29. 05. 2024
AUTHOR: Neil Makaroff and Aymeric Kouam
European Union (EU) Energy Ministers are meeting on 30 May 2024 to discuss the 2024-2029 priorities for the energy transition and the future of REPowerEU.
The challenge is high as Russia's war on Ukraine ended the supply of cheap and abundant gas fuelling Europe's economy. Gas prices were three to six times higher than those in the United States, and still significantly higher today. While the EU has mostly shifted its imports from pipeline gas to liquified natural gas (LNG), the volatile international energy market has made its economy extremely vulnerable to price shocks, undermining its competitiveness.
The European Green Deal and REPowerEU provided a first structural answer by accelerating the deployment of renewable energies, electric vehicles and heat pumps. As a result, one third of gas and oil consumption can be cut in the EU by 2030. But the job is not done.
The EU has a variety of tools at its disposal such as the Renewable Energy Directive, the Energy Efficiency Directive and the Emission Trading System Directive (ETS) to guide its Member States towards a more secure and fossil fuel-less energy system. However, as was exposed with Russia's war on Ukraine, the EU is still heavily reliant on fossil fuel imports and continues to struggle to produce sufficient affordable energy.
The challenges for the next term of the European Commission remain:
- Providing access to affordable energy for EU companies and citizens,
- Enhancing of energy infrastructures to allow for the integration of more renewables,
- Phasing out from fossil fuels,
- Creating an enabling environment for electrification, accompanied by a clear zero-emissions electricity production goal, and
- Ensuring the availability of sufficient investments.
Energy Ministers have the opportunity to draw up new priorities for strengthening the EU’s energy security in the next policy cycle for 2024-2029, starting with a zero-emission electrification framework.
The challenge is clear. A more energy secure Europe by 2040 can be achieved through:
- The electrification of half the economy by 2040, including 51% of transport, 63% of industry and 58% of heating, and
- The production of 4019 Terawatt hours (TWh) of zero-emission electricity to match this electrification rate, with a full decarbonisation of the power sector by 2037.
The EU carbon market alone will not deliver on energy security
The recent uptake of renewables continues to drive coal- and gas-based power down, however it does not ensure that sufficient zero-emission electricity will be produced to be able to electrify the economy in the coming decade. The EU carbon market does not provide the necessary assurance, nor does the Renewable Energy Directive in its current state. The ETS foresees a full decarbonisation of industry and power sectors by 2039, yet, volatile carbon prices do not incentivise a fast decarbonisation of those sectors nor secure the necessary revenues for governments to invest in renewable energy, energy efficiency improvements and low-carbon technologies.
Over the past few years, various external events have either directly or indirectly affected the level of carbon prices and, thus, the EU’s possibility to secure revenues dedicated to the climate neutrality goals. In the wake of Russia’s war on Ukraine and the resulting energy crisis and inflation, the carbon price reached €100 per tonne of CO₂ in 2022-2023. This helped to raise €38.8 billion in revenue, allowing Member States to invest in renewable energy, energy efficiency improvements and zero-carbon technologies.
The beginning of 2024 saw lower carbon prices, around €52 per tonne of CO₂, while today it is approximately €75 per tonne. This affects investment decisions by industrial companies, resulting in uncertainties on how quickly fossil fuels will be out of the power sector, and generates low revenues for Member States.
This is the conflict: only a high CO₂ price can decarbonise the power sector but such a high price will affect energy-intensive industries. They are in a global competition and any increase in production costs will have an immediate impact on competitiveness. Further, a high CO₂ price would not guarantee a just transition nor a well-managed decarbonisation of the power sector.
ETS price evolution

Source: https://sandbag.be/carbon-price-viewer/
As a market tool, the ETS alone can not guide the EU to energy security. It needs to be complemented by an electrification plan and binding targets for fossil fuel phase-out. Only then can the ETS contribute to funding the transformation and accompany workers and regions via the Modernisation Fund. Since 2013, the EU ETS has generated over €152 billion in revenue.
A zero-emission electrification framework is needed to secure affordable access to energy
New policies are necessary to plan the electrification of the economy, increase power production and decarbonise the electricity sector at a faster rate. A zero-emission electrification framework can support the ETS in accelerating the decarbonisation of the power sector, while contributing to a clear electrification plan of the economy:
- Production of sufficient zero-emission electricity
The power sector is already decarbonising in the EU, but not fast enough, as proven by the impacts of the energy crisis on EU electricity prices, creating competitive challenges for some industries in EU regions. With a new zero-emission electrification framework, the EU can set a clear zero-emission electricity production goal for the next decade, in line with the amount of electricity needed to satisfy the growing need in different sectors.
A 90% climate target by 2040 has been proven feasible, with a total electricity production of 4019 TWh by 2040, leading to the full decarbonisation of power by 2037. In concrete terms, this means 70 gigawatts (GW) of zero-emission electricity capacities need to be installed each year until then in order to reach this level. It is worth noting that, in 2023, this installation requirement was achieved. Accelerating the deployment of renewable electricity will reduce electricity costs for households and industries by 12% by 2035.
It is in the interest of policymakers and industry actors alike to ensure that power is decarbonised as fast as possible as this is the prerequisite for the electrification of the economy. It will also leave more time – and ETS allowances – for the industry sector. Renewable energy can already provide more affordable energy today compared to industrial processes that take more time to transform.
- Electrification
For many sectors, electrification is an important part of decarbonisation, when zero-emission electricity is both available and affordable.A zero-emission electrification framework can help maximise the potential of electrification across sectors and can specify the share of electricity in the various sectors by 2040 and beyond by:
- Putting in place concrete incentives for electrification (both direct and indirect), such as CO₂ standards and Carbon Contract for Difference (CCfD),
- Defining end targets for fossil fuel technology uses and installations, where efficient electric technologies are available (for example, gas boilers for heating in buildings), and
- Applying efficiency standards of electrified end uses.
EU Energy Ministers have the possibility to reflect on five challenges as identified above:
- Providing access to affordable energy for EU companies and citizens,
- Enhancing of energy infrastructures to allow for the integration of more renewables,
- Phasing out from fossil fuels,
- Creating an enabling environment for electrification, accompanied by a clear zero-emissions electricity production goal, and
- Ensuring the availability of sufficient investments.
They can set a clear course of action to electrify half the economy by 2040 and produce 4019 TWh of zero-emission electricity, with a full decarbonisation of the power sector by 2037.