play a crucial role in the future,” Dr Birol said. “Hydrogen electrolyzers and lithium-ion batteries could potentially be game-changers both for the EU and globally. I welcome the efforts by the European Commission to accelerate innovation and commercialization in these key areas.”
The IEA report also underscores that maintaining EU energy security remains critical, as the energy sector is vital for the health of citizens and economies. In particular, EU electricity systems and markets will need to accommodate growing shares of variable renewable energy. At the same time, risks such as extreme weather and cybersecurity threats are intensifying the challenges for designing and operating electricity systems.
The EU is facing the retirement of half its nuclear power generation capacity over the next five years unless decisions are taken to extend the lifetimes of the plants, which currently provide a major part of the continent’s low-carbon electricity.
To support the phase-out of coal, natural gas is becoming essential to ensure the flexibility of electricity systems in Europe, but the region’s supply of gas will be largely dependent on imports. In this context, the IEA report finds that the EU cannot afford to reduce its energy diversity and needs to invest in electricity sector resilience.
The IEA report also points out that as the EU accounts for a relatively small share of global greenhouse gas emissions (8%), global climate action and global partnerships will be essential to amplify its climate ambitions.
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